[Cryptography] On Security Architecture, The Panopticon, And "The Law"

ianG iang at iang.org
Fri Dec 27 03:25:14 EST 2013


On 27/12/13 00:11 AM, Natanael wrote:
> Why do you think Bitcoin is a ponzi? It rather mimics the mining process
> of precious metals in digital form. (There is also no need for it to go
> up and up forever. And I'd like to note that I actually have bought
> things with them.)


Getting somewhat off-scope here, but Bitcoin is now the bleeding edge of 
cryptography, so important to understand *the business model* as well as 
the technical stuff.  You can't do technical security without a business 
model.



Ponzis, pyramids and bubbles generally offer a better rate of return 
than is natural.  They feed on this 'great rate of return' by using 
their customers to bring in more customers, which in the long run 
creates the great rate of return.

They cannot go for ever up or even continue in operations.  The limit is 
how many new customers can come in to pump up the value of the insiders, 
which is something that can be estimated.

Bitcoin matches all these core requirements.  As a symptom, also, there 
is often unrealistic hype surrounding these things.



Where ponzis / pyramids differ from bubbles is that the former two have 
a person or few people behind them, early winners, whereas the bubbles 
tend to have more of a real underlying asset (real estate or stock market).

This also matches bitcoin:  the early miners are stockpiling their early 
buckets, and they are worth a fortune at today's price.  Perhaps we 
don't know who they are;  but they exist, and the blockchain tells us 
how much the early insiders have.

When the price crashes, people are not left with any asset at all. 
Whereas with a real estate bubble, people are left with the land, 
regardless of the price (leaving aside mortgage issues...).



So, if you want to model Bitcoin as a pyramid or a ponzi, it's possible. 
  To a great extent the differences are just semantic arguments or legal 
bla bla.

Whether this makes you upset is really your own emotional issues.  It is 
to be noted (and frequently noted by Bitcoin enthusiasts) that the 
governments run their own pyramid schemes called pension schemes, and 
also the recent wall street bubbles have insiders as well:  wall street 
itself.  And the USG runs a system called the USD which has been 
artificially pumped up by its use as the world trade currency;  a game 
that stopped in or around 2000, and has been lsoing a percent or so of 
dominance every year since then.

And and and...  Be careful to separate economics from excuses & emotions :)


> And regarding Ripple,  that system relies entirely on mutual trust in
> between a set of servers. It can not scale and at the same time ensure a
> high level of (well founded) trust. It's a weird form of web of trust,
> where the users have very little say in the process.


Yes, I agree.  Such systems have a sustainability problem.  The trust 
model is very important for long term sustainability.  Unfortunately, 
trust models are often too complex to understand easily or too 
simplistic to work, a good trust model is hard work.  Examples of both 
available on request, but I need you to trust me with some hard currency 
first...



As to the rest of the combined posters' comments -- as the business 
model that you are trying to solve is unclear, it is difficult to ground 
a solution...



iang



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