Subject: Re: [Bitcoin-development] libzerocoin released, what about a zerocoin-only alt-coin with either-or mining

From: Jorge Timón <[email-masked]>
Date: Sat, 13 Jul 2013 11:51:14 +0200

I'm not sure I understand the whole proposal, but it seems to me that
having different characteristics, bitcoins and zerocoins would be
different currencies.
I don't see the need to peg zerocoins to bitcoins.
It is great to have an anonymous p2p currency, maybe some bitcoin
users that use bitcoin because of the transparency they allow (public
funds expenditures could be more transparent than they have ever been)
don't like this hard-fork. Well, maybe this is not the main reason,
but I think this could be highly controversial.
Maybe everybody likes it, but can you expand more on the
justifications to peg the two currencies?
If you're requiring one chain look at the othe for validations (miners
will have to validate both to mine btc) you don't need the cross-chain
contract, you can do it better.

Instead of doing this:

https://en.bitcoin.it/wiki/Contracts#Example_5:_Trading_across_chains

You could do something like this:

https://bitcointalk.org/index.php?topic=31643.0

This very idea has been proposed recently by othe people, but I can't
find where.

The problem with this is of course scalabilty. Once you do it for what
chain, why not the others?
You can't validate 100 chains to mine bitcoin even if they're all
merged mined: that's asking miners too much.
If zerocoin enjoys this privilege why not, for example?

As some of you may know, Mark Friedenbach and I are working on a
protocol modification to support issuance of arbitrary assets. Would
be something like colored coins but better, we're calling it
FreiMarkets. Of course these assets are not p2p like bitcoin or
freicoin themselves: they have a centralized issuer.
But if you allowed to sacrifice real bitcoins (as opposed to IOUs
denominated in BTC like you have, for example, in ripple) so they
appear in Freicoin's chain and turn them back, you could have p2p
bitcoins inside Freicoin's chain.
Maybe ripplers want that too. If FreiMarkets prove to work well on
freicoin and be scalable enough, maybe a lot of scamcoins apply the
hardfork too and they want to have p2p btc in their chain as well.

Maybe I could have explained this without even mentioning FreiMarkets,
but my point is that you're asking for a lot like it was nothing.
Zerocoin-bitcoin fungibility hardfork is opening a little pandora's
box. Are we ready?

I was waiting for others to comment and I'm surprised that no one else
has made any objection yet. But if no one's going to point out the
controvery that is so obvious to me, I feel almost like a
responsability to act like a Devil's advocate here.
So if you make bitcoin and zerocoin fungible, I want bitcoins to be
transferrable to freicoin's chain. And I warn you there will be many
more people asking for the same thing on other chains. What criteria
will we have to say yes or no?
More

On 7/12/13, Peter Todd <[email-masked]> wrote:
> On Fri, Jul 05, 2013 at 04:01:40PM +0200, Adam Back wrote:
>> Do people think that should work?  It seems to me it should with minimal,
>> bitcoin changes.  I think the rule for either-or mining should be as
>> simple
>> as skipping the value / double-spend validation of the blocks that are
>> zerocoin mining blocks.  Obviously zerocoin blocks can themselves end up
>> on
>> forks, that get resolved, but that fork resolution can perhaps be shared?
>>
>> (Because the fork resolution is simply to accept the longest fork).
>
> Yeah, there's been a lot of doom and gloom about zerocoin that is
> frankly unwarrented. For instance people seem to think it's impossible
> to make a blockchain with zerocoin due to the long time it takes to
> verify transactions, about 1.5 seconds, and never realize that
> verification can be parallelized.
>
> Anyway the way to do it is to get out of the model of large blocks and
> think about individual transactions. Make each transaction into its own
> block, and have each transaction refer to the previous one in history.
> (zerocoin is inherently linear due to the anonymity)
>
> Verification does *not* need to be done by every node on every
> transaction. Make the act of creating a transaction cost something and
> include the previous state of the accumulator as part of a transaction.
> Participants verify some subset of all transactions, and should they
> find fraud they broadcast a proof. Optionally, but highly recomended,
> make it profitable to find fraud, being careful to ensure that it's
> never profitable to create fraud then find it yourself.
>
> Anyway Bitcoin is limited to 7tx/s average so even without probabalistic
> verification it'd be perfectly acceptable to just limit transactions to
> one every few seconds provided you keep your "blocksize" down to one
> transaction so the rate isn't bursty. You're going to want to be
> cautious about bandwidth requirements anyway to make sure participants
> can stay anonymous.
>
> As you suggest creating zerocoins from provably sacrificing bitcoins is
> the correct approach. The consensus algorithm should be that you
> sacrifice zerocoins (specifically fractions there-of - note how I'm
> assuming support for non-single-zerocoin amounts) and whatever chain has
> the highest total sacrifice wins. One way to think about
> proof-of-sacrifice is it's really proof-of-work, transferred. It also
> has the *big* advantage that to double-spend, or for that matter 51% the
> chain, you have to outspend everyone with a stake in the viability of
> the blockchain: they can sacrifice their zerocoins to combat you. In the
> case of a double-spend to rip off an online merchant the total amount
> you could profit is the same as the total amount they would rationally
> spend to stop you, and soon there will be collateral damage too
> increasing the amount third-parties are willing to sacrifice to stop
> you. You can't win.
>
> Of course, this does mean that even unsuccesful sacrifices need to be
> costly. You can make this acceptable to users by allowing a sacrifice to
> be reused, but only for the exact same transaction it was originally
> committed to.
>
> Sacrifices in this manner are *not* proof of stake. You really are
> giving up something by publishing the information that proves you made
> the sacrifice as that information can always be included in the
> consensus thereby taking away a limited resource. (your zerocoins) It's
> more heavily dependent on jam-free networks, and doesn't play nice with
> SPV, but zero-knowledge proofs will may help the latter. (you've got
> Bitcoin itself to act as a random beacon remember)
>
> Speaking of, another similar approach is to take advantage of how a
> Bitcoin sacrifice can be made publicly visible. Create a txout of some
> value like the following:
>
>     OP_RETURN <prev-ztc-blockhash> <blockhash> <ztc-created>
>
> Now even if you fail to publish your blocks, at least the whole world
> knows how much they need to outspend to be sure you can't 51% attack the
> network. This approach and not-btc sacrifices can go hand in hand too,
> especially if nodes follow rules where they consider btc txout
> sacrifices as "fixed" and only subject to change by the bitcoin
> blockchain re-organizing. Advantages and disadvantages to both
> approaches. (remember that visible tx's can be censored by miners)
>
> Sacrifice to mining fees may be acceptable in the future too, but only
> if OP_DEPTH is implemented so as to not give Bitcoin miners bad
> incentives. (the sacrificed coins should go to fees *months* or even
> *years* after they have been sacrificed)
>
> Turning zerocoins back into Bitcoins is just supply and demand: sell
> them. You'll always lose a bit given by definition the maximum exchange
> rate is 1:1, but anonymity may be worth it. Others have written about
> cross-chain trading protocols, and I'll point out they are easier to
> implement if one chain has full visibility into what's happening on the
> other; zerocoin is most likely to be implemented as an extension to the
> bitcoin client itself.
>
> Finally if the transaction rate is too slow there's nothing wrong with
> running multiple parallel zerocoin blockchains, although given the
> usecase of moving your funds through zerocoin for anonymity, and using
> the clean coins that come out the other side, there's no reason to think
> the zerocoin chain transaction rate needs to be especially high anyway.
>
> --
> 'peter'[:-1]@petertodd.org
> 0000000000000013b2f7ee77027f583b765ad9811dfe3d0adc801e295fd9acdf
>

-- 
Jorge Timón

http://freico.in/