[Cryptography] Bitcoin is a disaster.

jrzx jrzx at protonmail.ch
Fri Jan 1 14:35:57 EST 2021


On 2020-12-29 11:07, Ray Dillinger wrote:
> The scarcity of block chain space has led people to re-invent every
> last feature of the banks they thought they were going to be escaping.
> Including debt brokering (lightning network) and fractional-reserve
> banking, starting with the case of Mt.Gox and continuing to ventures
> today by "responsible" businesspeople who just don't get, or don't
> care, or both, that the entire reason the system existed, as far as the
> early adopters were concerned, was to get away from exactly that.

A public and analyzable blockchain is in fact useful, (though proof or work is inherently wasteful) because people ultimately want to be able to prove that they paid, and because cryptographic cleverness to avoid blockchain analysis eats up a lot of inherently scarce blockchain space.

We need a lightning layer on top to support real pseudonymity, to economize on inherently scarce blockchain space, and to provide instant transactions.
Unfortunately the bitcoin architecture makes a real lightning network impossible, and the so called bitcoin lightning layer is recapitulating central banking and fractional reserve banking.  We need to recapitulate full reserve correspondence banking instead, to provide real security of lightning layer transactions and to provide real anonymity.

Clever cryptography to avoid analysis of the blockchain (Monaro) merely reduces, rather than eliminates, the blockchain analysis problem, and the trouble is that any time you use a network whose primary job is to provide anonymity, you leave a trail on the equally evil DNS revealing that someone traceable through DNS has made an effort to avoid being traced.

We need a crypto currency that has, like Jitsi and Namecoin, a name system that replaces DNS, a replacement for TCP/QUIK that uses that name system instead of the domain system, and a lightning network that means that anyone can do full reserve correspondence banking with anyone without any information the ultimate beneficiary of payment is being visible to intermediaries or the blockchain.

We don't need clever cryptography to support pseudonymity on the blockchain.  We need clever cryptography on the blockchain to enable clever cryptography on the lightning layers that enables anyone with a full reserve to play on the lighting layer without signing up with anyone other than direct intermediaries, and without revealing the ultimate beneficiary of a payment on the lighting layer.

Proof of stake is inherently tricky, because anything that reduces the cost of finding the next block makes attacks cheaper.  It requires a protocol that detects Byzantine failure and disincetivises Byzantine defection, which are well known to be soluble but very difficult problems. But obviously, we need to have the cheapest possible way of finding the next block.

A proof of stake algorithm requires a protocol akin to Byzantine Paxos, in which stakeholders act not so much as shareholders voting an board, but as witnesses that final block was generated without Byzantine failure in accordance with the consensus of the chain as to how the next block should be constructed.


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