
That which does not kill Bitcoin makes Bitcoin stronger - tlrobinson
http://blog.tlrobinson.net/that-which-does-not-kill-bitcoin
======
zeteo
>Some people are pointing to Gox’s failure as a reason Bitcoin needs more
governmental regulation, but I believe cryptography and peer-to-peer consensus
protocols can eventually replace the need for certain types of regulation
entirely.

Frankly I don't see how that's possible. There are two sides to a transaction:
the transfer of money in one direction and _the transfer of goods or services
in the other_. Making one side very secure (or free from government
intervention etc.) while neglecting the other is like building a bridge with
one pillar made of tungsten and the other of adobe bricks. It'd only be as
usable as its weaker side.

The existing financial system is perhaps suboptimal in terms of transferring
money, but it has pretty good tools of ensuring the expected goods and
services flow back to the buyer: chargebacks, courts of law etc. The Bitcoin
"economy" has nothing comparable except a vague spirit of community that fails
more often than not (see e.g. the pathetic appeals of Silk Road 2 or Mt. Gox
depositors). So when a fraudulent transaction occurs, the best hope of the
victim lies, ironically, with the much maligned government institutions that
they were trying to avoid in the first place. (Incidentally, this is also why
it's perfectly reasonable for countries to outlaw Bitcoin transactions and
have a good expectation of enforcing it.)

There's no way cryptography and peer-to-peer consensus protocols will provide
verification for goods and services. It's a hard problem, and Bitcoiners
ignoring it will not make it go away anytime soon. Until it's solved, have fun
driving 18-wheelers across continually crumbling bridge pillars.

~~~
DenisM
>There's no way cryptography and peer-to-peer consensus protocols will provide
verification for goods and services

Yes, there is: bit-contract. I forgot where I read about it, but basic idea is
very simple: before transaction takes place, both sides make a separate
deposit exceeding in size the value of the transaction. After transaction
completes, either both sides vote to release the deposits and get their
deposit coins back, or one of the parties is so aggrieved, they decide to
punish the other party by voting to destroy both deposits. The loser loses
twice, but they don't let the perp to get away with it either.

This creates incentive for both sides to strive for mutual satisfaction.
Scammers and crazy cranks will run out of money pretty soon. This works really
well for small contracts, such as selling an old iPod on Ebay.

For large transactions you could rely on reputation instead - if the value of
reputation is $X, you can trade for $X/2 with that person, as it would be
silly for them to cash out so cheaply.

~~~
shitlord
> one of the parties is so aggrieved, they decide to punish the other party by
> voting to destroy both deposits. The loser loses twice, but they don't let
> the perp to get away with it either.

Honestly, that is wildly impractical and would never account for the
requirements of the real world. Want to buy a house for $300000? Well you
better put up at least another $300000. Oh, and if the other guy scams you,
you're out at least $600000.

Like you said, that scheme might work for microtransactions. For actual
business, almost nobody has that kind of money lying around.

> For large transactions you could rely on reputation instead

Isn't that fundamentally what you are trying to avoid?

~~~
natrius
This is an unreasonable complaint. No one buys houses with piles of cash.
Bitcoin is cash. It probably won't replace transactions that are impractical
to do using cash today.

------
atmosx
I guess this is paraphrasing Friedrich Nietzsche. I remember quoting this on a
discussion with my mother, about 5 years ago. She replied: "So you're saying
that if a kid gets bullied every time he steps out the door, will turn up
stronger or afraid?". At the beginning I thought she just _didn 't get it_ but
after elaborating the phrase more and more I came to the conclusion that
either it's _awfully incomplete_ (there should be a second part missing
somewhere) or it's just plain wrong.

Related to bitcoin, of course if Russia, EU, JP, China, US, AU, Brazil and
Turkey decide that _it 's illegal and should be stopped for the greater good_,
bitcoin with it's current form will either die or lose a huge % of it's
current value.

I understand that it's good (and to me a little bit suspicious) to come clean
and totally intact out of DPR bust and SK downfall, survive MtGox's failure,
but ultimately if beaten too hard it's going to die not _become stronger_.

~~~
cobbal
Another fun thing to do with that phrase is consider its contrapositive:

That which doesn't make you stronger, kills you.

Which is equivalent, but more obviously absurd.

~~~
chrismonsanto
Sorry to be pedantic, but I think it's implied that the universe of discourse
is "all things that are attempting to kill you." The contrapositive under that
assumption isn't absurd.

~~~
the_af
Sorry to be even more pedantic, but even with your correction, the phrase
still doesn't make sense. Maybe something that was attempting to kill you but
fails makes you weaker, so that the _next_ threat kills you more easily.

If a car runs me over and breaks something in my body, but I manage to
survive, it doesn't make me stronger or car-crash resistant.

~~~
chrismonsanto
I'm not defending the original quote--I was just saying that the
contrapositive "that which doesn't make you stronger, kills you" seems overly
absurd unless you consider the universe of discourse.

------
nullc
> The main issue with this is that services may be reluctant to give out this
> information if they consider it useful to competitors.

Well, if thats the issue it's possible to use more complex cryptographic
techniques to make the entire process completely zero-knowledge.

The idea is that you basically take the protocol I described but then execute
it in an environment for zero-knowledge proof of general computation (e.g.
[http://www.scipr-lab.org/](http://www.scipr-lab.org/)). You'd make a number
of different performance tradeoffs to optimize for that environment, but thats
basically the idea.

There would need to be some development needed to turn that into a production
system, but if the improved privacy is the _only_ holdup, it can certainly be
fixed.

~~~
tlrobinson
Are there other holdups you foresee?

------
dnautics
there is a much simpler reason why this is the case:

"But in a rational world this incident (might take a bit of time for the
market to realize this) should actually INCREASE confidence in BTC, since a
large, irresponsible player was knocked out, and the rest of the players on
the field have a net higher level of responsibility (for now)."

([https://news.ycombinator.com/item?id=7295430](https://news.ycombinator.com/item?id=7295430))

I predicted that the BTC price would bounce back quickly, but I had no idea
just how quickly (just wished my paycheck came in faster; I'd have bought in
at 450 instead of 600).

~~~
JamisonM
Does the elimination of a large irresponsible player actually offer any new
information about how irresponsible the other actors in the market are? I
don't think there is any particular reason why that would be the case, I am
interested to know how.

~~~
MarkPNeyer
All of the irresponsible actors involved in the 2008 financial crisis were
left intact. They have no incentive not to try this again.

The fall of mtgox shows that in the bitcoin world, failure will lead to death.

~~~
dublinben
>failure will lead to death

But not before you've made millions, and walked away with no repercussions.

------
paulbaumgart
Ethereum has a lot of potential. Here's a more digestible summary of the
whitepaper linked in the blog post, by a member of the founding team:
[http://bitcoinmagazine.com/9671/ethereum-next-generation-
cry...](http://bitcoinmagazine.com/9671/ethereum-next-generation-
cryptocurrency-decentralized-application-platform/)

~~~
nullc
I'm quite skeptical of Ethereum's ability to meaningfully contribute to these
matters. An enormous amount of trustlessness is already possible in Bitcoin,
but people just do not bother using it: They believe they can trust their
counterparties (or they wouldn't transact!) and implementing trustless systems
is substantially harder to do and harder to monetize (no central point to seek
rents from). Witness Ethereum itself: Instead of targeted improvements to
Bitcoin it's proposed as a whole new currency to be funded by eager
speculators before it even exists.

It is my experience that the limitations of trustlessness in the Bitcoin
ecosystem have arisen almost exclusively from a lack of interest or knoweldge
and not from any missing technological capability.

~~~
drcode
Exactly, ethereum is "pushing the borders" on a "border" of bitcoin that noone
seems to be running into yet, or caring about, anyway.

Once multisig is used more heavily in the bitcoin world then maybe a better
case can be made for ethereum becoming a success (though I nonetheless find
ethereum tremendously exciting, from a pure technology standpoint)

~~~
nullc
> ethereum tremendously exciting, from a pure technology standpoint

I don't.

I think it's the wrong model and it's only interesting when you don't have a
very complete model of what computation is doing inside a consensus system.

What script is actually doing in Bitcoin is not "running code"— running
identical code with identical on hundreds of thousands of nodes just for it
own sake would be stupid and wasteful. What happens is that users of the
network run the code themselves and their scriptSig is a proof that they ran
the code correctly (and that the code accepted their inputs). The simplest way
to do this is to replay the execution, but now it makes sense: The network
runs the code to verify you ran it right, and by doing so the contract
embedded in the script is made trustless.

Running the code in the network has a lot of downsides, however. It completely
lacks privacy (except to the extent that we have an opcode that implements a
zero knoweldge proof of knoweldge of the discrete log of an EC point), and
there is tremendous pressure on the computational complexity, implementation
complexity risk, and size of these scripts because of the cost of verify them.
Script execution is a pure externality that we only safely know how to cope
with by making sure that it is very very cheap (we do this in Bitcoin by
making sure that trivial static analysis can determine the execution cost
(measure the size), and then bounding that cost).

But actually executing the script isn't the only way to verify computation was
performed correctly. Using cryptography it's possible to have constant size
and complexity proofs, independent of the program size.

This lets you cook up stuff like:
[https://bitcointalk.org/index.php?topic=277389.0](https://bitcointalk.org/index.php?topic=277389.0)
and I find that a lot more exciting. Especially since these kinds of
enhancements don't demand the risky tradeoffs that making script more
expensive demands.

I'm also excited about distributed oracles— programs that sign transactions
conditional on user specified code, including— potentially— external inputs.
The ability to have external inputs (trusted by the oracle) greatly increases
the expressive power beyond what any in-consensus system could have, and using
multisignatures with multiple oracles you can achieve good security though not
trustlessness. E.g. "This tx pays to bob if bob.com is on the first page of
google, otherwise after april 1st it can be redeemed by greg". I would expect
to see any attempt at more powerful script first implemented via
multisignature oracles before even considering making it trustless by merging
it into the network.

------
GFK_of_xmaspast
If I see a major financial institution fail and lots and lots of
depositors/customers lose money, I'm going to maybe reconsider my strategy of
"not stuffing the mattress full of twenty dollar bills."

------
sentenza
Been quite some time since Kaiser Wilhelm was cited on HN.

------
zeckalpha
I'm still not sure why Mt. Gox existed in the first place. Isn't the whole
point of bitcoin that it is decentralized?

The failure of Mt. Gox could be viewed as a market reset.

~~~
dcc1
Mtgox existed because

Only ways to get bitcoin:

1\. Mine them (very very hard and getting harder)

2\. Get paid in bitcoin for product/service

3\. Buy them on an exchange for fiat

4\. Be given bitcoin by early adopters

Until its possible to get paid (salaries), pay suppliers, pay taxes etc the
exchanges are needed to convert traditional currency to bitcoin and vice
versa.

Anyways the writing was on the wall for a long time, i stopped using them over
a year ago, bitstamp are professional while mtgox were amateur cowboys with no
support.

~~~
zeckalpha
Isn't number 3 just a variation of number 4, with a middleman? That's all I
mean. Can't software exist for individual early adopters to sell their coin in
exchange for fiat at market values without a centralized exchange? To me, it
seems like centralized exchange just leads to collapse.

~~~
nwatson
Not all early adopters will want to sell. Heirs to their estate will ... which
is why in the next 40 years there will be a few floods of bitcoin supply to
deal with.

~~~
zeckalpha
If that is the case, where does the exchange get its coin?

------
ForFreedom
What theme is the blog?

------
hanswesterbeek
It seems the author thinks Bitcoin is like your average software-project,
where you fix a bug and just move on.

The naive view of a libertarian dreamer.

~~~
paulbaumgart
Please elaborate your argument instead of using opaque ad-hominem shorthands.

~~~
hanswesterbeek
I don't think it's ad-hominem, but alas.

I don't feel the need to provide the list of arguments that I'm sure critics
of Bitcoin have provided on this forum lots of times and I am confident you
are already familiar with. Don't mean to waste your time.

I /did/ want to respond to this article because the original author symptoms
of blind faith in Bitcoin, where even when something disastrous happens to it,
is portrayed as beneficial. I'm sure you'll agree that this is a bit of a
stretch.

~~~
cobrausn
Since you probably know, why do liberals / progressives / whatever seem to
hate on what essentially amounts to an opt-in currency that is not legally
backed and regulated? Is it only because people propose that it replace legal
tender? Does opposition decrease when you view it only as an alternative? Is
it because you associate it with libertarians, who tend to rustle jimmies on
the internet?

I'm genuinely curious, as I fail to see anything wrong with keeping the big
social experiment running.

Disclaimer: I own zero bitcoins, and have no dog in this fight. Not even a
doge.

~~~
jbooth
Personally, I just get annoyed at the libertarian dreamers. It's not that I
hate bitcoin or even that I want it to fail. On balance, I'm probably in favor
of it succeeding. But it's really hard to keep wanting that after hearing all
the ideological claptrap.. I find myself hoping it'll crash just to shut these
people up.

A movement that started as a reaction to the failures of communism has become
just as ideological and unrealistic. "The whole world would have peace and
prosperity if only people acted the way we think they should." That's aside
from the libertarians who are basically just garden-variety tribal Republicans
but want to be hip.

I'd also note that, for the purpose of this discussion,
"liberals/progressives/moderates/whatevers" basically includes everyone who's
not a true libertarian believer.

~~~
cobrausn
Well, I never said moderates. I guess I primarily meant 'pro-regulation',
specifically when it comes to currency, who tend to inhabit the left side of
the political spectrum. I've seen quite a few others who find the whole thing
interesting, but also a lot of hate, so it looked like it was being used as a
proxy to hate on libertarians. I'm just intrigued by the whole thing, and have
a few friends who made pretty good money by mining up coins early (made money
in spite of burned out graphics cards).

EDIT:

Should I have used the phrase pro-existing-regulations-or-more? That's
basically what I meant. I'm personally a fan of some level of regulation when
it comes to my legally recognized 'can pay the IRS this and they will probably
not send you to jail' kind of tender.

~~~
jbooth
That's the ideological thing I'm talking about. "Pro-regulation" is literally
100% of people on some level, aside from anarchists. It's a meaningless
statement.

EDIT: But yeah, a 'proxy to hate on libertarians' is sort of correct, although
from my viewpoint a better wording would be 'reaction to ideological
statements and straw-manning by libertarians'. I think a successful online
crypto-currency whether it's BTC or something else would be a good thing for
the world, but there's only so much nonsense I can hear before hoping it'll
crash just to take some people down a peg.

