Vitalik Buterin has a new post about an interesting theoretical attack against Bitcoin. The idea relies on the assumption that the attacker can credibly commit to something quite crazy. The crazy thing is this: paying out 25.01 BTC to all the people who help him in his attack to steal 25 BTC from everyone, but only if the attack fails. This leads to a weird payoff matrix where the dominant strategy is to help him in the attack. The attack succeeds, and no payoff is made.
Of course, smart contracts make such crazy commitments perfectly possible, so this is a bit less theoretical than it sounds. But even as an abstract though experiment about decision theories, it looks pretty interesting.
By the way, Vitalik Buterin is really on a roll. Just a week ago he had a thought-provoking blog post about how Decentralized Autonomous Organizations could possibly utilize a concept often discussed here: decision theory in a setup where agents can inspect each others' source code. It was shared on LW Discussion, but earned less exposure than I think it deserved.
EDIT 1: One smart commenter of the original post spotted that an isomorphic, extremely cool game was already proposed by billionaire Warren Buffett. Does this thing already have a name in game theory maybe?
EDIT 2: I wrote the game up in detail for some old-school game theorist friends:
The attacker orchestrates a game with 99 players. The attacker himself does not participate in the game.
Rules:
Each of the players can either defect or cooperate, in the usual game theoretic setup where they do announce their decisions simultaneously, without side channels. We call "aggregate outcome" the decision that was made by the majority of the players. If the aggregate outcome is defection, we say that the attack succeeds. A player's payoff consists of two components:
1. If her decision coincides with the aggregate outcome, the player gets 10 utilons.
and simultaneously:
2. if the attack succeeds, the attacker gets 1 utilons from each of the 99 players, regardless of their own decision.
There are two equilibria, but the second payoff component breaks the symmetry, and everyone will cooperate.
Now the attacker spices things up, by making a credible commitment before the game. ("Credible" simply means that somehow they make sure that the promise can not be broken. The classic way to achieve such things is an escrow, but so called smart contracts are emerging as a method for making fully unbreakable commitments.)
The attacker's commitment is quite counterintuitive: he promises that he will pay 11 utilons to each of the defecting players, but only if the attack fails.
Now the payoff looks like this:
Defection became a dominant strategy. The clever thing, of course, is that if everyone defects, then the attacker reaches his goal without paying out anything.
Take a look at Slockit or Airlock's page. Can you buy or implement their system? No.
They are working on developing something contingent on something that doesn't exist
Ethereum launched as a currency already, but that doesn't mean it's implemented it's claim to value - smart contracts. It's borderline a scam dare I say. That, or they're is something seriously wrong about the way they are conducting themselves. Altcoins really have been underwhelming as a whole since bitcoin - and even bitcoin is so poorly integrated into existing financial infrastructure it's not an immediately tractable concept and until it is...I'd rather not hedge my bank account into something that may very well end of catastrophic failure - some day there will probably be an ''attack'' which destroys a virtual coin economy and networks and delegitimises the movement, killing confidence in the concept.
Augur doesn't actually implement smart contracts in a prediction market, not yet at least. The best solution we have to that problem is ''oracles'', which are somewhat decentralised but not at all original and not at all trustless smart contracts.
edit: btw, Augur specifically is a fork of ethereum. It's a big way of saying fuck you and thanks for the code, basically. Consider for example the case of anoncoin planning to fork into zerocash - zero cash will entirely dominate anoncoin in theory so all those people who hold anoncoin can basically kiss their holdings goodbye thanks to their developers defecting to the new technology. If augur is successful, what can augur holders do that ethereum holders can? Everything. Coins of any currency become redundant when their selling point is a gimmick for which there are low barriers of entry to improving upon their inherent value (imagine being able to easily alchemise a more useful prettier version of gold, then sell it for less than gold initially - certainly doesn't make gold feel like a good investment - particularly as in the case of Ethereum were the use is merely aspirational...)
Of course investing in new technology is always risky.
I haven't heard of any altcoin besides Ethereum that provides a significant benefit over Bitcoin, so it's natural that other altcoins don't lead anywhere.
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