eric at voskuil.org [ARCHIVE] on Nostr: 📅 Original date posted:2022-05-18 📝 Original message:Good evening ZmnSCPxj, ...

📅 Original date posted:2022-05-18
📝 Original message:Good evening ZmnSCPxj,

Sorry for the long delay...

> Good morning e,
>
> > Good evening ZmnSCPxj,
> >
> > For the sake of simplicity, I'll use the terms lender (Landlord), borrower
> > (Lessor), interest (X), principal (Y), period (N) and maturity (height after N).
> >
> > The lender in your scenario "provides use" of the principal, and is paid
> > interest in exchange. This is of course the nature of lending, as a period
> > without one's capital incurs an opportunity cost that must be offset (by
> > interest).
> >
> > The borrower's "use" of the principal is what is being overlooked. To
> > generate income from capital one must produce something and sell it.
> > Production requires both capital and time. Borrowing the principle for the
> > period allows the borrower to produce goods, sell them, and return the
> > "profit" as interest to the lender. Use implies that the borrower is spending
> > the principle - trading it with others. Eventually any number of others end up
> > holding the principle. At maturity, the coin is returned to the lender (by
> > covenant). At that point, all people the borrower traded with are bag holders.
> > Knowledge of this scam results in an imputed net present zero value for the
> > borrowed principal.
>
> But in this scheme, the principal is not being used as money, but as a billboard
> for an advertisement.
>
> Thus, the bitcoins are not being used as money due to the use of the fidelity
> bond to back a "you can totally trust me I am not a bot!!" assertion.
> This is not the same as your scenario --- the funds are never transferred,
> instead, a different use of the locked funds is invented.
>
> As a better analogy: I am borrowing a piece of gold, smelting it down to make
> a nice shiny advertisement "I am totally not a bot!!", then at the end of the
> lease period, re-smelting it back and returning to you the same gold piece
> (with the exact same atoms constituting it), plus an interest from my business,
> which gained customers because of the shiny gold advertisement claiming "I
> am totally not a bot!!".
>
> That you use the same piece of gold for money does not preclude me using
> the gold for something else of economic value, like making a nice shiny
> advertisement, so I think your analysis fails there.
> Otherwise, your analysis is on point, but analyses something else entirely.

Ok, so you are suggesting the renting of someone else's proof of "burn" (opportunity cost) to prove your necessary expense - the financial equivalent of your own burn. Reading through the thread, it looks like you are suggesting this as a way the cost of the burn might be diluted across multiple uses, based on the obscuration of the identity. And therefore identity (or at least global uniqueness) enters the equation. Sounds like a reasonable concern to me.

It appears that the term "fidelity bond" is generally accepted, though I find this an unnecessarily misleading analogy. A bond is a loan (capital at risk), and a fidelity bond is also capital at risk (to provide assurance of some behavior). Proof of burn/work, such as Hash Cash (and Bitcoin), is merely demonstration of a prior expense. But in those cases, the expense is provably associated. As you have pointed out, if the burn is not associated with the specific use, it can be reused, diluting the demonstrated expense to an unprovable degree.

I can see how you come to refer to selling the PoB as "lending" it, because the covenant on the underlying coin is time constrained. But nothing is actually lent here. The "advertisement" created by the covenant (and its presumed exclusivity) is sold. This is also entirely consistent with the idea that a loan implies capital at risk. While this is nothing more than a terminology nit, the use of "fidelity bond" and the subsequent description of "renting" (the fidelity bond) both led me down another path (Tamas' proposal for risk free lending under covenant, which we discussed here years ago).

In any case, I tend to agree with your other posts on the subject. For the burn to be provably non-dilutable it must be a cost provably associated to the scenario which relies upon the cost. This provides the global uniqueness constraint (under cryptographic assumptions of difficulty).

Best,
e

> Regards,
> ZmnSCPxj