Bitcoin is a settlement network, used for periodic netting of positions. The fact that settlement is primarily used for direct payment now is chiefly due to the fact it is easy to do—path of least resistance—and transactions are still cheap. As bitcoin develops it will be used more by 2nd layer protocols that use the block chain only for reallocation of funds among settlement parties, and for this it is unclear how much larger the bitcoin volume needs to be above current levels.
Creating proof of work schemes that have resellable secondary value actually undermines the security provided by proof of work. The security provided by proof of work is the cost of the work minus the resellable outputs, so it is exactly the same or worse than if you just had fewer miners doing useless work and a few specialized servers doing the useful portion. It is possible though that we could come up with a scheme that has secondary value that is purely in the commons and that would be strictly better. For example, a proof of work that acts as unwinding a ticking timelock encryption, so it can be used to reliably encrypt messages to future block heights.
In terms of expected utility payout, working on such a scheme would be of very high benefit, more than most any task in any other domain I can think of, and I encourage people to take up the problem.
Bitcoin is a settlement network, used for periodic netting of positions. The fact that settlement is primarily used for direct payment now is chiefly due to the fact it is easy to do
I’m not sure that there’s any real distinction between “direct payment” and “settlement”. For that matter, while BTC may in fact be strictly preferable to physical/paper-based settlement in resource use (though even then I’m not sure that the difference is that great!), that’s rather small consolation given the extent to which electronic settlement is used today. (In fact, contrary to what’s often asserted, there seems no real difference between this sort of electronic settlement and what some people call a “private, trusted blockchain”; the latter is therefore not a very meaningful notion!)
This is a bogus argument (hehehe, sorry).
Bitcoin is a settlement network, used for periodic netting of positions. The fact that settlement is primarily used for direct payment now is chiefly due to the fact it is easy to do—path of least resistance—and transactions are still cheap. As bitcoin develops it will be used more by 2nd layer protocols that use the block chain only for reallocation of funds among settlement parties, and for this it is unclear how much larger the bitcoin volume needs to be above current levels.
Creating proof of work schemes that have resellable secondary value actually undermines the security provided by proof of work. The security provided by proof of work is the cost of the work minus the resellable outputs, so it is exactly the same or worse than if you just had fewer miners doing useless work and a few specialized servers doing the useful portion. It is possible though that we could come up with a scheme that has secondary value that is purely in the commons and that would be strictly better. For example, a proof of work that acts as unwinding a ticking timelock encryption, so it can be used to reliably encrypt messages to future block heights.
In terms of expected utility payout, working on such a scheme would be of very high benefit, more than most any task in any other domain I can think of, and I encourage people to take up the problem.
I’m not sure that there’s any real distinction between “direct payment” and “settlement”. For that matter, while BTC may in fact be strictly preferable to physical/paper-based settlement in resource use (though even then I’m not sure that the difference is that great!), that’s rather small consolation given the extent to which electronic settlement is used today. (In fact, contrary to what’s often asserted, there seems no real difference between this sort of electronic settlement and what some people call a “private, trusted blockchain”; the latter is therefore not a very meaningful notion!)