Ever since monarchies fell to the collective idea that citizenship and voting rights should belong to every individual, decision making has been constrained by a lack of long term thinking and rational irrationality. Of course, monarchy had it’s own drawbacks. Your sovereign can suddenly die and a power struggle between heirs can ensue. Every once in a while, the individual who comes to power might become a tyrant, insane, or incompetent.

These issues are usually what leads to the transformation into some form of democracy. Democracy, however, comes with a couple of insurmountable problems.

  1. Rational ignorance
  2. Rational irrationality
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Rational ignorance describes the incentives structure for people to even know about or understand the problems which face society collectively. In a democracy, individuals’ ability to change which decisions are made in regards to these problems are infinitesimally small. Additionally, knowing about, much less understanding, these problems is quite expensive. It requires research and thought, both of which take a great amount of time. So when the vast majority of people in a democracy vote, they do so almost completely ignorantly. …

“Users give value to frozen concentrated orange juice”

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Frozen Concentrated Orange Juice

I, the user, am a sovereign individual. All evaluations are in my, and other users, control and we determine that which is and is not valuable. There are no forces which act upon us by which this evaluation is determined. We deign to value frozen concentrated orange juice, and that act, alone, is what gives frozen concentrated orange juice its value…

This is nonsense.

Value is an ordinal placement in a prioritized list of ends. You give value to your ends when you place them in that list. Goods, however, are not ends. Frozen concentrated orange juice is a means. It is up to you to determine if it’s capable of meeting one of your ends better than, say, frozen concentrated grape juice. This ability to meet ends is called utility, but to determine which means you employ, you weigh the objective costs and utility of the alternatives. …

The NPC (Non player character) meme has recently come to internet fame as a way of disparaging people who seem to have nothing new to offer to a conversation, generally about politics, and speak about subjects as if they were dialog trees which were just responses programmed into them. While the most frequent occurrences of the NPC come from certain sections of the political spectrum, the level designers have still populated our simulation with NPCs of many different ideologies.

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Players often find themselves going down the same paths of these dialog trees multiple times with multiple different characters, and sometimes even with the same character. This certainly can be annoying for players, but let us consider why these NPCs have decided to go away from their keyboard and just run scripts for situations where they run into players discussing politics. …

Have you ever wondered why banks have marble floors? You walk in, the place is decked out with fancy columns and marble everywhere. Do you value that? Your goal is to spend as little time as possible at the bank to perform some transaction, does the interior matter THAT much? You know you’re paying more for that, right? That bank has to pay for the marble floors, and to do so, they must make money. So you pay more interest on your Mortgage, or get a smaller amount of interest on your savings account.

Why then does this exist in a competitive market? What would make this investment in marble floors profitable? It comes from the bank trying to signal to you their type. “Hi, I’m the good bank. I’m the only type of bank that would find it profitable to invest in lots of marble that it will take me time to repay, which means I expect to be around for a long…

Suspend your disbelief for a moment, and postulate that miners don’t actually control the blockchain regardless of what non-mining fully validating nodes say they would like the protocol rule set to be by broadcasting their node version. Imagine instead that full nodes are able to successfully constrain miners. These apparently provide miners information about the consensus of what rules are supported by the “economic majority”.

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The problem is you can’t actually tell which full nodes represent which coins unless each node broadcasts a signed message from their private keys holding their coins. Furthermore, one of the reasons for running a full node is to protect your privacy, which signing a message with your addresses and broadcasting through your full node would destroy. As anybody who has studied public choice theory when it comes to voting knows, voting is nearly worthless except as a psychological benefit and social conformity signal, both of which are most likely trumped by financial privacy. …

Recently, the St Louis Fed has entered crypto news stating that Bitcoin and government backed currencies have no intrinsic value. This is supposed to be in contrast to things like commodities, but this contrast doesn’t exist. To show why, let me first explain what the fed means by intrinsic value.

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It’s easy to informally say that you value your red car with a cup holder, but that’s not quite right. You value being able to quench thirst on your way to your desired destination, plus whatever reputational benefits and excitement is achieved by owning a red car. …

I try to bring to all my articles the principle of charity, taking the best arguments my opponents have to offer, and strive to never straw man them. I often do this by taking the points they argue for as given, and then go behind their front lines, and looking for non-obvious ways that their arguments still fail. …

It’s been said “Not your private key, not your Bitcoin. Not your node, not Bitcoin”. The theory goes like this. If you aren’t running a fully validating node to verify your own transactions, then you can’t know if you are transacting on the chain you intend to. Running a full node “guarantees” that you are securely transacting according to the exact rules that you desire.

Let’s see how close we can get to the security of a full node without running one. …

In the Bitcoin protocol, only 21 Million Bitcoin will ever be created because the reward for mining blocks halves every 210,000 blocks. This reduction of miner incentives has some worried that if block space isn’t artificially limited, then when the block reward is too small a race to the bottom will occur as miners clear out the mempool of all available transactions in order to claim the maximum amount of fees.

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Bitcoin schedule for miner reward

This analysis does not however reflect the true power that miners collectively have over the block reward. Even without a block size limit, miners can enforce any fee or mempool based validations they can agree upon. Using a mechanism similar to how hashing difficulty is set, miners can vote using something like bit-4 signaling for what the minimum fee that must be paid by a transaction is. If any block is mined which includes a transaction that has a fee paid less than the required minimum, then much like a block mined with not enough proof of work, the other miners will ignore that block. …

Bitcoin-accepting merchants want to receive payment and provide services instantly. However, block construction times can be as much as 10 minutes after the moment a bitcoin transaction is broadcast. In the time after a transaction but before a block’s creation, that transaction can be superseded by another transaction with a larger fee paid to miners.

With the change in the mempool protocol from first-seen-first-included and the rejection of conflicting double spends, to the inclusion of double spends and prioritizing transactions with larger fees attached, 0-conf transactions can no longer be reasonably secure for any sized transaction.

The idea of replace-by-fee was that miners will follow their immediate self-interest, and assuming that most of them wouldn’t act that way could potentially decrease trust in the system. Now that this approach has been assumed and is the default behavior of miner software, we might consider amending the protocol by building off this assumption. …


Sam Armstrong

Software Engineer @Go figure it out if you want to

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