But if somebody wants to waste a good amount of money to have something stored in the blockchain, let 'em.
Why? "If somebody wants to waste a good amount of money to steal your heirloom, let 'em." (analogously equivalent) doesn't sound like an appropriate answer.
Hmm. Not a good analogy. 1) The "heirloom" is already being freely passed around, 2) the "thief" is paying money to the police who are being charged with protecting/distributing the "heirloom" and thus the "thief" is kind of helping to further protect/distribute the "heirloom", which was the desire of the heirloom owner in the first place.
1) Whether it is or isn't, theft of it is still wrong.
2) The thief is paying a bribe so that the "police" allow the theft, when their job is to prevent it. I don't see how that's a positive thing, let alone justifies it.
My point was more to question the concept of "stealing" or "theft" of a digital creation. There is no "taking", there is no "conversion", the "victims" are not left with anything "lesser". Yes, you are appropriating their computer resources, but they are voluntarily giving their computing resources to run Bitcoin software already, and they are doing so with at least some knowledge of the risks and costs of doing so.
The blockchain is nowhere near an unlimited resource.
No, but neither is it discrete, nor bounded. (Which, mathematically speaking, means it's infinite, but I understand that we have SOME real-world limitations due to hard-drive sizes, etc....) My insertion of a transaction to 1HiLukeJrXXXXXXXXXXXXxxxx, which would permanently reside in the blockchain, would not necessarily displace a later transaction by somebody else. Given a certain static piece of hardware and a static Bitcoin protocol, yes, it eventually would... the hard drive would be full, the memory bursting with UTXO's. But that would be long in the future, and hardware and protocols would have long since changed by then.
The miners are the gatekeepers of Bitcoin and the people who are paid money to secure the blockchain.
Which is why their neglect of doing so is bad...
If somebody wants to use the blockchain for their own purposes, but they pay appropriate fees to the miners then I really can't complain.
Why not? They're bribing the miners to abuse their position to do the opposite of what their job is...
How are you in a better position to determine the "job" of the miners than the miners themselves? The code creates incentives and lays down rules. People act within the rules to maximize their share of the incentives. If it's not in the rules, it's not "abuse" or outside the scope of their "job".
I realize that disk space, and working memory space, is not free, nor is it unlimited. However, this is a larger problem with Bitcoin that is only being slightly exacerbated/accelerated somewhat with "on-the-blockchain" alts such as Counterparty.
Actually, no. Properly using Bitcoin does not create a never-ending growth of the UTXO database - items get added, and are always deleted later.
Blockchain spam (except when it uses OP_RETURN) permanently adds database entries which can never be deleted.
Even the "proper" use of Bitcoin will generally lead to several orders of magnitude increase in the UTXO database (and, assuming further divisibility is implemented when necessary, it will indeed create "never-ending growth"). In general, larger amounts split to smaller amounts, as the value of 1BTC rises. Assume (as we all hope) that Bitcoin continues to grow in usage, and rises 10x in (fiat denominated) price, but it's still being used for the same stuff it's used for now. That's 10x as many transactions to 10x as many outputs. Now reiterate a few times and we're talking Satoshis being used to buy pizzas. And what is "spam" and "dust" by today's measure becomes the standard transaction size. And the UTXO database will be 10,000 times what it is today. This is a problem that will be faced by Bitcoin regardless of blockchain hangers-on such as Counterparty and Mastercoin. (Assuming a bright future for Bitcoin, which I am of course happy to assume.)
Identification of spam in filtering is an independent matter from whether it is spam.
There are proposals for identification of valid hashes at least (look up P2SH2), but hopefully we won't have to use them...
I remember looking at the P2SH^2 stuff a couple of months ago when all of this was going down in the Counterparty thread, and it seems to me that it's a non-solution. It's just a hash of a hash, right? That doesn't prove that the first hash (which will still need to be published) is actually a hash. The only way to prove that a hash(X) is actually a hash, is to provide the (X) that it's hashing.
The first hash doesn't need to be stored in the blockchain, only relayed to the miner.
Is there anything like this existing in Bitcoin today? Something that is produced alongside a transaction and relayed with the transaction, but not reflected in the blockchain? Wouldn't this lead to a problem where clients would not be able to trust the transactions in the blockchain, because they are not fully self-proving? What if a bad miner decided to include transactions where the inside hashes weren't relayed? Wouldn't this cause consensus problems everywhere?
It depends on miners doing their job - consensus always follows the valid blocks, unaffected by P2SH
2.
It is only the transaction relay network and miners which verify the hash preimage.
"Consensus always follows the valid blocks" -- what about transactions that are included in a block but whose pre-images have not yet propagated to all of the network? Won't this lead to rejection of valid blocks? And again, how about miners that include non-pre-imaged transactions in their blocks? Won't this lead to the acceptance of invalid blocks? IMO, requiring something of a transaction, which something is not included in the blockchain, simply re-introduces the very consensus problem that the blockchain was designed to eliminate.
This has been happening with Darkcoin, which I know you probably don't follow, but I have been following it. Darkcoin relies on an integrated coin-mixing service which is performed by "Masternodes" (which also provide other services such as speedy connections for clients to sync the blockchain). These Masternodes are paid in the coinbase transaction, and their earnings consist of 20% of the miners' block reward. Some miners are (predictably) keeping this 20% for themselves and not paying it to the Masternode that should receive it. Every time the developer tries to implement "enforcement" of these payments, the blockchain starts forking. This is due to the fact that some aspects of the Masternode system are maintained off-blockchain, and when there is a sync problem in part of the network, that part of the network starts rejecting blocks that are recognized as valid by the rest of the network, and the problems just pile up from there. I believe that the only way that the Darkcoin developers will be able to solve this problem is to move all payment-related aspects of the Masternode system into the blockchain where they can be seen by all and remain self-proving despite any propagation problems.
Except unlike those, the governments can easily stifle/terminate Bitcoin in their jurisdictions.
Currency is inherently something publicly traded, and cannot survive if made illegal itself.
Bitcoin cannot be stifled or terminated without stifling or terminating Internet connectivity as a whole. Yes, exchanging from local fiat currency to Bitcoin can probably be stifled quite a bit (although never completely due to the black market). But the use of Bitcoin itself? No.
It is my hope that by the time a case involving crypto-equity comes before a court of law in the US, its use will be widespread enough that shutting it down is simply not an option. That cat's out of the bag. You can't stop the signal.
The "cat" could be just as much "out of the bag" on a centralised one too - but I think you underestimate the governments...
There is really no rational reason I can think of to think they will treat stock exchange any differently if the records are kept on a blockchain.
Because the blockchain does not reside in any identifiable locale, nor is it owned by any identifiable group. It is distributed among many groups in many locales, the laws of which can vary considerably. Can the US government stop me if I want to buy stock in a company traded on an exchange in the Cayman Islands, using Cayman dollars? Or an exchange located on the Isle of Man, using Manx pounds? Or existing solely on a ship in international waters, using scrip? Who's to say that the decentralized exchange isn't "located" there, if there's at least a single machine running a node there? As long as I pay taxes on any profits/proceeds that I repatriate to US soil, what law is there to stop me?
And of course the issuers could be prosecuted, but what if a US issuer, who issues legal shares of a legally-incorporated corporation, only markets his securities to non-US shareholders? And what if US shareholders only own securities issued by non-US entities? Who's going to go after who here?
Going even further... Say that I own a corporation with 30,000 legally issued shares. I own 20,000 of them outright, and I file with my state a filing that shows 10,000 of them are owned by the "Trustee of the Bitcoin address 1XYZ and successors". (Trusts can legally own just about anything.) 1XYZ starts out with 10,000 issued shares on Counterparty and offers them for sale on the Counterparty exchange for .05BTC each. This "Trustee" need not be me, or related to me. He need not be a US person. (Foreigners can own minority shares of US corporations.) He could be a person that just walked up to me and paid me in cash for 1/3rd of my company. And what he does with his shares, I have no ability to control. (Well technically I could if it were in the bylaws of the corporation that shares may not be sold to third parties without approval of the majority owners, etc. which is often done in closely-held companies like this. But if it's not in the bylaws, then I can't do anything about it.) If I pay out a dividend, I owe it to him, and as a Trustee, and he is legally obligated to perform his duty as a fiduciary for the beneficiaries of the Trust. And some US states allow Trusts to be created without specifically named beneficiaries.
Now say that it's not even my company... say that I own 10 shares of Apple, on a paper certificate. I gift the shares to a Trustee, and we go through the process to transfer the ownership and obtain a new paper certificate with the Trustee's name on it, and that Trustee's name now appears in Apple's books as the record holder of 10 shares. Now what happens when he lists those 10 shares on Counterparty's exchange?
I'm not saying that any or all of this would work. I am not a lawyer. But I think that some sufficiently-clever version of this could work and could basically lead to the practical impossibility of enforcing any laws against crypto-securities.
Not trying to end this discussion, but I would like to thank you for your time and your courtesy in hashing this out with me here. (Pun intended.)