12.02.2017

China has hacked Bitcoin, the solution is "Trust Level"

How has China destroyed bitcoin?  They attacked bitcoin in it's achilles heel; exchanges.  Whether or not you use exchanges is irrelevant.  The exchanges dictate the market price of all cryptocurrencies.  All cryptocurrencies are susceptible to an attack on exchanges.

How has China killed cryptocurrency by attacking the exchanges?  China shut down all exchanges in China.  This means that no one in China (people in china hold most of the worlds bitcoin) can buy or sell bitcoin.  This is an absolutely earth shattering thing.  When half of the worlds bitcoin can no longer be traded that means the effective pool of bitcoin is half of what it actually is.   Not only this but most bitcoin is created (mined) in china and now these coins can't be sold.  This means to get bitcoin you will have to pay more since the supply is lowered artificially.  This id what caused bitcoin's price to spike.

This spells the end for the current generation of cryptocurrency.  With a country like china able to cause the price to rise by stopping trade in china and the price to fall by allowing trade in china, bitcoin is no longer a stable decentralized currency.  It just becomes Yuan 2.0.

How do we fix this?  Ultimately we will have to move to an entirely different protocol (see my website www.ir.hn) but until then we can implement a temporary stop gap.  What we have to do is introduce trading into the cryptocurrency itself.  What we need to do is use the "notes" ability of the blockchain to request goods for our bitcoin payment.  

For example say I have .001 bitcoin ("bitcoin" is used here for shorthand but can be any cryptocurrency) and I want to buy a sandwich with it.  What I do is I give the .001 bitcoin to the person who has the sandwich and I write in the notes "for a sandwich" (you don't even need to write it in the notes but it will make it easier to keep track of).  

If you give bitcoin to someone, in this new system you can revert the transaction.  You have 3 month's worth of blocks to revert it (3 months should be long enough to ship to anywhere in the world).

 Miners would know that it is really you who reverted the transaction because you would sign using your private key (they wouldn't see your private key, but when you sign with your private key everyone can verify you own the private key who sent the bitcoin).

Now one other factor needs to be involved.  This factor is a trust factor.  The trust factor is how many blocks (or something related to that) you yourself (your private key) have mined since the last time that you reverted a transaction.  Yes you read that right.  This may or may not work with pool mining.  The point is that a trust factor can not be easily gained.  If you cannot mine blocks then you can buy a private key from someone who does mine.  If you did this then you can "change" the private key so the person you got it from can't use it again. To do this you hash the private key you got using a new private key that you created.  This new key only you will know but it required the old key.  This key now has the trust factor of the old key you bought and the trust factor of the old key is brought to zero.

Now the point here is that if you revert a transaction you do it at the cost of your trust factor.  This will make it unprofitable to revert a transaction unless you were seriously wronged.  Also the higher the trust factor you have, the more confident a merchant could be knowing you won't forfeit all that trust to revert the transaction.  People will probably not want to use accounts with too high a trust factor for the given transaction.  You want to balance your trust factor value with the value of the transaction.  You would probably want to mine each individual block to a different private key so you can sell or trade off the private keys later.

3 comments:

  1. This a small introduction about Bitcoins. The importance of Bitcoins as a experimental currency and the survival of this new type of internet cash. stuck bitcoin transaction

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  2. Bitcoin and other cryptocurrencies are the currencies of the future. Here is a short history of bitcoin and insight into whether or not it is a bubble. Coinmarket

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  3. This year the value of Bitcoin has soared, even past one gold-ounce. There are also new cryptocurrencies on the market, which is even more surprising which brings cryptocoins' worth up to more than one hundred billion. On the other hand, the longer term cryptocurrency-outlook is somewhat of a blur. There are squabbles of lack of progress among its core developers which make it less alluring as a long term investment and as a system of payment. Cryptocurrency

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