
How China Took Center Stage in Bitcoin’s Civil War - tpatke
http://www.nytimes.com/2016/07/03/business/dealbook/bitcoin-china.html
======
Hermel
As someone who has been closely following Bitcoin since 2011, I do not think
that article captures the current situation very well. Yes, there is a
concentration of mining power in China, owed to their low costs of
electricity. But it does not seem like the Chinese have found a way to use
that power yet. In practice, it is a number of Western developers around
Gregory Maxwell and Blockstream that calls the shots, aided by /r/bitcoin
admin Theymos who recklessly removes posts that do not fit their agenda (I've
received two temporary bans myself for mentioning ethereum in a comment).

I really hope that the Chinese miners start to make use of their power and
move Bitcoin back towards its original vision. The block size limit of 1 MB
was a temporary hack and the core devs who oppose an increase are in an
obvious conflict of interest: if Bitcoin can scale the way its inventor
envisioned (namely by simply increasing the block size limit every now and
then), the business case of the company they work for falls apart.
(Blockstream, who develops the Lightning Network, which aims at scaling
Bitcoin by building another layer on top.)

What makes me hope is this sentence from the article: "He said in an email
this week that if the core programmers did not increase the number of
transactions going through the network by July, he would begin looking for
alternatives to expand the network." Recently, I spoke to an executive of
another large Chinese mining company, and he shares that opinion. If the "core
team" continues to refuse to increase the block size limit, they will stop
applying core's updates. For that case, some members already threatened to go
nuclear and change the proof-of-work protocol, making all existing mining
hardware obsolete - which is quite worrying and shows that Bitcoin development
currently is not in the best possible hands.

~~~
CydeWeys
> if Bitcoin can scale the way its inventor envisioned (namely by simply
> increasing the block size limit every now and then)

It's not nearly that simple. There are two main reasons why "simply increasing
the block size" is neither safe nor simple:

1\. Centralization. Running a full node is already quite a commitment. The
bandwidth requirements are high, the storage requirements are high, and it
takes many days to sync the full blockchain. Many people already do not bother
doing it because it is such a bother. Running a VM in the cloud as a full node
is not that cheap. All of these problems scale linearly with increased block
size. A really large block size that causes most existing full nodes to give
up and stop relaying would not be worth it for the network in the end.

2\. Bitcoin is vulnerable to (and has been subject to) attacks by way of
computationally expensive transactions that scale polynomially with the
maximum size of a block. This has not been completely solved yet. Right now
the worst possible block verification time is on the order of 10-30 minutes
for an average CPU acting as a relaying node. "Simply" increasing the block
size a great deal without first fixing this issue (and it's a hard issue to
fix) could potentially lead to entire network collapse if a single attack
block gets mined and then chokes all nodes for days.

~~~
Hermel
> Centralization. Running a full node is already quite a commitment.

The problem is not the resources needed to run a full node. The problem is a
lack of incentives. If you want to have lots of full nodes running in the long
run, you need to focus on those that do not do so for idealistic reasons, most
notably the miners, payment processors, and exchanges. They all have
advantages by doing so. Blockchain.info, for example, runs a full node to be
able to display incoming transactions and to monitor the network. Adopting
this view, the way forward is to grow Bitcoin as much as possible. The more
users there are, the larger the ecosystem becomes and the more players there
are that benefit from running a full node. We can't rely on the early
enthusiasts. We need growth.

> Bitcoin is vulnerable to (and has been subject to) attacks by way of
> computationally expensive transactions

If you are referring to what I think, then there is a simple fix: do not allow
larger transactions than before when increasing the block size. AFAIK, this is
what Bitcoin Classic does.

~~~
CydeWeys
There is no maximum transaction size, other than that imposed by the fact that
it has to fit into a block. You would additionally need to hard-fork to add a
new transaction size limit. More info here:
[https://lists.linuxfoundation.org/pipermail/bitcoin-
dev/2015...](https://lists.linuxfoundation.org/pipermail/bitcoin-
dev/2015-July/009494.html)

Note that that is just one potential problem that we are aware of. I think a
conservative approach is reasonable. Look at what has happened with Ethereum
and the DAO.

~~~
aminok
>There is no maximum transaction size, other than that imposed by the fact
that it has to fit into a block.

There is a maximum transaction size:

[http://bitcoin.stackexchange.com/a/35882](http://bitcoin.stackexchange.com/a/35882)

It is equal to the maximum block size. One simple fix is to simply decouple
the maximum transaction size from the maximum block size and not raise the
former when raising the latter.

------
Animats
Most of the comments here are missing the point. Read the article more
closely. From the Bitcoin miner in China perspective, Bitcoin is an investment
vehicle and a way to get yuan out of China. Bitcoin for retail transactions is
irrelevant. More capacity for small transactions is a nuisance, not a feature.
The big miners are thinking wholesale, not retail.

Read the view of the CEO of Huobi.[1] He sees the functions of Bitcoin as 1) a
global financial asset, and 2) a financial tool for improving money transfer.
(By "money transfer" he means reasonably large transactions, comparable to
wire transfers.) As a payment network, he wrote "Bitcoin already works as a
payment network today, but relative to competitors like PayPal and Visa,
Bitcoin is very small." A bigger block size is useful mostly for the payment
network application, which is not a priority for the big miners.

[1] [http://www.coindesk.com/bitcoin-in-china-an-insiders-
view/](http://www.coindesk.com/bitcoin-in-china-an-insiders-view/)

------
klunger
For those who prefer audio/podcasts, the Planet Money companion piece covers a
lot of the same material:
[http://www.npr.org/sections/money/2016/06/29/484029238/episo...](http://www.npr.org/sections/money/2016/06/29/484029238/episode-708-bitcoin-
divided)

------
zekevermillion
The article presents the blocksize debate as Americans vs. Chinese. I see it
more as an effort by payments companies (some of which are US-based) to
capture the bitcoin protocol.

~~~
aminok
Oh yea we wouldn't want those parties who benefit from growing Bitcoin usage
to influence Bitcoin protocol decisions, because then Bitcoin might see mass
adoption and that would be a terrible fate because ???

------
riprowan
I think it's important to note that it's unclear that Bitcoin Core will ever
allow for a block size increase to occur: several influential Core developers
have publicly stated that that are still very much opposed to any increase,
and the team uses a consensus process that makes it easy to veto change.

~~~
TD-Linux
SegWit landed in Bitcoin Core master last week. Once activated, it increases
the size of an average Bitcoin block to ~2MB.

~~~
deftnerd
That's not true. At most, the amount of data in a block stays the same but
attaches an associated data structure to the block that is estimated to equal,
at most, 1.7mb.

That's a best case scenario once every piece of software that created Bitcoin
transactions has been altered to use the new transaction format. That software
upgrade process could take years.

~~~
TD-Linux
No, the 1.7MB figure was an average, the max for base+witness is about 4MB.
[https://bitcoincore.org/en/2016/01/26/segwit-
benefits/](https://bitcoincore.org/en/2016/01/26/segwit-benefits/)

It's true that to reach the maximum capacity, all Bitcoin software has to be
upgraded. But that's also true for a 2MB bump hardfork.

------
wallace_f
I don't really follow bitcoin but the NPR podcast that linked to this NYT
story claims that 'some bitcoin transactions are not getting processed at
all.'

Is that really true?

~~~
codingmyway
There is a back log for short periods yes, but if you pay a high enough fee
your transaction will go through earlier. When things quiet down or more
blocks are mined in a given time the back log goes down.

It's a supply and demand issue. If you want to use the blockchain to process
transactions you have to pay more the higher the demand until demand levels
out.

If you didn't pay high enough a fee and get stuck at the back of the queue you
are stuck until a proposal that will let you increase the fee for an existing
transaction is implemented or the queue goes down.

The segregated witness change will increase the capacity by 40% which should
be enough to last until lightning nodes take some of the strain.

There is no centralized-decentralized fork in the road. We need to have both.

~~~
joosters
Early adopters promoted bitcoin as 'fast' and 'free'. So it's not surprising
that people are getting annoyed when transactions can take ages to be
confirmed and the fees are growing large.

Worse still is that dynamic fee calculation is a hard problem. You can look at
past fees to try and guess a fee for a fast confirmation, but as more and more
people do this, the guesses will get worse and worse. It becomes a silly game
of trying to guess what fee other people are going to pick for new
transactions, and then adjusting your fee accordingly.

Just look at one of the most popular fee calculation page:
[https://bitcoinfees.21.co/](https://bitcoinfees.21.co/) \- it's far too
complicated, and has a bewildering range of numbers. Just to make it worse,
they mix up bitcoins, satoshis and dollars to confuse people further. On top
of that, fees have to determined based upon your transaction size. So users
have yet another complication to the fee selection.

You need a calculator and a deep knowledge of game theory to make a
transaction work. Currency of the future!

~~~
jsprogrammer
Don't think that banks didn't take calculators and game theory to their
currencies many decades ago.

I don't see how anyone could have claimed Bitcoin was free, while having even
a basic understanding of it. The entire system relies on proofs of _work_ and
transaction fees are part of the original paper.

~~~
bduerst
Maybe they did, maybe they didn't. It's irrelevant to deflect.

The point is that banks use a relatively simple / flat fee structure now
because user expectations are important for payment transactions.

This whole "Banks had this problem centuries ago" doesn't make a strong
argument for bitcoin's competitive use as a currency.

~~~
jsprogrammer
I missed that point. I argue exponential compounding interest is not so simple
and certainly not flat.

The US Federal government has required banks to produce standard term sheets
that supposedly more clearly describe a bank's particular fee scheme. That is
how bad "they" are.

------
ianpurton
_Ultimately, Mr. Armstrong said, “We were unable to convince them.”_

Brian Armstrong from CEO of Coinbase along with some other major Bitcoin
startups proposed a hard fork in the protocol to increase throughput. This
proposal was to raise the block size.

The Bitcoin core developers rejected this along with a lot of the Bitcoin
community as it may cause decentralization.

An alternative proposal was created that would not produce a hard fork but
still allow an increase in transactions per second. A further proposal called
the lightning network is in testing to allow for thousands more transactions
per second that then get settled on the main Bitcoin blockchain.

In my opinion consensus won. Everyone will get what they want with out taking
any risks with centralization.

The Chinese miners were right to stay on the main branch. If they had forked
and the Bitcoin economy didn't follow them, they would be out of business.

The Bitcoin block size debate is like the Brexit. Only this time everyone
wins.

~~~
Jarwain
> The Bitcoin core developers rejected this along with a lot of the Bitcoin
> community as it may cause decentralization

Isn't a core aspect of bitcoin decentralization? Or am I missing something

~~~
aianus
Yes, he meant to write 'centralization'

------
kristianp
Bitcoin miners don't have any incentive to make possibly risky changes to the
software. Recent congestion and changes have increased fees which seems to me
a strong incentive to keep the status quo of limited scalability.

As a network Ethereum is much more scalable, fast and more decentralised by
design, Buterin has learnt from bitcoin's problems (but obviously Eth has it's
own problems).

[https://www.cryptocoinsnews.com/ethereum-announces-
unlimited...](https://www.cryptocoinsnews.com/ethereum-announces-unlimited-
scalability-roadmap/)

Bitcoin is the slow moving Java to Ethereum's c# or scala.

------
rdlecler1
Ironic that Bobby Lee calls the Americans imperialistic given that BitCoin
wasn't invented in China, but Chinese firms have clearly taken control.

~~~
Kristine1975
_> Ironic that Bobby Lee calls the Americans imperialistic_

He doesn't:

 _He said the American companies failed to understand the power dynamics in
the room that day. “It was almost like imperialistic Westerners coming to
China and telling us what to do,”_

 _almost like_

And as the article states Chinese firms are hardly a hive-mind. But even if
they were, "taking control" by virtue of mining the most coins is a feature,
not a bug. And not "imperialistic."

------
amq
The photos are amusing, but certainly misleading. One could cherry-pick
similar places for any kind of activity anywhere in the world.

------
fencepost
I was surprised by the photos because I thought that these days most mining
was being done via USB-connected ASICs, but the clear implication of the
photos was for CPU mining. Perhaps this is just a case of "we're not showing
how it really works" but it was a surprise nonetheless.

~~~
toomim
Nope, those are ASICs. They aren't USB-connected, though. They are mostly
antminers from bitmain.com.

Motherboards aren't used for CPU mining, but for controlling GPUs that mine
Ethereum. There aren't ASICs for Ethereum.

------
cloudjacker
always some drama in bitcoin land

its almost kind of weird how my transactions get mined immediately in the next
block as if there was absolutely nothing different going on

~~~
TD-Linux
It's because all sane wallets have a fee estimator and will pay the
appropriate fee to confirm quickly.

~~~
cloudjacker
I know

My experience using bitcoin between addresses is the same as it was in 2013

------
known
We should strive for a better world, not perfect world.

------
nefitty
People with no necessary loyalty to a currency are dangerous.

