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|Tuesday, November 19th, 2013|
|Bait and Switzer
Pentagon spokesperson Geoff Morrell said on August 11, “We have yet to see any harm come to anyone in Afghanistan that we can directly tie to exposure in the WikiLeaks documents.” This has been repeated despite Secretary of Defense Robert Gates’ suggestion in the days after the release, “There has not been a single case of Afghans needing protection or to be moved because of the leak.” It has taken on a life of its own, even though the Associated Press concluded on August 17, “There is no evidence that any Afghans named in the leaked documents as defectors or informants from the Taliban insurgency have been harmed in retaliation. FROMhttp://dissenter.firedoglake.com/2011/07/25/reflecting-on-the-afghanistan-war-logs-released-by-wikileaks-one-year-ago/
Tom Switzer of the au EXPECTORATE magazine, sorry, SPECTATOR magazine said on the DRUM this evening that CIA informants in 'Ghan were endangered by Assmange.
Who to believe? Whats for dinner? Anything on the box tonight?
On the dire shortage of ammunition
Obviously, a website soliciting the shooting of politicians has some inherent contradictions, a few of which I shall list as follows:
1. Head shots are useless, as it is well known politicians don’t use their brain. Well, not the one in the larger head, anyway.
2. Heart shots are a waste of effort and ammo because those things have no heart, as their behavior demonstrates.
3. Gut shots cause no damage to a politician as they are the classic example of “the gutless wonder” - their craven cowardice on any issue is proof of this observation.
4. Shooting a politician in the foot is the definition of redundancy as politicians shoot themselves in the foot regularly, but their constituents never pay any attention.
Conclusion: Shooting a politician is a waste of time and valuable ammo.
|Nobody must die
]kingofthejaffacakes 7 points 12 hours ago*
I think lots of commenters are missing the point. You're all right that killing someone is probably not going to solve the problem. The point of an assassination market though is that no one will have to get killed. The presence of an assassination market, where the result will be your death if you are a public enough douchebag, is that you will stop behaving like a douchebag out of self-interest.
Who knows if it would work; but it's a fascinating idea -- and it's really got very little to do with actually killing people.
I'm not really advocating it; and I suspect it is doomed to failure because it self-regulates in that most people are not in favour of assassination. It's an intriguing use of game theory though. I think I'd watch the film.
Here's the original paper, which is also an interesting read... http://www.jrbooksonline.com/PDF_Books/AP.pdf http://cryptome.org/ap.htm
]jdkeith 4 points 10 hours ago
You need a majority to love you or fear you. Maybe I'm coming at it from too libertarian a perspective, but I doubt that too many people pay their taxes out of love for what the government does with it, though some would pay it even if it was voluntary. The IRS is able to make examples out of enough people that the majority fall in line.
That's not killing a single person, and doesn't contradict your claim, but making an example out of someone and letting it be known that you can can cause the system to change.
I'm not promoting or disparaging Jim Bell's idea or any specific implementation of it, but let's say that either a lot of people are a little fed up or a few people are a lot fed up with the level of their discuss measured in bitcoin donations to a target list.
Here's a hypothetical "internet warrior" story...
Now, let's say that a few high profile people get killed. What happens? The screws tighten, and people flip out. Bitcoin might even be blamed. But let's further suppose the government can't
Ban guns / ammo and
Ban the internet
Because either of those two would cause enough Americans to get off their ass to do something. You can ban centralized Bitcoin exchanges (operating in the U.S.), but Localbitcoin is not affected. It also doesn't stop people who already have Bitcoin from donating.
A few more people die, specifically the ones who are targeting bitcoin. After one of the previous assassins got caught, new assassins got smarter. Someone rigged a zipgun to a model drone and capped someone coming out of his house. A few others found unique uses for all that unaccounted for 1080 and tannerite. After that, assassinations became far less risky to the perpetrator and people discovered it was psychologically easier to press a button than to hide in someone's bushes until they went to get in their car. Sanitized warfare had become a double-edged sword.
Still, the screws tighten because the people in power still love power.
Soon the assassinations switch from "head of DHS/DEA/ATF/IRS" to "any person going to work in one of those buildings." These people are just "doing their job" and aren't in it for the power so much as the paycheck. Rumors spread around the water coolers and coffee machines. The spouses of these employees aren't used to D.C. life - they're just regular folks who want to see their significant others make it home to raise their children. The government can't afford the manpower or money to protect all of these people and the hits keep on coming.
If it hadn't happened earlier, a message comes out aggregating the information in the "donation reason" fields. The general gist is "stop fucking with us and we'll stop fucking with you." The risk bonuses are not enough to keep people working at certain agencies and the brain drain begins. The leaders had continued doing the wrong thing until they could no longer afford it, their choice now was to look weak by capitulating to the demands of an anonymous subset of individuals who had voted with their dollars or try to squash it. But people were getting fed up for a while and the increasing wealth gap and diminishing real opportunities fueled the anger. Most didn't support assassination politics, but most didn't really care when a politicians got hit. The blue-color bureaucrats were more sympathetic characters, but there were numerous people who had been fucked over by the system or had friends and relatives who had and who were seething in silence.
The more the strength of the government was put into question, the less obeyed its edicts against making contributions to such systems or using digital currencies in general. The system was becoming unstable as it walked away from the long-running attractor of state monopoly on legitimate power. Things were moving to chaos... or a new normal.
The decision, ultimately, was up to the old guard to make. Enough people who were sick of the status quo were willing and able to use technology to bring power to bear against the old guard that the old guard had to respond. The only question was, how would they respond? FROMhttp://www.reddit.com/r/Bitcoin/comments/1qw72y/meet_the_assassination_market_creator_whos/
Nevermore quoteth the Raven
The discovery that Iraq’s fabled "weapons of mass destruction" didn’t exist – and never existed – failed to provoke a general reexamination of the policies that culminated in the worst strategic disaster in American military history – or, indeed, any interrogation of the policymakers who made it possible. There was no criminal investigation, no congressional hearings, not even much of a journalistic probe into how we were lied into war and by whom. Just as there was no inquiry into and prosecution of those who instituted a torture regime and set up what previous generations would have scoffed at as impossible – an American gulag.
In America, if you’re a member of the political class, there’s no need to worry about being held accountable for a policy that not only failed miserably, but also involved illegal actions on your part: only the Little People are held up to a strict standard of law enforcement. If you are a Nobody, and you torture and murder and are caught, you wind up in jail – or in the electric chair. If you’re a Policymaker, however, you not only get off scot-free, you may even be honored at a memorial dinner at which waterboarding jokes are the highlight of the evening.
This is the kind of country we live in nowadays, the kind of world we live in: where a moral compass that ought to read "north" instead reads "south," and the normal ethical standards that endured for generations have been lost, discarded and forgotten.
|Monday, November 18th, 2013|
Anti state commie says:
November 15, 2013 at 10:56 pm
Fuck bitcoin and the restructuring of the capitalist infrastructure, you are probably one of those “anarcho” capitalists who takes the side of the bosses over that of the exploited you are not of the anarchist tradition in any way shape or form
November 16, 2013 at 8:49 pm
Let me get this straight you are saying we shouldn’t use a distributed, global, deflationary, with near zero transaction cost(which goes directly to the workers that help secure that transaction) and anonymous currency, because it might make capitalism look a little better? So instead we should keep using a banking and monetary system that has wreaked havoc on untold millions of lives, and is still being used as method of control on a global scale. That is,quite frankly, fucking insane. Anyone who would prefer supporting government currencies over Bitcoin is siding with the fascists. Please explain to me how supporting and using Bitcoin is worse than supporting the existing power structures.
Using Bitcoins takes power away from governments and banks because money has been their main method for control of the world for the last 50 years. Bitcoin is at least decentralized and open source making the banking elite and Governments powerless to stop or coerce. I’m sure you are familiar with Mayer Rothschild’s famous quote “Let me issue and control a Nation’s money and I care not who makes its laws.” Bitcoin gives that power to the people of the world, anyone can participate and be their own bank, no one has to ask permission from their government overlords before they make a transaction. This is the biggest power grab(taking the power back) opportunity for the people of the world in all of history. Bitcoin is progress, it’s better than anything we have, while I don’t purport it to be perfect I will say that is more perfect than any other monetary/transaction system right now. Since it is open source it can always be evolved into the perfect currency or even branched off to your own anarcho currency of whatever design you choose. Cryptocurrencies are here to stay no matter what any government or institution says or does.
As an aside, and I know this is cliche, but everyone should keep an open mind to new ideas. I think anarchists sometimes get too distracted on the particulars of the means but instead focus on achieving the end(reducing human suffering and allowing people to be fulfilled in their lives), anyway possible. FROMhttp://www.submedia.tv/stimulator/2013/11/11/fear-of-a-black-bloc-planet/?lulz=encrypt+airplane+airplane
I herd that
"...herd behavior is disappointing but customary cowardice.
Worse happened after 9/11. Many once valiant FOI fighters cleansed
their websites and heralded the need to obey the war-mongerers, and
urgently cautioned others as if the propaganda was believable.
No doubt, this self-censorship is market-driven to please
funders, advertizers and publishers who dare not displease their
dinner companions at Aspen, Davos, Bohemian Grove, and for
sure the DC centroid of privileged access to valuable information,
much of it spy boosting leakage of the Snowden type.
The heavy censorship of the Snowden documents by the hoarders
and their extremely slow pace of release while rhetorizing and
hyping the minimalist product fits this spy-favorite marketing
NPR is not what it used to appear to be. It has booted and censored
a slew of its reporters, editors and contributors. Not alone, the
journalism industry is panicked at loss of customers and is rushing
to cleanse its harem. Poor discards are deperately seeking Omidyar
and Soros invitation to their opium dens as if from frying pan into
|Saturday, November 16th, 2013|
|A Natural History of the Lowland Guerrilla
John McCreery • a day ago −
If I had the time, I would write a careful comparative review of Trouillot's Global Transformations and David Kilcullen's Out of the Mountains: The Coming Age of the Urban Guerrilla, which has a lot of intelligent and scary things to say about the limits and exercise of nation-state power in an evermore connected world in which critical systems in "littoral" (coastal) cities in particular are being overwhelmed by population growth, while at the same time they sit at the intersections of global trade, transport, finance, immigration and communication networks. The author is an Australian soldier as well as the holder of a doctorate in Anthropology.http://www.livinganthropologically.com/2013/11/07/anthropology-state-globalization/#comment-1113840926
|Thursday, November 14th, 2013|
Andy Greenberg of FORBES burn notice
Evidence exists that the above mentioned is pursuing evidence that a " Type One" Assassination Politics type market scheme exists.
This and his previous stories and YouTube postings leads me to believe he is seriously misrepresenting AP.
He knows, or ought to know as a reporter, that a ' Type Two' market has been operating every year since 2001. And so he's playing games with the facts here, possibly to assuage his notoriously stupid Libertarian boss, Steve Forbes.
As for the differences between the two types of markets, simply read the essay. Parts one-nine describe the ' Type One' project. Part 10 describes Type Two.
While most, if not all the published commentary on Assassination Politics plays up the first version, the fact remains that only the second has been regulary used ( against the sitting POTUS) every year since 2001.
Professional journalists should respect the significant facts of stories they are clearly chasing up on.
Since this specimen doesn't I regard him as something less than a reporter - hence this ' burn notice'.
Further details and documentation on request.
Public Law 80-772, which established Title 18 of the U.S. Code, is invalid because Congress violated procedures established by Article I of the Constitution when:
* The House voted to approve amendments added to the bill but not the bill "as amended."
* The Senate did not resubmit the bill to the House for its required approval after a 1947 adjournment.
* The House speaker and Senate president signed the bill and sent it to President Truman during an adjournment, violating requirements that business be conducted only when Congress is in session and a quorum is present.
If the Supreme Court voids the 1948 law, DerKunt said, it could lead to freedom for the roughly 200,200 inmates held in federal prison, plus clean records for many thousands more who have completed their sentences.
Von Kahl, however, estimates that 60,000 prisoners could be affected because the pre-1948 laws would be in force, Davis said.
|On a prison planet you need a lawyer
In late December 2006, I was exposed to pieces of a legal argument that claimed that the Federal "Title 18" (think of it as a file-cabinet containing the largest number of Federal criminal offenses, other than Immigration (Title 8), Controlled Substances (Title 21), and Taxes (Title 26).)
Ostensibly, it was re-arranged ("re-codified") in June 1948, but the allegation is that the US Congress didn't properly pass the law to do this re-codification. If valid, this argument asserts that each and every person convicted since 1948 (presumably, everyone currently in Federal prison) was convicted illegally, and is thus entitled to immediate release.
The original argument was made by an Austin Texas con-man named "Tony Davis", of "ILS" (International Legal Services: Try it: It Googles.)
Quite literally, Tony Davis was a con-man: He did Federal time in the late 1990's for some species of fraud. He began promoting his version of this argument, probably in late 2005. It has been met with nothing but derision ever since.
But, his argument is GENUINELY defective, but that does not mean the ISSUE is necessarily defective.
I saw pieces of his argument (photocopied pages, but not the complete argument) in late December 2006, and over the next few weeks I researched the argument, and I found the reasons that I knew it would be rejected. (But, in USP Florence Colorado, where I was until June 2007, I had only access to law books, NOT the computers.)
In June 2007, I was transferred to USP Tucson, where they had the LEXIS law library computers, and I did the research, and discovered that indeed Tony Davis' arguments were being rejected for the very same reasons I had predicted. But, they were also being rejected for wrong, frivolous reasons as well. Armored with this new information, I re-wrote the entire argument in July 2007, and by December 2007/January 2008 I filed it as a "habeas corpus action" in EVERY Federal Court district around the country, for the people who had been convicted in, or who were currently confined in, those districts.
It is those filings, which ought to number well over 100, which were found (in part) by your sloppy researcher.
And even more competently-done version of this argument (than my own) was made to the US Supreme Court, see references: http://www.statesman.com/news/news/ex-convict-appeals-to-inmates-hopes-for-freedom/nRw7c/ http://www.prisontalk.com/forums/archive/index.php/t-291718.html
But remember, Tony Davis was and is genuinely a con-man, and his ARGUMENT was defective. The issue was quite valid.
|Wednesday, November 13th, 2013|
Nice work if you can get it...
In the year 1215, Magna Carta provided a freeman of England with the right to a trial in a fixed, local law court, and protected him from being “amerced [fined] for a slight offence, except in accordance with the degree of the offence; and for a grave offence he shall be amerced in accordance with the gravity of the offence, yet saving always his contentment; and a merchant in the same way, saving his merchandise” – i.e., even for a “grave offence,” a man shall not be deprived of the ability to make his living.
Four-fifths of a millennium later, a 21st-century American merchant does not enjoy the rights of his 13th-century English forebear. The Economist reports on yet another case of “civil forfeiture” by the corrupt and diseased IRS – a Michigan grocery store owned by the Dehkos family:
Fairly often, someone takes cash from the till and puts it in the bank across the street. Deposits are nearly always less than $10,000, because the insurance covers the theft of cash only up to that sum.
In January, without warning, the government seized all the money in the shop account: more than $35,000. The charge was that the Dehkos had violated federal money-laundering rules, which forbid people to “structure” their bank deposits so as to avoid the $10,000 threshold that triggers banks to report a transaction to the Internal Revenue Service (IRS).
This is a quintessentially Washingtonian form of shakedown. First, they pass a stupid law that has the effect of making millions of routine, law-abiding transactions appear suspicious (in this case, deposits over $10,000). Then, the vast bloated support state of the Republic of Hyper-Regulation adjusts accordingly (in this case, insurers who’ll cover a mugging of $9,975 decline to cover one of $10,037). But by then, just to cover themselves coming and going, Washington has passed another stupid law making it an additional crime to avoid committing the original crime (thus, “structuring” your deposits to avoid the $10,000 threshold).
Meanwhile, no one has prosecuted or even convicted the Dehkos family — or even charged them with anything. Because these days, unlike in King John’s, the state doesn’t need to:
Prosecutors offered no evidence that the Dehkos were laundering money or dodging tax. Indeed, the IRS gave their business a clean bill of health last year. But still, the Dehkos cannot get their cash back. “They offered us 20%,” says Ms Thomas, “But if we settle, it looks like we’re guilty of something, which we’re not.”
Explodicle November 12, 2013 at 2:06 pm
(Disclaimer: I’m a Bitcoin zealot who normally lurks, but felt compelled to comment today)
This idea has been proposed frequently, but part of the reason it doesn’t take off is that it’s cost-ineffective. Since Bitcoin mining relies on integer-crunching performance, the only way to honestly mine profitably is to buy an application-specific integrated circuit (ASIC) designed exclusively for Bitcoin and other compatible SHA256 cryptocurrencies. CPUs are designed for general-purpose floating point calculations, so the cost of energy outweighs the payoff. Matt (above) is right – this service is basically taking advantage of your visitors because anyone informed would object to such a waste. It would be more cost-effective to mine Litecoins (which are designed for CPU mining) and then sell them for Bitcoins. Someone usually asks here – “why doesn’t Bitcoin use CPU mining like Litecoin does?” – it’s because CPU mining is heavily influenced by virus-infected botnets.
John Persona’s idea for a “useful” coin is also a frequent proposal. It can’t be done with cancer drugs, protein folding, SETI, etc because the goal must be defined by the p2p protocol, not a specific participant. If you rely on someone to issue specific real-world challenges like “fold this protein”, then there’s no telling if that person already got a head start on the solution. However, prime numbers ARE useful for humanity and can be defined entirely within the p2p protocol, so you might be interested in Primecoin. Primecoin uses CPU mining and has a lower hash rate so it’s less secure than Bitcoin, but it’s reasonably secure enough and >does< produce a public good.
- See more at: http://marginalrevolution.com/marginalrevolution/2013/11/markets-in-everything-44.html#sthash.3waBSeZF.dpuf
|Tuesday, November 12th, 2013|
Those who don't learn from whachamacallit
A Fierce Domain: Conflict in Cyberspace 1986 to 2012
Four key recommendations, if implemented, may improve our ability to learn from cyber conflict history.
1. The White House must encourage the military and Intelligence Community to declassify information on past cyber conflicts;
2. The National Intelligence University, Center for Cryptologic History, or Center for the Study of Intelligence should begin a parallel effort to develop a classified history, the lessons of which must be declassified;
3. The DoD, DHS, and others must teach cyber conflict history to both the newer cyber cadres and senior decision-makers. Professional historians need to become more involved. And cyber conflict should be taught in classes in both Cyberspace Engineering and International Security.
4. University history departments, historians, and other researchers must recognize cyber conflict as an area with a rich history, waiting to be mined. (Perhaps this might even offer better prospects for publication than other, long exploited areas of military or national security history. Trust me, you can make far more as a historian if you specialize in cyberspace than in the advantages or disadvantages of the phalanx.) Hopefully, once more cyber conflict history is revealed, new students, policymakers, and cyber practitioners will learn that the dynamics of cyber conflict are not as mystifying as they have been led to believe.
2013-1561.htm A Fierce Domain: Cyberspace Conflict 1986-2012 November 11, 2013
Bigger than Jesus
An Oxford University classicist is bringing back to life the music of ancient Greece, unheard for thousands of years.
Ancient Greek music brought back to life
Dr Armand D'Angour, Fellow and Tutor in Classics at Jesus College, has embarked on a two-year research project, part-funded by the British Academy, to reconstruct the songs and music of the classical world.
Piecing together the lyrics, rhythms, instrumentation and notation through the painstaking study of ancient documents, he aims to show that the music is not lost beyond recovery.
Dr D'Angour said: 'Suppose that 2,500 years from now all that survived of the Beatles' songs were a few of the lyrics, and all that remained of Mozart and Verdi's operas were the words and not the music.
'Imagine if we could then reconstruct the music, rediscover the instruments that played them, and hear the words once again in their proper setting, how exciting that would be.
'This is about to happen with the classic texts of ancient Greece.'
He added: 'It is often forgotten that the writings at the root of Western literature – the epics of Homer, the love-poems of Sappho, the tragedies of Sophocles and Euripides – were all, originally, music.
'Dating from around 750 to 400 BC, they were composed to be sung in whole or part to the accompaniment of the lyre, reed-pipes, and percussion instruments.'
The rhythms – perhaps the most important aspect of the music – are preserved in the words themselves, in the patterns of long and short syllables.
The instruments are known from descriptions, paintings and archaeological remains, which allow scholars to establish the timbres and range of pitches they produced.
And now, new revelations about ancient Greek music have emerged from a few dozen ancient documents inscribed with a vocal notation devised around 450 BC, consisting of alphabetic letters and signs placed above the vowels of the Greek words.
Dr D'Angour said: 'The Greeks had worked out the mathematical ratios of musical intervals: an octave is 2:1, a fifth 3:2, a fourth 4:3, and so on.
'The notation gives an accurate indication of relative pitch: letter A at the top of the scale, for instance, represents a musical note a fifth higher than N halfway down the alphabet. Absolute pitch can be worked out from the vocal ranges required to sing the surviving tunes.
'While the documents, found on stone in Greece and papyrus in Egypt, have long been known to classicists – some were published as early as 1581 – in recent decades they have been augmented by new finds. Dating from around 300 BC to 300 AD, these fragments offer us a clearer view than ever before of the music of ancient Greece.'
But it is important to remember, according to Dr D'Angour, that ancient rhythmical and melodic norms were different from our own.
He said: 'We must set aside our Western preconceptions. A better parallel is non-Western folk traditions, such as those of India and the Middle East.
'Instrumental practices that derive from ancient Greek traditions still survive in areas of Sardinia and Turkey, and give us an insight into the sounds and techniques that created the experience of music in ancient times.'
He added: 'Some of the surviving melodies are immediately attractive to a modern ear. One complete piece, inscribed on a marble column and dating from around 200 AD, is a haunting short song of four lines composed by Seikilos. The words of the song may be translated as: "While you’re alive, shine: never let your mood decline. We’ve a brief span of life to spend: Time necessitates an end."
'The notation is unequivocal. It marks a regular rhythmic beat, and indicates a very important principle of ancient composition.
'In ancient Greek the voice went up in pitch on certain syllables and fell on others – the accents of ancient Greek indicate pitch, not stress. The contours of the melody follow those pitches here, and fairly consistently in all the documents.'
Read the BBC article How did ancient Greek music sound? by Armand D'Angour
|Monday, November 11th, 2013|
Abstract models Vs real ones
Gordon Mohr says:
November 10, 2013 at 6:51 pm
Despite game-theoretic results, prisoners don’t always defect, ultimatum-givers don’t always set their offer at (0 + epsilon), and ultimatum-receivers don’t accept every positive offer.
While the Eyal-Sirer paper is clearly valuable for its analysis of strategic mining with some rigor, I predict its ultimate impact will be to remind people that lots of other, harder-to-analyze factors dominate in real systems.
Mining pools have been operating for years in a trench-warfare environment. Their profit-maximizing, statistically-savvy operators have already faced DDoS, computational DoS, ruthless anonymous competition, treacherous participants (‘block withholding attacks’), rational and irrational ‘pool-hoppers’, discriminatory block- and transaction-propagation, black-hat hacking, and other kinds of network glitches and software bugs.
Based on my observation of pool evolution, dating back to a few months of my own solo and pool mining back in 2011, I suspect that the major pools have already encountered, tried, and folk-remediated not just ‘selfish mining’, but other gaming that academic analysis won’t discover for another few years.
After all, the 1st discussion of a similar ‘mining cartel attack’ in the Bitcoin forums dates back to December 2010. But the forums aren’t likely to show the state-of-the-art. Pool operators don’t have an academics’ incentive to formalize models and publish results. Defending quietly, via ad-hoc and non-public action, avoids educating or encouraging either the original attackers or copycats.
Against that potential “street-level” reality, the authors’ confident pronouncements of imminent doom come off as patronizing and naive. For example:
* “You heard it here first: now is a good time to sell your Bitcoins” (tweeted just before the paper announcement, when Bitcoin was at USD$210)
* “[Our recommended] measures must be taken immediately, since if at any time a single pool exceeds threshold it can execute Selfish-Mine, causing a phase transition where rational miners will want to join that pool, leading to a collapse.” (from the paper)
Having now read the paper, I’ll go over some major blind spots below. I’ll follow Felton in referring to the paper’s attack as “ES-mining”, rather than “selfish-mining”. (‘Selfish’ vs. ‘honest’ as a terminology is prematurely conclusory and reductionist. I assume all participants are self-interested, but have varied values and are already practicing diverse strategies beyond a simple two-type model.)
(1) *No backtesting.* The authors make the strong claim that ES-mining is a profitable strategy and imminent risk. But there have been large, well-funded, profit-seeking mining groups in operation for years, highly motivated to independently discover and implement this strategy. Pool operators watch their performance versus expectations very closely, and regularly seek advantage over rivals in features, payouts, and policies.
Further, ES-mining would leave public evidence, in the rates of orphaned blocks, consecutive block-batches from certain pools, and skews in block timestamps.
But have the authors looked for such evidence? The possibility seems waved off with a single sentence: “To the best of our knowledge, so far such pools have been benign and followed the protocol.” But historical pool competition has not been “benign” and strictly by-the-book, and the idea this strategy would sit undiscovered and untried, even after described in sketch form in the forums nearly three years ago, is hard to believe.
(2) *No consideration of costs.* The paper includes a section on ‘revenues’ (4.2), but none on ‘costs’. In ES-mining, “while both honest and selfish parties waste some resources, the honest miners waste proportionally more”. Holding difficulty constant, whatever increase in proportionate revenues ES-mining yields its practitioners comes with larger electricity/rent costs. (Even holding physical plant constant: the network as a whole will generate fewer main-chain blocks, in the presence of ES-mining, for same amount of wall-clock time.) The magnitude of this cost increase, for the ES-miner, relative to the gain will determine whether ES-mining is profitable at the outset. Difficulty adjustment changes the analysis – resetting the revenue rate in the attacker’s favor – but if the strategy requires initial losses, it becomes harder to bootstrap.
There will be other costs to ES-mining, especially as it grows. Moreso than other pools, it must obscure its ‘wins’, recruit hashpower in secret, and enforce sanctions against those who contribute hashpower only when it is ahead, or leak its motivations to the public. It must somehow prove to its own members that it is not underpaying them, even while attracting them with its proven ability to underpay the outside world – a difficult proposition technically and socially. Clandestine discipline is costly, perhaps super-linearly.
And that’s before detection and retaliation. Simple uncoordinated tit-for-tat strategies by other miners may be sufficient for mutual deterrence. Slow-delivering blocks to any parts of the network that seem to lag or batch blocks, or biasing against pools (or all ‘unknown’ sources) when they often orphan others’ blocks, will drive up ES-miner costs. Given the real-world phenomenon of “altruistic punishers”, it is insufficient to model just ED-miners and the simplistically, uniformly ‘honest’ remainder. Motivated-enforcers will improvise multiple strategies, and incur larger losses, to enforce norms until they see abuse subsiding. As a result, no simple modeling of immediate payoffs can predict a ‘phase transition’ or ‘collapse’ of the whole system.
More analysis is worthwhile, for sure, but looking only at the proportion of revenue, and ignoring profit net of increased costs – periodic/variable costs, strategy overhead, and retaliations – is insufficient to pronounce an “imminent danger”.
(3) *Shaky gamma assumptions.* If a pool’s real-world gamma is a function of its size, rather than the paper’s often-assumed 1/2 or conjectured-to-be-achievable (via Sybil attacks) near-1, the feasibility thresholds drop. If the gamma already varies dynamically based on other pools’ self-defense, perhaps dropping to near 0 when shenanigans are suspected, then the authors’ recommended fix of nudging it *up* towards 1/2, by randomization, could make things worse.
Taken together, these are symptoms of trusting a clean abstract model moreso than empirical system behavior. There’s nothing wrong with clean abstract models, unless you mistake them for a ground truth whose predictions require emergency action – “sell Bitcoins now”, “take measures immediately or face collapse”.
Such prescriptions are premature; more real-world observation makes sense instead. If and when evidence of unchecked ES-mining arrives – and it should be obvious if it does – there will be plenty of time, and ideas, for countermeasures.
|Saturday, November 9th, 2013|
|Intrade, a sign of markets’ ability to predict the future.
ore than 200 climbers are entombed in the ice on Mount Everest. When wind clears the snow away, clothing and limbs sometimes surface like saplings in a spring thaw. You can tell the older victims by their mid-century ice axes and crampons. The latest are recognizable by their branded parkas and iPhones, still loaded with text messages and snapshots.
The 2011 climbing season drew its usual clientele of rich mountaineers, and it left four more dead, at least one of whom had been trading messages with his office until days before his death. A goateed Irishman of 42 with the gaunt, taut look of a fitness obsessive, John Delaney ran the Dublin-based betting site Intrade, a playground for speculators whose interests extended beyond sports and stocks. At the time, Intrade allowed users to bet on the outcomes of a wide range of events—elections, legal cases, TV talent shows, hurricanes—and to buy and sell their bets using a dynamic stock market-like interface.
Like all bookmakers, Intrade rewarded the prescient. But to the outside observer, it also offered an abundance of exceptionally responsive, fine-grained predictions about current affairs. The site’s collectively generated odds, the reflection of a cacophony of amateur bets, often turned out to render uncannily accurate forecasts of world events—more accurate, even, than the predictions of highly trained experts.
"The problems that Intrade has had are problems that any company could have that suddenly loses a strong CEO who left, unfortunately, incomplete business records," Bernstein says.
Some economists, especially libertarians, saw Intrade as a sign of markets’ superhuman ability to predict the future. Others saw it as a laboratory for studying the quirks and limits of prediction markets themselves. Investors poured money into the company. And presiding over all of this—the virtual casino itself, the libertarian technocrats, the market behavioralists, and the curious public—was Delaney.
He was a man of consuming intensity. He worked late, then showed up at his health club in the dark hours of the next morning so he’d be first on the treadmill. But in public, John Delaney, CEO, was a cool technocratic presence. He made the rounds on cable news during U.S. election years, calmly explaining in his Irish lilt that the predictions made by Intrade were not his own—he was just an accountant reporting the numbers, not a political expert—and that the numbers should be trusted more, not less, as a result.
As someone who watched odds for a living, Delaney probably knew that by going to Everest he faced a serious risk of death: around 1.3 percent, about the same as that of a U.S. soldier fighting in the First World War. Already he had tried and failed to summit the mountain once, in 2007, due to bad weather. On May 17, 2011—the day he left base camp, at 17,700 feet—he was optimistic, judging by the text messages he sent to his colleagues, his two kids, and his wife Orla, who was 38 and eight months pregnant.
Four days later, Delaney and his Sherpa set out for the peak from their highest camp, a rudimentary facility at 27,000 feet. They began climbing after dark, to take advantage of the overnight hardening of the snowpack and to leave enough daylight to get down safely. Like most climbers on Everest, they anticipated that it would take 10 hours to summit, followed by a half hour or so to bask in glory at the top, snapping photographs, shivering, and huffing canned oxygen.
Delaney climbed fast. His decades as an ultramarathoner and health-food nut were paying off. “They were going very, very strongly,” says Mingma Gelu, a Sherpa with the climbing club Delaney had hired. After leaving camp, the climbers surmounted a few technical challenges. But the last few hundred feet of Everest are a gentle slope. “They already crossed all the dangerous parts. He was very strong,” Gelu says. Then, without warning, 50 yards from the finish, Delaney paused and crumpled to the ground. “They couldn’t go up, and they couldn’t go down,” says Gelu. Three days later, the club posted a message on its website:
John who was a climber on the 7summitsclub’s Everest climb ran into difficulty at 8800 mts. Guides and sherpa’s asisted John but he was pronounced dead at 0430 on 21st May 2011 by guides.
Delaney has been dead now for more than two years, and his collapse was soon followed by another: In November 2012, the U.S. Commodities Futures Trading Commission, a federal regulator, sued Intrade for operating an unlicensed futures market that catered to Americans. The move prompted Intrade to effectively bar U.S. citizens—who accounted for 75 percent of its user base—from placing bets. Then, in March of this year, in a cloud of half-explained circumstances, Intrade shuttered its markets altogether. Among other things, an audit of the company’s books, obtained and published by the Financial Times, had found “insufficient documentation” for $2.6 million transferred from the business into accounts held by Delaney himself.
In fairly rapid succession, the highest profile prediction market in the world saw the death of its chief evangelist and then the flatlining of its operations. But the collapse of Intrade is more than a story of a single company’s rise and fall. In its brief life, Intrade’s apparent mastery of the future had been held up by dreamers as a model for whole new forms of government. But with legal obstacles piling up for prediction markets in America, it looks increasingly like the dream of a certain sort of utopian technocrat is permanently on ice.
Delaney, back row with red bandana, climbed Aconcagua in Argentina—the Americas' highest peak—in 2005. His goal was to conquer each continent's highest summit. (PHOTO: COURTESY OF PAT FALVEY)
Delaney, back row with red bandana, climbed Aconcagua in Argentina—the Americas' highest peak—in 2005. His goal was to conquer each continent's highest summit. (PHOTO: COURTESY OF PAT FALVEY)
THE REPUBLIC OF IRELAND is small and flat, with a population the size of South Carolina’s and a tallest peak of just 3,415 feet. Delaney, already a national figure, was the first Irishman to die on Everest, so his death would have been a minor tabloid frenzy under any circumstance. But the tragedy was made especially delicious for the country’s media by an environment in which all Ireland was searching for overconfident financiers to blame for the country’s economic implosion. Delaney seemed almost a caricature of an elite businessman with a utopian faith in markets and data. After his death, film crews stalked his grieving widow, steadying zoom lenses from the edge of the family’s driveway to get the first shot of the fatherless children. When I asked Dan Laffan, Delaney’s interim successor as CEO of Intrade, whether I could visit his offices a month after the death, he asked to meet instead at a downtown hotel, saying my presence in the office would prove “extremely upsetting.” The staff had been hounded by press. This reticence was new for Intrade, which had always courted public attention—and received it, far beyond Ireland.
The idea behind the business was simple: Intrade issued contracts that paid off depending on whether an event occurred or didn’t. If the event occurred (Argo to win Best Picture), the contract was worth $10. If it didn’t (Mitt Romney to win the presidency), the contract was worth nothing.
In the summer of 2011, for example, contracts that promised to pay out $10 in the event of a 2012 Romney presidential victory traded at a paltry $2.80. But over the course of the fall, as the other Republican candidates flamed out and embarrassed themselves, the Romney-to-win contract gained in value—sometimes slowly, sometimes in an instant. When Rick Perry humiliated himself by forgetting one of the federal agencies he wanted to ax (“oops”), the price of his Intrade contract fell by half in a matter of seconds. Romney’s price, in turn, ticked upward.
By Election Day a Romney-to-win contract traded for a bit under $5, just a few cents less than an Obama-to-win. Anyone who had bought at $2.80 had multiplied his money by about 1.7 in a year (provided he sold the contract before Romney’s loss, when the contract became worthless).
But Romney’s Intrade numbers were of interest not only to gamblers. For political junkies, a contract’s price represented an easy-to-read code: When a Romney contract traded for $4.60, the market was implying that there was a 46 percent chance Romney would win.
According to one way of looking at Intrade, that single number—$4.60—represented a distillation of all the available knowledge in the world at that moment concerning the state of Mittmentum. The theory behind this view is called the “efficient market hypothesis,” which is a basic principle of economics and a good reason never to try to beat the stock market. The hypothesis says, in its simplest form, that markets know what they are doing. (Needless to say, since the financial markets imploded in 2008, the hypothesis has come under severe attack.) If the real-world odds of a Romney win are in fact 53, not 46, percent, buyers will rush to buy $4.60 contracts, and the price will very quickly rise until it settles at the right number: $5.30. Markets are good at picking up information quickly and from all directions, the theory goes. Individual buyers might not know why they are willing to pay more, but in aggregate, their hunches add up to real knowledge. “When you aggregate information from a very diverse, large community, or a crowd of people,” Delaney himself said during one of his many sage media appearances, this one on CNBC, “then typically the information that you aggregate has the opportunity to be smarter than any one individual.” You may think that a stock is “overvalued” or “undervalued,” but the market knows better.
Intrade's numbers performed freakishly well. In 2004, bettors bought and sold contract saying George W. Bush would win the presidency at higher prices than contracts for a Kerry win—even when major pollsters were confidently predicting a Kerry presidency.
The potential of prediction markets to aggregate and reveal information is so great that some have surmised they might remake whole political systems. Robin Hanson, an economist at George Mason University, has endorsed what he calls “futarchy,” a form of government that would use prediction markets extensively as a policymaking tool. If the aggregated predictions of the market are better than the individual predictions of a few appointed experts, why not let citizens bet on, rather than submit to professional opinion on, for example, which tax policy is more likely to bring prosperity?
Other scholars—the ones who saw Intrade as a laboratory—were more interested in simply using it as an instrument to find out how prediction markets tick. Intrade obliged. The company often cooperated with researchers, listing contracts for sale at their request, and Delaney was a celebrity at academic conferences, where he discussed how the markets were working. Economists had observed smaller, university-run prediction markets, but Intrade allowed the testing of hypotheses on a much larger scale, and on almost any imaginable subject. “We live on data, and when we are in a data-poor ecosystem, we die,” says Erik Snowberg, a political economist at Caltech who has studied prediction markets. Intrade gave scholars a Niagara of data.
Perhaps most intriguingly, Intrade data allowed economists to test the limits of the efficient market hypothesis itself—to find out where markets do well, and where, and why, they break down. Snowberg and his colleagues Eric Zitzowitz and Justin Wolfers observed, for instance, that across all categories, Intrade’s predictions lost meaningful accuracy when odds rose above 90 percent or fell below 10 percent—that is, whenever any event became very likely or very unlikely. (The finding could be read as a validation of work by the 2002 economics Nobelist Daniel Kahneman and his late colleague Amos Tversky, who, using different methods, showed that people are inherently bad at making predictions about very rare events—tending to either wildly downplay or overstate the odds of things like winning the lottery, getting a rare disease, or being mugged.) And one observation that surfaced again and again was that prediction markets rely on heavy trading volume for their accuracy: The fewer the bettors, the less accurate the odds.
On balance, researchers found that while Intrade’s predictions weren’t always perfect, they were nonetheless remarkably accurate in markets—like those for political elections—where trading was high. And at times, Intrade’s predictions performed freakishly well. Throughout the 2004 presidential race, its bettors priced the Bush-to-win contract higher than the Kerry-to-win, even when most major pollsters were confidently predicting a Kerry victory. The 2006 U.S. mid-term elections were another moment of Intrade glory: Its bettors predicted the winners in every race. And they picked Joseph Ratzinger as the favorite to succeed John Paul II at a time when many experts scoffed at the notion that the cardinals would elect an ex–Hitler Youth.
It wasn’t just Intrade’s ability to predict the outcomes of competitions that thrilled its advocates. Intrade also operated where there was no competition, satisfying a demand for foresight on questions that previously had no reliable forecasting industry at all. Will weapons of mass destruction be found in Iraq? Will Israel bomb Iran? The answers could alter global economics and politics—and Intrade ventured them, sometimes appearing to reflect insider information in the process. On December 13, 2003, U.S. military forces discovered Saddam Hussein in his spider hole in Tikrit. Up to that week, the Intrade contract for his capture had traded at a dismal 40 cents, indicating merely a four percent chance of his capture by the end of the year. Then, in the days before his capture became public, the contract registered unusual trade volume—driven, one can only assume, by someone who knew what was about to happen. By the time Paul Bremer said “We got him” to reporters, Intraders already knew. Anyone who bought a Saddam contract a week before had made a profit of 2,500 percent.
For serious prediction-market supporters, this kind of insider trading is a feature of the model, not a bug. To some economists, markets that aggregate not only the best amateur hunches, but also the best inside dirt, are displaying “strong-form” market efficiency—something one rarely sees in more tightly regulated settings.
“A specter is haunting the punditocracy—the specter of Intrade,” wrote The New York Times’ John Tierney in 2005. As a columnist, Tierney counted himself among the many prognosticators threatened by the prediction market. “If recent history is any guide, their collective wisdom could be a lot more valuable than ours.” Columnists in newspapers and talking heads on TV are subject to bias, wishful thinking, groupthink, and ordinary myopia. But they pay little to no price for making bad, or even preposterous, predictions (see: Morris, Dick). By contrast, gamblers in a prediction market have money at stake, and therefore a direct incentive to get things right. And not just the punditocracy but the Pentagon took notice: In 2003, the Defense Department’s blue-sky think tank, DARPA, floated a plan to set up its own prediction market to forecast threats in the Middle East. The idea was eventually scuttled. But for a while, the clear-eyed rationality of prediction markets looked ready to shape military strategy, depose tenured figures like opinion columnists and pollsters, and democratize prognostication at the same time as it perfected it.
Economists were thrilled with Intrade's data; they could put efficient market hypothesis—the idea that markets see the truth clearly—to the test.
Economists were thrilled with Intrade's data; they could put efficient market hypothesis—the idea that markets see the truth clearly—to the test.
JOHN DELANEY WAS BORN on New Year’s Day, 1969, the son of a dairyman in Ballinakill, County Laois (pronounced “leash”), about an hour southwest of Dublin. His upbringing was unremarkable, and he chose what many would consider the dullest of financial-sector careers, that of accountant. He earned an MBA from University College Dublin, then spent eight years counting beans for a number of companies in that city, including Oppenheimer International Finance, and AIB Fund Managers.
In 2001, Delaney was recruited to be the chief financial officer of Global Sports Exchange, or GSX, a futures market for sports. (In Ireland, as in the United Kingdom, betting on sports is legal, common, and culturally accepted. There are betting parlors on every major pedestrian thoroughfare, and bookmaking firms sponsor sports leagues, teams, and even individual players.)
At the time, GSX was attempting to expand into the U.S. market, but its efforts were hampered by U.S. laws that restrict sports betting. So GSX’s then CEO, Ron Bernstein, decided that betting on non-sports events—elections, natural disasters—was the answer. It wasn’t hard to see that the move would position GSX atop a potentially huge market: “Almost any event that had a yes-no result,” Bernstein says, could be turned into a wager. And the business model seemed foolproof. GSX, like any bookie, would profit off the vigorish—the small commission charged on every bet placed. To placate American investors fearful of getting tangled in illegal sports gambling, GSX spun off the non-sports betting market as a separate operation, and called it Intrade. Delaney had joined GSX with only a casual knowledge of futures markets, but in late in 2001 he took over as CEO after just a few months with the company.
Mark Irvine, a Scottish-born friend of Delaney’s and former Intrade executive, describes the young CEO’s daily regimen in those days as starting at five in the morning with a check of all the company’s active markets, to see how traders in the Antipodes had reacted to the night’s news. Then it was off to the gym. Since adolescence, Delaney’s fitness routines had grown ever more intense. Members of his fitness club complained that during his treadmill sessions—which he ran carrying a backpack of rocks—his sneakers filled with sweat, and his every step sprayed a fetid geyser onto the machines behind him. At two o’clock on the morning of his wedding in 2005, he woke up and ran a marathon, followed on a bike by his best man, who groaned with a hangover but accompanied dutifully.
The wedding came after a period of great strength for Intrade as well. The company was accepting bets on subjects ranging from disease outbreaks to elections to Academy Award winners, and the number of active users was in the tens of thousands. James Surowiecki’s 2004 book The Wisdom of Crowds—which related dozens of stories about uncannily accurate market forecasts and the collective genius of amateurs—was a bestseller. And among the chattering classes, mentioning Intrade was becoming a mark of sophistication.
The absolute peak of Intrade’s powers may have been the 2004 U.S. presidential election season. That year, Irvine recalls, someone tried to manipulate the market by buying up thousands of John Kerry contracts, thereby raising their price and the implied probability that Kerry would win. But the Intrade system demonstrated its resilience. It absorbed the roughly million-dollar Kerry dump—and immediately reverted to the original price-point.
As someone who watched odds for living, Delaney probably knew that by going to Everest he faced a serious risk of death—about the same as that of a U.S. soldier fighting in the First World War.
Despite these successes, Intrade’s founders knew that the company was on shaky footing in America, where it operated in a moral and legal gray zone. In the U.S., Intrade presented regulators and the public with a puzzle: Was it a commodity futures market—in which case it needed to be regulated and have its books scrutinized, like the Chicago Mercantile Exchange? Or was it a gambling saloon—in which case it needed to be policed and controlled, if not outlawed completely, like online poker? Those regulatory questions were going to be resolved sooner or later. In May of 2005, Delaney seized the initiative and wrote to the Commodities Futures Trading Commission, asking the agency to regulate Intrade. Six months later the CFTC responded by ordering the company to cease and desist from soliciting Americans to trade in commodities like oil and gold.
Shortly thereafter, Congress dealt a second setback with the Unlawful Internet Gambling Act of 2006. That law, which was tacked on to a bill relating to port security in a last-minute legislative sausage-making session, forbade U.S. financial institutions from dealing with online gambling operations. Intrade executives sensibly worried that the company might be on the wrong side of this law. On the advice of lawyers, Delaney ceased traveling to the United States for fear of being arrested, and the company began erecting barriers to keep out the thousands of Americans who wanted to buy contracts—and who were the majority of it customers.
In 2008 Delaney again wrote to the CFTC, making the case that Intrade deserved oversight and legal recognition—to no avail. By the time Delaney set out for Everest in spring 2011, Intrade was hobbling.
The setbacks did not dim Delaney’s focus on preparing for the mountain. He had already conquered six of the world’s “seven summits”—the high points of each continent. And despite a 2009 surgery to remove a benign chest tumor, he was in rude health. Mindful of his failed attempt to summit due to bad weather in 2007, this time he left as little as possible to chance. Before leaving Ireland, he changed his usual diet of salads and health food, subjecting himself instead to meals that included unwashed vegetables and other foods covered with dirt. The idea was to toughen his guts and prepare him for the bowel-busting Tibetan and Nepalese camp food he would have to eat while acclimating.
Almost 4,000 climbers have reached the top of Everest, the vast majority of them in the past two decades. The cost of the trip—tens of thousands of dollars—has made it most feasible for wealthy professionals, businessmen, and CEOs like Delaney. They make up a strange tribe. Despite all their high-tech gear and the support infrastructure that has grown up around the mountain, the climb is in many respects as dangerous for them now as it was for the first men who summited in the 1950s. Biology hasn’t changed, and in the thin air above 26,000 feet—what climbers call the “Death Zone”—the body conspires against its owner in a variety of macabre ways. Massive headaches strike at random as the body, trying to maintain sufficient oxygenation, pushes extra fluid into the brain. The pressure builds up, and the brain slowly squeezes to death. In some cases, the lungs also fill with pink frothy sputum; even if your brain still works, you must descend quickly out of the Death Zone—or you will drown, five and a half miles above sea level.
Delaney (2003) spin Intrade out of an Irish sports-betting market to get around American squeamishness about gambling. It didn't work. (PHOTO: JOHN COGILL/BLOOMBERG)
Delaney (2003) spun Intrade out of an Irish sports-betting market to get around American squeamishness about gambling. It didn't work. (PHOTO: JOHN COGILL/BLOOMBERG)
WHEN INTRADE SHUT DOWN its markets last March, it posted a cryptic note stating that it had recently discovered “circumstances” that “may include financial irregularities.” Intrade no longer had all the money its customers had deposited with it—it was $700,000 short—and it intended to recover $3.5 million from two parties. One was reported to be Delaney’s estate. But, facing the immediate threat of a run on its remaining funds, Intrade said it would have to shut down and liquidate unless its account holders agreed not to demand their full balances back immediately. The customers agreed to forbear, and Intrade still exists—as a legal entity, not a normally functioning business.
It’s still a mystery what happened to those misplaced funds reported by Intrade’s auditors, and why they appeared in an account of Delaney’s. But it’s clear that Intrade was suffering in the months leading up to his death, and that it never really recovered. With trading volume down, Intrade’s ability to predict winners waned in the 2012 election. (Perhaps reflecting the libertarian longings of the remaining Intrade betters, the market overrated Ron Paul’s chances of winning.) The site also stopped being as valuable a source of data to economists and other social scientists. “[There] are questions that we needed data to answer,” Snowberg says. “And because of the slowdown in prediction market activity, there hasn’t been data to answer [them].”
In November 2012, the CFTC sued Intrade, saying its contracts on the price of commodities like oil and gold (will it trade above $1,400 per ounce on January 1?) amounted to illegal futures trading. Within hours, Intrade closed itself off entirely to U.S. bettors, and according to Ron Bernstein, the company lost 75 percent of its remaining accounts.
Bernstein, who helped found the firm in 2001, returned to Intrade last year to help sort out the mess. He acknowledges that the CFTC lawsuit devastated the Intrade markets: “Liquidity has to be very high for prediction markets to be valid,” he says. But he is adamant that none of the company’s current legal problems reflect inherent flaws in the prediction market model. “The problems that Intrade has had are problems that any company could have that suddenly loses a strong CEO who left, unfortunately, incomplete business records,” Bernstein says. “It absolutely has nothing to do with the fact that it was running prediction markets.”
Delaney had long claimed that Intrade was a powerful financial invention whose wisdom would be recognized once the public’s fear of new things subsided—and once regulators agreed to oversee it and grant their stamp of approval. There is plenty of history to support this idea. “Nearly all financial instruments we use today were at one point or another considered illegal and immoral,” says Hanson. Life insurance, for example, was long considered evil, because it is, effectively, gambling on human life. (And indeed, in the 19th century, when laws allowed people to take out an insurance policy on a stranger’s life, “life insurance murders” were a real, if rare, problem.) The government could have outlawed life insurance, but instead moved to regulate it. Now life insurance is safe, boring, and—most everyone would agree—socially beneficial.
Delaney wanted prediction markets to go much the same route. In his 2008 letter to the CFTC, he listed the ways in which Intrade predictions would save America money: by forecasting, say, the results of media format wars (Blu-ray vs. HD DVD) so as to help firms avoid wasteful investment; by helping Floridians prepare for bad weather; and by generally giving people the tools to navigate uncertainty. The CFTC should embrace prediction markets; “To do otherwise,” he wrote, “would be a societal travesty.” He acknowledged, too, that Intrade stood to profit from allowing the CFTC to examine the company’s books regularly and make sure it was a fair and dependable steward of its traders’ money.
Intrade was never given the CFTC oversight it sought, so it’s not clear how well the company played by the rules, including its own. For example, it forbade its employees from playing its markets—it would not be fair for them to bet if they could peek at the trading positions of other bettors—but Bernstein declines to say whether they did so anyway. If the insufficiently documented funds mentioned in Intrade’s audit do end up being linked to wrongdoing by Delaney, then it would appear that by beseeching the CFTC to regulate Intrade, he was beseeching it to save Intrade from himself.
The collapse of Intrade is more than a story of a single company's rise and fall. Intrade's apparent mastery of the future had been held up by dreamers as a model for whole forms of government.
ADVOCATES AND STUDENTS OF prediction markets like Snowberg and Hanson continue to think the theory behind them is sound, even if their reputation is in tatters. But the chances of another Intrade’s coming into existence are slim. Hanson points to the Hollywood Stock Exchange, a prediction market for box-office figures, as another example of the fates awaiting prediction markets. Soon after that exchange’s first success, Congress passed a law explicitly outlawing trading in movie futures.
Hanson continues to do academic research on the value of Intrade-like entities, and is chief scientist of Consensus Point, a company that sets up prediction markets for businesses seeking insight into crucial questions of future supply, inventory, and sales. (Best Buy has been a client.) But Snowberg says he has written his last paper on the subject, and believes the moment of prediction market vogue has passed now that the regulators have throttled off the data flow.
Still, Intrade isn’t giving up. Ron Bernstein says the company may try to operate in a way that would allow it to pass U.S. regulatory muster. He won’t give specifics about how a revived Intrade might work, but he suggests that the desire for status and reputation, rather than the desire for money, could motivate bets. Users might pay an entrance fee to enter a fake-money casino, and if they traded with intelligence and foresight, they could, say, put Intrade badges on their Facebook pages and brag about being super-predictors. And since users would hazard no real money, the Commodities Futures Trading Commission would have no jurisdiction over the market.
Other entrepreneurs are looking to evade the heavy hand of government more directly. The Dublin-based prediction market Predictious debuted in July. It deliberately avoids using the traditional banking system—the principal choke point for regulators—by forcing users to bet with Bitcoins, the peer-to-peer digital currency. “The U.S. blocked [dollar-denominated] transfers and could control Intrade by ordering the banks not to trade with them,” says Predictious’s founder, Flavien Charlon. “With Bitcoin that is impossible.” And he points out that the open nature of Bitcoin allows anyone to see exactly where the money is in the accounts, and whether there is any fraud. Predictious has only seen a few tens of thousands of dollars of bets placed, and Bitcoin has problems of its own (most damning, its extreme volatility). But the market is still young, and it will be harder to legislate out of business than Intrade.
Delaney appeared in public often, calmly professing Intrade's freakishly accurate predictions. But is accuracy what people really want?
Delaney appeared in public often, calmly professing Intrade's freakishly accurate predictions. But is accuracy what people really want?
WHETHER THE REVIVED INTRADE or Predictious succeeds may depend on how their legal issues resolve. But there is also the unsettling possibility that they will fail because the product they deliver—accurate predictions about the future—is not a product people actually want. For all its promise, Intrade never expanded its user base far beyond the niche world of gamblers and hobbyists, and its employee head count never rose above double digits.
Startlingly little of the bounty once expected from prediction markets has materialized. John Zogby and the people at Gallup still have jobs, and inflict their numbers on us every day in the newspaper, even though their track records of prediction are awful. Meanwhile, one of the most accurate political predictors in history is fending off creditors, and the visions of futures-market utopians still sound like science fiction.
It’s perhaps no great surprise that we haven’t embraced Hanson’s “futarchy.” Our current political system resists dramatic change, and has resisted it for 237 years. More traditional modes of prediction have proved astonishingly bad, yet they continue to run our economic and political worlds, often straight into the ground. Bubbles do occur, and we can all point to examples of markets getting blindsided. But if prediction markets are on balance more accurate and unbiased, they should still be an attractive policy tool, rather than a discarded idea tainted with the odor of unseemliness. As Hanson asks, “Who wouldn’t want a more accurate source?”
Maybe most people. What motivates us to vote, opine, and prognosticate is often not the desire for efficacy or accuracy in worldly affairs—the things that prediction markets deliver—but instead the desire to send signals to each other about who we are. Humans remain intensely tribal. We choose groups to associate with, and we try hard to show everybody which groups we belong to. We don’t join the Tea Party because we have exhaustively studied and rejected monetarism, and we don’t pay extra for organic food because we have made a careful cost-benefit analysis based on research about its relative safety. We do these things because doing so says something that we want to convey to others. Nor does the accuracy of our favorite talking heads matter that much to us. More than we like accuracy, we like listening to talkers on our side, and identifying them as being on our team—the right team.
“We continue to have consistent results and evidence that markets are accurate,” Hanson says. “If the question is, ‘Do these things predict well?,’ we have an answer: They do. But that story has to be put up against the idea that people never really wanted more accurate sources.”
On this theory, the techno-libertarian enthusiasts got the technology right, and the humanity wrong. Whenever John Delaney showed up on CNBC, hawking his Intrade numbers and describing them as the most accurate and impartial around, he was also selling a future that people fundamentally weren’t interested in buying. FROMhttp://www.psmag.com/business-economics/death-summit-67326/
|Friday, November 8th, 2013|
Swing: the Velocity of Celebration
This series explores the history of the major American musical form. We track its development in African American culture, its rise to prominence with its golden age of popularity spanning from the 1920s to the mid 1940s both in its original form and in Swing through its popular decline and the rise of vital new sub-genres into the present day. Along the way, we learn of the lives and work of major contributors to the form such as Louis Armstrong, Duke Ellington, Billie Holiday, Benny Goodman, Charlie 'Bird' Parker and many others who helped form jazz into the vibrant musical form it is. Moreover, we see how the music reflected the political and social issues of the African American community over the course of the form's history.
|Thursday, November 7th, 2013|
Bitcoin – The Internet of Money
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This post is old – I wrote it for Wired, which just published an excerpt in “The Wired World in 2014″ issue, but the article was written in July. Apologies for the obsolescence.
Bitcoin will eventually be recognized as a platform for building new financial services.
Most people are only familiar with (b)itcoin the electronic currency, but more important is (B)itcoin, with a capital B, the underlying protocol, which encapsulates and distributes the functions of contract law.
Bitcoin encapsulates four fundamental technologies:
Digital Signatures – these can’t be forged and allow one party to securely verify a transaction with another.
Peer-to-Peer networks, like BitTorrent or TCP/IP – difficult to take down and no central trust
Proof-of-Work prevents users from spending the same money twice, without needing a central authority to distinguish valid from invalid transactions. Bitcoin creates an incentive for miners, who run powerful computers in the network, to validate transactions and to secure them from future tampering. The miners are paid by “discovering” new coins, and anyone with computational resources can anonymously and democratically become a miner.
Distributed Ledger – Bitcoin puts a history of each and every transaction into every wallet. This “block chain” means that anyone can validate that a given transaction was performed.
Thanks to these technical underpinnings, bitcoins are scarce (Central Banks can’t inflate them away), durable (they don’t degrade), portable (can be carried and transmitted electronically or as numbers in your head), divisible (into trillionths), verifiable (through everyone’s block chain), easy to store (paper or electronic), fungible (each bitcoin is equal), difficult to counterfeit (cryptographically impossible), and can achieve widespread use – many of the technologists that brought us advances on the Internet are now working overtime to improve Bitcoin.
Proponents of the role of government argue that a currency with fixed supply will fail. They posit that inflation is required to keep people spending and that prices and wages are still as sticky as they were decades ago. They overlook that the world functioned on fixed money supplies until 40 years ago (the gold standard), and that bitcoin can gather many uses and value long before it has to become the main currency in which all prices are denominated. Another fear is that a central actor could take over the Bitcoin computing network – but the combined Bitcoin distributed supercomputer runs at the equivalent of 2,250 PetaFLOPS, 90x the rate of the fastest supercomputer (note – in Nov, it’s now 48,000 PetaFLOPS!), and consumes an infinitesimal fraction of the resources used by a bloated banking system. Many label it as a speculative pyramid scheme – without realizing that all government-printed money is such. To the extent anyone holds cash over other assets, they are speculating that other assets will decline in relative value. Concerns abound over the security of the encryption scheme, the speed of transactions, the size of the block chain, the irreversibility of the transactions, and the potential for hacking and theft. All are fixable through third-party services and protocol upgrades. It’s better to think about Bitcoin the protocol as Bitcoin 1.0, destined to evolve just as HTTP 1.0 evolved beyond of simple text and image-only web-browsers.
So why not just use Pounds or Dollars? One can use bitcoins as high-powered money with distinct advantages. Bitcoins, like cash, are irrevocable. Merchants don’t have to worry about shipping a good, only to have a customer void the credit card transaction and charge-back the sale. Bitcoins are easy to send – instead of filling forms with your address, credit card number, and verification information, you just send money to a destination address. Each such address is uniquely generated for that single transaction, and therefore easily verifiable. Bitcoins can be stored as a compact number, traded by mere voice, printed on paper, or sent electronically. They can be stored as a passphrase that exists only in your head! There is no threat of money printing by a bankrupt government to dilute your savings. Transactions are pseudonymous – the wallets do not, by default have names attached to them, although transaction chains are easy to trace. It has near-zero transaction costs – you can use it for micropayments, and it costs the same to send 0.1 bitcoins or 10,000 bitcoins. Finally, it is global – so a Nigerian citizen can use it to safely transact with a US company, no credit or trust required.
Even more importantly, Bitcoin the protocol will enable financial services transactions that are not possible today or require expensive and powerful third-parties.
Bitcoin has a scripting language which enables more than a “send money from X to Y” transaction. A Bitcoin transaction can require M of N parties to approve a transaction. Imagine Wills that automatically unlock when most of the heirs agree that their parent has passed, no lawyer required. Or business accounts that require two of any three trusted signatures to approve an expenditure. Or wire escrows that go through when any arbiter agrees that the supplier sent the goods to the buyer. Or wallets that are socially secured by your friends and family. Or an allowance account accessible by the child and either of two parents. Or a crowdfunding of a Kickstarter project that pays out on milestones, based on the majority of the backers approving the next payment. The escrow in each case can be locked so that the arbiters can’t take the money themselves – only approve or deny the transaction.
The scripting language can also unlock transactions based on other parameters. Unlocking them over time can enable automatic mortgage, trust, and allowance payouts. Unlocking them on guessable numbers creates a lottery auditable by third parties. One can even design smart property – for example, a car’s electronic key so that when and only when a payment is made by the car buyer to the seller, the seller’s car key stops working and the buyer’s car key (or mobile phone) starts the car. Imagine your self-driving car negotiating traffic, paying fractional bitcoin to neighboring cars in exchange for priority.
Everyone has a copy of the Bitcoin block chain, so anyone can verify your transactions. You can write software that will crawl the block chain and generate automatic accounting histories for tax and verification purposes. You can engaged in “Trusted Timestamping” – take a cryptographic signature of any document, timestamp it, and put it into the block chain. Anyone can verify that the document existed at a given time. If you sign the document with your private key and another party signs it with theirs, it becomes an undeniable mutually-signed contract. This entirely eliminates notaries and websites like https://www.proofofexistence.com/ are showing the concept. The Namecoin project is building a distributed Domain Name System that allocates and resolve Domain Names without needing ICANN or Verisign, by using the block chain to establish proof-of-ownership. Similarly, look for entrepreneurs to apply this authoritative proof-of-ownership to built P2P Stock and Bond Exchanges – at least one Bitcoin site, “Satoshi Dice,” has sold shares and issues dividends without using a stock exchange. The ownership and dividends are easily verifiable by anyone who wants to look inside the block chain. Predictious.com is combining the transaction scripting and the verifiability to create a prediction market in which you cannot be cheated and third-party arbiters can allocate the winnings.
Bitcoin’s “send-only” and irreversible nature makes it much less vulnerable to theft. Today, anyone with your Credit Card or E-Checque (ACH) information can pull money from your account. This creates chargebacks, expensive dispute resolution and merchants double-checking your identity. Bitcoin is send only. Anyone who has received bitcoins from you can’t request or pull more money from your account.
Most importantly, Bitcoin offers an open API to create secure, scriptable e-cash transactions. Just as the web democratized publishing and development, Bitcoin can democratize building new financial services. Contracts can be entered into, verified, and enforced completely electronically, using any third-party that you care to trust, or by the code itself. For free, within minutes, without possibility of forgery or revocation. Any competent programmer has an API to cash, payments, escrow, wills, notaries, lotteries, dividends, micropayments, subscriptions, crowdfunding, and more. While the traditional banks and credit card companies lock down access to their payments infrastructure to a handful of trusted parties, Bitcoin is open to all.
Silicon Valley knows a platform when it sees it, and is aflame with Bitcoin. Teams of brilliant young programmers, entranced by the opportunity, are working on Exchanges (Payward, Buttercoin, Varum), Futures Markets (ICBIT), Hardware Wallets (BitCoinCard, Trezor, etc), Payment Processors (bitpay.com), Banks, Escrow companies, Vaults, Mobile Wallets, Remittance Networks (bitinstant.com), Local Trading networks (localbitcoins.com), and more.
Looming over them is how governments view Bitcoin and the entrenched financial powers it threatens. The last few decades have seen a move towards a cashless society, where every transaction is tracked, reported, and controlled. Bitcoin takes powers from the central actors and returns it to merchants and consumers, savers and borrowers. Bitcoin brings back some pseudonymity in the transactions, and can be irrevocably traded like cash. And finally, it points a way towards a single currency – it is a bug, not a feature, that we have multiple global currencies with exchangers and transaction fees in between.
Governments have been cracking down on the bitcoin exchanges, making it harder to obtain and slowing its development. Strict and expensive Money Transmitter regulations, designed to slow terrorist and child porn financing, threaten the next great technological revolution – never mind that terrorists can use cash just fine, the means of terror are cheap, and that they account for an infinitesimal fraction of global commerce. The development and innovation in Bitcoin has already begun the move to friendlier jurisdictions, where its innovation can continue un-impeded. Regulators in the US and UK would be wise to proceed with a light touch, lest they push the development of Bitcoin and its entrepreneurs to places like Canada, Finland, and the Sino-sphere. The United States has benefited enormously from being home to the majority of global companies driving the Internet revolution. The country that is the home to the Internet of Money could one day end up as the guardian of the new Reserve Currency and the Global Money Supply.
Thanks to Shawn O’Connor, Lucas Ryan, Paul Bohm (@enkido), and Oleg Andreev (@oleganza) for feedback. Follow me at @naval FROMhttp://startupboy.com/2013/11/07/bitcoin-the-internet-of-money/
I don't quite know why I received the message below, but I am answering (including cypherpunks@NOSPAMcpunks.org) since it seems a good time to do so given the humorous connection to my isotopically-modified optical fiber invention. And, I would like to make a request, indeed an offer.
A few weeks ago, when I re-appeared on cypherpunks.org, I pointed out that my patent application was recently (mid-July 2013) published by the US Patent and Trademark Office (USPTO). See http://www.freepatentsonline.com/WO2013101261A1.html
This is an invention that I thought of in December 2008, stuck in a prison cell at USP Tucson: I realized that much of the index of refraction of ordinary silica (which is about 1.46; of that amount above an index of 1.000) was due to the presence of Si-29 atoms. (Si-29 is the only naturally-existing silicon atom with an 'electromagnetic spin', due to its unpaired neutron circulating in the nucleus.) I concluded that by dramatically reducing the proportion of Si-29 atoms, which amount to about 4.67% atom/atom in ordinary silicon, it would be possible to make silica with a much-lower index of refraction: Probably between 1.10 and 1.02, but the amount is uncertain.
One big advantage of this fiber will be a far-higher 'velocity factor', approaching 0.90-0.98 of 'c', where 'c' is physicist-speak for the speed of light in a vacuum, compared with ordinary silicon optical fibers with a velocity factor of 1/1.46, or 0.685 of 'c'. This will amount to a dramatically-faster signal velocity. While not quite as fast as line-of-sight microwave, or neutrino-beams piercing the earth, it would be significant.
Other advantages will be a reduction in optical loss by perhaps a factor of 10x (from perhaps 0.19 db/km in existing fibers to 0.019 db/km), a reduction of optical dispersion by a similar factor of 10x, and an increase in useable optical bandwidth from 50 nanometers wavelength (1510-1560 nm) to 800 nm (1000-1800 nm). (The practical limit on fiber tends to be the limitation on the gain-bandwidth of EDFA's; Erbium-Doped Fiber Amplifiers http://en.wikipedia.org/wiki/Erbium_doped_fiber_amplifier#Erbium-doped_fiber_amplifiers
Shortly I will begin preparing a prototype for this fiber, which will cost between $200-250K. (USD). I have received a committment for this amount. However, having filed for a US Patent (specifically, a PCT or 'Patent Cooperation Treaty' filing), it will be necessary to file for many dozens more 'national-stage' patents: The way patents work, around the world, is that a person must file for a patent in each nation around the world that he desires to have patent-protection in. A national-stage patent costs about $10,000. Generally, the reasoning is that an inventor should file for a patent in any country:
1. Where a significant amount of the invention will be made.
2. Where a significant amount of the invention will be used.
If I assume that the royalty per meter of fiber is $0.25/meter (25 American cents per meter), it would be worth filing for a patent if the amount of fiber made or used is $10,000/$0.25, or 40,000 meters of fiber. This would be about 1.1 kilometers of cable that has 36 fibers in it. Obviously, even the smallest country would use enough fiber to justify obtaining a patent.
There are 148 PCT-signatory countries. http://en.wikipedia.org/wiki/Patent_cooperation_treaty
I would like to obtain, at the very least, national-stage patents in at least 40 nations, probably 80 nations, and possibly as much as 120 nations. That would cost about $400,000, $800,000, or $1.2 million. (USD). I have considered raising the money by means of a Kickstarter campaign, but that site is oriented to collecting donations of money: It is specifically prohibited that a project proponent promise a financial return on such a contribution. But I'm not looking for a handout: I'm looking for a loan which will be paid back. Perhaps that's called a 'bond'?
How would it be paid back? Corning says that 300 billion meters of fiber were manufactured in about 2012. If I get a market-share of 10%, that's 30 billion meters per year. At a royalty of, say, $0.25 per meter of fiber, that would be $7.5 billion per year. With even a tiny fraction of such a value, I could pay a huge return on a loan to finance these national-stage patent applications. I see nothing wrong with a 3x return: $3 returned for each dollar loaned, probably within 1-2 years. Does this sound interesting?