[Cryptography] What is or isn't Bitcoin

[ianG]

On 15/12/13 14:21 PM, Ben Laurie wrote:
> On 14 December 2013 00:10, Greg <greg at kinostudios.com> wrote:

>> Decentralized: there is no central authority controlling all the names
>
> As I pointed out elsewhere, Bitcoin (and hence Namecoin) is not
> decentralised: http://www.links.org/files/decentralised-currencies.pdf.


I wrote similar musings in
http://iang.org/papers/BitcoinBreachesGreshamsLaw.pdf

I don't disagree, but the devil is in the details.  As I mentioned in my 
recent talk at Afrikoin, the economics never lies.  The problem is that 
we might apply the wrong economics, and it will only reveal itself to be 
right or wrong well after the fact.

Your analysis gets somewhat caught up in the definition of decentralised 
as being some sort of binary property, when in reality 
(de)centralisation is more of a comparison between different solutions 
along an axis of more or less (de)centralisation.  Proving something as 
decentralised per se isn't going to work, showing that Bitcoin is more 
decentralised than say USD is more likely.

Also, the argument fails to account for stickiness and transaction 
costs.  The group is sticky, in part because the only ones interested 
are the ones holding the value.  The same argument can be made for USD, 
those holding the value are more interested in preserving the group.

Yes, the group can move.  A good movie is the "The Counterfeiters" a 
german movie about concentration camp inmates being used to 'enter' the 
group that subscribed to the value of the British Pound.  But because of 
the various transaction costs, the group cannot easily move so fast that 
the value just collapses without redemption.

(The counterpoint to this observation is that Bitcoin is frequently seen 
as a Ponzi or bubble.  Those operations migrate their groups as they 
feed on their value, and will burst at some point when the group has 
migrated too far, and consumed too much value.  Right now, the group is 
migrating to China...)


iang

[1] http://www.rottentomatoes.com/m/the_counterfeiters_2007/
Also good to see hints about the Sabotage Manual in action...