[TangoTrotFox]

Markets are constantly manipulated and what we consider acceptable or not seems at times quite arbitrary. For instance quantitative easing is a practice we engage in whose entire purpose is to artificially inflate the value of markets to help spur 'growth.'

Is the problem that people may be trying to manipulate the price of decentralized commodity or that people are investing in a decentralized commodity without realizing that there may be people trying to manipulate it? I think there is a place for 'hard regulations' but I think there is also a time when the focus should be more on information than trying to enforce national rules on a global scale. Even more so when those rules are likely to fall subject to all the failings of political systems including graft, corruption, and the like.

[sine]

   decentralized commodity

This is a misconception about cryptocurrencies such as Bitcoin or Ethereum. Both are highly centeralized, in the hands of a tiny oligarchical ownership along with a small group of mining warehouses.

https://news.earn.com/quantifying-decentralization-e39db233c...

[bhouston]

And they are likely going to get more centralized over time. The smaller currencies, outside of the top 10, are now all likely vulnerable to 51% attacks. I wouldn't be surprised if that grows to include any outside of the top 5 soon.

It looks like this is how smaller currencies die, they are vulnerable at any time to 51% attacks thus no one wants to use them. At least in the traditional banking system if you had a lot of money you could manipulate exchange rates, but you couldn't just outright steal when you had extreme market power.

[zdkl]

The case of coins that optimise for consumer/general purpose hardware (by employing PoW algorithms suited for CPUs, or explicitely switching algorithms periodically) is interesting in this context.

Traditional cloud platform providers are also in a position to impact mining on those. I doubt that any coin could cope with those warehouses of potential mining power.

I'm looking closely at monero on this subject. Despite or because of their hardcore emphasis on privacy, that project has made interesting decisions regarding how to deal with potentially hostile miners.

Disclaimer: Yep, you guessed it, I hold coins, and monero is among them. I'm not saying buy XMR, but definitely take a look at their "politics".

[simias]

I think it's only postponing the inevitable. If any cryptocoin manages to become "the new dollar" the incentives to micro-optimize the mining will be tremendous. Even assuming that they manage to create an algo (or change it often enough) to make custom ASIC pointless it just means that it's CPU vendors who have the edge. Intel, AMD and friends could sell their first batches of new and improved CPUs for a primer during the first months. And it's even less risky for them than for cryptocurrency ASIC vendors because CPUs don't immediately become useless if they can't be used to mine cryptocurrency. It's just a bonus.

On top of that even if a cryptocurrency manages somehow to completely level the playing field when it comes to mining hardware you still have significant differences when it comes to cost of electricity. Bitmain will stop building ASICs and start building hydroelectric dams instead.

I can't see how you can imagine a future where cryptocurrencies are successful and it's still worthwhile for individuals to mine in their basements. There's always be economies of scale that'll favor the cartels.

Beyond that it might even be possible that PoW algorithms designed to run on general purpose CPUs can end up giving more power to the cartel than an ASIC optimized algorithm because in the latter case the network consensus can decide to hard fork and change the PoW algorithm, hurting immensely the ASIC vendors and their users. That gives leverage. Similarly a new cryptocurrency or minority fork can protect itself from a 51% attack by changing the PoW algorithm, making highly-optimized mining farms unable to attack the coin (Bitcoin Gold should probably have considered that).

Meanwhile if everybody uses general-purpose server farms to mine then they can easily be repurposed to attack any small coin, making sure that the coin they favor remains dominant.

[zdkl]

I think you're missing some context on the difference between CPUs and ASICs in terms of PoW algo design and hardware cost&distribution.

Again with monero because it's pertinent to your point, I would encourage you to read up on its design goals, and the discussions around the recent PoW algo change on github or Reddit.

[sine]

Monero changing its mining algorithm doesn't change how most of the supply was produced and given away nearly for free to the dev team and early users.

The math behind it equates to existing capital wealth being used to generate the supply which is amplified by several magnitude for the first users to show up and run the software. Future production costs increase, and the relative newly produced supply decreases.

Old users rely on the gullibility of new users to exchange real world value for these easy to produce database-tokens.

[TangoTrotFox]

Decentralization does not mean owned by everybody, it means owned by nobody.

For instance imagine we had a mine that was effectively infinitely large (for the sake of the analogy). If we allowed absolutely anybody with a pickaxe to to come in and mine it, we might call it decentralized. Nobody would own the mine. That one group sent a million miners to go mine it would not suddenly make them owners, even if they happened to receive the largest benefit from the it. By contrast centralization would be when one individual or group forcefully stops, generally with government support, any other individual from mining in "their" mine. In this case they would indeed own the mine. In the case of Bitcoin there is absolutely and literally nothing stopping from somebody from starting up a mass mining farm becoming the new plurality beneficiary.

[Retric]

Due to centralization of hardware the Chinese government can trivially do a 51% attack. That's a form of centralization your ignoring due to an overly specific definition.

The tiny block size is arguably an ongoing 51% attack from an oligarchy that is in collusion. Again, depending on what you consider centralization having a tiny group that's in direct communication easily qualifies.

Pas: In your example if the only option is to use picks from one company or your hands because other tools are confiscated at the enterance then it's very centralized.

[TangoTrotFox]

51% attacks are mostly overblown. If a group decides to engage in a 51% attack, all they are doing is effectively revoking their own license to print money - which is what having a > 51% mining capacity in a major crypto translates to. Bitcoin is a public ledger and double spend transactions would be completely visible to all. All this means is that the coin would end up getting forked, similar to what happened when Ethereum screwed up - and it continued on with minimal fanfare. And in that case their screw up was of their own fault instead of something inherent - even fewer people would be inclined to stay on a Bitcoin line that has been 51%'d.

Rolling with the mine analogy, a 51% attack is equivalent our group that sent in a million miners changing the diamond mine into a 'glass' one. It becomes fake, and loses nearly all of its value and people move to the new 'real' mine. You do nothing except critically hurt yourself.

[Retric]

This assumes the entity wants Bitcoin to survive. The Chinease government has zero intrest in keeping Bitcoin alive and would happily kill it off.

Forks don't help with 51% attacks as the attacker can continue to use their hardware on the fork. Further, you can use a proxy to hid the origin of a block, so Bitcoin would need to move to a new hash which would take a long time and prevent any obvious successor.

[TangoTrotFox]

I was making the assumption that the entity wants to kill the coin. Doing a 51% attack out of greed makes no sense as it'd be immediately self defeating, at least on a mainstay coin.

There are numerous different hashes with varying levels of ASIC 'resistance' - yeah it's a cat and mouse game, but hardly a major issue. The 'obvious' successor would be a matter of the unpredictable public as I'm certain numerous entities would vie to become e.g. Bitcoin 2.0. In the end the market would decide which was the winner. The great thing about it all being that the users could actually come out net winners in the end as the successors would likely not only be technical superior, but it would also be able to use the exact same ledger (as with Bitcoin cash for instance) so that you start with the same relative share in it as you did with the original.

In a way it would even be a good thing as Bitcoin itself is increasingly dated technologically, but is dominant because of its market positioning - which makes it difficult to change. If its market positioning was damaged, we could see the rise of an improved successor.

[donjoy]

Besides double spending attack they can also censor certain transactions not allowing them to be confirmed.

[sine]

Ethereum and Bitcoin mining work like this:

Take a freshly baked pie, and give half of it away for a suggested donation of $1 USD to the first 10 people who show up.

Now split the last half of the pie into smaller chunks and slowly give out bread crumbs to new "miners" with the requirement they spend large amounts of capital on exceedingly inefficient number guessing machines in order to win the lottery of "mining" more crumbs.

  Satoshi Nakamoto
  Thu Jan 8 14:27:40 EST 2009
  I made the proof-of-work difficulty ridiculously easy to 
  start with, so for a little while in the beginning a 
  typical PC will be able to generate coins in just a few 
  hours. It'll get a lot harder when competition makes the 
  automatic adjustment drive up the difficulty.

  first 4 years: 10,500,000 coins
  next 4 years: 5,250,000 coins
  next 4 years: 2,625,000 coins
  next 4 years: 1,312,500 coins

The 10,000 BTC pizza is a case study in how Satoshi designed the supply to rapidly dump very cheaply before other users were able to discover the network, by that time and later new users not only need to spend more to mine but less coins are produced for a correct lottery number.

  In economics, the Gini coefficient is the standard measure 
  of how inequitable a society is. This is tricky to 
  determine for Bitcoin, as it's not quiet a "society" in 
  the Gini sense, one person may have multiple addresses and 
  many addresses have been used only once or a few times. 
  (The commonly-cited figure of 0.88 is based on one small 
  exchange in 2011.) However, a Citigroup analysis from 
  early 2014 notes: "47 individuals hold about 30 percent, 
  another 900 a further 20 percent, the next 10,000 about 
  25% and another million about 20%"; and distribution 
  "looks much like the distribution of wealth in North Korea 
  and makes China's and even the US' wealth distribution 
  look like that of a workers' paradise

  Dorit Ron and Adi Shamir found in a 2012 study that only 
  22% of then-existing Bitcoins were in circulation at all, 
  there were a total of 75 active users or businesses with 
  any kind of volume, one (unidentified) user owned a 
  quarter of all Bitcoins in existence, and one large owner 
  was trying to hide their pile by moving it around in 
  thousands of smaller transactions. (Shamir is one of the 
  most renowned cryptographers in the world and the "S" in 
  "RSA encryption")"

Ethereum:

  Presale ICO / Premine ( max cost $0.50 USD per ETH  )
  = 72,009,990 ETH
  
  Total Supply today (Feb 23rd 2018)
   = 97,800,000 ETH

  Source:
  https://etherscan.io/stat/supply

[bhouston]

Central banks are in the business of market manipulation via interest rates, and money supply. This is to control growth and inflation so that business cycles are smoothed out to a degree.

[Cthulhu_]

Central banks are however beholden to national and international laws, governmental scrutiny, and the international financial market. Yes they can - and do - manipulate the markets on an unfathomable scale, but it's to enable and protect national and international economies, instead of optimising for quick wins and personal gain.

[TangoTrotFox]

And it's a good thing that the international financial market and governments are not driven by self interest... Decisions like quantitative easing completely distort our economy and more importantly benefit a certain group of individuals and hurt another. To imagine that these considerations are put aside by those involved in these decisions is unreasonable.

I mean I don't understand the cognitive dissonance here. In nearly every action our government carries out we can see the behind the scenes motivations which tend to be appeal to special interests. And here you are straight faced arguing that because quantitative easing is done by government (and financial markets) it's somehow above the notion of quick wins and personal gain. This is illogical.

[mamon]

The problem with that approach is that market cycles serve important purpose: they faciliate best allocation of our resources by ensuring that inefficient companies will go bankrupt. Smoothing those cycles out enables poorly managed companies to stay in business for way too long. Then, since there's a limit to a market manipulation that central banks can do we end up with one huge crisis, like Great Depression, or 2008 housing buble, instead of series of small ones.

[ufo]

This austrian-style economic thinking about market cycles lines up with bitcoin ideology but is far from being accepted in mainstream economcs. It is flimsy pseudoscience.

[TangoTrotFox]

Appeals to authority are generally not great, but this is made even more bizarre given that our current economic systems seem to be teetering on a precipice. Think about how truly desperate we are when we need to resort to quantitative easing, zero interest rates, and even flirting with negative interest rates - just to desperately try to maintain the status quo.

This doesn't mean any alternative is better, but rather that trying to refute alternatives by appeals to authority is an even worse idea than it usually is. And it's usually already an awful idea!

[frockington]

Europe did even more than flirt with negative interest rates and yesterdays reports proved the negative outcome of that experiment

[s73v3r_]

Plenty of poorly managed companies are still able to stay in business despite economic downturns because they have inertia.

Not to mention that, businesses going under means people without jobs. Lots of businesses going under at the same time means lots of people without jobs, and fewer companies able to take them on. That's a bad thing, no matter how you slice it.

[api]

Inefficient and poorly run things die in down cycles but so do new things and innovative things. Efforts to innovate must usually burn money for a long time and are more vulnerable to downturns since in downturns people become more conservative.

[whataretensors]

Not to mention steal money from the public with QE.

[wcarron]

It's interesting that bitcoin (and crypto maximalists in general) repeatedly harp on and attack QE as if it was the end of democracy itself.

QE is just another tool for monetary policy designed to combat deflation and increase available capital supply as a stimulus measure. Because QE belongs to the school of thought that the economy is driven by consumer spending as opposed to consumer savings.

Could you please elaborate on what you mean by: > steal money from the public with QE ?

[whataretensors]

Sure. QE is buying stock with printed money, inflating stock prices. People with lots of stocks get inflated value. When the inflated value leaves the stock market, it has an effect of deflating the value of the USD. It's a slow inflationary method of distributing public funds to the rich in the stock market, while creating market manipulation tools to coerce stock-driven companies into essentially being proxy government entities, since a large percentage of their value can be decided with 'monetary policy'(leading to things like google's pentagon drone ai collaboration).

I also believe SV companies are lining up to IPO because of this blank check.

[wcarron]

First off (but probably inconsequential), why do you put "monetary policy" in quotations? Monetary policy is literally an Econ 101 term.

But also: A large percentage of any public companies' value can be decided by monetary policy, in the sense a companies value can be decided by inflation or deflation. Monetary policy is just an official term for central bank decisions to influence the supply of money and credit in an economy.

> When the inflated value leaves the stock market, it has an effect of deflating the value of the USD

If you're trying to argue that QE is bad because inflation is bad and people participate in profit taking, you'll need to get over that. What would you like to do? Ban the sale of stocks by persons over a certain net-worth?

> while creating market manipulation tools to coerce stock-driven companies

What, pray tell, are these tools? You know, besides creating mild inflation and some influence on interest rates?

Additionally, you seem to have forgotten that an explicit goal of QE is to lower interest rates, allowing everyone, not just the rich, easier access to capital in order to stimulate the economy. QE demonstratively does not solely redistribute more wealth to the wealthy.

Furthermore, your entire premise is shaky, considering the most prominent historical example (the US recession) mostly consisted of the Fed purchasing $4.5 trillion of mortgage-backed securities.

It's really not exactly "making money out of thin air" considering the Fed purchased securities pegged to a real good/service, mortgages.

Lastly, SV IPOs weren't exactly popular last year. Nor in 2016 or 2015.

[CryptoPunk]

QE extracts wealth from the public through seignorage, and redistributes it to private parties.

[staplers]

Never get in the way of web devs inflated egos when they're ranting about things which are vastly outside their scope of expertise. Bitcoin is a trigger word for the HN community and unless you're using every big word to insinuate it's a scam, then you'll get downvoted/ridiculed.

You're absolutely right by the way, libor rates have been rigged for decades and governments simply "fine" companies doing it. A simple google search will bring up sources for this claim.

[the_mitsuhiko]

QE is announced and done by central banks. It’s their job to do that. I don’t see how that is arbitrary.