From mboxrd@z Thu Jan 1 00:00:00 1970 Return-Path: <eric@voskuil.org> Received: from smtp1.linuxfoundation.org (smtp1.linux-foundation.org [172.17.192.35]) by mail.linuxfoundation.org (Postfix) with ESMTPS id 33FE4BDC for <bitcoin-dev@lists.linuxfoundation.org>; Wed, 3 Jul 2019 22:31:00 +0000 (UTC) X-Greylist: whitelisted by SQLgrey-1.7.6 Received: from mail-io1-f47.google.com (mail-io1-f47.google.com [209.85.166.47]) by smtp1.linuxfoundation.org (Postfix) with ESMTPS id C754387C for <bitcoin-dev@lists.linuxfoundation.org>; Wed, 3 Jul 2019 22:30:58 +0000 (UTC) Received: by mail-io1-f47.google.com with SMTP id h6so499657iom.7 for <bitcoin-dev@lists.linuxfoundation.org>; Wed, 03 Jul 2019 15:30:58 -0700 (PDT) DKIM-Signature: v=1; a=rsa-sha256; c=relaxed/relaxed; d=voskuil-org.20150623.gappssmtp.com; s=20150623; h=mime-version:subject:from:in-reply-to:date:cc :content-transfer-encoding:message-id:references:to; bh=XN0YHqFRhPMfJYqQEozNYfr+eWr1qSK1tliSZ2YxIsY=; b=aH7hpalGD+2SCnFD+dqR2fNUqqnn4v49hwiNF836NELncCSbfHmwFHTYV6/A3UD1Iw Cs8bvJQu/uuYfAV5vDZGmvRNpRr/zM6TY2MFxEuTAhPxXZiEuLxz2SCZf/K+1+3SlraS Fpem+4s2xzsqmyl0swruabD50RzCvKxub+gAEKlSV1HAlveNbmdNkS3xiaNlzRKkEgp/ RIRJQxTddSW4rJKR22J866kKYau/fZEQnyb5NiovRmxw2Q72TTDQagmj0vEKDRGv69ks u4ClF9CxpX3+Mi5/LWoBuHRDgZE/qCTjcQtqvcjAkWllg1lkzutEYZQyugKtXQhtVpOr SKHQ== X-Google-DKIM-Signature: v=1; a=rsa-sha256; c=relaxed/relaxed; d=1e100.net; s=20161025; h=x-gm-message-state:mime-version:subject:from:in-reply-to:date:cc :content-transfer-encoding:message-id:references:to; bh=XN0YHqFRhPMfJYqQEozNYfr+eWr1qSK1tliSZ2YxIsY=; b=WsZ5l5rndYjL53pAKuZXlohrTMnGXA3jUCtJoZTweAMB9gLdo/9oltQaidTd6kH3QI XU/EdgYIkAmiPurI29U2hLrftdhZhCLCyKEwGklbplOskvsnQmpExjSMnryT8gqKHCB8 JTpRJid4FKMA5lEnnFViAKZf4PjpoxDvoiFyfsghpnHtIN+MeV/QVSlAwlhkByqhHUI2 99Cmi4GNTwfiN00pWQKsdbMsKXXT7mGEZnUGkFk14bvt33Wd+MY22AL7DxgcCZaNCoBV 5K1WQxOSnqFa7+5pNBZJcSEOc8lkiMXVZEvjF8uAe/+ELDyXbuyMzvQOVU3pKe6o82yu d50A== X-Gm-Message-State: APjAAAU4kVR+BkZpU4rvaz8kyEOU3Soa2cQd/vdV4u2e73peOpwBVyOm +VmLOQWohVYnPSXCk+JmVG87N0hPFZ0= X-Google-Smtp-Source: APXvYqx1Z9ZY9GdU3YoefperzG8N7mpbX/4Z1jzF3tL5YpSKGuYJOCN/pzCC1xMzfleOoZL5AkMTuQ== X-Received: by 2002:a6b:da01:: with SMTP id x1mr41465586iob.216.1562193057664; Wed, 03 Jul 2019 15:30:57 -0700 (PDT) Received: from [192.168.0.106] (96-3-65-135-dynamic.midco.net. [96.3.65.135]) by smtp.gmail.com with ESMTPSA id q1sm5842832ios.86.2019.07.03.15.30.56 (version=TLS1_2 cipher=ECDHE-RSA-AES128-GCM-SHA256 bits=128/128); Wed, 03 Jul 2019 15:30:56 -0700 (PDT) Content-Type: text/plain; charset=utf-8 Mime-Version: 1.0 (1.0) From: Eric Voskuil <eric@voskuil.org> X-Mailer: iPhone Mail (16F203) In-Reply-To: <A64C3DCB-10CE-45EA-9A1B-7E3D13DF90EA@gmail.com> Date: Wed, 3 Jul 2019 17:30:55 -0500 Content-Transfer-Encoding: quoted-printable Message-Id: <6B9A04E2-8EEE-40A0-8B39-64AA0F478CAB@voskuil.org> References: <0DBC0DEA-C999-4AEE-B2E1-D5337ECD9405@gmail.com> <7A10C0F5-E206-43C1-853F-64AE04F57711@voskuil.org> <EB743E28-8486-4CD5-B9AE-09B5693B27FA@gmail.com> <708D14A9-D25E-4DD2-8B6E-39A1194A7A00@voskuil.org> <1A808C88-63FD-4F45-8C95-2B8B4D99EDF5@gmail.com> <83705370-79FC-4006-BA04-4782AD5BE70B@voskuil.org> <BF027CD0-FE29-4DD1-AB96-DE92B597AD18@gmail.com> <3F46CDD5-DA80-49C8-A51F-8066680EF347@voskuil.org> <A4A6099F-F115-4CBF-B7D5-F16581476126@gmail.com> <063D7C06-F5D8-425B-80CE-CAE03A1AAD0C@voskuil.org> <0AA10217-E1CC-46D1-9B43-038CEEF942CD@gmail.com> <E72C4A8E-F850-400B-B19B-7D06B8A169EC@voskuil.org> <A64C3DCB-10CE-45EA-9A1B-7E3D13DF90EA@gmail.com> To: Tamas Blummer <tamas.blummer@gmail.com> X-Spam-Status: No, score=-1.9 required=5.0 tests=BAYES_00,DKIM_SIGNED, DKIM_VALID, MIME_QP_LONG_LINE, RCVD_IN_DNSWL_NONE autolearn=ham version=3.3.1 X-Spam-Checker-Version: SpamAssassin 3.3.1 (2010-03-16) on smtp1.linux-foundation.org X-Mailman-Approved-At: Thu, 04 Jul 2019 01:31:45 +0000 Cc: Bitcoin Protocol Discussion <bitcoin-dev@lists.linuxfoundation.org> Subject: Re: [bitcoin-dev] Generalized covenants with taproot enable riskless or risky lending, prevent credit inflation through fractional reserve X-BeenThere: bitcoin-dev@lists.linuxfoundation.org X-Mailman-Version: 2.1.12 Precedence: list List-Id: Bitcoin Protocol Discussion <bitcoin-dev.lists.linuxfoundation.org> List-Unsubscribe: <https://lists.linuxfoundation.org/mailman/options/bitcoin-dev>, <mailto:bitcoin-dev-request@lists.linuxfoundation.org?subject=unsubscribe> List-Archive: <http://lists.linuxfoundation.org/pipermail/bitcoin-dev/> List-Post: <mailto:bitcoin-dev@lists.linuxfoundation.org> List-Help: <mailto:bitcoin-dev-request@lists.linuxfoundation.org?subject=help> List-Subscribe: <https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev>, <mailto:bitcoin-dev-request@lists.linuxfoundation.org?subject=subscribe> X-List-Received-Date: Wed, 03 Jul 2019 22:31:00 -0000 > On Jul 2, 2019, at 00:08, Tamas Blummer <tamas.blummer@gmail.com> wrote: >=20 >=20 >> On Jul 1, 2019, at 20:52, Eric Voskuil <eric@voskuil.org> wrote: >>=20 >> I said that I would make no further comment given the belief that no new i= deas were surfacing. However, after giving it some more thought on my own, I= believe I have found the one case in which a person could value such encumb= ered coins. >>=20 >> In the case of tracking an asset that becomes worthless at a specific tim= e, one could value a record of ownership, and the ability to trade ownership= of the asset during the period. Consider colored coin type tracking of a th= eater ticket for a specific show, where the ticket is worthless by the end o= f the show. >=20 >=20 > In other words you now see the utility of a register offered by UTXOs that= are only temporary availability to current owner. If there is a utility the= re is also a value in it for them. In other words I discovered a potentially-valid use case for you. The concer= n I expressed was that you had not presented one. > I am glad we are on the same side on this utility My goal is never to discourage, but understanding of provable behavior and u= tility. Our space is replete with unsupportable conjecture and hyperbole. Th= ere are no sides, just discovery of truth. > and thanks to you and ZmnSCPxj we now have two additional uses cases for U= TXOs that are only temporarily accessible to their current owner. Actually you have a single potentially-valid use case, the one I have presen= ted. The others I have shown to be invalid (apart from scamming) and no addi= tional information to demonstrate errors in my conclusions have been offered= . I=E2=80=99ve noticed that in subsequent posts you continue to imply that the= re is economic value in such tracking of any asset, and of course here imply= the validity of your other use case, monetary lending. This, as I have show= n, is not the case. Tracking of an asset of value beyond the net compound in= terest cost of dust is more cheaply accomplished by burning than by renting,= and as I have shown, it is not accurate to claim that the encumbered coin c= an be used as money (or to track any asset of perpetual value). When the coi= n expires the money/asset holder becomes a bag holder, invalidating any init= ial value apart from scamming. In the valid use case that I have demonstrated (tracking of expiring assets)= , the marketable value of the rented coin is not the market price of that co= in, but the price paid for it. So for example, 1 coin rented at 10% APR for o= ne year is worth .1 coin. And when a renter resells this tracking coin it is= worth the fraction of this amount for the time remaining. The coin itself (= i.e. its face value) cannot be used by the renter to purchase anything. As such this is truly not a loan in the financial or economic sense. Given a= n actual loan the borrower can use the full value of the amount borrowed to p= urchase goods that can be used in production. Subsequent generation of produ= cts and thereby revenue is the source of yield on a loan (economically equiv= alent to dividend on an equity contract). This allows the borrower to repay t= he loan with interest. Without *any* usable capital over the term of the ren= tal, there is no investment possible and the time value of the rented coin c= annot be realized by the renter. So the one potentially-valid scenario, a fixed-term tracking rental, is enti= rely an *expense*, not a loan. A financial loan incurs an interest expense, b= ut also implies the value of the amount loaned is fully usable (i.e., consum= ed or traded) during the term (the reason to pay interest). That is money ov= er time, yielding the time value of money. In this case the value of the loa= n at any time to the renter is simply the amortized interest remaining. This= implies that no income can be generated from the rental =E2=80=9Cprinciple=E2= =80=9D by the renter. A price is paid for the rental and that value of the r= ental is fully exhausted by the end of the term, with no other benefit than t= he tracking that was purchased. The person renting the fixed-term tracking coin (i.e. =E2=80=9Cowner=E2=80=9D= ) can earn income by selling dust+1 outputs at the cost of capital, limited t= o a maximum term dictated by the cost of capital and the dust limit (as show= n previously). Economically speaking, all business returns gravitate toward t= he cost of capital, including lending, and this is no different. But it cann= ot be said that the owner is a financial lender. The owner is simply selling= non-depreciating (from his perspective) fixed-term tracking space. The owner can of course trade rights to the controlling output. The rental c= ontract has been prepaid (by your design, in order to shift counterparty ris= k). As such the traded contract has no yield and therefore contracting for i= ts sale is a currency future, not an interest rate future as would be implie= d by a debt market. Yet FX speculation already exists for Bitcoin, requiring= no covenant or rental market. This would seem to undermine any secondary ma= rket for these more complex and limited currency futures. Finally, valuation is based on the assumption of a non-zero dust+1, which BT= C enforces as a 0 satoshi dust limit (i.e. 0 sats is considered dust and is n= ot valid). Anything above this is policy-enforced only. As such a miner can u= ndercut the cost of tracking an individual asset down to 1 sat. Given that t= here is no financial incentive to a higher dust limit for a miner, but a pos= itive financial incentive to undercut the rental price for the same return, t= his is economically rational and therefore must be assumed. One might argue that a lower dust policy would hurt BTC and therefore its mi= ners collectively, creating an offsetting negative financial pressure. Howev= er given that the apparent cost is socialized in relation to individual bene= fit, this is not an economically rational conclusion. Furthermore, as the tr= acking outputs become unspendable due to the nature of the covenant, there i= s no actual dust accumulation (implementation dependent). As such the return on any fixed-term tracking output, given a 10% APR, would= become as low as .1 sat per year, assuming such a market could continue to f= unction at that level. But it is also the case that a 1 sat output can be bu= rned directly by the tracker and used indefinitely. This would presumably un= dermine any robust market for fixed-term tracking rental. Best, Eric > Since ZmnSCPxj also raised the question if covenants are needed at all, le= t me continue my thoughts on this in reply to his mail. > Tamas Blummer >=20 >>=20 >>=20 >>> On Jun 30, 2019, at 13:26, Tamas Blummer <tamas.blummer@gmail.com> wrote= : >>>=20 >>> My argument does not need the comparison with ICOs. >>>=20 >>> They were just an example that people pay for the utility of register ev= en though others think the tokens they keep track of are worthless. >>>=20 >>> Tamas Blummer >>>=20 >>>=20 >>>> On Jun 30, 2019, at 22:13, Eric Voskuil <eric@voskuil.org> wrote: >>>>=20 >>>> ICO tokens can be traded (indefinitely) for other things of value, so t= he comparison isn=E2=80=99t valid. I think we=E2=80=99ve both made our point= s clearly, so I=E2=80=99ll leave it at that. >>>>=20 >>>> Best, >>>> Eric >>>>=20 >>>>> On Jun 30, 2019, at 12:55, Tamas Blummer <tamas.blummer@gmail.com> wro= te: >>>>>=20 >>>>>=20 >>>>>> On Jun 30, 2019, at 20:54, Eric Voskuil <eric@voskuil.org> wrote: >>>>>>=20 >>>>>> Could you please explain the meaning and utility of =E2=80=9Cunforgea= ble register=E2=80=9D as it pertains to such encumbered coins? >>>>>=20 >>>>> I guess we agree that some way of keeping track of ownership is prereq= uisite for something to aquire value. >>>>> We likely also agree that the security of that ownership register has g= reat influence to the value. >>>>>=20 >>>>> The question remains if a register as utility in itself gives value to= the thing needed to use that register. >>>>> I think it does, if people are interested in what it keeps track of, f= or whatever reason, even for reasons you find bogus. >>>>>=20 >>>>> It was not intentional, but I think I just explained why Ethereum aqui= red higher market value by being register of ICO tokens. >>>>>=20 >>>>> Now back to the coins encumbered with the debt covenant: >>>>> Transactions moving them constitute a register of covered debt and you= need them to update that register. >>>>> Should some people find such a register useful then those coins needed= to update this register will aquire value. >>>>> Does not matter if you think the concept of covered debt is just as bo= gus as ICOs. >>>>>=20 >>>>> Here some good news: If they aquire value then they offer a way to gen= erate income for hodler by temporarily giving up control. >>>>>=20 >>>>> Tamas Blummer >>>>>=20 >>>>>>=20 >>>>>> The meaning in terms of Bitcoin is clear - the =E2=80=9Cowner=E2=80=9D= of outputs that represent value (i.e. in the ability to trade them for some= thing else) is recorded publicly and, given Bitcoin security assumptions, ca= nnot be faked. What is not clear is the utility of a record of outputs that c= annot be traded for something else. You seem to imply that a record is valua= ble simply because it=E2=80=99s a record. >>>>>>=20 >>>>>> e >>>>>>=20 >>>>>>> On Jun 30, 2019, at 11:35, Tamas Blummer <tamas.blummer@gmail.com> w= rote: >>>>>>>=20 >>>>>>>=20 >>>>>>>> On Jun 30, 2019, at 19:41, Eric Voskuil <eric@voskuil.org> wrote: >>>>>>>>=20 >>>>>>>>=20 >>>>>>>>> On Jun 30, 2019, at 03:56, Tamas Blummer <tamas.blummer@gmail.com>= wrote: >>>>>>>>>=20 >>>>>>>>> Hi Eric, >>>>>>>>>=20 >>>>>>>>>> On Jun 29, 2019, at 23:21, Eric Voskuil <eric@voskuil.org> wrote:= >>>>>>>>>>=20 >>>>>>>>>> What loan? Alice has paid Bob for something of no possible utilit= y to her, or anyone else. >>>>>>>>>=20 >>>>>>>>> Coins encumbered with the described covenant represent temporary c= ontrol of a scarce resource. >>>>>>>>>=20 >>>>>>>>> Can this obtain value? That depends on the availability of final c= ontrol and ability to deal with temporary control. >>>>>>>>=20 >>>>>>>> For something to become property (and therefore have marketable val= ue) requires that it be both scarce and useful. Bitcoin is useful only to th= e extent that it can be traded for something else that is useful. Above you a= re only dealing with scarcity, ignoring utility. >>>>>>>=20 >>>>>>> There is a deeper utility of Bitcoin than it can be traded for somet= hing else. That utility is to use its unforgeable register. >>>>>>> We have only one kind of units in this register and by having covena= nts we would create other kinds that are while encumbered not fungible with t= he common ones. >>>>>>>=20 >>>>>>> Units are certainly less desirable if encumbered with a debt covenan= t. You say no one would assign them any value. >>>>>>>=20 >>>>>>> I am not that sure as they still offer the utility of using the unfo= rgeable register, in this case a register of debt covered by reserves. >>>>>>> You also doubt forcing debt to be covered by reserves is a good idea= , I got that, but suppose we do not discuss this here. >>>>>>> If there are people who think it is a good idea, then they would fin= d having an unforgeable register of it useful and therefore units needed to m= aintain that register valuable to some extent. >>>>>>>=20 >>>>>>>>=20 >>>>>>>>> I think you do not show the neccesary respect of the market. >>>>>>>>=20 >>>>>>>> I=E2=80=99m not sure what is meant here by respect, or how much of i= t is necessary. I am merely explaining the market. >>>>>>>=20 >>>>>>> You are not explaining an existing market but claim that market that= is not yet there will follow your arguments. >>>>>>>=20 >>>>>>>>> Your rant reminds me of renowed economists who still argue final c= ontrol Bitcoin can not have value, you do the same proclaiming that temporar= y control of Bitcoin can not have value. >>>>>>>>=20 >>>>>>>> It seems to me you have reversed the meaning of temporary and final= . Bitcoin is useful because of the presumption that there is no finality of c= ontrol. One presumes an ability to trade control of it for something else. T= his is temporary control. Final control would be the case in which, at some p= oint, it can no longer be traded, making it worthless at that point. If this= is known to be the case it implies that it it worthless at all prior points= as well. >>>>>>>>=20 >>>>>>>> These are distinct scenarios. The fact that temporary (in my usage)= control implies the possibility of value does not imply that finality of co= ntrol does as well. The fact that (renowned or otherwise) people have made e= rrors does not imply that I am making an error. These are both non-sequiturs= . >>>>>>>>=20 >>>>>>>>> I say, that temporary control does not have value until means deal= ing with it are offered, and that is I work on. Thereafter might obtain valu= e if final control is deemed too expensive or not attainable, we shall see. >>>>>>>>=20 >>>>>>>> The analogy to rental of a consumable good does not apply to the ca= se of a non-consumable good. If it cannot be traded and cannot be consumed i= t cannot obtain marketable value. To this point it matters not whether it ex= ists. >>>>>>>=20 >>>>>>> I meant with control the control of entries in the register which I t= hink is the deeper utility of Bitcoin. Final control is meant to be the oppo= site of temporary which is the time limited control with some expiry. >>>>>>>=20 >>>>>>> Thank you for your thoughts as they help to sharpen my arguments. >>>>>>>=20 >>>>>>> Best, >>>>>>>=20 >>>>>>> Tamas Blummer >>>>>>>=20 >>>>>>>> Best, >>>>>>>> Eric >>>>>>>>=20 >>>>>>>>> Tamas Blummer >=20