sipa changed the topic of #bitcoin-wizards to: This channel is for discussing theoretical ideas with regard to cryptocurrencies, not about short-term Bitcoin development | http://bitcoin.ninja/ | This channel is logged. | For logs and more information, visit http://bitcoin.ninja
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<nsh>
'MIT researchers have developed a new algorithm that vastly reduces the computation of virtually any computational model. The algorithm may be thought of as a shrinking bull's-eye that, over several runs of a model, and in combination with some relevant data points, incrementally narrows in on its target: a probability distribution of values for each unknown parameter. With this method, the research
<nsh>
ers were able to arrive at the same answer as a classic computational approaches, but 200 times faster.'
<yoleaux>
"In statistics, Markov chain Monte Carlo (MCMC) methods are a class of algorithms for sampling from a probability distribution based on constructing a Markov chain that has the desired distribution as its equilibrium distribution. The state of the chain after a number of steps is then used as a sample of the desired distribution." — https://en.wikipedia.org/wiki/Markov_chain_Monte_Carlo
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<Taek>
bsm117532: since you are spending a lot of time on dagchain and fork-merging stuff right now, do you think you could throw together a page on the subject for https://github.com/DavidVorick/knosys ?
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<Taek>
even if we could get people excited about -ev mining (through gambling or some other incentive), I'm skeptical that it would make a dent against centralized mining for a long time. Economy-of-Scale benefits for Bitcoin mining currently appear to offer heavy benefits. To get mining as a whole -ev, you'd need smaller parties willing to take a huge hit. State lotteries iirc are like 0.5 expected ROI, but I don't think that's enough for btc mining.
<Taek>
bsm1175321: it's not that simple. people will play the lottery despite knowing that it favors the house
<maaku>
bsm1175321: if anything a tax on despiration, not stupidity
<waxwing>
utility curve concept from economics (i think). like, 1% chance of $100 is worth more than $1 to some people.
<bsm1175321>
waxwing: also known as "bad at math".
<Taek>
If I was sufficiently miserable I could see myself opting for a negative-return chance at a better life.
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<waxwing>
i'm arguing not *necessarily* bsm117532 , but OK.
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<bsm1175321>
Taek: that's a sad situation. These things should not be legal, and shouldn't be done by the state. But we're way off topic now.
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<MRL-Relay>
[othe] Why not legal? That´s hilarious, 5 bucks a month doesn´t hurt me for a lottery ticket; but maybe when i win once in a life it can change my life forever for the good. That´s why so many people play - i guess.
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<maaku>
Most people who don't e.g. play the startup game or early invest in bitcoin don't get the chance to be millionaires in life, ever. Not playing is absolute certainty of a mundane, meaningless existence. $5/week opens the door, even if by just a little crack.
<bsm1175321>
There are better ways to make miserable people's lives better.
<amiller_>
Taek, the threat of -ev lottery could even discourage the asic progression
<Taek>
to tie it back into Bitcoin, existing lotteries all seem to have 50%+ expected revenue on the ticket cost. Economies-of-scale mining appear to have a much better than factor-of-two advantage over small-operation mining
<Taek>
to make it so that all mining is -ev would take a lot
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<amiller_>
Taek, IMO that's the most relevant point... if that's true, epecially for all PoW schemes, that absolutely is a detriment to this idea
<sipa>
waxwing: interesting... if you use log(wealth) as utility, then investing 1% of your income to have 1/1000 chance to win 500x the betted amount actually on average increases utility
<sipa>
waxwing: oops, my math was off; nope, not the case
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<amiller_>
Taek, it's one thing to imagine lotto-players driving the price down to where it's -ev for them, and even -ev for more efficient others... but it's hard to imagine that going less then 0.5 based on the current lottery markets, and even a small +EV for big miners seems like it would encourage them
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<amiller_>
on the other hand, even if it would be slightly +EV for big miners, the super high variance could be a discouragement
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<Taek>
amiller_: if people really did start investing in 'gambling asics', then you'd have more R&D going into making better tiny asics, which would be an improvement over today, where most R&D seems to be going towards ascis that only benefit corporations
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<amiller_>
yeah
* nsh
blinks, reads backscroll
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<gmaxwell>
Taek: technically the parts used in all the current successful devices are small chips that could easily be deployed in small, silent, devices.
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<nsh>
so let me surmise: the hypothesis is that miner decentralisation is benefited by distribution of tolerance to negative expected value of 'playing' bitcoin-miner-as-lottery -- if ASICs were available at negligible capital-cost -- because empirical results show that individuals will play a lottery at far lower e.v. than centralisers will accept in business logic
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<phantomcircuit>
nsh, that's the idea
<phantomcircuit>
issue is that miners are capital intensive (for now) and loud as shit so nobody wants to run the things
<nsh>
however the exact dynamics depend on the variation of the expectation -- specifically the cross-over points between worthiness as a punt and worthiness as a business investment -- as a function of the hardware and energy costs and the variation of the mining subsidy fiat valuation
<nsh>
right
<nsh>
(sorry, there's two X points defining three regions, with the hypothesised window of decentralisation utility being between the two)
<phantomcircuit>
nsh, well and possibly it would not be good for all the people selecting transactions to be irrational gamblers
<phantomcircuit>
otoh /me looks at the channel he's in
* nsh
nods
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<nsh>
well i guess the latter is a question of whether the irrationality has any effect on selection, which depends on how possible and worthwhile it is to change the miner software behaviour for a lottery player, and then whether these changes would tend to average out or not
<nsh>
i doubt there would be any effect really unless someone found a way of making playing with your miner part of the 'game'
<nsh>
when most likely it just breaks things and you can't play and have to accept the sunken cost of your btclotterytoy
<nsh>
but it obviously empowers the people who write the software that runs on the solo-miner ASICs, but that is just the same problem we already have
<waxwing>
sipa: i think if you hold probability and payout fix, you can maximise U on the betting fraction (assuming U is log let's say)
<sipa>
seems that the only way to make the maximum utlity not be at bet=zero is by having a superlinear utility function
<amiller_>
i don't like calling this kind of decision making "irrational", that has a rather strong connotation... it's plausible to me there's nothing wrong with gambling... so i prefer to say this is "decision theoretic" incentive analysis rather than "rational" incentive analysis
<waxwing>
sipa: yes that makes sense. log() doesn't work for a maximum.
<sipa>
waxwing: however, if the utility function is superlinear everywhere, the maximum utility is obtained by everything you have :p
<amiller_>
there's a decision theory model that i think is pretty close to this called cumulative prospect theory, it's almost as useful/simple as expecuted utility
<sipa>
waxwing: by betting everything you have
<amiller_>
it can be seen as a sligt weakening of the expected utility axioms... especially it removes the "independence" axiom
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<waxwing>
sipa: right, i find this confusing. i remember something called "optimal f" - where, if you have a whole set of discrete outcomes, you can maximise
<amiller_>
but it's also numerically ill-behaved for really rare really positive-value events... so not so useful for planning a lottery
<waxwing>
that being an extension of the simpler "kelly criterion", same idea but with only binary outcome.
<waxwing>
amiller_: nobel prize in economics is worthless, they nominate any old fool nowadays :p
<waxwing>
but more seriously, thanks :)
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<amiller_>
the theory says a way to think about it is you have a valuation curve, and a "probability distortion" curve
<amiller_>
in expected utility theory, there's just one valuation -> utility curve, which you can bend down to model "risk averse" or bend up to model "risk seeking", but not both at the same time, which is why you can't use EU to model people that go to casinos but also buying life insurance
<amiller_>
there's a nice form of a fitted function for the "probability distortion" curve based on empirical data
<amiller_>
but the empirical data only covers chump change
<waxwing>
one reason i didn't look into this whole thing much further is that it feels like giving the model way too much degrees of freedom if you can specify an arbitrary curve to preferences.
<waxwing>
a model like that could say anything.
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<amiller_>
so the empriical data only validates relatively small amounts (obv. no one is going to blow $60M on a laboratory study), and the curve they fit basically has slope infinity for larger and larger values
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<gmaxwell>
I wouldn't be surprised if the curve depended more on context and priming than anything else.
<amiller_>
gmaxwell, yeah. that basically says that protocol design gets washed out by factors outside the control of the protocol
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<gmaxwell>
It may be that protocol design is necessary (can't provide the right context without the right protocol) but not sufficient.
<waxwing>
u is just essentially a free variable. is it the same across people? across one person at different times?
<waxwing>
looks tautological to me
<amiller_>
it doesn't have to be the same across people, and i don't think it's tautological
<Taek>
buying a lottery ticket might make it easier to fantasize about having a lot of money. Instead of paying for the acutal opportunity, maybe some people pay so that they can have stronger/more real-seeming fantasies. (are we OT?)
<kanzure>
this is likely a constantly depreciating lottery ticket generator, though.. so it's not quite the same analogy.
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<amiller_>
Taek, I don't think that's OT. But I don't like that explanation because it doesn't say anything about the role of the actual underlying proposition... which is presumably the knob we have control over
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<amiller_>
maybe it just leads to another question, which is what lottery payoff propositions are best at helping people fantasize?
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<amiller_>
an answer to that might be actionable
* Taek
smells a high-risk startup
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<nsh>
high risks with other people's stakes, you say? sounds good to me...
<nsh>
we could definitely solve miner centralisation if individuals were allowed to mine as a lottery using venture capital
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<nsh>
although ironically, that was also what caused the centralisation to begin with
<kanzure>
a65a926900ca804b04f2857880f5c6a9 Ring confidential transactions.pdf
<kanzure>
aa480da9b131562720f49abf71a0eca1 Ring CT for Monero.pdf
<kanzure>
what was the difference?
<Taek>
the startup I was referring to involved creating a product (bitcoin-gambling machines) and then figuring out how to tweak them so that people used them in high volume.
<MRL-Relay>
[othe] second one is newer, both are not final tho
<nsh>
(should be able to determine most recent by pdf metadata if not obvious from contents)
<amiller_>
one of them's on the eprint, where all the academic cryptographers of the world will see it https://eprint.iacr.org/2015/1098
<amiller_>
that's fun to see
<kanzure>
minor typo in title on iacr eprint server ("RIng")
<kanzure>
... er, i mean "SIgnature"
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<amiller_>
what surprises me the most is that eprint has its own entire forum system they wrote, and it's a total ghost town
<gwillen>
amiller_: some people do not quickly grok that community building is about social engineering and not software engineering
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<nsh>
the average writer of a preprint is past caring about the thing they wrote and definitely doesn't want to talk about it with the average reader of a preprint
<nsh>
in this case, maine and texas really do have little to communicate
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