How will SAFE Network deal with "arbitrage"

In the stock exchange business, there are people who earn money with “arbitrage”, for example the “yen carry trade”: http://www.investopedia.com/terms/c/currencycarrytrade.asp How will this be prevented? For example: let’s say I would offer resources on the SAFE Network through my Safe Network client, but I would “channel” the Safe Network client to a virtual disk at a Cloud provider, Amazon, Google, Azure, whatever. And I would earn safecoins for providing this storage. Then I would exchange these safecoins to for example bitcoins, and then back to actual dollars. If the value in dollars of exchanged safecoin I earn is more than the cost of the virtual diskspace at this cloud provider, then I could just rinse, repeat, and get rich? This could even be automated, because these cloud providers have good API’s you can use to create resources.

Storing data on cloud providers will not be efficient enough to earn any safecoins. When your vault receives a get request, retrieving the corresponding chunk from a distant storage will take too much time and your vault will respond after everyone else. So you will not get a single chance for a farming attempt.

2 Likes

I don’t agree with you here. For example, I could create a Virtual Machine, for example a Windows machine in Azure, and I could use an Azure Table (which is a key-value store, like a NoSQL database). These are very fast in retrieval. Read this article: http://www.troyhunt.com/2013/12/working-with-154-million-records-on.html I quote:

154M records being searched and the connection overhead plus some validation of the email address and then splitting it into partition and row keys and it’s all wrapped up in 4ms.

So if I would have a table like that with rows containing the hash of a chunk as a key (row key in Azure Table) and the actual chunk as the value, this will be VERY fast. Even faster than 4ms in his example maybe, because it would be a very efficient “index lookup”. Also, the internet speed out of the cloud is very fast, probably much faster than at home.

As far as I know the price of storage on the safe network should (at least in the long term) somehow resemble the actual cost of storing data. At least in the sense that if you can make money running a vault in the cloud, there is nothing wrong about doing so. But lots of other people will do the same, and the large amount of free disc space on the network will drive down the farming rewards until it is not (or barely) profitable. This is actually what arbitrage is supposed to do, shift the resources as long as it is economically reasonable. I can not see how this would be not beneficial for the safe network, and it is certainly not and “infinite money making machine”, but it depends of course on how well the algorithms adjust the farming reward w.r.t. supply and demand…

2 Likes

SAFE instances on AWS may turn out to be competitive, and may be a centralization threat to the network.

I believe SAFEcoin it would be wise to pay SAFEcoin to slower nodes to maintain diversity.

Time will tell – it is all speculation until it is running and used how it will actually be used…

1 Like

If that would work for you, cheers.

I suspect you would not profit, but as long as the SAFE Network data and traffic is taken care of sufficiently for you to earn safecoin, nobody loses.

Remember, the design is that “spare” resources are used and best rewarded in relationship to costs. Maybe you can game free cloud storage providers for a while and earn some safecoin, maybe not. But as long as the data and network participation targeted at your vault is taken care of, you deserve the safecoin, as far as the SAFE Network is concerned.

Don’t forget, though, that while you are being rewarded based upon stored and delivered data, if your vault doesn’t handle it’s other actions that by the network expects it to carry out, it will be down-ranked and your safecoin earnings will diminish or disappear.

In other words, game it if you can, but you’ll probably find it more profitable to play it straight.

2 Likes

That is why I see AWS and Azure as a pretty big threat… If you have a network that is designed to deliver data fast it is likely to do just that… But then you wind up with centralization… You wind up with centralized authorities that can interfere with SAFE… It would be wise in my mind to diversify the rewards so that it pays to be a mediocre vault as well as an outstanding one…

1 Like

@jreighley You’re right to pay SAFEcoin also to slower nodes to maintain diversity, but I think that in general, you would want to reward speed. You would want the network to get faster and faster, and this would be a way to get competition to achieve that.

1 Like

I don’t think it’s feasible to run a node at home and farm out the storage. How this would work is to run a virtual machine in the cloud, just like the network is now being run on Digital Ocean droplets, for testing and control purposes. But if an individual is running and paying for these individual instances of the network, then it’s really not centralized. Could the cloud service company shut down its servers and splash some SAFE nodes? Sure, along with whatever else they’ve got going.

Could they single out just the virtual machines running vaults? Perhaps, but they’d have to all be operating in collusion internationally and strike all at once to do any damage, and they still wouldn’t be able to control the network, just cause some slows or (unlikely) minor data loss.

Could a cloud data farm run million SAFE nodes for a time and then shut them off, causing the network to go down? This is one that do I see as a potential threat early on. I doubt it will happen, though. The data center would likely find it more profitable to earn safecoin on the instances they have running. Would that leave less for everybody else? Yeah, probably. But think of the performance of the network!!

The more the merrier.

It would take a focused attack by a very large group of resources early on to cause any problem, and I don’t think anybody in that sector is worried enough to do it. We’re all just a bunch of crazy, misguided freedom minded, out of the mainstream dreamers who want peace and freedom for EVERYONE, after all. :heart_eyes: We’re much too deluded in the minds of anybody serious to draw such an attack. (I hope.)

5 Likes

Yes, you could run a virtual machine in the cloud. But it would not need to be a full virtual machine, just the functions of a SAFE node. Then we’re talking about IaaS (expensive in this case) vs SaaS (probably cheaper). You could just upload a Node.js instance that does that. https://cloud.google.com/nodejs/
With Azure for example, you can start a “free trial”, this will give you $170 to spend on Azure resources…

3 Likes

You’ve exceeded my knowledge on the technical/program level. I don’t know.

But my answer is still the same as before. If it works, it’s economical, and it’s fast, all’s the better for the speed and function of the network.

2 Likes

And you have to remember that SAFE network will be encouraging the home vaults where people use their computer as normal and run a vault or few on their machine using up some of their free disk space.

This way the only costs to them is a very small amount of extra electricity.

You would be hard pressed to have enough virtual servers to compete with the users vaults. The default install of SAFE will be to include the vault. So if 1/2 the users run a vault and there are 200,000 users then there are 100,000 home vaults.

It is true that if one can get virtual servers at a low enough price then they may break even or make a little profit, it will be marginal when home users pay out nothing and “profit” any coins they receive.

The ratio of “professional” vaults to “home” vaults in theory should be very small and so any co-ordinated attack of the virtual servers should have minimal effect to none.

6 Likes

I have no idea but I assume it wont be profitable if you can get it to work because lets assume the cost price to store data on SAFE is the same as market costs (I believe the aim is for it to be cheaper…there are no startup costs etc) you’re now essentially a re-seller of sorts paying a premium to your supplier and then re-selling at best case scenario back to the network at cost price but only you will get paid in SAFE which you will have to convert to BTC and then back to USD paying for transactions each time you do it and add to that the volatility of each of those markets and you could be sitting on currency which is valued at far below what you spent on the whole process.

2 Likes

Interesting dream. I thought arbitrage was mostly an Institutional investor trade for minuscule profits involving tremendous volume.

If Maid Safe reaches a volume worthy of arbitrage, hat’s off! I think. For probably the economy and politics will be so eroded at that point that storage capacity at the individual level will be maxed-out and volume beyond its capacity.

Every penny counts!