[Cryptography] Zimbabwean Bitcoin, was Re: Shorting Bitcoin

[Henry Baker]

At 10:49 AM 12/9/2017, John Levine wrote:
>In article <E1eNfIJ-000FVk-E1 at elasmtp-mealy.atl.sa.earthlink.net> you write:
>>At 08:08 AM 12/4/2017, John Levine wrote:
>>>But that's not how shorting works.
>>
>>Yes, I know how shorting works -- currently.
>>
>>But the whole point of cryptocurrencies is that they don't have to mimic every feature (or bug) in current currency systems. ...
>>But standard physics provides at least one example where "negative" (anti) particles work, so there is hope for currency systems which incorporate "short" positions naturally.
>
>I have to say, I couldn't ask for a better example of "blockchains are magic."
>
>Real world markets have all those complex rules about naked short sales not because they don't know how to make negative ledger entries, but to prevent market manipulation and outright fraud.
>
>Market manipulation is from selling fake shares to try to depress the price before you buy from suckers to cover, the outright fraud is when someone tries to collect the shares you sold that don't exist and you don't have them.
>
>That's why you have to borrow any shares you short (and pay the real owner interest) so the shares you sell are real.
>
>It's also way your broker and regulators have margin rules so when it's time to collect on a short sale or short futures position, you have enough to pay what you owe.
>
>Every intro to Bitcoin seems to have a mandatory slide of a 100 trillion Zimbabwean dollar note, and a pompous explanation of how that can never happen to Bitcoin.
>
>Remember that your Bitcoin wallet doesn't actually have a balance; the balance you see is just the sum of all the its transactions.
>
>One of the rules computing that sum is that the inputs to each transaction have to be at least as much as the outputs.
>
>But let's wave our hands and now we have positronic Bitcoins.

"Naked" shorting is only illegal for the unwashed masses.  Govt's, banks, brokerage firms, do it all the time.

Why do you think there is more "gold" and "silver" circulating than has ever been refined -- perhaps by orders of magnitude?  That's why so many people get nervous when someone -- e.g., Putin -- decides he's going to take physical possession of all of his "gold".  If Putin takes all his (golden) marbles home, the entire house of cards collapses.

Every once in a while, the sh*t hits the fan, and even these naked creeps get caught.

There was a high quality firm which was so boring that its stock was quite thinly traded.  Someone with a relatively small long position took their stock out of their brokerage account and put it into certificate form and the stock's price exploded.

Founders of companies should do this from time to time to see who's been swimming naked (to use Buffett's phrase.)  The usual suspects are the founders' own brokerage firms!

WRT quantum bitcoins:

Chemistry reactions "borrow" electrons, energy, etc., all the time.  There're always pair creation/pair destruction going on, so "impossible" reactions can happen if the potential barriers are lowered enough.  Just like an Olympic pole vaulter's center-of-gravity never actually makes it *over* the bar, the "impossible" reaction somehow manages to happen.