That is the part that I simply do not understand.  The "protocol" is not an entity that can take actions.  The protocol is a set of rules that all peers use to evaluate the bitcoin messages they receive and build up a shared, agreed-upon concept of what the "global balance sheet" of bitcoin is (in the form of transaction chains stored in the block chain).  The protocol dictates rules about transaction validity that individual peers are free to ignore but since other peers have no incentive to ignore the rules, and incentives to obey them, a disobeying peer will get nowhere fast.  At every point in the complex dance of bitcoin peers, the protocol rules are constructed to cause natural agreement between everyone with minimal effort.  It's a thing of beauty.

You talk about the protocol as if it's something running somewhere in real time making decisions and effecting outcomes.  It's not that at all.  The protocol is a set of rules, and those rules must be set out ahead of time to effect the actions you want from the bitcoin peer network.  Not only that, the rules don't specify what any peer has to do, only what is valid for any peer to have done.  The protocol rules do not compel any action on the part of any peer, they establish criteria for deciding when what a peer has done is illegal, and because following these rules is to everyone's benefit due to the clever construction of the protocol, everyone naturally obeys them and everyone agrees when someone has done something against the protocol rules and ignores them identically.

So you have to formulate rules that can be described ahead of time and which, for any peer who doesn't know anything about the history of transactions in your system, can be used to ingest all of the block chain blocks and then decide on its own, independently of any other peer, what the state of the "global balance sheet" is after every block; and each peer must be able to do this identically.  The identically part is what, in my opinion, rules out appealing to external entities for values to use in protocol equations for determining validity of transactions, because nobody ought to, or ought to be expected to, rely on an external authority whom they have to trust gives out accurate information to everybody and who is always available to every bitcoin peer and always presents a true, factual, and consistent set of values when queried.

Furthermore, the requirement that the protocol establish rules that peers can use to verify transactions themselves using only the data available in the block chain (or other data that is publicly shared via the peer network and is cryptographically secure using hashes and forced work functions) means that the data sets and rules involved in verifying a given transaction must be minimal; otherwise, the work required to verify a transaction chain becomes prohibitive and gets even worse as the network scales.

This last part is why I keep asking for a concrete description of the rules that peers will have to follow to validate transactions.  If a client has to a) keep an entire history of every transaction in order to be able to evaluate the validity of a transaction chain (bitcoin peers don't due to the merkle trees), and/or b) appeal to external authorities which may or may not be accessible or trustworthy, and/or c) require the evaluation of complex relationships between transactions or escrow accounts or whatever, and/or d) require every peer to retain huge amounts of data on disk in order to be able to validate any transaction, and/or e) any number of other ways to make the work of peers to establish faith in the validity of a transaction impractical that I haven't thought of yet, then it is an unworkable system.

It is my supposition that your proposal suffers from more than one of these problems; and I've been trying to fish out more detail (admittedly I don't understand every aspect of your proposal so I'm trying to get you to consider my concerns and apply them to your system rather than doing it myself).  I don't think you should write to Satoshi or publish a white paper or take any other premature step before addressing these concerns.

[POLL] Add ideas from second bitcoin whitepaper proposal to bitcoin?
https://bt.irlbtc.com/view/32417.0

Yeah, I took a poll, and that seems to be the consensus.


In your example, you and I would both buy the tokens we want on the open market (run within the network). There is no way for us to know where the tokens came from - we may have bought them from other users, or one of us may be buying tokens which were generated from thin air by the protocol in order to keep the tokens balanced and the escrow fund solvent.

When oil rises by 10%, the protocol will buy oiltokens and/or sell antioiltokens until funds in escrow are balanced. The exact combination of buying and selling would be determined by what keeps the escrow fund the healthiest.

You and I can't realize profits/losses until we sell our tokens, at which point we may be selling to other users and/or the escrow fund.

The price we buy and sell at is determined by us and the market. We have an incentive to trade close to the external spot price of oil, because the protocol charges an increasing fee the further we trade from the external spot price. The external spot price is imported into the block chain by miners, and their blocks are accepted or rejected by the rest of the network in exactly the same way that the distributed timestamps work.

At first I had thought this would be the case, but I believe that is impossible. Instead, the system would try to keep the anti-oilcoin escrow fund equal to the oilcoin escrow fund.


You are right that the system I described would buy oilcoins when they went up in price, and sell them when they went down in price. This would have the annoying effect of amplifying any price swings, although I doubt it would consistently lose money since it can always choose the best option between manipulating oilcoins or antioilcoins. I can't prove that though.

I've been frustrated trying to think of what the spot price of an antioilcoin should be. The simplest answer is 1/oilcoin, and you just have a lot more anti-oilcoins. However, no matter what price scheme I choose, they get out of balance after any price movement and require active intervention.

I'm also warming up to morpheus' idea to control prices with mining rewards: https://bt.irlbtc.com/view/29135.msg367322#msg367322

He does this rather than using an "anti" coin and escrow fund, but I'm pondering whether the ideas could be combined.