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([2601:600:a080:16bb:34af:872a:acbd:cba8]) by smtp.gmail.com with ESMTPSA id g1sm5268065pgg.27.2019.07.01.11.52.58 (version=TLS1_2 cipher=ECDHE-RSA-AES128-GCM-SHA256 bits=128/128); Mon, 01 Jul 2019 11:52:58 -0700 (PDT) Content-Type: text/plain; charset=utf-8 Mime-Version: 1.0 (1.0) From: Eric Voskuil X-Mailer: iPhone Mail (16F203) In-Reply-To: <0AA10217-E1CC-46D1-9B43-038CEEF942CD@gmail.com> Date: Mon, 1 Jul 2019 11:52:57 -0700 Content-Transfer-Encoding: quoted-printable Message-Id: References: <0DBC0DEA-C999-4AEE-B2E1-D5337ECD9405@gmail.com> <7A10C0F5-E206-43C1-853F-64AE04F57711@voskuil.org> <708D14A9-D25E-4DD2-8B6E-39A1194A7A00@voskuil.org> <1A808C88-63FD-4F45-8C95-2B8B4D99EDF5@gmail.com> <83705370-79FC-4006-BA04-4782AD5BE70B@voskuil.org> <3F46CDD5-DA80-49C8-A51F-8066680EF347@voskuil.org> <063D7C06-F5D8-425B-80CE-CAE03A1AAD0C@voskuil.org> <0AA10217-E1CC-46D1-9B43-038CEEF942CD@gmail.com> To: Tamas Blummer 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: Mon, 01 Jul 2019 20:55:19 +0000 Cc: Bitcoin Protocol Discussion 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 List-Unsubscribe: , List-Archive: List-Post: List-Help: List-Subscribe: , X-List-Received-Date: Mon, 01 Jul 2019 18:53:01 -0000 It=E2=80=99s an exceedingly poor example. First, value is subjective. It mat= ters not what other people may consider, only those who act. Given that peop= le trade them (ICO tokens), they have value to those people. Second, the sce= nario would not function given that the value, as with money, is based on th= e ability to trade perpetually. I said that I would make no further comment given the belief that no new ide= as were surfacing. However, after giving it some more thought on my own, I b= elieve I have found the one case in which a person could value such encumber= ed coins. In the case of tracking an asset that becomes worthless at a specific time, o= ne could value a record of ownership, and the ability to trade ownership of t= he asset during the period. Consider colored coin type tracking of a theater= ticket for a specific show, where the ticket is worthless by the end of the= show. Now consider the value attributable to renting coin (e.g. to the tick issuer= ) in order to track the ticket. First, there is no net value in renting coin= to pay confirmation (mining) fees on transfers. The cost of a fee is driven= by competition and remains the same whether the coin used for payment is en= cumbered or not. In other words, even with value in tracking there is no *co= st advantage* to renting of such coins for use as money. But tracking an asset in this manner has required not only a fee for each tr= ade, but also the burning of coin. By allowing the lender to recover the coi= n when the asset expires, this part of the cost of on-chain tracking can be t= ime-shared (rented), and without depreciation of the coin. In this case the lender is achieving both a time-locked hoard/speculation an= d a pre-paid rental return. The return to the lender would be the rental pri= ce minus the opportunity cost of not investing (ie, in production) this coin= otherwise during that period. This is of course based on the economic princ= iple that both hoarding and speculation are expected to produce no predictab= le return. As such the cost of the rental would be driven (by competition) t= oward the cost of capital (e.g. annualized 10% of the coin price) for the sa= me period.=20 Depending on the term, rental will be cheaper than the outright cost of burn= ing the same minimum amount of coin (i.e. dust+1, assuming policy compliance= ) as required for tracking. As soon as the rental cost exceeds the minimum t= racking burn, rental becomes more expensive than just purchasing the coin. S= o, for example, at 10% market return on capital (rental cost), purchasing th= e coin is cheaper than rental at any tracking term beyond 7.2 years. As discussed previously, there can be no monetary value of such encumbered c= oins. And as shown above, the non-monetary (tracking) scenario is limited to= fixed-term tracking. This use of Bitcoin would of course reduce the average= cost of non-monetary blockchain storage. I=E2=80=99m not sure that is a use= people want to facilitate with a protocol change, but that=E2=80=99s for th= e community to decide. Best, Eric > On Jun 30, 2019, at 13:26, Tamas Blummer 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 even= 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 wrote: >>=20 >> ICO tokens can be traded (indefinitely) for other things of value, so the= comparison isn=E2=80=99t valid. I think we=E2=80=99ve both made our points c= learly, so I=E2=80=99ll leave it at that. >>=20 >> Best, >> Eric >>=20 >>> On Jun 30, 2019, at 12:55, Tamas Blummer wrote= : >>>=20 >>>=20 >>>> On Jun 30, 2019, at 20:54, Eric Voskuil wrote: >>>>=20 >>>> Could you please explain the meaning and utility of =E2=80=9Cunforgeabl= e 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 prerequi= site for something to aquire value. >>> We likely also agree that the security of that ownership register has gr= eat influence to the value. >>>=20 >>> The question remains if a register as utility in itself gives value to t= he thing needed to use that register. >>> I think it does, if people are interested in what it keeps track of, for= whatever reason, even for reasons you find bogus. >>>=20 >>> It was not intentional, but I think I just explained why Ethereum aquire= d 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 n= eed them to update that register. >>> Should some people find such a register useful then those coins needed t= o update this register will aquire value. >>> Does not matter if you think the concept of covered debt is just as bogu= s as ICOs. >>>=20 >>> Here some good news: If they aquire value then they offer a way to gener= ate 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 o= f outputs that represent value (i.e. in the ability to trade them for someth= ing else) is recorded publicly and, given Bitcoin security assumptions, cann= ot be faked. What is not clear is the utility of a record of outputs that ca= nnot be traded for something else. You seem to imply that a record is valuab= le simply because it=E2=80=99s a record. >>>>=20 >>>> e >>>>=20 >>>>> On Jun 30, 2019, at 11:35, Tamas Blummer wro= te: >>>>>=20 >>>>>=20 >>>>>> On Jun 30, 2019, at 19:41, Eric Voskuil wrote: >>>>>>=20 >>>>>>=20 >>>>>>> On Jun 30, 2019, at 03:56, Tamas Blummer w= rote: >>>>>>>=20 >>>>>>> Hi Eric, >>>>>>>=20 >>>>>>>> On Jun 29, 2019, at 23:21, Eric Voskuil wrote: >>>>>>>>=20 >>>>>>>> What loan? Alice has paid Bob for something of no possible utility t= o her, or anyone else. >>>>>>>=20 >>>>>>> Coins encumbered with the described covenant represent temporary con= trol of a scarce resource. >>>>>>>=20 >>>>>>> Can this obtain value? That depends on the availability of final con= trol and ability to deal with temporary control. >>>>>>=20 >>>>>> For something to become property (and therefore have marketable value= ) requires that it be both scarce and useful. Bitcoin is useful only to the e= xtent that it can be traded for something else that is useful. Above you are= only dealing with scarcity, ignoring utility. >>>>>=20 >>>>> There is a deeper utility of Bitcoin than it can be traded for somethi= ng else. That utility is to use its unforgeable register. >>>>> We have only one kind of units in this register and by having covenant= s we would create other kinds that are while encumbered not fungible with th= e common ones. >>>>>=20 >>>>> Units are certainly less desirable if encumbered with a debt covenant.= You say no one would assign them any value. >>>>>=20 >>>>> I am not that sure as they still offer the utility of using the unforg= eable 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 find h= aving an unforgeable register of it useful and therefore units needed to mai= ntain 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 it= is necessary. I am merely explaining the market. >>>>>=20 >>>>> You are not explaining an existing market but claim that market that i= s not yet there will follow your arguments. >>>>>=20 >>>>>>> Your rant reminds me of renowed economists who still argue final con= trol Bitcoin can not have value, you do the same proclaiming that temporary c= ontrol of Bitcoin can not have value. >>>>>>=20 >>>>>> It seems to me you have reversed the meaning of temporary and final. B= itcoin is useful because of the presumption that there is no finality of con= trol. One presumes an ability to trade control of it for something else. Thi= s is temporary control. Final control would be the case in which, at some po= int, it can no longer be traded, making it worthless at that point. If this i= s known to be the case it implies that it it worthless at all prior points a= s well. >>>>>>=20 >>>>>> These are distinct scenarios. The fact that temporary (in my usage) c= ontrol implies the possibility of value does not imply that finality of cont= rol does as well. The fact that (renowned or otherwise) people have made err= ors 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 dealin= g with it are offered, and that is I work on. Thereafter might obtain value i= f 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 case= of a non-consumable good. If it cannot be traded and cannot be consumed it c= annot obtain marketable value. To this point it matters not whether it exist= s. >>>>>=20 >>>>> I meant with control the control of entries in the register which I th= ink is the deeper utility of Bitcoin. Final control is meant to be the oppos= ite 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