
Bitcoin Is Dead, Long Live Bitcoin - gist
http://avc.com/2016/01/bitcoin-is-dead-long-live-bitcoin/
======
AndrewKemendo
Back in 2009 when I was getting into bitcoin, it was widely described as a
"stateless currency" and not just an alternative to Visa or credit cards.
Having a background in economics, bitcoin looked to me like a truly
revolutionary technology and if it was adopted en masse would change politics
forever.

The problem however is that a nation's currency is arguably the primary source
of it's sovereignty. Whomever controls the currency primarily used in a
nation, controls the nation. So it's safe to say that no nation is going to
let bitcoin or any other currency take hold for widespread commercial use in
lieu of it's sovereign currency - that's a hallmark of a failed state.

In fact that's why when regulators declared bitcoin as a commodity it was such
a big deal. The US doesn't really care because we haven't had commodity money
since the 1970s, but the idea that if enough people decided that they wanted
commodity money, they would arguably have a medium with which to do it with
that wasn't tied to any state.

So as with every product, unless a massive number of people decide to stop
using their home currency and start using bitcoin, then bitcoin will "fail."

Whether it pivots to some kind of credit system or not is largely immaterial
because of the potential it had.

It's like if we created Artificial General Intelligence and it decided to just
write movie reviews forever.

~~~
snowwrestler
> The problem however is that a nation's currency is arguably the primary
> source of it's sovereignty.

The reverse is also true--any significant currency creates sovereignty by
elevating the power of those with the greatest influence over that currency.

In the case of Bitcoin, the "core" developers, in addition to the highest-
volume miners, have been elevated to the sovereign position. Rather than a
distributed stateless currency (which I would argue is impossible), what
Bitcoin has become is a currency whose sovereigns are accidentally selected,
poorly organized, and not responsible to its currency users in any direct way.

There is a famous concept called the "tyranny of structurelessness," which
says that there are always political structures when groups of humans
interact, the question is just whether they are defined or hidden. A
"structureless" organization, rather than egalitarian, is governed by a small
secret clique that assembles for unknown or possibly trivial reasons. There
are no clearly defined procedures for removing or adding sovereigns, or for
adjudicating disagreements.

Does this sound like Bitcoin? Based on the articles I've read this week, it
does to me.

Edit:

[https://en.wikipedia.org/wiki/The_Tyranny_of_Structurelessne...](https://en.wikipedia.org/wiki/The_Tyranny_of_Structurelessness)

~~~
ErikAugust
Well, right.

One may frame this whole "failed versus not failed" as a power struggle
between two camps:

a. Those who own a large stake in the original BitCoin - such as the
developers, miners, venture capitalists, the Winklevoss Twins, etc.

and

b. Those who don't own a large stake in BitCoin currently, but wish to own a
large stake in the dominant cryptocurrency. Wall Street...

When you attack BitCoin on any grounds, technological or otherwise, you are
attacking those stakeholders.

~~~
snowwrestler
Another way to look at it is, what was the goal of the Bitcoin experiment?

a. To create a new network for digital financial transactions? This seems to
be what Fred Wilson is writing about, and I agree with him that the jury is
still out.

b. To create a distributed currency free from government bureaucracy? Bitcoin
seems well-separated from the U.S. federal government, but lately it also
seems like Bitcoin has organically sprouted its own messy government
bureaucracy.

~~~
npongratz
> Bitcoin seems well-separated from the U.S. federal government, but lately it
> also seems like Bitcoin has organically sprouted its own messy government
> bureaucracy.

Bitcoin, nor its tokenholders, cheerleaders, etc. do not have the violence-
backed power to tax. So while it may have the nasty trappings of a
bureaucracy, I don't think it sinks to the level of a _government_
bureaucracy.

~~~
krapp
That's damning with faint praise, if the best thing you can say about the
Bitcoin community is that at least it hasn't monopolized its capacity for
violence.

------
mabbo
The problem with bitcoin, as I see it, is that discussion of problems that may
exist can lower the value of bitcoin- whether the problem is real or not. If
you're heavily invested emotionally with bitcoins, you need to discuss these
problems so that they can be solved. If you're heavily invested _financially_
, you need to make sure no one talks about these problems, at least until you
have a plan for how you're not going to lose your fortune.

Those invested financially have very good reasons to believe in solutions that
will retain their investment, and dismiss solutions that put them at risk.

~~~
yc1010
Well the problem is THAT DISCUSSION OF SOLUTIONS to bitcoin issues are being
censored, with key people being banned from the usual discussion forums

A decentralized currency where the development, mining and discussion is
controlled by less than a dozen people which is a joke

~~~
kang
It is irrational to complain about censorship in a private location.

~~~
Dylan16807
No it's not.

~~~
kang
Contribute to the discussion please as to why private property rights should
not apply?

~~~
jbooth
Nobody's saying it should be illegal for them to censor. They're saying that
they shouldn't censor.

------
Animats
The article asks "is Bitcoin gold" or "is Bitcoin Visa".

Bitcoin's first killer app was drugs. Then Silk Road I and Silk Road II were
taken down. That put a dent in the price.

Currently, Bitcoin is a way to get yuan out of China and convert it to dollars
or euros, despite China's exchange controls. Most of the mining and the
exchange volume are in China. Buying Bitcoin with yuan and selling it outside
China is technically prohibited by the People's Bank of China, but they
haven't cracked down hard on it. Yet. Mining is also a way to convert yuan to
dollars. Miners in China can also qualify for the loans and subsidies the
government of China gives businesses.

Bitcoin as a general currency for transactions just isn't happening. The real
transaction costs are too high. There's volatility risk. There are exchange
costs getting in, and exchange costs getting out. (At the retail level, those
are high; Robocoin ATMs have a buy/sell spread of about 15%) There's also the
substantial risk that the exchange will fail or steal your money. (This got
better in 2015, but until then, more than half of Bitcoin exchanges went bust.
It wasn't just Mt. Gox.) Paying 1% - 3% to Visa looks good compared to that,
especially since buyers get protection against merchant fraud.

Bitcoin as a speculation looks good some years, and bad in others. It's like a
penny stock, except that Bitcoin is zero-sum. There's no intrinsic value, and
no fundamentals. It's all greater-fool speculation.

The impressive thing about Bitcoin is that the system is well behaved in the
presence of a very high level of criminality. Few, if any, other distributed
computer based systems can make that claim. It would be nice if DNS or BGP or
SS7 worked that well.

------
Anonobread
Block size isn't a free parameter. The team behind btcd, a Bitcoin full node
written in Go, made the following observations about block size [1]:

1\. a 32 MB block, when filled with simple P2PKH transactions, can hold
approximately 167,000 transactions, which, assuming a block is mined every 10
minutes, translates to approximately 270 tps

2\. a single machine acting as a full node takes approximately 10 minutes to
verify and process a 32 MB block, meaning that a 32 MB block size is near the
maximum one could expect to handle with 1 machine acting as a full node

3\. a CPU profile of the time spent processing a 32 MB block by a full node is
dominated by ECDSA signature verification, meaning that with the current
infrastructure and computer hardware, scaling above 300 tps would require a
clustered full node where ECDSA signature checking is load balanced across
multiple machines.

For context, a meager 300 tps is less than 10% of what VISA does - hence this
solves no long standing problems in Bitcoin, yet it condemns all the nodes to
run in compute clusters in datacenters. Naturally, "small blockists" as we're
called, point out that this isn't how Bitcoin works today at all. Forcing
nodes into compute clusters in remote datacenters is a major, sweeping
departure from nodes running on home networks with consequences both
forseeable and unforseeable.

[1]: [https://blog.conformal.com/btcsim-simulating-the-rise-of-
bit...](https://blog.conformal.com/btcsim-simulating-the-rise-of-bitcoin/)

~~~
wmf
Hasn't signature verification speed been improved significantly since 2014?
And what year would 32MB blocks be needed in and what processors would be
available in that year?

~~~
Anonobread
> Hasn't signature verification speed been improved significantly since 2014

Pieter Wuille's work in libsecp256k1 promises to improve verification speeds
on 64-bit CPUs by as much as 700%, and it's set to be deployed on the network
as early as February.

This will hopefully be enough of a boost to reasonably process 2MB blocks on a
desktop PC. This desktop processing goes very underappreciated by most
onlookers. Imagine if you couldn't run a BitTorrent client on a home PC? To
put it mildly, I would have an issue calling BitTorrent "peer-to-peer" in that
case. For example, it would be absurd to out-and-out need a remote compute
cluster to seed or leech torrents.

> And what year would 32MB blocks be needed in and what processors would be
> available in that year?

The "big blockist" proponents actually contended Bitcoin dies without 20MB
blocks starting this month, January 2016, and doubling every two years. Going
by their original propositions, we would have >32MB block capacity by around
this time in 2018. How much do you think desktop PC performance will have
improved by then? And this is to say nothing of the bandwidth costs [1].

[1]: [http://statoshi.info/dashboard/db/bandwidth-
usage](http://statoshi.info/dashboard/db/bandwidth-usage)

~~~
wmf
Something seems off here. If a 7x performance increase is only enough for 2MB
blocks, does that mean a PC today can only handle <300KB blocks? How have we
not heard about this? How are people running full nodes on RPis?

And I don't remember seeing anyone call for 20MB blocks. The debate looks more
like 1MB vs. 2MB vs. 8MB etc.

~~~
Anonobread
First, it would behoove you to run a full node on your desktop PC.

What you will surely find is that maxing out your CPU at 100% for hours on end
isn't very fun and isn't necessarily conducive to getting other work done at
the same time. This is again to say nothing of the bandwidth requirements,
streaming videos or playing games for example may become out of the question
depending on the quality of your network connection.

This is to say, at 1MB blocks, full nodes on the desktop are already becoming
problematic for some users. The warning signs are as clear as day. What's
more, to even get the performance of full nodes on desktop to this level has
been a monumental feat and one largely spearheaded by the so called "small
blockists" \- th efforts of Dr. Adam Back, Gregory Maxwell and Dr. Pieter
Wuille have been absolutely essential to making Bitcoin full nodes at least
runnable on consumer hardware. For example, Greg Maxwell claims testing an
original version 0.1 full node would take upwards of _20 weeks_ to sync fully.

Second, Gavin Andresen originally proposed 20MB blocks starting January 2016,
and doubling every two years [1]:

> CPU and storage are cheap these days; one moderately fast CPU can easily
> keep up with 20 megabytes worth of transactions every ten minutes. > >
> Twenty megabytes downloaded plus twenty megabytes uploaded every ten minutes
> is about 170 gigabytes bandwidth usage per month – well within the 4
> terabytes/month limit of even the least expensive ChunkHost plan. > > Disk
> space shouldn’t be an issue very soon– now that blockchain pruning has been
> implemented, you don’t have to dedicate 30+ gigabytes to store the entire
> blockchain. > > So it looks to me like the actual out-of-pocket cost of
> running a full node in a datacenter won’t change with a 20 megabyte maximum
> block size; it will be on the order of $5 or $10 per month. > > I chose 20MB
> as a reasonable block size to target because 170 gigabytes per month
> comfortably fits into the typical 250-300 gigabytes per month data cap– so
> you can run a full node from home on a “pretty good” broadband plan.

That we now see Gavin entertaining a much lesser fork - to 2MB instead of his
previously claimed "safe" 20MB - speaks volumes about the severity of this
issue.

Now, the Bitcoin core team has proposed a similar increase to 1.6MB effective
through SegWit. Hence, the divisiveness of this issue isn't just about the
numbers, but it is regretably devolved into a political power struggle with
one side apparently wanting to demote the other side. "Big blockists" have
long seen no harm in putting full nodes datacenters, backing their logic up
with such gems as "Satoshi said this was fine 8 years ago therefore it's fine
now". Meanwhile the "small blockists" \- who are comprised of the very people
who optimized Bitcoin full nodes to the point where we can now have this very
debate - believe you need desktop PC users of full nodes to have a truly P2P
network.

[1]: [http://gavinandresen.ninja/does-more-transactions-
necessaril...](http://gavinandresen.ninja/does-more-transactions-necessarily-
mean-more-centralized)

------
pcmaffey
1\. I have no idea how to get Bitcoin. A quick search takes me to several
exchanges that look like torrent sites for pirating shit.

2\. Nor has anyone presented me a compelling reason to get bitcoin (other than
the future). Off the top of my head, if a company offered me an account that
would take care of my online transactions in a secure way using Bitcoin, I
might be interested. Maybe I'd put a few hundred in it each month and use it
for random expenditures, and hopefully get access to some cool micro-services.

But I have zero awareness anything like that exists.

3\. If it's to succeed as capital, it will be a daring bank that creates their
own bitcoin equivalent... followed by one of the norwedish countries making
their own national bitcoin. Then the floodgates will open.

~~~
mabbo
The only real compelling reason anyone has these days to buy a bitcoin seems
to be for use on darknet markets, mostly to buy drugs. The merits of those
markets are wonderful to discuss, but as I don't really have a use for drugs
in my life right now, I have no need for bitcoins.

~~~
StavrosK
I don't know, have you tried to buy plane tickets with a credit card? It takes
me a solid half hour every time, between the "verified by Visa" crap, the
merchant not accepting the card and some failure on their system. With
Bitcoin, you tap the link and press "confirm".

It's miles ahead of any other payment system I know, including cash (because
you don't have to be in proximity of the recipient).

~~~
bduerst
>have you tried to buy plane tickets with a credit card? It takes me a solid
half hour every time

Who exactly are you buying plane tickets from?

The last time I bought tickets, it took less than a minute to pay with a
credit card. I spent more time searching for a flight with wifi.

~~~
such_a_casual
Maybe his country has different rules about this sort of thing? Or maybe
airlines/credit card companies have different rules for his country?

~~~
bduerst
Or _maybe_ it's pure hyperbole to support a narrative that Bitcoins are easier
than credit cards.

Bitcoin transactions can take up to 10-15 minutes just to complete.

------
kang
It is a traditional view that in order to increase throughput we need to
increase the bandwidth. This is true but we also know that throughput can be
increased by abstracting the existing bandwidth to hold more information.

Increasing the blocksize will increase throughput, but is it the only way?
Definitely not. The very recently improvement by Dr.Peter Wuille to segregate
the witness (cryptography used to validate transactions) from the data
(transactions) increases the capacity by around 66%, even if block's max size
is unchanged. This is already in the testing phase. There is a whole bitcoin
scaling roadmap & a lot of work going on.[0]

Practically, the death scenario being painted by XT hasn't realised and
transactions are still going through normally.[1]

The bitcoin developer community comprises of very capable hackers many of whom
are not only PHDs but have also invented new cryptographic techniques and also
are robust security coders.[2][3]

[0][https://bitcoin.org/en/bitcoin-core/capacity-increases-
faq](https://bitcoin.org/en/bitcoin-core/capacity-increases-faq)
[1][http://statoshi.info/dashboard/db/transactions?panelId=4&ful...](http://statoshi.info/dashboard/db/transactions?panelId=4&fullscreen&from=1435768112971&to=1452875394268)
[2][https://people.xiph.org/~greg/confidential_values.txt](https://people.xiph.org/~greg/confidential_values.txt)
[3][https://blockstream.com/2015/08/24/treesignatures/](https://blockstream.com/2015/08/24/treesignatures/)

------
manyoso
This is interesting to me because it presents the blockchain size dispute in a
way that seems much more sympathetic to the "no, we shouldn't increase the
blockchain size" crowd than Mike Hearn's essay.

Is it really true that the people who are objecting to increasing the
blockchain size see Bitcoin turning into a reserve "currency" to _hold_ wealth
instead of a liquid currency used to make real time transactions?

Is that _really_ the debate? Because I didn't get that from Mike Hearn's essay
at all...

~~~
TD-Linux
The opinion, of course, widely varies. Mike's piece was Mike's opinion, so of
course it's not going to be very sympathetic to Core developers.

The limits on transaction size have been known since the beginning of Bitcoin.
VISA level transaction rates require insanely high block sizes, much larger
than those proposed so far. People have come up with many, many different
solutions to this problem.

One thrown around a lot is the lightning network [1], but it's not really a
"reserve currency" in this case - it's a way to prevent a bunch of
intermediate transactions from entering the blockchain forever, but it's based
around advanced Bitcoin scripting usage, so it's using Bitcoin for much more
than just a backing value.

Keep in mind that Bitcoin currently has a $6 billion USD market cap. Breaking
Bitcoin would reduce that to $0. Many people have strong motivations to be
conservative with changes...

[1] [https://lightning.network/](https://lightning.network/)

~~~
woah
The Lightning network is not based on advanced Bitcoin scripting, in the sense
that Bitcoin script makes it possible or something. Bitcoin script is, rather,
an impediment which has added a huge amount of complexity to Lightning. The
same principle expressed without Bitcoin script can be explained in a few
minutes[1]

1\. [http://altheamesh.com/blog/universal-payment-
channels/](http://altheamesh.com/blog/universal-payment-channels/)

~~~
josephpoon
You are wrong. Lightning works by using smart contract logic. For Bitcoin in
particular, that involves using Bitcoin scripting using real Bitcoin
transactions.

That blogpost is basically describing lightning. Lightning Network has
explicitly described instant cross-chain swaps privately, and publicly for
many months.

~~~
woah
Yes, and on a platform that allows for arbitrary logic, like a Turing-complete
blockchain, or just a regular server, Lightning-like transactions are trivial.
They can be described in minutes, and implemented in weeks. Due to the
limitations of Bitcoin script, Lightning takes 60 pages to describe and is
still not implemented. It's a revolutionary concept, hobbled by an antiquated
platform.

------
phaet0n
Bitcoin is simply going through a discontinuity brought on by a fixed
blocksize. Personally, I feel uncertainty is the real issue. The "community"
should either accept this, or opt for a potentially unlimited ceiling (limited
by physics and network size and topology).

If you choose to remain with the fixed blocksize, then you're betting the
system will reach another equilibrium (which may be total collapse). This
equilibrium will revolve a natural evolution in the pricing of transactions.

Either way, at some other point in the future another source of discontinuity
will be the circulation limit. Again, which may or may not kill the system.

Bitcoin is simply evolving, as it necessarily needs to.

It's definitely interesting to watch as an outsider.

------
brudgers
Even when Bitcoin was riding high, Wilson was investing in something he
believed was likely to fail. It's what he does: invest in startups, I mean.

I don't see any reason to believe that his position on Bitcoin should be read
in any other terms than his investment in Bitcoin _companies_ is not
appreciably worse or more risky than other companies in his fund. That his
personal asset portfolio holds less Bitcoin than wine illustrates the
distinction he's making.

His message is for people invested in Bitcoin _companies_. It is don't panic,
these companies were always risky.

------
compcoin
Bitcoin will one day be known as 'the grandaddy of them all' just like the
Rose Bowl. Bitcoin suffers from centralization, the very thing it was designed
to circumvent The Bitcoin cultist are emotionally wrapped up with the idea
that it has to be everything for everyone. Money has a way of making us
emotional. Bitcoin has to be a payment machine for payment processors, It has
to be a store of wealth for investors, It has to be a currency for
libertarians. It is so caught up in trying to be everything that it does none
well. Bitcoin developers dont be afraid to go your own way. They should branch
out into new areas and create new coins, applications and opportunities. Why
does it have to be Bitcoin or bust. Proponents attack new ideas. They wake up
at night in terror that something new might emerge that meet needs in better
ways. What would the Stockmarket be like if there was but one issue to trade.
It is no wonder that Bitcoin companies struggle to make money. The market is
being restrained from growing by those that seek to control the golden goose
and make certain that there is no other options. Yes, new things are coming
and new financial markets will come into being whether Bitcoin changes its
protocol or not. Centralization leads to waste fraud and abuse even with the
best of intentions Bitcoin

------
tomasien
Love the Bitcoin/VISA analogy. Wrote about it here:
[https://medium.com/shekel-magazine/odd-bedfellows-the-
strang...](https://medium.com/shekel-magazine/odd-bedfellows-the-strange-
history-of-visa-and-how-it-relates-bitcoin-101a93507c17)

Can 100% understand why some people may hate that future for Bitcoin, but I
think the parallels are serious and it's probably what will happen.

------
maaku
> At the core of the debate is whether the Bitcoin blockchain should be a
> settlement layer that supports a number of new blockchains that can be
> scaled to achieve various goals or whether the Bitcoin blockchain itself
> should evolve in a way that it can scale to achieve those various goals.

No, among the developers actually working on Bitcoin that is not what the
debate is about at all.

Bitcoin is a decentralized ledger, and indeed it can be argued that this is
the only property about Bitcoin which is interesting/useful. Why? Because all
properties we care about (availability, uncensorability, unseizability, etc.)
derive from decentralization[0]. And at the end of the day we can do
everything Bitcoin does faster, better, and cheaper on some alternative
consensus system (see: Stellar, Open-Transactions, Liquid) that does not have
this decentralization property. Decentralization is _expensive_. It requires a
dynamic membership, multi-party block signing algorithm, which at the moment
means proof of work. And proof of work costs hundreds of millions of dollars
per year to maintain, and throttles the available bandwidth due to the
adversarial assumption and the existence of selfish mining[1].

The question is not whether Bitcoin _should be_ a store of value or a medium
of exchange. That implies we have some choice in the matter. The question is
what level of on-chain utility does Bitcoin actually support under untrusted,
adversarial conditions, without losing all properties derived from
decentralization. This is an empirical question. The available bandwidth is
something that can be determined from the performance of the code in the real
world extrapolated to various adversarial simulations.

We had two Scaling Bitcoin workshops last year that gave us a data-driven
answer: 3-4MB per block, tops. There are potentially ways that this number can
be improved (see: weak blocks), and those are being worked on but are still
some time from showing results. There are also some assumptions underlying
this number, e.g. that we change the validation cost metric, which none of the
existing proposals do in a smart way. But the scientific process is telling us
right now that with the tools available to us we can increase the worst-case
block size to 3-4MB with a better metric without the decentralization story
becoming unacceptably worse off.

That is the plan of Bitcoin Core. The deployment of segregated witness will
allow up to 2MB blocks under typical conditions, and 3-4MB under worst-case
adversarial conditions. It will exhaust the available capacity for growth in
the Bitcoin network at this time. Meanwhile, work progresses on IBLT, weak
blocks, Bitcoin-NG, fraud proofs and probabilistic validation, and other
related technologies that might provide an answer for the next increase a year
or two later. I'm hopeful we may even be able to get an order of magnitude
improvement from that one, but we'll see.

No one I'm aware of is pushing for smaller blocks because Bitcoin _should be_
a store of value and a settlement layer. If I had magic pixie dust I'd want
1GB blocks and everything on-chain too. But we live in the real world and are
stuck in a situation where Bitcoin loses all of its unique properties if we
scale much further than where we are at now. And so we must ask the question:
what will Bitcoin become, since it can't scale on-chain? How can we live with
that outcome? The idea of a settlement layer and off-chain but trustless
payment networks like Lightning naturally arise from that thinking. The
Lightning Network[2] is a way that we can have our cake and eat it too:
Bitcoin remains small and decentralized, but everyone still has access to
bitcoin payments. Lightning can potentially scale to global usage with a
small-block chain as the settlement layer.

[0]:
[http://bluematt.bitcoin.ninja/2015/01/14/decentralization/](http://bluematt.bitcoin.ninja/2015/01/14/decentralization/)

[1]: [http://hackingdistributed.com/2013/11/04/bitcoin-is-
broken/](http://hackingdistributed.com/2013/11/04/bitcoin-is-broken/)

[2]: [http://lightning.network/](http://lightning.network/)

~~~
manyoso
This is very interesting and another rephrasing of "what the debate is
actually about!" At this point, as a complete outsider to Bitcoin I must say I
am a bit confused. Here are the camps I am seeing:

Hearn seems to be saying that Bitcoin right now is _not_ really decentralized
- aka the Chinese firewall problem and so much power already centralized in a
few peoples hands. He also seems to be saying that the motivations for Bitcoin
Core developers are not based on good faith technical disagreements, but more
about bad faith political disagreements.

Fred Wilson seems to be saying that he concurs with Hearn's concerns about
Bitcoin already being centralized, but would characterize Bitcoin Core
developers as having _good_ faith political disagreements and advocates for
"hard fork(s)" as a way to resolve these _good_ faith political disagreements.

You seem to be saying that, in fact, BitCoin Core developers have good faith
technical reasons - nay - _empirically validated reasons_ to believe BitCoin
has no real choice and that it can not ever become a visa-like transactional
currency without destroying the decentralization qualities that make it so
interesting. I assume you also believe that Hearn's qualms about the current
centralization are wrong in some way.

So that makes for very conflicting stories about what is going on for this
outsider to have any hope of judging. Very interesting though.

Can you tell me why the decentralized ledger can't just be made more granular
so that increasing the block size might make kick out current under-powered
nodes, but those nodes could be turned into virtual nodes where under-powered
machines could pool resources to establish a virtual node and thus maintain
decentralization?

~~~
maaku
> Hearn seems to be saying that Bitcoin right now is not really decentralized
> - aka the Chinese firewall problem and so much power already centralized in
> a few peoples hands.

This is true, and people are working to fix it on many levels. For example,
separating the transaction selection from coinbase reward (what p2pool does,
but with better scaling properties). Also, large chip manufacturers like
BitFury selling all-in-one mining setups rather than running the miners
themselves--they are presently doing mostly in-house mining, but are moving in
the right direction. Also, smart property miners so that it doesn't matter if
the hardware centralizes to where power is cheapest. There are also protocol-
level changes along the lines of Bitcoin-NG, or non-outsourceable puzzles
which remove a good deal of the mining centralization pressures.

So what you might not have gotten from the Hearn article is that this is a
known problem and while scarily bad, work _is_ progressing on this front.

> He also seems to be saying that the motivations for Bitcoin Core developers
> are not based on good faith technical disagreements, but more about bad
> faith political disagreements.

I don't know what to say to that. We had two open workshops last year for
discussing the scaling problem, which Hearn did not participate in. We have a
plan for increasing the capacity of the system which also references what we
do genuinely believe to be the technical hurdles to scaling. I charitably hope
that Hearn is simply ignorant on this matter.

> I assume you also believe that Hearn's qualms about the current
> centralization are wrong in some way.

No, the present state of mining centralization is concerning. But I'm not
willing to throw in the towel on that just yet.

> Can you tell me why the decentralized ledger can't just be made more
> granular so that increasing the block size might make kick out current
> under-powered nodes, but those nodes could be turned into virtual nodes
> where under-powered machines could pool resources to establish a virtual
> node and thus maintain decentralization?

Decentralization in Bitcoin is about _mining_ decentralization. Everything
else barely matters. A cabal of miners can censor transactions costlessly. A
cabal of miners can require extra-protocol information to de-anonymize bitcoin
holders. A cabal of miners can keep anyone else from mining bitcoin, thereby
closing off competitors. The threat to Bitcoin's decentralization is
centralization of control over the mining hashpower -- whether from the form
of pools, or external coercion on pools, or companies having exclusive or
back-door access to mining hardware (e.g. 21co).

Outside of the back-doors, what causes mining centralization is a combination
of validation cost, latency, and external factors like electrical power
subsidies.

But, having said that, what you propose is known in the community as
'probabilistic validation' \-- only checking part of the contents of a block
and being able to relay small fraud proofs when such validation fails. This
requires the ability to create such fraud proofs, which we will get with
segregated witness (being worked on by Bitcoin Core right now), and with a lot
work will eventually get us to the point where validation cost is not concern
so long as there is a large, healthy network of probabilistically validating
full nodes.

But we'd still have latency and real world power economies to worry about.

------
magicmu
It seems like the potential fork in bitcoin is already happening to some
degree with Elements and the sidechain
([https://github.com/ElementsProject/elements](https://github.com/ElementsProject/elements))
-- a super interesting project that I just found out about yesterday! I can't
help but feel, to a certain degree, like forking bitcoin is re-arranging deck
chairs on the titanic though. There already seem to be more viable alternative
cryptocurrencies.

~~~
zanny
The problem is for almost everyone technical features are trumped by market
cap when it comes to cryptocurrencies. Viability for almost everyone comes
down to which economy commands the most investment into it.

------
gtrubetskoy
Correct me if I'm wrong, but if this was a stock or some other security, and I
somehow had influence over how it is managed thus what I said could affect its
value, declaring it "dead" (or soon to be worthless) AND holding interest in
it (long or short) - would be criminal in most countries.

~~~
witty_username
Then this would be illegal (the website owners have a short in Herbalife).

[http://www.factsaboutherbalife.com/](http://www.factsaboutherbalife.com/)

I think as long as you disclose your position in the stock/security, you can
say whatever you want.

~~~
shawn-furyan
Indeed. People who specialize in shorting stocks, bonds, etc. live on the
cycle of finding dirt through thorough private research, shorting the stock,
and then publicizing the dirt.

This is actually one of the mechanisms that Efficient Market Theory relies
upon for disseminating market information. If you could only benefit from
assets increasing in value, then there would mostly be negative incentive for
anyone to try to expose companies that are weaker than the market assumes them
to be.

------
nikolay
The big drawback to the consumer is the speculative price. Of course, this
attracts the scum of the Earth, but that's another r story. Bitcoin can be
saved by applying the concept of a Currency Board [0]. All speculator will
leave and only the serious players will stay and then regular folk can jump
in. Of course, you can't make a million dollars from a single bitcoin you
bought at $400, but you won't make it anyway if things go the way they've been
going! Well, I know you can't apply the concept to Bitcoin, but just wanted to
give some food for thought.

[0]
[https://en.wikipedia.org/wiki/Currency_board](https://en.wikipedia.org/wiki/Currency_board)

------
markbnj
I have never understood the bitcoin protocol very well, and I did not have
time to read the entire posted article and its linked supporting pieces. That
said, I did pick up that one of the major issues is that a few miners in China
control a huge portion of the hash power and have an incentive not to allow
growth. Given that computing power is so affordable, is it really not possible
for some competing group to decide to save the protocol by creating some large
resource pools? In other words, can miners not be evicted once in control?

~~~
outworlder
The problem is one of scale. Bitcoin is heavy resource-intensive. So much so,
that your Core i7 can't really do anything. These days, not even the latest
GPUs can compete. You really need specialized hardware, and a ton of it. And
so, money.

It's not enough to spin a thousand VMs in AWS and call it a day.

~~~
markbnj
Yes, certainly. I wasn't assuming that a couple of programmers could pull it
off. But if a group of people with the funding wanted to take control of the
network away from these problematic miners could they?

~~~
wmf
Sure, but they'd lose $10M+ to do it.

------
brighton36
The actual story here is that the attempt to fork Bitcoin (Bitcoin XT) is
dead. Hearn tried to do so, failed, and left. Anyone who doesn't run XT should
be celebrating their victory.

~~~
geofft
But there's Bitcoin Classic now, right? Which is emphatically an attempt to
fork Bitcoin (just an attempt to fork it _even more aggressively_ than XT to
the point where Core is the actual fork).

Would Classic have happened without XT? It seems to share some developers.

------
pbreit
I'm worried (about myself) that I easily shift between these 2 camps: this
thing is outrageously ingenious and this thing is outrageously preposterous.

------
anon4this1
if chinese miners are indeed trying to limit blocksize in order to increase
transaction costs, then the necessary chain of events which needs to occur is:
1) faith in bitcoin as a currency/payment system drops causing price crash 2)
miners realise that the marginal increase in money made via transaction costs
is massively outweighed by what they have lost in block rewards by limiting
growth of the system 3) the miners get their act together and everyone
upgrades to a new whizzy high capacity bitcoin.

This should continue to work until block reward becomes negligible in 2035.

------
nikolay
Bitcoin is long dead; the blockchain - not so much, but it won't survive in
its present form as it's highly inefficient.

~~~
krupan
How do you have one without the other?

~~~
im_down_w_otp
"Blockchain" is just a brand name given to a particular form of using Merkle
trees, and Merkle trees have no correlation or dependency whatsoever on
Bitcoin.

------
RealityVoid
Yeah, well,that's just like... your oppinion, man.

------
glossyscr
> I read his entire post a couple times.

because some blockchain investments might be in danger

