Author Topic: A Key Insight  (Read 1788 times)

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J_Smithy

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A Key Insight
« on: June 16, 2015, 05:05:19 PM »
Not sure where to put this but not only do I think Travis did a good job on this article but I think it brings up a key insight of Nash's that I was unable to explain but certain observed.

http://www.coindesk.com/did-john-nash-help-invent-bitcoin/
https://diginomics.com/did-john-nash-help-invent-bitcoin/

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In a paper published in the Southern Economic Journal, Nash described a nonpolitical value standard for comparisons of value, asserting that an industrial consumption price index could be “appropriately readjusted depending on how patterns of international trade would actually evolve”. Moreover, Nash described how actors that were in control of this standard could corrupt this continuity, yet the probability of damages through corruption would be as small as politicians who alter the measurements of meters and kilometers.

Within the bitcoin network, the mining difficulty index, which can be viewed as a type of consumption index, is intelligently adjusted based on a regulatory algorithm which assigns the difficulty at a rate where new blocks are mined every 10 minutes, on average. Further, authorities of the bitcoin network (51% mining pools) could corrupt the standard of non-double spending, yet doing so would be an attempt to alter the calculation of transactions while not honoring their own incentive to remain an honest mining participant.

The bitcoin whitepaper itself describes how such an authority would choose to ensure the integrity of this transaction standard as doing otherwise would devalue their own authority position in the mining network.

The nonpolitical industrial consumption price index Nash described in his 2002 paper is represented by the bitcoin network’s intelligent design towards regulating mining consumption power and readjusting the difficulty and block rewards accordingly.

Given that the bitcoin network is inherently regulated by an algorithm which adjusts the consumption index to an average of 10 minutes, could it be argued that the standard unit of measurement is time itself?

The above observation is interesting when compared to some obscure paragraphs from a different version of "Ideal Money":

Quote from: Ideal Money
“It seems possible and not unlikely, however, that if two states evolve towards having currencies or more stable value as measured locally by national CPI indices that then also these distinct currencies would tend to evolve towards more stable comparative relations of value.

Then the limiting or “asymptotic” result of such an evolutionary trend would be in effect “ideal money” but this as a result achieved without the adoption of anything like an ICPI index as a basis for the standard of value.”


J_Smithy

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Re: A Key Insight
« Reply #1 on: June 16, 2015, 05:10:36 PM »
The meeting of the minds comes from Travis' observation...:

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Given that the bitcoin network is inherently regulated by an algorithm which adjusts the consumption index to an average of 10 minutes, could it be argued that the standard unit of measurement is time itself?

...and the end of my writing where the quote from Ideal Money lies:

https://thewealthofchips.wordpress.com/2014/12/01/securing-decentralization-through-nash-equilibria/

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It might be difficult to project beyond this but one can expect a certain form of standardized unit of currency in the near future as well as a new formula for a type of “economic velocity”.

With Time and Velocity being part of the same function in this sense everything becomes quite relatable and I do believe a new type of metric arises.  Their are ramification, but without going into them it seems that this is only the beginning of a new perspective which only a select few seem to have shared for some time in this world/society.

J_Smithy

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Re: A Key Insight
« Reply #2 on: June 18, 2015, 07:49:02 PM »
I have in the past felt that this quote, and a especially the bold:

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    So here is the possibility of “asymptotically ideal money”. Starting with the idea of value stabilization in relation to a domestic price index associated with the territory of one state, beyond that there is the natural and logical concept of internationally based value comparisons.
    The currencies being compared, like now the euro, the dollar, the yen, the pound, the swiss franc, the swedish kronor, etc. can be viewed with critical eyes by their users and by those who maybe have the option of whether or not or how to use one of them. This can lead to pressure for good quality and consequently for a lessened rate of inflationary deprecation in value.
...refered to bitcoin's price in relation to the USD possibly because it is the world currency reserve. But with the insight from Travis' article is suggests rather the true stabilization is in relation to the mining costs of production vs the demand...

This observation seems quite significant.

Travis Patron

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Re: A Key Insight
« Reply #3 on: June 23, 2015, 01:44:57 PM »
I have in the past felt that this quote, and a especially the bold:

Quote
    So here is the possibility of “asymptotically ideal money”. Starting with the idea of value stabilization in relation to a domestic price index associated with the territory of one state, beyond that there is the natural and logical concept of internationally based value comparisons.
    The currencies being compared, like now the euro, the dollar, the yen, the pound, the swiss franc, the swedish kronor, etc. can be viewed with critical eyes by their users and by those who maybe have the option of whether or not or how to use one of them. This can lead to pressure for good quality and consequently for a lessened rate of inflationary deprecation in value.
...refered to bitcoin's price in relation to the USD possibly because it is the world currency reserve. But with the insight from Travis' article is suggests rather the true stabilization is in relation to the mining costs of production vs the demand...

This observation seems quite significant.

This is precisely what I was aiming to articulate with the article.

The key insight is that the non-political industrial consumption index Nash would describe, is the mining costs of production vs demand in the bitcoin network. Although the USD is useful for speculators, the best measure of value of bitcoin is really the hashing power - something which is increasing exponentially.


If hashing power could be seen as the key factor behind the industrial consumption index, and a bitcoin node can be run from essentially anywhere in the world, could it be argued that bitcoin as a money system may solve the Triffin delimma?

J_Smithy

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Re: A Key Insight
« Reply #4 on: June 23, 2015, 02:27:46 PM »
To me its as if Nash teaches and lays the ground for the suggestion and invention of exactly what you point out:

These particular quotes from ideal money:
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    The long-term trend of the value of any index of prices will depend, sometimes predictably on the choice of the composition of that index.

    It is a coincidental fact that the inherent nature of mining and mining technology makes it possible for the prices of certain commodities that are produced as a result of the devotion of labor and capital to the effort of mining to increase less (or decrease more) than might be expected.  There is a “dimension paradox”: Agricultural products are produced by using the two-dimensional resource of the earth surface, so the “disappearing frontier” creates a limitation. In contrast, some mining, particularly for elemental metals, can essentially be done in three dimensions, although, of course, there are increasing costs for deep digging.

    If we then consider which commodities would be optimally suitable for providing a basis for a means of transferring utility, and if we specifically consider the possibility that the trading partners may be located in different nations and perhaps on different continents, than the suitability of such commodities with regard to the ideal function of facilitating utility transfer depends on the extent to which such a commodity seems to have a value independent of its geographical location.

    Clearly, in terms of this geographical perspective, gold has historically been optimal, largely because the labor cost of moving it over great distances is so small relative to the value of what is being transported.  Thus, gold formed a very efficiently movable medium for the transportation of a value exchangeable for other values, ultimately deriving, in one way or another, from human labor (with the achievements of warriors here also being viewed as involving labor).

    Nowadays, however, few would propose a return to the actual use of simply the metal gold as a standard, for the following reasons.
    (i) The cost of mining gold effectively does depend on the technology. Recent cyanide leaching techniques have made it possible again to profitability mind gold at formerly abandoned sites in the U.S. so that it is now a big producer.  However, the unpredictability of the cost is a negative factor.
    (ii) The location of potential gold-mining locations may not be “politically appealing.” so it would seem undesirable to make a political choice to enhance the economic importance of those particular areas.
    (iii) There is some negative psychology about gold such tat even if it were the most logical choice after all, the unpopularity of the idea could be very obstructive.

    However, right now platinum would be even better than gold, because it has more value per unit of weight.

    Crude petroleum could also be used for barter transactions, and in view of the present state of the global economy it would seem a proper component of an index of prices of internationally traded commodities that enter into the costs of industrial consumption.

I think you have brought about the need for a 2nd prt, and I don't think it should suggest that bitcoin solves the Triffin dilemma but rather "Does bitcoin solve the triffin dilemma?" should be the theme. Truly I think in the end we will understand that bitcoin is the "asymptotic" solution, or the implementation of how to get from a not ideal economy with not ideal money, to an ever increasingly more  ideal economy and ideal money.

It's a terrible way I am wording it, but the above quotes mixed with how you are phrasing things, to me is the most significant revelation/revolution going on today.

On a side note, people brush and breeze through Nash's words as if he doesn't have a history of genius and creative solutions that take years and years to understand.  Here in the above quotes he hasn't proposed anything intelligible yet, but rather he perfectly outlines something that COULD fit around his description of what could or couldn't be.  We have the advantage here of me piecing together the relevant clips from different lectures and papers titled "ideal money".
« Last Edit: June 23, 2015, 02:29:59 PM by J_Smithy »

J_Smithy

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Re: A Key Insight
« Reply #5 on: June 24, 2015, 02:39:54 AM »
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If hashing power could be seen as the key factor behind the industrial consumption index
^This occurs to me that this is something completely describable by math.

Nash also talks about the different casual effects of different paradigms of "consumption" vs production:
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    It is a coincidental fact that the inherent nature of mining and mining technology makes it possible for the prices of certain commodities that are produced as a result of the devotion of labor and capital to the effort of mining to increase less (or decrease more) than might be expected.  There is a “dimension paradox”: Agricultural products are produced by using the two-dimensional resource of the earth surface, so the “disappearing frontier” creates a limitation. In contrast, some mining, particularly for elemental metals, can essentially be done in three dimensions, although, of course, there are increasing costs for deep digging.

The above too, can be formalized into maths, this time by Szabo:
http://unenumerated.blogspot.ca/2014/10/transportation-divergence-and.html#links
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Metcalfe's Law states that a value of a network is proportional to the square of the number of its nodes.  In an area where good soils, mines, and forests are randomly distributed, the number of nodes valuable to an industrial economy is proportional to the area encompassed.  The number of such nodes that can be economically accessed is an inverse square of the cost per mile of transportation.  Combine this  with Metcalfe's Law and we reach a dramatic but solid mathematical conclusion: the potential value of a land transportation network is the inverse fourth power of the cost of that transportation. A reduction in transportation costs in a trade network by a factor of two increases the potential value of that network by a factor of sixteen. While a power of exactly 4.0 will usually be too high, due to redundancies, this does show how the cost of transportation can have a radical nonlinear impact on the value of the trade networks it enables.  This formalizes Adam Smith's observations: the division of labor (and thus value of an economy) increases with the extent of the market, and the extent of the market is heavily influenced by transportation costs (as he extensively discussed in his Wealth of Nations).

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and a bitcoin node can be run from essentially anywhere in the world,...
Its interesting and relevant that Nash' points out:
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    If we then consider which commodities would be optimally suitable for providing a basis for a means of transferring utility, and if we specifically consider the possibility that the trading partners may be located in different nations and perhaps on different continents, than the suitability of such commodities with regard to the ideal function of facilitating utility transfer depends on the extent to which such a commodity seems to have a value independent of its geographical location.

Then there really seems to be a solid connection to be pointed out here, and something quite describable as maths.




J_Smithy

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Re: A Key Insight
« Reply #6 on: July 03, 2015, 09:17:43 PM »
Here is a key and relevant tweet from szabo:

Labor may or may not be valuable, but in context can be a good proxy measure of value: http://unenumerated.blogspot.ca/2011/06/of-wages-and-money-cost-as-proxy.html

I don't have time to go into it and pick it chop it up and glue it together, but we have laid out here a perfect bridge for bitcoin as a standard I think.

Basically you need to have a standard for printing money that is both somewhat predictable in price and incorruptible.  Nash outlines all the reason why the popular choices are good and why they are bad, and goes on to discuss exactly what is needed and why.

So explainable when you look at the pyramids and think about the "cost of labor" but also the precision and speed.

Anyways I'll be around to add more to this, soon :)

eBlob

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Re: A Key Insight
« Reply #7 on: September 15, 2015, 02:14:27 PM »
The meeting of the minds comes from Travis' observation...:

Quote
Given that the bitcoin network is inherently regulated by an algorithm which adjusts the consumption index to an average of 10 minutes, could it be argued that the standard unit of measurement is time itself?

...and the end of my writing where the quote from Ideal Money lies:

https://thewealthofchips.wordpress.com/2014/12/01/securing-decentralization-through-nash-equilibria/

Quote
It might be difficult to project beyond this but one can expect a certain form of standardized unit of currency in the near future as well as a new formula for a type of “economic velocity”.

With Time and Velocity being part of the same function in this sense everything becomes quite relatable and I do believe a new type of metric arises.  Their are ramification, but without going into them it seems that this is only the beginning of a new perspective which only a select few seem to have shared for some time in this world/society.

Time is the ultimate form of money. Unable to be manipulated. Known scarcity. Easy to measure yet impossible to define.

Here is an interview with George Gilder when he talks briefly about the relationship between time as money and bitcoin's involvement as a new internet layer: https://www.youtube.com/watch?v=drbEqLIEI3M