I've enjoyed watching the Bitcoin experiment. It's been enlightening in a variety of ways, from technically to socially.
I've been fascinated and appalled in equal measure at the fanboy community, at the intolerance of criticism that sprang up very quickly, and how strong feelings ran (likely because of financial investment in the tech).
It's also been interesting watching it go from simple CPU mining, to multiple GPU rigs in dorm rooms, all the way through FPGA and then to massive installations of custom ASIC miners.
But I've always hoped it wouldn't go mainstream for two reasons - limited supply with weighting in favour of early adopters, and the massive electricity costs of the 'mining' and transaction validation process. Scalable, competitive proof of work systems for a widespread currency are an ecological disaster in the making, and deflationary currency with a handful of early users controlling a huge proportion of the total currency supply... these aren't "features".
I'll be very interested in what happens next, and for the reasons given I hope it's not just a BTC clone with better governance.
I 'll also notice what the whole experiment proved: That money can perverse moral incentives. The electricity/wasted energy issue you mention is just one of them. The amount of time spent on building and specializing the hardware is another. All this was in the hope of the abstract goal of creating money, not wealth. People weren't so zealous in building specialized hardware for, say, protein folding. Bitcoin advocates usually put forward "the good of humanity" argument, yet the product by design puts individual interests above all other interests.
In that vein, I'd like to point out Gridcoin[1], a crypto-currency that rewards you for throwing your computing power at a BOINC project (basically scientific data crunching) [2] instead of wasting it on pointlessly solving crypto problems. It's certainly not perfect, but an interessting idea nonetheless.
That's quite cool, I like that idea a lot more. I think I'd still rather a currency that didn't rely on burning power as fast as possible, but using that power for good is, well, good :)
The current system for USD is pretty close to ideal. Short term money is creating through lending, long term money through bonds.
It's a great mechanism and could be readily adapted to digital currencies. Have a group of banks that may issue loans in the currency and have a central authority that will issue bonds and pay interest on them in the currency. Set the lending rate to under the bond rate to "bootstrap" the initial currency flow, then manage it from there.
Management could be automated by computers to constantly find the optimal rates for loans and bonds.
Well, there needs to be some proof of work, something that is hard to do at scale but easy for individuals.
To that degree, Bitcoin has failed, because massive SHA256 crunching is now easy to do at scale and hard for individuals.
More varied challenges, like BOINC, or PoW that is bandwidth, connectivity, latency, or disk-space based, will provide a lot more value to the community and make it easier for individuals to contribute. I eagerly await the day that one of these alternatives becomes mainstream.
Alternatives are good but.... well, disk-space based would push up the price of hard drives. Bandwidth connectivity and latency could again be owned by big players...
I don't know. What I do know is that in a centralised crypto-currency system you don't need any of this as the issuing authority merely signs the transactions and we're away. I hope that some bright spark comes up with a way to make a decentralised one almost as simple...
> I 'll also notice what the whole experiment proved: That money can perverse moral incentives. The electricity/wasted energy issue you mention is just one of them. The amount of time spent on building and specializing the hardware is another.
The existence of high frequency trading already proved this. All that technology built and maintained, all that electricity wasted, merely so that one company's bots could play a zero-sum game nanoseconds faster than another company's bots, undermining them.
> limited supply with weighting in favour of early adopters
How is that not true for the royal families of Europe or pretty much all the billionaires in China/India/Russia? Of course, it is not a desirable feature as we've discussed in criticism of pg's essay but what option do we have?
>> How is that not true for the royal families of Europe or pretty much all the billionaires in China/India/Russia?
While I agree there are problems when individuals can accrue control of such a disproportionate amount or influence and economic output... I don't think it's quite the same.
2/3 of all the Bitcoin that there will ever be already exist. The number of people involved in Bitcoin is comparatively small. Were it to become a mainstream world currency, on the scale of the dollar, some of these folks would likely become trillionaires. Those oligarchs in India, Russia and China are wealthy, but they haven't got such a huge proportion of all currency sewn up. And because of the nature of 'fiat' currency, we can always make more. With BTC this isn't the case.
>Spending energy to secure and operate a payment system is hardly a waste. Like any other payment service, the use of Bitcoin entails processing costs. Services necessary for the operation of currently widespread monetary systems, such as banks, credit cards, and armored vehicles, also use a lot of energy. Although unlike Bitcoin, their total energy consumption is not transparent and cannot be as easily measured. Bitcoin mining has been designed to become more optimized over time with specialized hardware consuming less energy, and the operating costs of mining should continue to be proportional to demand. When Bitcoin mining becomes too competitive and less profitable, some miners choose to stop their activities. Furthermore, all energy expended mining is eventually transformed into heat, and the most profitable miners will be those who have put this heat to good use. An optimally efficient mining network is one that isn't actually consuming any extra energy. While this is an ideal, the economics of mining are such that miners individually strive toward it.
> Spending energy to secure and operate a payment system is hardly a waste.
That's not the question. The question is if more energy is being spent than is necessary to achieve the goals of a well-secured, well-operated a payment system, and I think there are very strong reasons to believe the answer is yes. (Among many other things, Ripple and Stellar are existence proofs of being able to get something with comparable security and much lower energy usage.)
> Furthermore, all energy expended mining is eventually transformed into heat, and the most profitable miners will be those who have put this heat to good use.
what
> While this is an ideal, the economics of mining are such that miners individually strive toward it.
And it is equally valid to say that the economics of cloud computing are that cloud hosts should individually strive towards it, too, but is AWS so much as keeping a single pizza warm?
Is there any previous case in human history where "Negative externalities could be turned into profitable positive externalities with cleverness" has worked?
I disagree that the optimal network doesn't waste any energy - any hash attempt that fails is a waste of energy. As more people compete and the difficulty goes up, more and more energy is consumed.
I understand that this is the way BitCoin protects itself. I want to be clear that I am saying I think this is a bad way of doing things. As someone that understands a bit about crypto - most crypto schemes that are hard to break are not hard to break because the encrypting device has worked so hard at encrypting them. They're hard to break because they have been designed in a mathematically sound way.
I hope this endless grind is not something inherent to the idea of decentralised crypto-currency, but if it is I don't think the decentralisation aspect is worth it, and as we see in this article it can be illusory anyway and the amounts of energy involved are pretty huge.
>> Furthermore, all energy expended mining is eventually transformed into heat
Well, there's always the conspiracy theory that the bitcoin network (and the blockchain) is a harness created by the NSA to crack encryption around the planet.
It uses vastly more energy than payment processors that have vastly more throughput. And the ideal miner that finds a valuable use for the waste heat is a fantasy, and it's an incredibly inefficient way of generating that heat.
I think at the end of the day there's an important axiomatic difference.
Are you willing to trust any central authority? Maybe a government, maybe a set of independent businesses you can chose among, maybe a specifically selected advisory committee, one really cool dude. Just anything.
If you are, then burning coal and compute cycles is just insane and wasteful.
If you aren't, then you might be willing to admit that from some angles it is an inelegant solution, but it is a solution.
Taking Bitcoin on its own terms, as a solution to a problem you may not personally care about, the wastefulness of the process isn't really a problem. If anything, I agree with what someone else said down thread -- it would be better if mining for Bitcoin wasn't profitable, and it was a lottery people played at a loss (wasting even more resources!). That would discourage the centralization of mining power. IMO the biggest problem Bitcoin faces is that it put voting power in the hands of miners instead of users, and then encouraged those miners to coalesce into a relatively small coalition of big-money players.
The energy waste of Bitcoin isn't a function of its decentralized nature, it's evidence that the decentralized nature is being subverted. A truly decentralized Bitcoin wouldn't have giant mining rigs that have to figure out what to do with all the waste heat, it'd be using spare CPU cycles that everyone has and the energy impact would be minimal. The energy waste comes from people using ASICs devoted to nothing but Bitcoin mining. And those same people, according to the article being discussed, are using their outsized impact to help steer the direction Bitcoin is headed in to the detriment of the majority of Bitcoin users. Bitcoin's ethos of "one CPU, one vote" was subverted as soon as people using dedicated Bitcoin mining hardware could have more votes than all the CPUs in the ecosystem put together.
Also we have no reason to believe that the trend will change away from advances in hardware efficiency just buying more of them - the ratchet mechanism doesn't reward stable capacity.
It's made me a little down on digital stamps, which was an idea I used to like.
Back before spam filters got good, one of the proposed solutions to the spam problem was to require everyone to compute an easy to verify, difficult to produce hash for their email message and bounce everything which didn't come with an attached hash. The idea was that a regular user could spend 1 or 10 seconds hashing each email, but a spammer couldn't spend the time hashing millions of spam messages.
Now I suspect that we would have just ended up with data centers full of highly efficient hashing hardware cranking out signatures for spam messages.
We didn't need bitcoin to know that HashCash and the like wouldn't work to prevent spam. The existence of botnets already means spammers won't be impacted. No need for expensive specialised hardware when other people are paying for the commodity hardware and electricity. And since a regular user on a not-so-powerful mobile device needs to be able to compute the hash in a reasonable time, that puts an upper bound on the processing that's guaranteed to not be an obstacle to a spammer with 3000 botnet slaves.
Yeah, the botnet / cell phone gap was already large enough.
I wonder if that could have been foreseen in the halcyon days of the late 90s, when the image of the l33t hax0r was someone sitting in the middle of a cobbled-together supercomputer in a garage with painted over windows, and not in the middle of an anonymous coffeeshop with a botnet.
> since a regular user on a not-so-powerful mobile device needs to be able to compute the hash in a reasonable time
I would assume this would be implemented at the SMTP level, so when I connect to gmail with my phone, it's their servers that need to generate the hash before they send it through SMTP.
gmail handles a lot of mail, which again puts an upper bound on how difficult the puzzle will be. I don't think this changes anything. And if you make it too hard, "free" (ad-supported) email will no longer be possible because the costs are simply too high for the financial return.
The root problem with Bitcoin isn't the program, it's the money supply equation. Deflationary currencies fail exactly because they are too volatile, which is the anti-thesis of designing a currency to be held as an asset. Imagine currency like the oil in an engine. Someone needs to create a coin that rewards mining by giving them futures contracts on the currency and still deflating it.
Doesn't this all seem a bit dramatic? Throwing away the baby with the bathwater? Cryptocurrency is still in its infancy, and BitCoin is the first cryptocurrency. It's a little early to declare the project a "failure," throw up your hands and walk out of the room, just because a few people haven't acknowledged the urgency of a (very fixable) technical problem.
People disagree about the reality of global warming. Does that mean we throw out the entire system of laws of the United States and other world powers because it hasn't yet addressed this problem?
This is exactly why I never bought the concept of BitCoin as a 'libertarian' currency. There's always politics, there's always governance. It becomes political as soon as more than one person is involved. And as soon as it's political, institutions, processes, procedures, and laws become necessary - also known as "government."
I still believe in BitCoin, however. Ultimately, there's a way out of this tangle, and like with most political problems, it's a political solution. BitCoin will either adapt and scale up or stay the same and scale (way) down.
I'm not sure why you think bitcoin is the first cryptocurrency, things like digicash existed since the early 90s. In any case, did you even read the post? The author explicitly describes the failings of bitcoin's political processes. His concerns weren't some hypothetical issues of ideology, they were concrete examples of how those who control bitcoin are preventing it from growing in a very technical sense, and refuse to engage in any sort of compromise because it's not within their (business) interests.
edit: To clarify, I'm not trying to say I agree or disagree with the author, as I don't know anywhere near enough about the bitcoin community to say either way. I'm merely pointing out that the OP was talking past the author's points, not addressing them. (In particular, they built a strawman against governance and political solutions.)
Ok, I'll add some modifiers: BitCoin is the first global peer-to-peer distributed cryptocurrency actually in use.
And yes, I did read it.
Step A is realizing that the political processes aren't working, and Step B is figuring out a way to make them work. Step B is not throwing up your hands and quitting.
Mike Hearn has been doing all the quite politicking, technical writing, code prototyping, message board and mailing list discussion, and etc that you would expect a mature OSS project to require to do a technically contentious change. He lost the argument, decisively, but not for lack of trying reasonable steps. This is not Step A nor Step B. This is not even Step F ("fork the codebase and network with the idea of forcing Bitcoin Core to accept a new ground truth"), which he and collaborators tried unsuccessfully. Quitting is Step Q.
It may be helpful in evaluating the above to note that I'm an open and notorious critic of Bitcoin and believe efforts to save it are poorly advised, but I'll happily function as a world-readable notary to say "Yep he really did try doing that; I watched it happen."
Either way it will be left to people other than Hearn to decide. I admire Hearn for his very many hours spent on this seemingly intractable problem, and I understand his frustration. I just think it's premature to declare this undertaking a failure.
XT may still be the go-to option when scale and transaction bandwidth actually starts being an existential problem.
You'll find that people rarely react as urgently as they need to until the problem starts making their wallet lighter. But for the last year Bitcoin has increased both in popularity and price. And even at their slowest, actual settlement times of transferring monetary value on the BitCoin network are still lifetimes faster than clearances on ACH or other traditional financial networks, which means Bitcoin still has a competitive advantage over the traditional financial system. When that competitive advantage starts going away, I have an intuition that the block size will suddenly increase. I don't know for sure, but I have a feeling.
That's the genius of it all. Even the governing body doesn't prevent people from running the existing patches. As soon as the impasse becomes an existential threat, we already have a solution, and anyone who wants to run it can run it. Downloading and running the new Bitcoin is kind of like voting.
XT was intentionally designed to split the Bitcoin transaction history into two rapidly-diverging versions - the XT and official chains - each with enough support to continue to exist for some time. This would have killed Bitcoin - and I mean actually killed it, complete with plummeting exchange rate and termination of trading and acceptance all over the place, not just caused a disgruntled ex-developer to write blog posts about how it was dead. Even supporters of larger blocks were largely unwilling to support it for this reason.
This was a deliberate design decision. Mike Hearn didn't think he was going to get widespread support, so he set the threshold for it to fork Bitcoin at 75% of the last 1000 blocks indicating support, which actually means it would activate with less than 75% support from miners due to variance and the fact that he was retesting the condition every block until it succeeded. Potentially quite a lot less, if I remember correctly, maybe even a minority.
Enough miners did not in fact do so, and the "centralized control over miner software" was anything but - bitcoin.org pulled links to the one or two services that used XT because there was a huge amount of demand from Bitcoin users to do so, and they were making the same demands of everyone else. Also, part of the problem was that the threshold for enough miners was intentionally set dangerously low. If it had succeeded then I'd say it would be a sign that Bitcoin was fundamentally broken and couldn't survive without centralized control, but it didn't.
His concrete examples are of problems, but not of "those who control bitcoin preventing it from growing". The block size debate is ongoing and the work on it is widespread. Just a few days ago Bitcoin Classic was announced with wide miner support.
Bitcoin doesn't move fast and break things-- and that's one of its strengths, not a weakness.
Also, its inherently democratic- those with the hashing power , and thus the most on the line, determine its future. IT's in their best interests to find solutions-- in a considered way.
I don't see that this system has broken down at this point.
People can do things that serve their best interests in the short term but happen to hurt other people. Additionally, short term value is highly emphasized over long term value when most people make decisions. Just because the people with the most bitcoin mining power have the majority vote doesn't by default make their decisions good for the unrepresented miners in the short term, or even their own selves in the long term.
Small quibble. To me, that spelling of Bitcoin signals a speaker's lower familiarity with the bitcoin community and subject matter. Akin to using the word "CyberSpace".
Apologies for the mistake, but I'm quite familiar with Bitcoin (and also have a financial stake in this matter). You can see my past comments here on the subject (many of which, regrettably, also contain the capitalized C)
Not just directing this at you as numerous people have pointed this out, but it seems awfully pedantic to quibble over my capitalization of a letter than to address the substance of the point which is that the technical issue here is quite fixable and that the political will to fix it is not impossible.
Actually it shows the author knows the bit-coin community very well indeed, and knows that they freak out and write pointless posts like yours about trivialities... you are well-trained.
This seems like someone saying "I don't agree with the direction that BitCoin is heading in" and then taking his ball and going home. A bit dramatic yes, but not uncommon in open source projects. It's like someone saying "Linux is dead because it doesn't confirm to XYZ principle", which seems to occur every other Tuesday. Forks happen.
It seems like he makes some cogent criticisms, for which the best solution seems to be to fork the project, or begin developing for any of the other *coins that were so popular a couple of years ago. But BitCoin has the dominant brand and the people who control the mining and the source code can do whatever they want. Something tells me that bitcoin itself isn't dead because there's been too much invested in it by too many people, whatever the problems. But it's dead in the eyes of the author and maybe for several others, and that's all that matters in the context of his blog.
He did fork. He's the creator of Bitcoin XT, which was trying to bring light to the blockchain issues he discussed. He was met with DDOS attacks, and was banned from several bitcoin communities.
When the BTC community has become so hostile to literally attack those who criticize it, it becomes hopeless to resist. The best you can do is walk away until the community stops being so hostile.
That's the discussion. Technical hurdles appear to be solvable. The core concept should still be sound. It's the political structure around Bitcoin that appear to be killing it.
Fixing Bitcoin would be the best solution, but the politics and governance structure aren't letting this happen. Aside: As I age I'm understanding more and more how critical leadership is. All of the pieces are there for Bitcoin to succeed, but they aren't organized correctly.
The second option is the community choosing to change to a different client, so that by a grassroots movement, eventually the blockchain moved in the right direction. It would likely be a rough transition for uneducated people, companies, and software for businesses that use Bitcoin, but if it can't be official, it would have to be something done similarly to XT.
The last solution is to switch to another cryptocoin and blockchain entirely. I don't keep up with news, so hopefully some of the smaller coins have implemented fixes. This would set back blockchain-based cryptocurrency a few years, though. If the whole community abandoned Bitcoin and moved to Vertcoin or Dogecoin, companies that went out of their way to support Bitcoin might be reluctant to follow.
> "Something tells me that bitcoin itself isn't dead because there's been too much invested in it by too many people, whatever the problems."
So in other words, too big to fail? I don't necessarily disagree with you, but that sure seems to support the argument that the Bitcoin ecosystem as a whole isn't in a very healthy place.
Additionally, what does it say about the managers of the project when the Bitcoin Core people decide that (because ever-shrinking available capacity means ever-more unpredictable [and gradually-upward-trending] transaction fees) it's better to allow a transaction partner to silently reverse a transaction they made, rather than increasing the maximum block size to keep up with the ever-growing (due to Bitcoin's increasing popularity) transaction volume?
It means that the fundamental innovation of Bitcoin - peer-to-peer, trust-less, distributed concensus - is a solid one, even a technological breakthrough. And it means as first-mover in implementing that innovation, Bitcoin will have continued life. It also means that the problem has not reached a sufficient level of urgency that the scales have tipped to the pro-block-size-increase camp, but that I believe it will.
> It means that the problem has not reached a level of urgency that the scales will tip to the pro-block-size-increase camp.
Hmm. That's one way to interpret it.
Is it true that that -without a max block size increase-, Bitcoin can't process a higher volume of transactions than it processes now? [0] That -in fact- the unpredictable -and generally increasing- transaction fees are a feature of the network designed to shed load -by discouraging "less important" transactions- when the network is at or near capacity?
[0] Which is -apparently- somewhat less than three transactions per second. [1]
> like with most political problems, it's a political solution
I don't know anything about Bitcoin but the promise seemed to be to invent a technical form of money, with limited supply, that would be free of politics and interference from governments.
To quote the beginning of the article:
> What was meant to be a new, decentralised form of money that lacked “systemically important institutions” and “too big to fail” has become something even worse: a system completely controlled by just a handful of people.
You cannot have a human system that is free of politics. This is one of the great techie fantasies, that messy human need can be eliminated from the system, where in fact it's at the root of why people do things.
Bitcoin became valuable enough to attract people with a lot of real money on the wrong side of the Chinese capital controls, who've taken it over as their major use case.
It's not just that a few people haven't acknowledged the technical issue though - it's also that 95% of mining capacity is now held by a handful of people and they don't want to change it either.
with the mining capacity mostly in the hands of china, i'm not surprised of DDOS attacks and censorship behavior against XT proposals. bigger blocks would put out of competition the majority of chinese miners unable to support the network with their crappy uplink and criminal attacks keep the situation unchanged, they are going to milk the cow as long as possible
There's no such thing as a libertarian currency. Money was invented to provision government. Everything else is a commodity. Currencies can only be issued by a sovereign with the ability to impose taxes to drive the value of the currency
You have a bunch of down-votes, but you're right. Taxes are the best driver of demand since they force the currency to be the unit of account in a country. In essence, any bitcoin transactions in the US will need to be accounted in USD in order to taxes to be paid. Thus, bitcoin is, as you say, commodity money.
Bitcoin can only operate as a stand-alone medium of exchange in regions without taxes (or in transactions where taxes are ignored).
Countries without a "sovereign" or other government, like Somalia, still use money. Some people have been known to use laundry detergent as a currency since it lasts for a long time, is relatively expensive, and is inherently useful.
Shrug. And which central government issues laundry detergent? Your argument is circular-- if it's issued by a government, you call it a currency. If it's not, you don't, regardless of how people use it.
By the way, the position that you're taking that taxation creates money is called monetarism. It peaked in the 1970s and has been discredited in mainstream economics ever since. The reality is that people create government, and people create money, not the other way around.
Just to be clear, I'm not some big bitcoin propnent. Bitcoin is an interesting experiment but I'm keeping my US dollars.
No, the position that I'm taking that taxation drives demand for currency is a core tenet of Modern Monetary Theory which is starkly in opposition to Monetarism on almost all issues[1][2].
Monetarism is the basis of the neoliberal agenda which enjoys near perfect adoption all over the world. It is the mainstream. Austrian economics is mainstream amongst "conservatives" and MMT is on the fringe of everything because it sounds too conservative to be progressive and too progressive to be conservative (and yet contains the most complete description of how currency works out of any of them!)
It is only dramatic because you seem to think that Mike Hearn declared the cryptocurrency experiment a failure - but he did not. Bitcoin is the first decentralized cryptocurrency - if it fails because of some social dynamic issues - there will be others.
Precisely. I find amusing how every time there is a trend up in the price, there is a flood of doom sayers, as though they want to force the price down...
I think the bitcoin network is fine. These issues will eventually be resolved, although not likely to OP's satisfaction or the way he wants to solve them.
In the conclusion he states: "<i>Even if a new team was built to replace Bitcoin Core, the problem of mining power being concentrated behind the Great Firewall would remain.</i>"
Bitcoin's decentralized nature encourages power pool formation by promoting economies of scale. It is not surprising that like the production of electronics, clothing, toys, etc. the lowest cost center is in China.
I think he is kind of burying the lead here. The major development in Bitcoin in the past week is that several crucial players came together to form Bitcoin Classic.[0]
They have the trifecta of a majority of mining power, two of the largest exchanges, and several key developers on board. More importantly the miners supporting the project are in agreement on increasing the block size. It goes a long way to addressing most of the things Mike brings up in this post.
Mike's done a lot of Bitocin particularly by bringing to light the issues with Bitcoin core. At the same time this post strikes me as alarmist. It seems more like a rationalization of his decision than anything else.
Thanks for reading the article. I mentioned Classic briefly at the end. I did not dwell on it because it is simply repeating the same process as XT went through.
When we were preparing for XT, we also went and talked to the Chinese miners. They told us that the original 20mb limit Gavin proposed was too high, but that they could accept 8mb. So we compromised and went with 8 + a growth function. Then after XT was launched they changed their mind and said any growth after 8 at all was totally unacceptable. Now they're telling the Classic guys that 2 is the most they could handle. Did the Chinese internet border really get 4x worse in the span of 3 months? I doubt it.
Western miners aren't much better. One told me quite clearly they'd start voting for BIP101 back in November (though: voting in such a way that it wouldn't actually activate!). But they didn't. When I followed up, they again said it was on their todo list and they'd start really soon. But they didn't.
The miners have proven over and over again that what they say they will accept and what they actually do accept is not aligned. So right now I'm seeing some excitement (maybe more like desperate hope) that Bitcoin Classic will solve anything. Maybe now the "Scaling Bitcoin" conferences have come and gone and Core's reputation is much worse, they'll have better luck, but even then the best case scenario is that Bitcoin gets a 2mb limit. That isn't nearly enough and big backlogs will still occur.
More to the point, even in the best case scenario, the community will essentially accept that Bitcoin is controlled by the Chinese government and grows or shrinks at their whim.
To be fair, 8mb and 8mb doubling every two years are two very different things. I understand why 8mb with doubling was offered, but I also understand why the chinese miners expressed their concerns, concerns which you were unwilling to address.
I supported BIP101, but your unwillingness to compromise - they offered 4mb doubling every 4 years I believe - played a great part in it's eventual failure.
The situation now is very much different with almost 100% of miners saying they will support 2mb and some 50% already supporting bitcoin classic with more to come.
So, I share your concerns, but unfortunately mistakes were made, some of them grave mistakes, mistakes from which we learned, and are thus now well placed to move forward.
I think the difference is that in the XT case it wasn't clear that this had been done to the casual outside observer. The signed statement on the XT site is mostly companies not in the mining space and only a single mining company. By contrast the classic site publicly lists several miners as supporters of the project and at least two of the developers on board are involved in mining operations.
On your point about the current dominance of China in mining. Two years ago people were flipping out that Ghash.io might have the ability to perform a 51% attack and now they barely register a whole number percentage share of the hashrate. Things change.
>Yeah but is there any group/business in bitcoin that doesn't consist of keyboard warriors on reddit?
This is exactly why I went from being a great champion of Bitcoin in 2011 (came on board late 2010, right after Mike if I recall) to totally disengaging with the project today.
For the record, I deeply and vehemently disagreed with Mike about the direction of the project on numerous occasions (e.g., coin "redlists"), but I'd much, much rather spent my time around Mike (an all-around nice guy, by the way) than the idiots and know-nothings than presently have come to form the Bitcoin "community". Things were far, far different back in 2011-2012, before the first big price jumps led the current crown on board. Ironically, their "participation" in the project (mostly screaming, censoring, and belly-aching on Reddit) will only cause the thing their fear most: a Bitcoin bus-plunge and loss of most of their assets.
Mike, if you read this, I was only a minor player in Bitcoin core (< 5 commits) but I appreciated your work and particularly your talks about Bitcoin, as well as your work on Bitcoinj, an extremely well-led open source project. I look forward to seeing your next endeavors.
> It is not surprising that like the production of electronics, clothing, toys, etc. the lowest cost center is in China.
The lowest cost center for mining bitcoin is absolutely not China. The reason mining power is currently centered in China is because producing the latest-generation ASICs is cheapest and quickest in China and for various reasons the companies involved prefer to just bring them online in China quickly.
Soon ASICs will stabilize on the most modern production processes and commoditize and Bitcoin mining will shift to where the marginal cost of mining is low -- Iceland or other cold countries with extraordinarily cheap energy.
China is the place where the marginal cost of mining is lowest. It's the only place in the world where a command economy has hybridized with crony capitalism to offer you as much electricity as you want at below-market prices; if the otherwise idle hydropower station that was built 300 miles from any center of population or industry under the last five-year plan can't give you all the juice you can use, you can get more from your choice of local coal-fired power plants at six cents per kilowatt-hour (after a small consideration to the provincial party chief).
The other major reason that Bitcoin mining is big in China is that it's far and away the biggest source of capital looking to escape government controls. You put in yuan at one end, turning it into ASICs and electricity, and you take bitcoin out at the other end. Say what you want about bitcoin, but it's a whole lot easier than your yuan deposits at the Industrial & Commercial Bank of China to get across the border.
Some day these things will change. But for now, Bitcoin is stuck with Chinese miners.
China is certainly not the place where the marginal cost of mining is the lowest.
I moved my GPU mining farm in 2011 to Douglas County, Washington state where my electricity cost was 2 cents per kWh. China does not beat that. In fact to this day none of the large professional mining farms beat this cost. At best they match it: in 2013 the first professional miners—MegaBigPower—came into Douglas County... http://www.spokesman.com/stories/2014/apr/26/northwests-chea...
Yes, there are Chinese bitcoin miners paying even less than that for power.
China has a quarter of the world's hydroelectric generating capacity, but its utilization rate is low, far lower than in places like the Unites States, Canada, or Norway. This is primarily because much of the potential hydropower cannot be absorbed by the grid in western China, where many dams have been built over the past decade on the rivers flowing off the Tibetan plateau. Bitcoin mining operations are the rare customers that can show up near an isolated, idle hydropower station and gobble up electricity from turbines that otherwise wouldn't even be spinning.
The other factor I mentioned, that bitcoin mining in China provides an added return in the form of expatriated revenue, does not enter into the calculation of marginal cost. But it does effectively add several percent—the price of moving money out of China via other mechanisms—to Chinese miners' marginal revenue. And it's marginal revenue minus marginal cost that matters, not marginal cost alone.
I don't believe large mining farms in China pay less than 2 cents per kWh. But if you have sources, quote them. I would like to be proven wrong.
For example the lowest Chinese costs I remember reading were from a remote farm who benefits from hydro power and admits that paying 3 cents per kWh is already "on the cheap side": https://bitcointalk.org/index.php?topic=1072474.msg11472186#... Farms don't usually disclose how much they pay (strategically sensitive number), but I always do some back-of-the-napkin math when possible, eg. when they release approximate figures, and I usually calculate somewhere between 4 and 10 cents per kWh.
Why are these hydroelectric plants not connected to the main grid that powers Shanghai and Beijing? If the turbines are otherwise literally turned off, surely the transmission losses become irrelevant?
According to Wikipedia the distance shouldn't be an issue with HVDC lines and there's no need to store power, you can take some of the coal plants near the cities offline.
Bitcoin mining could be more decentralized if it better resembled a lottery, where huge numbers of people play for an expected loss.
In other words, the lack of people mining at a loss makes mining profitable and hence subject to forces of centralization.
There are several reasons why mining as a lottery substitute is rare, a major one being that commodity hardware is inefficient by many orders of magnitude,
making even a botnet next to useless.
Perhaps, if a proof of work, whose efficiency gap (with custom hardware) is at most an order of magnitude, were adopted (or slowly phased in), enough lottery players would arise to make mining unprofitable at scale.
Botnets should then just be welcomed as a modest increase in decentralization.
Yes there are several other cryptocurrencies that (at least attempt to) address this issue. Those solutions were disregarded as non-essential technical improvements, and any change to Bitcoin would bring instability. Now perhaps more people will see those as fundamentals to the currencies' goal.
You can see here many alternative coins and an estimated market cap:
A lot of altcoins came up as mere clones of another, pump-and-dump schemes, or with irrelevant or plain bad changes; but there were quite a few valid innovations. Bitcoin has barely changed in it's core protocol. I hope other projects get more exposure in the future (or Bitcoin becomes less afraid of change).
"You can't possibly get a good technology going without an enormous number of failures. It's a universal rule. If you look at bicycles, there were thousands of weird models built and tried before they found the one that really worked. You could never design a bicycle theoretically. Even now, after we've been building them for 100 years, it's very difficult to understand just why a bicycle works – it's even difficult to formulate it as a mathematical problem. But just by trial and error, we found out how to do it, and the error was essential." -- Freeman Dyson
Has anyone run the numbers on what it would cost to build data centers with equivalent hashing power using the latest ASIC's in various areas taking into account labour and energy costs. Between a wealthy libertarians, BitCoin startups and crowd funding (not necessarily donating, could be buying shares in a company that will mine, with a charter, governance etc) and regain control to do whats required to make it work.
BitFury were apparently spending around $100M on a new mining data centre[0] so I would imagine cost would be in excess of this. There was also a discussion at https://news.ycombinator.com/item?id=10774204 with some estimated numbers.
1) Mining power is still decentralized. It's not evenly distributed, true, but it is decentralized.
2) Just because some significant percentage of it is in China, doesn't mean it's controlled by one single entity like you're trying to present it here. It's still distributed across thousands of independent miners.
> ...the block chain is controlled by Chinese miners, just two of whom control more than 50% of the hash power.
That's a pretty unique situation.
If a predominant amount of hash power were concentrated in China, but distributed among some large (100+ to 1000+) number of miners, that would be fine. But a system of any kind is no longer decentralized the moment more than 49% of that network is entirely controlled by a small [enough] group of people.
A pool is not a single entity, it's composed of hundreds, thousands of miners.
To do some evil thing they will have to convince all of their miners to participate, and stay quiet at the same time. And all for what? So they can perform a >50% attack, crash the value, and ruin their investment?
I would worry more about things like BitFury's ASIC datacenter, which is a true singular entity.
Unfortunately miners don't get to make any real decisions about e.g. which transactions to include when running on a pool - so for arguments of decentralization the pool is one miner. Of course the miners can move to a different pool if bad things start happening, but it's only reactionary.
There's some neat tech that gets around this that is compatible with Bitcoin, for example p2pool. It's not super popular yet but it solves some of these problems.
Okay, so we need to trust three people, or whoever has the biggest datacenters.
The US Financial System relies on more than just Bank of America, Chase, and JP Morgan btw. There's more decentralization in the status-quo than the three or four big-name BTC Miners.
Miners produce a stream of bits by consuming CPU cycles, energy, data centers and admins. First, China is a low cost producer across many product categories. It is not surprising that bitcoin mining is also on that list.
Second, there are economies of scale to be exploited. Over time, it will become more profitable for the largest miners to increase capacity vs the smaller miners. The largest miners will get cheaper power contracts. That alone gives them an advantage that will allow them to take market share from the smaller miners.
The end result is fewer, but larger, miners doing more work.
Read the article, he was clearly laying the groundwork for this move back in Thanksgiving.
“The current Bitcoin system, I mean the system we actually use today with the block chain, isn't going to change the world at all due to the 1mb limit. … So if I have a choice between helping the existing financial system build something better than what they have today that resembles Bitcoin, or helping the Bitcoin community build something worse than what they have today that resembles banking, then I may as well go where the users are and work with the banks."
Whether or not Mike might profit from Bitcoin failing (in favor of the alternate cryptocurrencies he works with), the picture he paints is one of inherent instability, mismanagement, and censorship, and it seems like a solid argument. I'm skeptical of where his money comes from, and I don't think he's unbiased enough that I would short BTC just on this article alone. But I'm certainly less bullish on its future than I was.
"The use cases they are looking at and requirements they have cannot be met with the Bitcoin protocol, it just doesn't have the things they need. They are actually spending a lot more time looking at Ethereum than Bitcoin, as it's more obvious how to apply it to their use cases."
No, only that the article is being misleading in it's breathless clickbaitiness.
The quote is absolutely in line with the article; actually including the quote in the article would have rendered the headline 'Bitcoin dev thinks blockchains for banks are way cooler, has thought so for months, and is reluctantly moving on'; that might be a fun article to read, but it's not frontpaging HN.
> No, only that the article is being misleading in it's breathless clickbaitiness.
If you read the entire article, you would not describe it as click-bait.
Additionally, I agree with kevinwang's assessment that the statement by Hearn that you quoted is 100% in line with what Hearn is saying in his Medium article. The key quote is "...the system we actually use today with the block chain, isn't going to change the world at all due to the 1mb limit.". Hearn's Medium article is -actually- ~50-> ~75% about this 1MB limit. (Spoiler alert: it's not a limit of the Bitcoin protocol, but rather a political decision made by many of the Bitcoin Core developers.)
What I take from this (and I think I really should invest my own time in researching more on) is psychology.
People want to protect their investments. But because we are talking about money, don't confuse this for meaning that the investments are just about money.
Investments in code contributions, investments in all the articles read, investments in community, friends, social networking, investments in belief systems, investment in the justification for choosing one thing rather than another.
It's simply not consistent to say "oh you only have 20BTC, so you've nothing to lose" or "oh, you made no code contributions, so why are you complaining" as both ignore the potential for massive psychological and personal investments.
All these investments act as a barrier to change. It hurts, it hurts physically to lose big investments.
There is a cost benefit analysis that humans perform internally. Is the hurt of losing this investment now worse than the pain by keeping the investment later.
If we go back to the article, we see Mike repeatedly tell us that Bitcoin is an experiment. He is saying to us now "look, don't invest your time, effort and money into it" - and he is telling himself "I have made the change, I have accepted a loss by investing so much of my time and effort into this, and am moving on".
I have always felt that Bitcoin was doomed to this sort of fate, for the simple fact that the "specification" for the Bitcoin protocol was "whatever Satoshi's client does". The community repeatedly failed to encourage a diversity of implementations, and as a result they effectively ceded control of Bitcoin to the maintainers of the one and only implementation.
By the time independent implementations did begin to develop, it was too late to introduce diversity into the ecosystem.
>for the simple fact that the "specification" for the Bitcoin protocol was "whatever Satoshi's client does"
Fully agreed. The largest failure of the so-called "developers" (pretenders after Satoshi) of Bitcoin have failed to concentrate their efforts on understanding and specifying Satoshi's code.
The original Satoshi bitcoin implementation is a mess of Boost-y C++ that was clearly written by a bright guy who was steeped in mediocre C++ programming (probably on Windows). Studying the code and writing a proper specification is job number one. Adding random new features onto Bitcoin without first understanding the codebase is simply juvenile.
So this is a political problem -- here's my prediction of what will happen (given that we live in the real, political, world).
A political entity -- not necessary a sovereign government, but perhaps a bank or financial institution -- will offer a currency swap to existing blockchain holders to adopt their crypto currency. The inducement will be a limited time window to put in your claim, with all unclaimed but mined numbers going to the financial entity to reward their followers or stakeholders.
In the real world, this is called escheat and it is a power of the crown. Bitcoin is essentially a system for recording deeds to digital land. They aren't making more numbers, so the problem is the political resolution of competing claims to the same resource. This sort of claim comes, in the end, to a network consensus of who is the sovereign.
Ethereum is one prominent example of this: we'll swap currency on your blockchain for currency on our blockchain, ours will totally be worth more due to enhanced features.
They aren't making more numbers
"We can conveniently restrict the supply of numbers" is one of the fundamental failures of the imagination among Bitcoin enthusiasts. "There's only 21 million. Trust us. We counted." "But couldn't I make a new 21 million with a one character code change?" "Well yeah but they'd be so much less cool than our 21 million and you'd have to convince people to use them." "But wouldn't I be able to use the Satoshi adoption strategy -- give them away for cheap to bootstrap a distributed boiler room then gradually make them more expensive, enriching early participants in the scheme at the expense of later participants?" "But that's crazy, it will never work. Nobody wants worthless currency units tied to a transaction network that provides absolutely no value. They want spendable money." "Of course people want worthless currency units tied to a transaction network that provides absolutely no value, if they have the expectation that they will not be the last people to want those currency units. That describes why you invested in Bitcoin!"
The problem is incentivizing people to "mine". This effectively created a pyramid scheme where the "first in" benefit from the "later in" spending money.
Bitcoin will be more interesting to me once the mining pool is exhausted. At that point, we'll see how much of Bitcoin's value is in use instead of speculation.
A currency which gains value encourages holding it, agreed, however, there are opposing economic forces at play as well.
First, the marginal utility of additional units drops for the hoarders, and marginal utility is a well established economic fact.
Second is the time preference of goods. People's lives are finite and they don't want money for money's sake, they want to exchange it for useful things. If you're really hungry, you will buy your sandwich today, not tomorrow even if it's going to be cheaper. Real world examples are electronics and the price of oil. Electronics get better and cheaper with time, and yet, people still buy today. Oil has depreciated hugely in the last months, and yet, people are buying gasoline and heating oil right now, even though signs point to it being even cheaper.
Taken together, you have the desire to hoard counterbalanced by these two factors, which creates a balance of hoarding and spending. This does an economy make.
I think the point is that it lives on a spectrum. If inflation was so bad that your savings would be worthless tomorrow, you would run out and buy as many materials goods and services as possible. If you knew that tomorrow it would reach 10 times its current value, you might go hungry for a day to cash in on that.
In either case, you're obfuscating the consumer's real demand due to 2nd order speculation. Using some particular good as a unit of account fundamentally introduces a distortion into the way that people elect to spend / save. And many people have different takeaways from this fact. If you're a goldbug or a Bitcoin enthusiast, you think that inflationary pressure is evil and deflationary pressure is good. If you're really into Keynesianism, you might think that consumption is good and saving is counterproductive. If you're the Federal Reserve, you think there is a right amount of spending that expert economists should target by tinkering with the money supply.
For anyone interested, I personally think the real answer is to look for ways to design a system that removes the distortion entirely by introducing a currency that cannot be held. In other words, a financial system in which the unit of account, the grease in the gears of the economy, only exists in the brief context of a transaction. The actual holding of wealth would all be done using electronic "shares" of real material goods, sort of like what you're buying at a commodities exchange. In this world, people's personal savings would be electronic, hyper-diversified stock portfolios. The "currency" of this system, if you could even call it that, simply acts as a yardstick for understanding relative costs, rather than needing to understand the N^2 different exchange rates of a typical barter system. You would hold micro shares in thousands of different products thanks to automatic software tools that blended expedience with your desire to personally elect what goods you wanted a long position on. In this way, the appreciation / depreciation of your personal savings would rely quite transparently on current values of the goods it represented. Crucially, removing this layer of abstraction would make it much harder for your fortune to evaporate purely on perception of value (see: Zimbabwe) since you would never give it away for less than what the underlying goods were worth to you personally.
I'm not an economist, but I suppose that yes, in a sense it's true. An economy requires the value of money to be stable or very slowly decreasing in time. To obtain this, the amount of money in circulation must roughly match the amount of wealth. Since wealth is usually increasing, so has to be the total amount of money for its value to remain stable.
If you want an economy that encourages investment and trade then you want people to have some inherent motivation to spend money rather than hold on to it. The easiest way to do this is by introducing small amounts of inflation. At the very least we know that more people are being produced in the world, and people desire money, so merely by the practice of reproduction we are creating more demand for the same amount of money over time.
It's a nice story, but it's unconvincing. I would agree that a fixed supply of money might become more valuable as human population increases.
But I'm utterly unconvinced that 'prices can only increase' for the economy to work. For example, in electronics prices for hardware have generally fallen in nominal and real terms and yet it's still a pretty big industry.
"Nice story": it's not like I'm making up stories to convince people.
Think of a house: would you buy one if you knew that just by waiting a year its price would be 80% of what it is now? And the year after 65%? You'd probably just wait. If you waited long enough, you could buy one for, literally, today's peanuts.
Electronics sounds like a good counterexample, but electronics are also developing at extremely high speed. The price of a given device decreases very rapidly in time, but new more powerful devices come on the market every day. Sure, you could have waited five years to buy an iPhone 1, but that piece of electronics is now almost worthless compared to the other options you have on the market.
Well, the Fed's approach is a flexible supply. You change the supply of money based on economic factors (that no one agrees upon true, but flexibility is the key)
Isn't the amount of money with real currencies also supposed to be limited?
(I'm not the kind of person to complain about being downvoted, because I literally don't care, but I'd like to know what's wrong in what I said. I always thought printing money is something no sane government would do.)
Ideally the value of currency should map to a fairly consistent value. If 1 unit buys a loaf of bread today, it's probably for the best it maps to one loaf of bread tomorrow.
If the amount of currency is fixed, but the economy grows, then the bread becomes cheaper. This has multiple effects, but one is to value work yesterday more than work today (work today will be compensated more poorly). Another is that it favours people who hold currency already over those that are actually producing useful economic output right now.
So in a growing economy, the currency supply probably should increase. It's arguable that tilting things the other way - favouring work today over work yesterday (or ten years ago) and favouring economic activity over holding cash - is desirable, so most developed economies aim for low but positive inflation.
This is my very simplistic understanding of why completely limited currencies are not a great plan.
The folly of BitCoin is to believe that technical problems are somehow orthogonal to social problems. They never are. And never has this been more true in the history of our species than with the technology of money. Money is an artifact of the state; always has been, always will.
>Money is an artifact of the state; always has been always will.
Nothing can be further from the truth. You don't have to go too far for the example. Cigarettes in prisons are used as money. People use all sorts of things as money. State wants to control it because it wants to collect some of the value produced by other people. That is all. Bitcoin is about not giving states these powers.
Cigarettes have all those properties, just somewhat imperfectly. Cartons are divisble to packs which are divisible to individual cigarettes. Cigarettes are pretty durable - if you don't get them wet and avoid breaking them they have a reasonably long shelf life. And they are pretty uniform in each division - carton, pack, cigarette. Since prisons allow prisoners to smoke cigarettes they have the cover of utility while being used as money.
I always thought that money has three characteristics: fungibility, divisibility, and verifiability (although divisibility can be relaxed for small values). Cigarettes pass two of the three, and fail only the weakest one, in a fashion that doesn't matter.
Mackerel was chosen since it's cost was closest to $1USD, and nobody wants to eat it. It also has unique markings so they can track down theft from each other.
Dudes trying to get swole inside usually trade junk food for more prison chow and milk with other inmates who cant get commissary, also weight stacks were removed in most state and fed yards like California, so they fill laundry bags with water in their cells as makeshift weights when guards aren't around.
Mackerel would be worse than cigarettes as they are not divisible. It would also be a good source of Vitamin D if you were incarcerated in northern latitudes
In most countries AFAIK it is illegal to mint your own "currency" and call it as such, hence artifact of the state.
Bitcoin lets non-state actors create currency.. incidentally, those most equipped to fund the processing power, are state actors, hence artifact of the state.
You can make your own currency all you want. You just can't make currency and pass it off as state sponsored currency without permission from the state.
There is almost no archeological evidence to support your claim. There is ample evidence supporting my claim.
Money (specie: often in the form of coinage but not limited to such) was invented when a warlord or monarch captures riches (mines, cities), strikes coins with his visage, uses the coins to pay his soldiers (who are otherwise awful credit risks), then demands taxes from the free peasantry, creating a market economy in the process. States create markets. Markets require states. If for no other reason than to provide protection over the transaction with the threat of coercion.
Before money existed, the free peasantry used credit. The historical evidence shows that first came credit, then came money, then came barter. The exact opposite of what Adam Smith and most economists believe.
It does refute it. What looked like barter on closer inspection was really credit. As in "I'll give you three chickens for that cow. I know this isn't a fair exchange but we'll mark the exchanges on this stick and later when I have something you want we'll sort it out." The stick was a record of the transaction. Sometimes the record itself was exchanged. This last step is how money emerged from credit.
I fully agree with you about debt/credit. If I give you something without getting anything in return, that can be considered debt.
The point I'm specifically trying to come to grips with is the idea that money came before barter: considering that money is used as a token that is itself bartered for goods or services, I can't understand how money came before barter. It just doesn't make sense, using money is barter.
The idea isn’t that money came before barter - barter has always been around on the fringes of things. It’s that credit came before money & that credit tokens backed by a credible issuer turned out to be extremely useful as tokens of exchange & units of account. Hence it’s credit that evolves into money, not the things you might have bartered occasionally. Barter was for exchange with people you didn’t trust & didn’t have any kind of on-going relationship with & was therefore rare & fairly irrelevant economically. Anyone worth doing business with had some kind of credit relationship with your state anyway.
I'll answer your question: barter came after money because the barter systems that emerged came after money and they marked to a currency to measure the barter transaction. IOW, they used a virtual currency. Even Charlemagne's empire defined a virtual currency that was used hundreds of years after the empire fell apart and Charlemagne never even ever struck coin but only left behind a specification of the HRE currency.
So I just read the pages you cited, and everything there is talking about recorded history. Barter has been in use since at least 12000BC, according to archaeological records. Your citation doesn't really refute my statement.
The concept of debt predates the concept of barter a long time. Barter requires judging things of equal value. Debt however is easy to understand for humans regardless of ability to have the concept of possession (help me today and i help you tomorrow). I see no reason to believe that money or barter would become before debt in human development.
I fully agree with you about debt/credit. If I give you something without getting anything in return, that can be considered debt.
The point I'm specifically trying to come to grips with is the idea that money came before barter: considering that money is used as a token that is itself bartered for goods or services, I can't understand how money came before barter. It just doesn't make sense, using money is barter.
> The point I'm specifically trying to come to grips with is the idea that money came before barter
I had this discussion a few years ago and one thing that I found interesting as a thought is that barter is not something people like to do. It's generally only used if a token cannot be used because for instance the token is not stable in value. So in times of crisis people would fall back to barter as an alternative but when a stable token of exchange exists, barter does not play a role.
The first thing that develops in a new community is debt and credit but with regards to if money or barter came first there does not seem to be a lot of agreement. I personally feel that barter is quite an unnatural concept because one party will most likely always lose. I cannot imagine that it would come naturally because it's a step back from debt and credit. The only thing it would give you is the ability to trade with someone you don't trust. And that is probably when you tribe meets another tribe which I feel is something that would happen after establishing a local currency.
To me it seems more natural to assume that money would emerge from barter. Barter is only fair to a certain extent. As you (OP) mentioned, in bartering one party will "most likely always lose" while that isn't necessarily always true in pure black and white thinking eventually a barter system would become difficult to maintain in an economy (early or late). Now that would assume that one good or service in the exchange has more worth than the other end of the barter.
I see barter as an early, rugged form of money. Many early civilizations would trade goods such as cows or other animals in exchange for services or other goods. Technically those cows or whatever else WERE a currency. You could give someone 3 cows to help you do X, Y, Z. Replace cow with 300 gold coins and there isn't an enormous difference because each only has as much value as you allow it.
Eventually through barter you'd realize maybe you don't want to give all your cows away or perhaps people begin to realize that sure maybe now they have 3 cows since they did X, Y, Z for you but now the person they need stuff from doesn't need cows because they have 100 cows. Naturally I think currency (coin, paper money... etc) would develop from this to form a more "universal" token for barter so that it could then be more easily used by whoever receives it.
Read graeber. He this fallacious just so story quite thoroughly. in the old times happens pretty much only between tribes, in tense circumstances, not within them. Within a tribe, purposely ambiguous debt systems tend to be used. Also, there's a strong argument that money derives from ceremonial goods used to track the exchange of human lives, in marriage, murder, our slavery.
You misunderstand the concept of barter. It was actually an informal, unrecorded socially-based debt system. Read "Debt, the first 5,000 Years" for a good explanation.
Try asking what came first, law or private property (the answer is private property): the implications of that realization are far more important compared to asking whether or not barter existed before money (it did). Also, you can frame it so that debt is conceived of as a type of barter; ie - i barter a debt of equivalent value I herewith owe you in exchange for this item you're offering to give to me as a consequence of that promise.
> Also, you can frame it so that debt is conceived of as a type of barter; ie - i barter a debt of equivalent value I herewith owe you in exchange for this item you're offering to give to me as a consequence of that promise.
The point is that "I'll give you this cow and you'll owe me one" predates "I'll give you this cow and you'll give me those chickens". To the extent that debt is a special type of barter, so is money; I think the distinction between exchanging something for a thing and exchanging something for a debt is worth making.
I would suggest "money is an artefact of societies" would be a better way of expressing this - people will otherwise get hung up on whether complex societies, with currencies, that don't look like modern nation-states, disprove this statement.
>The folly of BitCoin is to believe that technical problems are somehow orthogonal to social problems. They never are.
This seems to be a mistake repeated routinely throughout the tech world. You see it today's Netflix announcement about proxies. You see it with the software/media industries reliance on DRM. You see it with people trying to halt the NSA with stronger forms of encryption (or with the NSA's mass surveillance in the first place). Technology is not a cure-all and unloading an army of computer scientists on a problem isn't usually the answer.
Money is an artifact of the state; always has been, always will.
Money solves the "Coincidence of Wants", that is, it acts as a collectively agreed upon medium of exchange. Cowry shells, beads, feathers, and gold have all previously been used as money. I don't believe those were artifacts of the state, they were an emergent phenomenon that arose to solve a very real problem. Can you elaborate on why you believe that money always has been and always will be an artifact of the state? Because I'm really not seeing it.
There are examples of it being emergent phenomenon, yes, but when you look closely at how the cowrie shells moved around, you'll see the behavior of state actors. The vast majority of the shells were stored in a single dwelling in the settlement with thick walls and often below ground. These dwellings were guarded by warrior-class members of the societies, The dwellings were connected to a single family or even just a single person: a warlord or monarch. If it walks like a duck...
Okay, so money follows a power law distribution (like many natural phenomena), where wealth tends to concentrate. And early people who used money needed a bank (safe/guarded place) to store it in. Your argument seems tautological, "The state uses money, therefore money is an artifact of the state". This feels like a "Wet sidewalk causes rain" situation.
It's not tautological, it's just observing the thing a lot of people with libertarian mindset tend to forget - that state is a natural step in evolution of groups. When your society grows bigger than several dozen members, you no longer can have everyone deal with everyone else personally. You can't spontaneously coordinate larger groups of people, so a mechanism of coordination naturally arises. This mechanism pretty much always is a form of state.
> Money is an artifact of the state; always has been, always will.
Abraham listened to Ephron, and Abraham weighed out for Ephron
the silver that he had named in the hearing of the Hittites,
four hundred shekels of silver, according to the weights current
among the merchants.
Gen 23:16[1]
This silver transaction that occurred thousands of years ago was weight out based on merchant standards. Abraham was a nomad at the time, not belonging to any state. The merchants seem to be the ones who set the weight of the silver currency.
Such a claim requires the Bible be taken at face value, which is not at all certain. It very well could have been written much later than the date it supposedly occurred by political authorities to promote a specific ethno-religious order.
What makes you think there weren't governments in the Americas guaranteeing the value of wampum prior to the invasion from Europe?
Here's an article from what remains of one such pre-colonial state detailing how wampum formed the basis of their international treaty laws: http://www.onondaganation.org/culture/wampum/
>Money is an artifact of the state; always has been, always will.
Money is an artifact of the state because you have to pay taxes in the state's money. If you could pay state and local taxes in bitcoin it would be possible to use bitcoin exclusively for all transactions.
I don't remember any "people before the internet" ever saying anything of the sort.
I am aware of plenty of people saying it about the internet now - both that information has become an artifact of the internet and that the internet has become an artifact of the state (specifically, of American cultural and political hegemony.)
I love this summary, it really touches on all the core issues. However, even though bitcoin has such severe flaws, I think that cryptocurrency in general is still really promising. I've been particularly excited about ethereum for the past two years or so, and progress on that project definitely seems to be happened (although it's not a currency per se). The concept of the block chain still has massive potential.
Indeed, it seems really early to throw away blockchains because one change to the consensus rules for the Bitcoin blockchain ended up not being popular. There's still tons of other unexplored space on the Bitcoin chain itself, not even counting altcoins - there's a lot of flexibility with Bitcoin script, and new opcodes are being added (OP_CLTV got turned on very recently).
Some of these allow you to develop altcoins that are backed by Bitcoin, called sidechains (see Elements Alpha for an example [1]). There's other clever ways to use the scripting system to do fancy things that could help lower the cost of transactions, like the Lightning network [2].
"The rank-size rule (or law), describes the remarkable regularity in many phenomena, including the distribution of city sizes, the sizes of businesses, the sizes of particles (such as sand), the lengths of rivers, the frequencies of word usage, and wealth among individuals. All are real-world observations that follow power laws"
People breathe, people have shoes, people have cars, people have toothbrushes, people have phones, people have email addresses, people work, ... must be something else.
Bitcoin did fork. That is what Bitcoin XT was. Every major operator of Bitcoin XT nodes got systemically DDoSed, including Coinbase, until participation died down. There are concerted efforts to prevent blocksize expansion.
Additionally, admins at most major bitcoin news sites censored or banned users discussing it.
Switching to another cryptocurrency is a whole different can of worms - remember, btc right now costs around $420 a coin, and all that value is because of the total sum of people invested in it. No other cryptocurrency has anything close to the btc market cap, so capital fleeing the bitcoin blockchain may not trust alternative ones that are much smaller. The problem with bitcoin right now is that mining power is majority controlled by a very small group of people, and any other competitive cryptocurrency is much more at risk for whales taking control.
> mining power is majority controlled by a very small group of people
what can change to make this better? Because it seems the root of the problem is that some small group of people managed to amass a large amount of hardware.
A large part of the problem is again a flaw in bitcoin itself. SHA256 mining is extremely GPU unfriendly by design, whereas most other cryptocurrencies use scrypt which is much more applicable to the GPU model. As a result, ASIC hardware to do SHA hashes to compute blocks in bitcoin became by far the most efficient hardware to mine bitcoin, but because it is custom it requires a ton of money to fabricate. So you see hundred million dollar mining operations emerge because only they can afford the fab run on a custom PCB to do SHA256 hashes.
In theory, Litecoin would not have the same pandemic ASIC runaway market control problem. GPUs would still moderately competitive, and act as a counterbalance that normal users have available to them to mine. There would be custom scrypt hardware, certainly, but it would most likely not have the insane performance advantage over general purpose computers that SHA algorithms have.p
To fix bitcoin itself, you need to commoditize the hashing hardware used by the best in the industry. If everyone had access to the ASIC's bitfury were using at reasonable prices normal people could afford, people could distribute the mining more, but as it is most of these vendors are using in house solutions that dramatically outperform off the shelf bitcoin mining hardware.
This is a fantastic question, not naive at all, and it's really at the heart of what the debate is all about. This is a really complicated issue, hence all of the vitriolic discussion. I'm going to try to take a crack at it and fail. I will mostly be reiterating ideas that are from this[1]. I'll try to be brief, and you can read more from [1]. I am also very opinionated on this issue, and I will try to be as impartial as I can.
Something that's really confusing is that the word "fork" actually means at least two different things in the block-size debate context. The first is forking the bitcoin software, and the second is forking of the bitcoin blockchain/network. Bitcoin XT, Hearn's project, was the former, a software fork, that would cause a "hard-fork" in the blockchain. Hard-forks in Bitcoin are very dangerous. There has never been an intentional hard-fork of the Bitcoin blockchain since its inception 7 years ago.
There's a very difficult question of just simply, "how do hard-fork?" A hard-fork would separate the p2p network into two different networks with incompatible rules. A hasty hard-fork could very easily destroy people's money and bitcoin all together. Many, including myself, strongly disagree with Bitcoin XT's hard-fork procedure.
It's also not clear that this particular software fork, Bitcoin XT, is better. I'm not going to go into that issue here as it's extremely complicated. We have an alternative solution, segregated witness, which is effectively equivalent to Bitcoin XT's short-term plan implemented as a blockchain soft-fork. Soft-forks are significantly less dangerous as they do not segregate the network.
It's actually not true that there's never been a hard fork. I know the Core FAQ says that, but it's incorrect. When we moved past Berkeley DB to LevelDB, there was an accidental hard fork that revealed limits in older nodes nobody knew about. But those limits had to go, and so the change was attempted again in a more controlled manner some time later. So it was known that the network would start producing blocks that older nodes would reject. That's a hard fork. It was scheduled in advance and went off smoothly.
The idea that hard forks are dangerous or irresponsible is a belief that is not well supported. However it's a rather good piece of Bitcoin Core propaganda to scare people away from doing what's necessary.
Most block size hard-forks can be deployed as a soft-fork. "It's necessary" is highly contentious and you have failed to cite any of the arguments you disagree with- you're wasting everyone's time.
I said "intentional hard-fork" for a reason. For everybody's reference, the bdb to leveldb hard-fork happened in early 2013. Everybody acted swiftly to correct the issue by downgrading to 0.7 if I recall correctly.
An accidental hard-fork is a completely different animal from an intentional contentious hard-fork where half of the network goes one way and the other half the other way for the foreseeable future.
So did I. Please re-read my post. The same change that triggered the accidental fork was done smoothly later on, but the change was the same - it was a deliberate hard fork. You probably didn't notice because there was plenty of lead time and I don't think any miners got split off the chain, even though they could have.
I think the fundamental problem OP puts here is that true power always seem to be in hands of few - whether its physical currency or crypto currency. Look at it this way: Every currency needs to have attribute of being produced through some work. However ultimately most of the work is owned by who have wealth or power. Thus no matter what currency one comes up with, ultimately few handful of wealthy individuals or governments can completely control its production as well as evolution. In Bitcoin case, few governments or individuals can own 95% of the production capacity because that's the proportion of wealth/power they own. So fundamental premise that general population's computing power would outweigh computing power of governments/wealthy is wrong due to simple fact of inequality that necessarily has to exist. No amount of forking would prevent this scenario to occur again.
That was sort of the idea of BTC, that a decentralized currency would mitigate this. Nakomoto's original paper actually devotes some attention to this, discussing why they don't want to rely on a centralized authority, and in the introduction he writes:
> What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.
The thing that jumps out to me the most at this point is that Nakomoto also wrote:
> The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes.
And with Heard's article, presuming that the facts are true, which seems to very much be the case, this seems to me the most serious risk to the system.
It can. It will if it has to. This is yet another person who is upset that only a minority believes their fears that we are on the brink of catastrophe.
If the block size becomes a problem, it will change. It is not yet a problem. If the transition is painful, people will be more open to this kind of warning in the future. If it's painless this will all have been moot.
That's a controversial premise that the article repeatedly addresses.
You may not be convinced, but there is a lot of stuff cited in there on that exact point.[1] Those links lead to other resources fleshing this out pretty quickly.[2, 3]
I found this bit persuasive:
> "Some customers contacted Chris earlier today asking why our bitcoin payouts didn’t execute ... The issue is that it’s now officially impossible to depend upon the bitcoin network anymore to know when or if your payment will be transacted, because the congestion is so bad that even minor spikes in volume create dramatic changes in network conditions. To whom is it acceptable that one could wait either 60 minutes or 14 hours, chosen at random? It’s ludicrous that people are actually writing posts on reddit claiming that there is no crisis. People were criticizing my post yesterday on the grounds that I somehow overstated the seriousness of the situation. Do these people actually use the bitcoin network to send money everyday?"[original article, citing [4]]
I'm an outsider here, and don't have a stake in this. So maybe people who have followed this debate more closely can recognize that as a total fabrication, but to me it sounded like a plausible business concern.
Complaining about that, and at the same time complaining about the (opt-in) new feature to allow transactions to be changed before inclusion in the block chain, seems hypocritical.
Could you explain how that's hypocritical? I don't see it.
I actually think it seems like pretty good evidence. They're adding a (according to the author) questionable feature with notable possible downsides while ignoring a long standing problem with the simple solution because it (allegedly) furthers their goals to have the problem continue to exist.
It's opt in, anyone that wants to accept zero conf can just insist that all transactions don't opt in.
>a long standing problem with the simple solution
Hard forking bitcoin is not simple. It's never been done before on purpose, and many people are extremely hesitant to mess around with a billion dollar system.
Why is it hypocritical? He complains that some transactions took too long to go through. With RBF, those transactions could simply be resent with a higher fee. But if you're against RBF, then you need the original transaction to go through, and you'll have to wait if it had a low fee.
Basically, the problem is caused by his own opposition to RBF, as far as I see.
(Disclaimer: I've been spending less time around the bitcoin community recently, so my information might be out of date. The patch that was committed is definitely opt-in, but I can't guarantee all the mechanics work how I'm describing them.)
Whilst i have no stake in the claim (other than my .001 btc), and have not spent any, i m getting conflicting conclusions from different posts/sources. Since I do not follow any of the people, it's hard to know what is reliable or not.
This might simply mean that bitcoin is too immature and isn't quite ready for the mainstream.
There's some friction to switch, but it's not necessarily a bad thing. Especially with some new tech like sidechains, you can make a new cryptocurrency following new rules, but still backed by Bitcoin value: https://www.blockstream.com/sidechains.pdf
You can't actually just buy your way to the raised thresholds. Blocks greater than 1MB are invalid according to the current Bitcoin Core consensus rules, and will be rejected.
You mean they'll be rejected by the minority of miners who voted no?
Because if so, it sounds like you can buy your way to raised thresholds.
EDIT:
Oh, I see... Can you really call it a main branch if you just added all the capacity that is immediately forked? Or is it really just an independent unrelated project at that point?
Let me lay those semantic issues to rest by noting that my original post was not in any way a serious proposal. I was just thinking through the implications of a few individuals with fiat over the voting.
Yeah, the questions in regard to post-hardfork haven't been definitively answered yet because Bitcoin has never intentionally hardforked before. It has done once in the past due to a software error [1], and it was nearly a disaster but luckily all the right people were online and quickly decided which fork to keep.
Since we probably shouldn't have two articles about this on the front page, and the current one is the original source, I guess we'll treat the NYT piece as the dupe.
(We plan to build something to aggregate URLs so this will become less of an issue.)
Bitcoin was always going to fail because even as a technically competent guy, I could never understand, nor be bothered to understand how the damn thing worked.
There was no way in hell a normal, non-tech guy could ever understand it enough to use it everyday.
This was a case of tech folks missing the woods for the trees. Even this article will go way over the heads of 99% of people on the planet.
Why would you go through all that pain when cash is everywhere, easy to access, and easy to understand?
I have to admit, even as a technically competent guy with secondary school economics and a lifelong interest in economics, I have a hard time understanding the monetary system. I don't think people not understanding things fully is an adequate explanation for failure. As Milton Friedman is said to have said, "nobody knows how to make a pencil". Nobody fully understands any system they use, the world is just too complex for that. All they really need to know is how to use a system to get the results they want. By this measure, government issued money is very easy.
The problem is that we use the monetary system right from childhood. We are born in it. There's no need to learn it at all.
Asking someone in their 20s or 30s to learn a completely new monetary system, one built on things as "obscure" (to the lay person) as bits and bytes - well, that's asking a bit too much.
The current monetary system might be confusing if you dig in, but its implementation is ridiculously simple.
Because cash won't be that easy to use anymore. Where I live they want to ban using cash like in a restaurant. Because it's easier for the government to check the restaurant that they pay taxes on the income they have.
This means for me as punter that I can't pay with cash anymore and for me the same thing applies. All my money can be checked.
I still want to be able to spend money without anybody tracking me. You know because there are privacy concerns. Maybe governments in the future ban buying ice cream and I need to be able to buy my ice cream fix?
It is true, cash is everywhere and easy to access, but it is not easy to understand. It SEEMS it's easy to understand but the underlying system, WHY the cash has value and WHAT that value should be is less than obvious to most of the people on the planet.
There was a pyramid scheme in China using btc and the Chinese are using Bitcoin to transfer money out of the country. And the price hasn't been increasing for the past month or so. I just dumped all mine after getting in around 350.
Have a citation? The claim that a couple of exchanges in china have majority of the mining power seems plausible and I'm willing to accept it as fact on the strength of multiple assertions that it's the case. But the claim that these exchanges, which are presumably composed of the pooled resources of many independent or semi-independent agents are coordinating to prop volume and price (in the face of a collapse) seems to call for a bit more support than a flat assertion.
I think you are confusing bitcoin exchanges with bitcoin mining pools. 2 mining pools have 52% of the hashing power and a responsible for "producing" bitcoins. The exchanges are basically just places to buy and sell bitcoins. With regards to wither or not Chinese exchanges are deceptively manipulating the price of bitcoin I don't have any idea.
You're right. I momentarily confused the two terms. I could see how a couple exchanges, as opposed to pools, would have more unilateral (or bilateral rather) power for manipulating market statistics.
Either way, the main question still remains, and it doesn't look like a citation is forthcoming. Going to file this under unfounded speculation for now.
Look at the people who derive their influence from the Bitcoin ecosystem. Do you agree with their views? Do you find them generally friendly? Are you happy giving them more power by buying Bitcoin? This was what made me stay out of Bitcoin.
I am confused as to what you are referring to? I am not deeply involved with Bitcoin and I don't live in the valley so maybe I am missing something. The only real view I have noticed people universally share in the bitcoin scene seems to be the need for a decentralize currency. Can you elaborate?
Disclaimer: I know very little about the bitcoin community.
It seems like the quotation, "One of the great things about Bitcoin is its lack of democracy" is grossly out of context. In the original comment, by the person that @octskyward is talking about, it seems to be referring to the fact that it is not a majority rules democracy.
What other kind of democracy is there? If there's a binary decision to be made (i.e. increase the block chain or not) anything other than majority rules fails to resolve the issue.
I suppose what I meant is this, when someone is quoted as saying something is "not a democracy" most people read it (or at least what I first read it as was) as meaning it is an autocracy, whereas the point that theymos (referred to as the person that @octskyward was talking about in my parent post) was making is that anyone can do something if they want, even if it goes against the majority.
If I were so inclined, I would infer that sabotage is taking place. Taken from the sabotage expert's manual (page 6):
"Simple sabotage is more than malicious
mischlef,and it should always consist ,of acts whose
results will be detrimental to the materials and man-
power or the enemy"
> Allowed buyers to take back payments they’d made after walking out of shops, by simply pressing a button (if you aren’t aware of this “feature” that’s because Bitcoin was only just changed to allow it
What "feature" was recently added? This has always been a problem with BTC.
Replace by fee. Zero-confirmation transactions have always been insecure; replace-by-fee is essentially Firesheep for this vulnerability -- it puts a friendly UI on it and drops the technical acumen required from "substantial -- you probably have to write your own complicated C++ code" to "you have to be willing to lie; that's it."
(Replace by fee in a nutshell: All Bitcoin transactions are unstable for a period of time, generally believed to be "approximately 60 minutes." Exploiting this instability to retroactively invalidate a transaction was possible but beyond the ken of casual attackers. Replace by fee lets you reverse any transaction you made younger than N minutes by simply saying "I'm willing to outbid the fee I offered on that transaction. The new transaction does this new thing, for example replacing the $100 transaction 'pay from my left pocket to restaurant for dinner' into 'pay from my left pocket to my right pocket.'")
Not really, it used to be that they would just pick the first non-conflicting transaction they saw, although iirc that wasn't a "rule of the protocol" so much as how-the-software-worked.
Mike is incorrect about this one. He is under the impression that replace by fee "RBF" was committed in Bitcoin Core and will ship with 0.12. In fact it is "opt-in RBF" that was committed: https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2015...
The network is being used to capacity and fees are being determined by a market, which values capacity at an increasing premium! What a failure! (sarcasm intended)
Hearn's post may be technically accurate in terms of the data he's collected. But the conclusions he draws are not correct. Usually in any entrepreneurial project, the fact that the service is over-subscribed and increasingly valuable is a sign of success. If one views bitcoin as an open-source project which should have some ideal technical implementation, then yes Hearn has failed to convince everyone to run his preferred implementation of bitcoin, or to agree on exclusively running a different protocol that is not bitcoin while calling it bitcoin.
There is plenty of room for Hearn to run a bitcoinXT altcoin. The only failure here is one of logic, forced by the concept that there can be only one successful network based on nakamoto consensus protocol, and that that network must either be bitcoin or a replacement bitcoin which supplants the original.
I have no experience with Bitcoin or its community - so apologies if the following is naive - but some parts of this article make no sense for me.
For events to have taken place like described in the article, several parties would have been required to work together with the common goal of keeping the blocksize restriction in place:
The Chinese miners who hold the majority of the hashing power, the developers of Bitcoin Core, the admins of bitcoin.org and the as of now unidentified operators of the DDOS attacks.
If you assume it's not a conspiracy, then each party must have reasons why such a decision would be desirable. But as the author describes it, there are no reasons. This goal wouldn't just push Bitcoin into a questionable direction, it would be downright suicidal: Over time, Bitcoin would become unusable for any kind of transaction. Not even the greedy miners could want a cryptocurrency that no one uses.
So I think there has to be some upside to the blocksize restriction. If anyone has more info on that, I'd be happy to know.
I think the doom a gloom is overdone because the "handful of guys sitting on a single stage" who control 95% of hashing power have a massive incentive not to destroy their main asset.
In all seriousness? Dogecoin. It's a joke currency, but that's precisely why it's good. It has an inflationary economic model (so slightly more practical than Bitcoin) and people don't take it too seriously.
Guys like Wladimir, Pieter, Gavin, Cory Fields, Gregory Maxwell and Luke Jr have a voice because they’ve contributed many thousands of lines of code. (Lines of code are only a proxy for impact).
You may have noticed Mike Hearn isn’t in the top 100 contributors list. He is the primary author of the Java implementation of a bitcoin library:
https://github.com/bitcoinj/bitcoinj
He started it in 2011, definitely early. But a substantial amount of bitcoin core work had already set the path. There are also similar implementations in many different languages but they are not the primary reference implementation for full nodes.
According to Hearn’s blog post:
“I’ve talked about Bitcoin on Sky TV and BBC News. I have been repeatedly cited by the Economist as a Bitcoin expert and prominent developer. I have explained Bitcoin to the SEC, to bankers and to ordinary people I met at cafes.”
Being cited by journalists is not the same as being a primary contributor.
The disagreement between Hearn and the other developers isn’t about whether to increase capacity, it’s about how. Many of the primary full-node contributors believe a hard-blockchain-fork is a risky approach. Lots of work is being done to explore better options, like segregated witness (http://gavinandresen.ninja/segregated-witness-is-cool).
Mike Hearn tried to (very aggressively) push the idea of increasing the block size with a hard fork. In fact the patch allows node operators to vote and 75% adoption is needed. When it looked like that wasn’t going to pan out, he created Bitcoin XT where “Decisions are made through agreement between Mike and Gavin, with Mike making the final call if a serious dispute were to arise.”
So the claim that Hearn not being able to take over decision making power for the bitcoin community is evidence that bitcoin has failed seems to show something slightly different. It shows that open source software methodology of forking and adoption lets the best implementation win and prevents hostile takeovers.
Mike Hearn is not as impactful to bitcoin development as he or recent news would indicate. Mike leaving the bitcoin community has little impact on the future success or failure of bitcoin.
> You may have noticed Mike Hearn isn’t in the top 100 contributors list.
I've also noticed, there are no any Satoshi Nakomotos in the list of contributors. Does that mean he (Satoshi) was "not impactful to the development"?
P.S.: I'm not following the Bitcoin news. Is Satoshi a nickname of one of those top contributors or the initial author just didn't use version control system? Or am I missing something?
Yeah I was using that as a transition to talk about Mike's other contributions. His bitcoinj contributions are hundreds of thousands of lines. Also I said "Lines of code are only a proxy for impact" and unfortunately there's probably no realistic measure.
I'm not a bitcoind contributor and this is more of a generic observation about how open source projects are controlled in general.
Satoshi Nakamoto is a pseudonym used by Bitcoin's creator and first developer. Anyway, I believe that if Nakamoto never made a GitHub account then they wouldn't show up in the list, even if they had commits.
Yeah that's exactly what I think. Software forking (and even blockchain forking) allow us to "vote with our feet" so we don't need to mandate central control.
Not knowing who he was I didn't get the impression he was trying to say Bitcoin would be in serious trouble without him, only that he had enough involvement to have a good handle on the issue (ignoring if his view was pro/con).
If true then I hope that the next XXXcoin cost of work function is more geared toward something inherently useful like protein folding or a more general purpose problem like simulating cell interactions?
Pretty good article, and a great overview of the blocksize controversy.
Also a great exhibit of some stereotypical programmer social problems; we don't get a lot of middle ground, most programmers are either openly hostile and combative or so deathly afraid of confrontation and responsibility that they give away their authority so that they don't have to handle the pressure. Gavin should've kept control. Bitcoin is learning exactly why a strong central authority is so desirable in money exchange: it keeps the value of the currency stable by preventing panic and confusion over issues like this.
Many discussions of Bitcoin claim that this power is transferred to "the network" to make the final decision, which sounds very egalitarian and democratic, but Bitcoin failed to provide the controls that would prevent power hoarding and ensure that the people who depend on bitcoin were fairly represented. This is one reason why modern democracies are structured within the framework of a republic. This is probably one of bitcon's hardest to solve problems, since the hardware to get respectable hashrates is unobtainable for quite literally everyone who doesn't have access to their own microfabrication facilities. Even if one of the specialty bitcoin hardware makers had a really good, cheap chip, why would they share it? They'd hoard all the hashpower for themselves. Litecoin attempts to address this by hasing with scrypt, under the belief that it's harder to hoard power with custom hardware if the algorithm uses a lot of processing power and memory instead of just a lot of processing power.
Mike failed to mention one incentive that exists to prevent increasing the block size: miners get the transaction fees attached to each block they mine. If the block size is large, there is little contention for space in the blocks, and ergo there is not much reason to incentivize miners to include your transaction in the next block. By keeping the artificial constraint on the block size, people who own a lot of hash power will be gaining a lot more bitcoin for themselves.
I don't think this crisis is insurmountable. So much money has been sunk into bitcoin that I can't believe people are just going to let this cabal take it out. BitcoinXT will gain notoriety through the mainstream press and the resultant sell off among casual investors will freak the big players out and force them into running XT nodes.
> Mike failed to mention one incentive that exists to prevent increasing the block size: miners get the transaction fees attached to each block they mine. If the block size is large, there is little contention for space in the blocks, and ergo there is not much reason to incentivize miners to include your transaction in the next block. By keeping the artificial constraint on the block size, people who own a lot of hash power will be gaining a lot more bitcoin
If the blocks are bigger, doesn't that mean they can hold more transactions and thus get more fees total? Or are you assuming the relative scarcity of transaction space would push fees high enough to overcome that?
>are you assuming the relative scarcity of transaction space would push fees high enough to overcome that?
Yes.
The blocks always contain approximately 10 minutes' worth of transactions because the network periodically adjusts mining difficulty to approximate that target.
Right now, the issue is that there are times when 10 minutes' worth of bitcoin transactions are occupying more than 1MB of space in the completed blocks, which means a processing backlog is formed. Miners prioritize transactions by their attached transaction fee, since they get that fee if they find the block. Thus, users are effectively placing a bid for the network hash power to verify their transaction.
When a backlog forms, customers that want their transaction processed quickly have to outbid others to get a miner to start working on it. If there's not a backlog, their transaction will be included with only a token fee attached because something is better than nothing. Going from 1MB to 8MB means that bitcoin would need 8x more transaction volume per 10 minute block to get back into a transaction backlog, which is the only time that users will attach a meaningful transaction fee to their transactions.
So if the block size goes up from 1MB to 8MB today, there will still be a block every ten minutes, but since transaction volume will presumably remain nearly the same, space in each block won't be scarce and the bidding war won't take off. It'd be a long time before we got back into the same predicament, meaning miners would have to wait a lot longer to start collecting meaningful transaction fees. That's why some people with heavy investments in mining want to keep the block size artificially low: they're trying to instigate a bidding war for their hash power.
It should be noted that this eventuality was always part of bitcoin's design. Bitcoin is programmed to stop "minting" around 22 million coins. At that time, the network will not issue any reward to the miners that find a block (the reward will cut itself down until that number is reached, targeted for approximately 2022 iirc). The solution to this has always been "users will have to incentivize miners with transaction fees".
It's just that the assumption was always that we wouldn't have to deal with that until the network itself stopped attaching rewards to mining. In practice, however, we're in that situation now due to the artificial constraint on the size of a block (which, afaik, is mostly accidental and was never intended to be permanent). The debate is over whether bitcoin should remove the artificial block size constraint and keep its fees negligibly low or whether it should keep the constraint and "allow" miners to start charging more for processing transactions.
"Why has the capacity limit not been raised? Because the block chain is controlled by Chinese miners"
The author is complaining that Bitcoin is working exactly as designed.
From Satoshi's paper:
"Proof-of-work is essentially one-CPU-one-vote. The majority decision is represented by the longest chain, which has the greatest proof-of-work effort invested in it."
If you want to raise the block size, out-vote the Chinese miners.
You cannot simply out-vote the Chinese miners on the issue of the so-called protocol: you need to convince the Bitcoin "economic majority" to accept a change to the codebase that everyone uses to verify the blockchain, otherwise you're effectively mining a very expensive altcoin which no merchants or exchanges accept. (An altcoin is a cryptocurrency that generally captures every feature of Bitcoin except being called Bitcoin.)
The economic majority on Bitcoin has basically said "We're terrified of what happens if we de-throne Bitcoin Core, which is the lineal descendant of the Satoshi client. Accordingly, we'll go along with whatever that project decides." The problems with Bitcoin Core's decisionmaking process are in the post. Worth noting, since I don't recall seeing it: Bitcoin Core is operated by "consensus" with respect to this issue and any of five devs can blackball a change; three of the devs work for a company whose economic justification for existing is "the Bitcoin network is inadequate to do the things that many users want Bitcoin to do." Fixing Bitcoin Core would harm their economic interests at the new company they founded.
Why be terrified of de-throning Bitcoin Core? Isn't it a protocol with multiple competing implementations? NO, because the "Bitcoin protocol" does not exist -- Bitcoin is a network of nodes running one C++ codebase and that is essentially the entire ballgame. Bitcoin's requirement for distributed consensus means that if you are not bug-for-bug compatible with Bitcoin Core, which runs a supermajority of the network, you risk being catastrophically forked from the network at any time of an attacker's choosing.
Also, the scenario where some economic players remain on Bitcoin Core and some economic players migrate to Bitcoin Better, followed by a hard fork (irreconcilable split of the blockchains regarded as authoritative by these two incompatible software ecosystems), results in loss of the global non-technical consensus in what a "Bitcoin" actually is. You'll find that your "Bitcoins" might not be actually useable at a merchant who accepts "Bitcoins." You might find a payment made to you in "Bitcoins", which your wallet says happened, has not actually happened according to your payment processor. Cats and dogs living together; catastrophe happens; the price of Bitcoin Core coins and Bitcoin Better coins both approaches the natural value of Bitcoin, which is zero.
> otherwise you're effectively mining a very expensive altcoin which no merchants or exchanges accept.
This is not the case. You could run XT for example and remain compatible, which was precisely its adoption strategy? It just simply did not reach consensus (aka CPU power).
> By mining with Bitcoin XT you will produce blocks with a new version number. This indicates to the rest of the network that you support larger blocks. When 75% of the blocks are new-version blocks, a decision has been reached to start building larger blocks that will be rejected by Bitcoin Core nodes.
That's BitcoinXT's protocol, sure, but that isn't Bitcoin Core's "protocol", so the powers that be can simply say "We do not accept your attempt to reject our reality and substitute your own."
But who calls it the protocol? Let's pretend this fork happens. Someone goes to bitcoin.org and download the software called bitcoin and runs it, and they won't be using that protocol.
Yes but as the article said some(s) started DDOSing or otherwise applying pressure to those who chose XT. That's on top of the fear of a long running fork in the blockchain.
It's been a good run with a lot of interesting observations. Upcoming iterations will likely solve a lot of the (truly compelling) problems that bitcoin failed to solve.
This "people problem," as Mike calls it, is undoubtedly a result of the mechanics of the blockchain. Slightly different rules may lead to dramatically different (and less insurmountable) people problems.
"I have not failed. I've just found 10,000 ways that won't work."
- Gotta say, even if bitcoin "fails" I don't feel it will be a "failure". The community and people have learnt so much, I mean, Bitcoin became...big and it's the first cryptocurrency to reach this level.
To have made a perfect system would be unrealistic really.
Bitcoin was always going to fail one way or the other. I expected it to be power usage, but I should have anticipated bog-standard Open Source infighting. I'm hoping the idea of a decentralized electronic ledger and programmable currency doesn't die with it.
With the benefit of hindsight, perhaps what should have happened is that the original 5 developers should have each maintained their own compatible fork of the codebase, cross-sharing patches they agreed on.
That's basically what the Bitcoin XT fork mentioned in the article is. The developers who thought it was a good idea to increase the block size limit increased it and released the client.
When enough people are using it it will end up being the official block chain and the versions that don't support these larger blocks will filter away as they become useless.
There are two problems with this approach. First, as mentioned in the article, people applied outside pressure such as DDOSes to force people to not use the alternate software.
Second is simple confidence. While the fork is an unsettled question you can end up with two diverging blockchains. This makes it uncertain whether someone has successfully made a payment or not, and introduces the possibility of double spending. All that uncertainty is likely to hurt the adoption of bitcoin, possibly causing irreparable damage to its reputation.
I'm inclined to blame the author's negativity on his obvious conflict of interest.
At least, my understanding is that he recently began working for a group that competes with Bitcoin in trying to connect traditional banks and (non-Bitcoin) blockchain technology. He has an incentive to scare people away from Bitcoin.
Not saying there are no scaling/social/whatever issues in Bitcoin. But the author seems to be conflicted.
Disclaimer: I own a few Bitcoins, and thus hold the opposite conflict of interest.
Linkbait-ish template of the article takes away from otherwise promising technical content.
Typical template of building up hype linkbait case - start with a couple of puffed up credentials, pose yourself like a well wishing visionary and then shed few crocodile tears of sadness over "it failed" statements which of course conveying an absolute truth.
Nothing helps to share links better than controversy.
Of all the Bitcoin people, Mike Hearn is the guy who is respect the most. He is the only one who could see the picture objectively and not get carried away by fanaticism. Even very early circa, 2010, he was always a voice of reason amongst insanity.
I wonder whether there could be a hierarchy of transactions (like credit cards, banks, and cross-bank transactions). I.e. not requiring the entirety of transactions to be present in the top blockchain.
Bitcoin's potential got ruined by the Chinese speculators. In the West, on the contrary, people oversold expectations. I really want back the slow, but steady growth before the boom days!
Guys like Wladimir, Pieter, Gavin, Cory Fields, Gregory Maxwell and Luke Jr have a voice because they’ve contributed many thousands of lines of code. (Lines of code are only a proxy for impact).
You may have noticed Mike Hearn isn’t in the top 100 contributors list. He is the primary author of the Java implementation of a bitcoin library:
https://github.com/bitcoinj/bitcoinj
He started it in 2011, definitely early. But a substantial amount of bitcoin core work had already set the path. There are also similar implementations in many different languages but they are not the primary reference implementation for full nodes.
According to Hearn’s blog post:
“I’ve talked about Bitcoin on Sky TV and BBC News. I have been repeatedly cited by the Economist as a Bitcoin expert and prominent developer. I have explained Bitcoin to the SEC, to bankers and to ordinary people I met at cafes.”
Being cited by journalists is not the same as being a primary contributor.
The disagreement between Hearn and the other developers isn’t about whether to increase capacity, it’s about how. Many of the primary full-node contributors believe a hard-blockchain-fork is a risky approach. Lots of work is being done to explore better options, like segregated witness (http://gavinandresen.ninja/segregated-witness-is-cool).
Mike Hearn tried to (very aggressively) push the idea of increasing the block size with a hard fork. In fact the patch allows node operators to vote and 75% adoption is needed. When it looked like that wasn’t going to pan out, he created Bitcoin XT where “Decisions are made through agreement between Mike and Gavin, with Mike making the final call if a serious dispute were to arise.”
So the claim that Hearn not being able to take over decision making power for the bitcoin community is evidence that bitcoin has failed seems to show something slightly different. It shows that open source software methodology of forking and adoption lets the best implementation win and prevents hostile takeovers.
Mike Hearn is not as impactful to bitcoin development as he or recent news would indicate. Mike leaving the bitcoin community has little impact on the future success or failure of bitcoin.
To be clear, Mike Hearn's unilateral fork doesn't switch over to the new rules when 75% adoption is achieved, or even when 75% of mining is done by supporters - it switches when 75% of the last 1000 blocks indicate support, which can quite easily happen with less than 75% support just by random chance. This is an astonishingly aggressive threshold, and if he succeeded it's almost certain that Bitcoin would fork into two different, conflicting versions of the transaction history for a substantial length of time.
The random chance is very very low. For simplicity, let's say that 50% of the hashing power agree and 50% of the hashing power disagree. Then the probability of getting 750 blocks is 7*10^-59 ( http://www.wolframalpha.com/input/?i=binomial+distribution+n... ) There are approximately 50000 blocks in a year, so the expected time is a lot of millions of years.
This changes when most of the hash power agree. If the 74% agree then the chances are 24% ( http://www.wolframalpha.com/input/?i=binomial+distribution+n... ). The calculation is more complicated because the intervals may overlap, but this would take less than a year.
So, when more than 70% of the hash power agree, it's time to upgrade, but 70% is a clear majority.
(Just for curiosity: With 75% hash power you get a 52% chance. With 76% hash power you get a 78% chance.)
>it switches when 75% of the last 1000 blocks indicate support, which can quite easily happen with less than 75% support just by random chance.
I was astonished when I read this 'consensus' code in the Bitcoin repository. I recommend removing it or deploying an old version of the Bitcoin server. It is a reckless and deceitful (how many users actually understand the tacit consent they are granting by running this code?)
> conflicting versions of the transaction history for a substantial length of time.
Indeed if a new block size is 'forced' with a fork, it essentially creates a new currency. I doubt the new big-block Bitcoin will stand on its own.
Yes-yes I understand that. There could be two networks: bitcoin and bitcoinxt. And people could choose between the two. So why is that bad? I am asking genuinely
There are three types of people who are into Bitcoin:
1. People who are in it out of sheer curiosity.
2. People who are in it to get rich quick.
3. People who have been scammed into it.
The people who are in it out of curiosity are the people I don't take issue with. At its beginnings, I found Bitcoin to be a curious thing because it was a novel and new idea. However, as things progressed and I learnt more about how it all worked, I saw it as a cumbersome idea that wouldn't effectively replace anything and as a result now I'd rather make jokes about it than take anything about it seriously. I've never spent more than $20 CAD on Bitcoin and I have gotten it all back for that matter too.
People who get scammed into Bitcoin typically get scammed either one of two ways: they're either being coerced into using it because they've gotten something like malware on their machines (CryptoWall and its variants) or they see it as an investment alternative. The only times I've ever seen non-technical people experience Bitcoin is when I have to tell them that the malware on their computers will only release their unbacked-up data requires a payment using the cryptocurrency to get it all back. And that is really what a non-technical person's experience with Bitcoin is going to be: it's a way to pay thieves.
As for the get rich quick people, they tend to fall into the third category or they themselves are scammers.
Right now there are two forces dominating the Bitcoin community: the miners and those who are holding out on whatever magical unicorn rainbows makes the coins have value. The miners don't want to see changes to the software because it'll hurt their bottom line and the people holding and exchanging it want to see these changes so they can benefit. So as a result, Bitcoin has entered a war of attrition and is starting to show its problems. Mike Hearn's leaving is definitely a consequence of this problem.
Earlier yesterday [1], I made a quip about how it's insulting to suggest that we get those who are "unbanked" as a result of living at no-fixed-address (ie: "homeless") should eventually move on to Bitcoin as an alternative to mainstream financial institutions. It's really for the reasons that Hearn made: would you want to wait a random period of time ranging from maybe a few minutes to a few hours for your transaction to go through? It's already insulting enough that they're living at the bottom of society, so why would we want to get them to use a bottom-tier financial system? Why not instead suggest making it easier for them to participate within mainstream banking schemes?
I anticipate based on my last remarks that the responses to this post will consist of feckless anecdotes and pointless accusations that I and others have a "problem" with Bitcoin. I guess to a certain extent the statement of me having a problem is true, but at the end of the day Hearn is right.
Bitcoin is a failure and if you invested into it then you're getting what you deserve. If you think that it isn't a failure then you obviously didn't comprehend Hearn's writing.
Meanwhile, you give your credit card number to someone and they can just pull money out of it. The $15 transaction you agreed on is more like a gentlemen's agreement just like unticking the "auto-renew my subscription" checkbox. As you use your credit card, over time you give more and more people a direct line of access to your credit until it expires or gets revoked. That you might notice on your statement if someone abuses it or that you might remember to cancel that 14-day free trial only makes it slightly less precarious.
Both methods of payment have their uses, but a pull-based system isn't the default model I want for 99% of my payments.
Until I can generate credit card numbers on the fly with one-time-use amounts of money, Bitcoin helps solve the problem by giving me push payments.
> Meanwhile, you give your credit card number to someone and they can just pull money out of it
Here's a Bitcoin private key: 5JcgxNrn4WFcA8trEix7ComAyLNEsDEyBqYVjEo8JaaXWQQNg1u
Now you have the ability to drain whatever coins are in that wallet and I'll never see them again unless you somehow decide to return them to me.
You can probably convince a layperson to give you their private key through the same means you could ask them to tell you their passwords or whatever personal information they should not divulge.
> As you use your credit card, over time you give more and more people a direct line of access to your credit until it expires or gets revoked.
Credit cards are a form of payment. I go and pay my bill for using that credit card. A month before the card expires, the issuer sends me a new card. Provided I don't neglect to pay my bill and don't abuse it, my credit card will almost always allow the transaction to go through immediately.
> Until I can generate credit card numbers on the fly with one-time-use amounts of money, I'll have a use-case for Bitcoin.
"To access the ShopSafe service, sign in to Online Banking and choose Use ShopSafe from your credit card Account Activity screen. Enter your spending limits and the ShopSafe service will automatically generate a temporary 16-digit account number, with expiration date and security code, that allows you to complete your purchase while protecting your privacy."
"When shopping online or by mail order, you can use a randomly generated Citi card Virtual Account number instead of your real account number. Simply click Enroll in/Get below to begin using Virtual Account Numbers.
All purchases made with your temporary number will appear on your monthly statement with your other purchases and will include the Virtual Account Number that was used for each transaction."
> Here's a Bitcoin private key: 5JcgxNrn4WFcA8trEix7ComAyLNEsDEyB...
Notice that it's a private key that's paired with a public key. You give a hash of the public key to accept payment, and revealing your private key is the doomsday event in its security model.
Meanwhile, with most credit cards, the entire interface is that you hand out the secret directly. Maybe they'll even make a carbon copy of it with a click clack machine depending on where you live, and this is acceptable. So acceptable that here in 2016, on-the-fly credit card numbers is a niche service offered by a few companies and you need to install a desktop Adobe Flash app to even use it.
> Meanwhile, with most credit cards, the entire interface is that you hand out the secret directly. Maybe they'll even make a carbon copy of it with a click clack machine depending on where you live, and this is acceptable. So acceptable that here in 2016, on-the-fly credit card numbers is a niche service offered by a few companies and you need to install a desktop Adobe Flash app to even use it.
You're overlooking something here.
Ignoring the fact that the merchant won't typically see the credit card number if I am using it physically, you are correct that I have to offer it up to them if I am using an online store. However, there is an important distinction between a credit card number and a Bitcoin private key that you're neglecting to look at here.
A credit card number is just a reference to an account between the card holder and the issuer. In a situation where the credit card number becomes exposed via negligence not on the part of the card holder, the card holder themselves in almost all situations is not liable for the charges incurred that were not of their own. So if Target for example gets breached like they did in 2014 where millions of credit card numbers were exposed, the account holders of those affected cards are not on the hook for any purchases that they did not make. In fact, issuers and payment processors were largely able to determine who was affected and issued new cards very quickly.
The only situation I can easily recite where you are on the hook for your credit card number being exposed is if you willfully expose it to a third party. It is at this point that the credit card issuer can tell you to effectively "buzz off" and pay for the undesired purchases.
In the situation where the card becomes compromised, the solution for the issuer is to issue a new credit card number and then to deny all use of the previous number going forward. All charges are then reversed and it's a matter between the payment processor and the merchant to flesh things out. In a few days the consumer will have a new card and even in extreme cases with certain classes of credit cards, they'll have a card hand-delivered to them within 24-hours.
With Bitcoin, if the private key becomes exposed (and there are many, many ways for this to occur), then there is no recovery nor any third party to rely on to get the coins back. You're effectively out of luck and must then generate a new private key and public key and start anew.
Also with Bitcoin you need to install a third-party application on your phone or computer in order to make use of it. I can easily send a payment via credit card via telephone, Internet, or in person.
What about the people who know just enough to be both sour and aggressively, passionately wrong when they seek validation from other people about how bitcoin 'has failed'.
Bitcoin is literally working right now. I order food with it, avoid currency conversions with it, buy blankets with it...
When people say it has failed it is pretty obvious they have some sort of emotional investment and are not objective.
The Zimbabwe Dollar was literally working in the sense you mean it too. You could buy goods like bread with trillions of it, etc. So I think a currency's definition of success is more than that.
The Zimbabwe dollar was centrally controlled by a government which was printing it as fast as they could, and it only worked under the most extreme cases. Anyone holding any amount of dollar would see it's value destroyed by the government who was in sole control.
In any event he said 'bitcoin has failed' which is ridiculous.
I don't know about bitcoin, but your logic is flawed: "The Titanic is working right now. I'm floating in the middle of the ocean, drinking wine, listening to great live music" and we know how that went.
The titanic wasn't a decentralized piece of software being run by hundreds of thousands of people. Many people are constantly trying to manipulate and attack it. It isn't sitting serenely in the ocean. If the Titanic had ice bergs smashed into it constantly and then suddenly sank it would be a different story.
>it's insulting to suggest that we get those who are "unbanked" as a result of living at no-fixed-address (ie: "homeless") should eventually move on to Bitcoin as an alternative to mainstream financial institutions.
What about Africans who have no access to a bank but have access to a cellular device?
>maybe a few minutes to a few hours for your transaction to go through?
Credit cards take 180 days for the transaction to confirm. Paypal is able to be clawed-back for up to almost the same amount of time. Cash can be counterfeited. Even some bank wires can be clawed back. Bitcoin works as a payment mechanism.
> Credit cards take 180 days for the transaction to confirm. Paypal is able to be clawed-back for up to almost the same amount of time. Cash can be counterfeited. Even some bank wires can be clawed back. Bitcoin works as a payment mechanism.
On average, an electronic transaction on your credit card will not be visible to the consumer for one or two days, depending on the merchant. This can be delayed if the merchant and all other parties are taking in a large volume of transactions, but it will show up. Other reasons include allowing for modifications to the transaction (such as merchants who wish to include tips which is a manual process), but if the transaction is electronic, it will appear visible to you within a day or two.
With EMV being in place in the majority of the world and also ignoring some of its security problems, merchants don't have to be concerned about a fake credit card being used as much as they once had to.
With Bitcoin, the merchant won't be able to tell if the transaction is approved without having to wait an onerous and unpredictable amount of time. If this is a restaurant, are we to expect that the person who's paying with Bitcoin will wait for the transaction to be received on the other end?
Credit card transactions run in the realm of 100,000,000,000 transactions per year globally [1], or 274,000,000 per day, or 3,200 per second. At best as of this current writing, Bitcoin can handle anywhere between one to three transactions per second. A delay of one or two days of a transaction on my Visa card to show a meal I had a restaurant is acceptable considering the volume per day, but being that Bitcoin takes anywhere between a few minutes to a half-day to just process the transaction when it operates at <1% the speed is just pathetic.
You cannot tell me with a straight face that compared to credit cards Bitcoin is able to scale and act as a "[workable] payment mechanism".
Surely, before claiming I could be lying you at least googled credit card chargebacks?
This is an example from Discover:
"If you have found a charge you believe is incorrect, you may request billing assistance. You have 120 days from the date of the transaction to open a dispute online. For disputes older than 120 days, please contact 1-800-DISCOVER. Most transactions can be disputed once the charge posts to your account, however, please wait until your first monthly statement after the transaction to report a missing transaction."
Credit card transactions are reversible by a third party that is supposed to only exercise such power when it believes the original transaction is fraudulent, and is in turn accountable to a very robust legal system.
With reversible bitcoin transactions, the person paying can unilaterally reverse the transaction in a definitive way, without any way to appeal the reversal.
I think it's clear we are talking about fairly different threat models, even if you are all for fully irreversible transactions without any centralized control.
This is precisely it. The idea that Bitcoin is going to work better than credit cards because you cannot claw transactions back and saying it leads to leads to less fraud is absurd. As a consumer, I like knowing that if I purchase something via my credit card that I have the ability to claw back my payment should I find that I have been defrauded.
What is being missed by this person is that with Bitcoin there is no option for this and it relies on the honesty of all parties involved which does not make for a good model.
I mean, in many contexts I would ok to pay in a way that cannot, under any circumstances, be reversed. Specially if the other side of the transaction is equivalently irreversible (that's the whole idea behind smart contracts). For the things where reversing payments is a desired feature, you can build that on top of crypto-currencies (e.g. by using an escrow), so is not like it has to be the wild west. You can get reversible payments or irreversible payments (after confirmation) depending on what the transacting parties need. This flexibility is a good thing.
The problem is that this recent change, allows you to claw back your payments without any third party signing off on it, and without your counterpart being able to appeal the claw back. It is also a "feature" most people don't know about, because it is the consequence of the low level implementation of something designed to solve another problem altogether. This change existing and being unknown will lead to more fraud vs plain old "irreversible" transactions. And it is strictly worse than being able to claw back your transactions by appealing to the credit card processor, even if under Bitcoin the payment becomes "fully irreversible" earlier than under card processor rules.
The argument for why this is not a bug, is that even before this change, a transaction could be reversed via a double spend with a certain probability. However, this change makes unilaterally reversing a transaction trivial and certain for multiple hours after it was originally created.
The only people affected are those who accepted 0-conf transactions. If you accept them, either you trust the person, or you accept the risk. In the first case, this change makes no difference. In the second, you should be checking for the flag that says the payment was opted in to RBF.
>However, this change makes unilaterally reversing a transaction trivial and certain for multiple hours after it was originally created.
This is false: it is trivial until accepted into the blockchain. That usually happens for normal transactions far sooner than several hours.
> The recent change is entirely opt in. [...] In the second, you should be checking for the flag that says the payment was opted in to RBF.
Do you know if most common bitcoin wallets and payment processing APIs accept or reject payments which have opted in to RBF? It might be a configuration issue, but how big a deal this is depends entirely on what the default configuration is. Still, thanks for the clarification. From the article I assumed all transactions were RBF capable now, without any way to disable it.
> This is false: it is trivial until accepted into the blockchain. That usually happens for normal transactions far sooner than several hours.
Fair enough. The point is that confirmation might take several hours. If I want to accept 0-conf transactions for say, my Bitcoin-powered public coffee machine (not an actual product, but should be...), then I feel a bit safer if canceling 0-conf payments is hard to do and unreliable, even if I don't have any strong guarantees. Waiting even a few minutes for confirmation before brewing coffee might result in grumpy sleepy customers ;)
>Do you know if most common bitcoin wallets and payment processing APIs accept or reject payments which have opted in to RBF? It might be a configuration issue, but how big a deal this is depends entirely on what the default configuration is.
I don't know. Any serious business (which, unfortunately, doesn't describe many bitcoin ones) should be monitoring them, and frankly, as I said above, if you're accepting 0-confs and not checking for the flag, and sending irreversible products, you're beyond my sympathy. Official guides to accepting bitcoin always say to wait several confirmations, and anyone accepting zero confs has make that decision deliberately.
> If I want to accept 0-conf transactions for say, my Bitcoin-powered public coffee machine (not an actual product, but should be...), then I feel a bit safer if canceling 0-conf payments is hard to do and unreliable, even if I don't have any strong guarantees.
As far as I can see, this is entirely alleviated by the opt-in part. Just reject any transactions that opt in.
I've seen people complain that users will opt in by default and be turned off if they need to wait, but that's a problem with whatever wallet they're using. If I was designing a wallet, I'd make an "enable undo?" button, with a warning that said "if this is checked, you can undo until it posts, which usually takes a few minutes. Be aware that some merchants won't accept such transactions, so if you're buying something instantly then make sure the merchant is ok with it.", and merchants should have signs telling people to turn off the undo feature.
> For the things where reversing payments is a desired feature, you can build that on top of crypto-currencies (e.g. by using an escrow), so is not like it has to be the wild west.
As it stands with credit cards, it's 180 days maximum for a chargeback; meaning that the consumer has six months to make up their mind on any transactions they may not deem acceptable.
How long should it be in escrow if we're to switch to Bitcoin? I don't see how merchants will want to wait six months for them to see any payments and I don't see how consumers will want to see the timespan lessened.
> Credit cards take 180 days for the transaction to confirm.
Now you're going on about chargebacks. Of course the window for a chargeback is going to have a lengthy period of time. Chargebacks involve a manual process where someone has to identify a payment that they wish to dispute.
What is with the attitude you have? I wasn't going on about anything, really. You brought up transaction times which are related to confirmation times. Anything other than bitcoin is molasses-like.
> What is with the attitude you have? I wasn't going on about anything, really. You brought up transaction times which are related to confirmation times. Anything other than bitcoin is molasses-like.
How is a credit card "molasses-like" when it is capable at this very moment you're reading this response of doing 1,000 times more than Bitcoin?
In the time it took to load this page (100 ms), at least 300 credit card transactions have successfully gone through whereas this cryptocurrency nonsense hasn't even completed one.
You don't get it. Every 7 or so transactions that bitcoin has processed in that couple or so seconds cannot be clawed back, as in NEVER, unless there is a flaw in very popular and important cryptographic technology which in of itself would mean a whole lot worse things can/will be happening besides your 0.01 BTC coffee being clawed back. Those 300 credit card transactions can be clawed back for up to 100+ days. If you are a fraud, you can sit back and relax for a few months before scamming someone.
> Every 7 or so transactions that bitcoin has processed in that couple or so seconds cannot be clawed back, as in NEVER
Normal people read this and hear “if you don't notice theft instantly there's nothing you can do”. This is not the persuasive sales pitch which you seem to think it is.
To clarify my stance: I am not pitching bitcoin to anyone on hackernews (this is not a Show HN). The ability to not claw back bitcoin is a reality, unless there are flaws in the technology behind bitcoin. I believe this is a feature and society could manage to change its ways regarding transacting as a result of that reality.
So … how does anti-fraud work? There's no third party to process charge backs and unlike physical currency a theft can cross international borders near-instantly.
This sounds like wire transfers but everyone is exposed by default and there's no third-party monitoring for fraud. How am I wrong for thinking that sounds like everyone having to pay for their own private security service?
> Credit cards take 180 days for the transaction to confirm.
I've worked on batch settlement software and never heard of this. The payment processor has very strict timelines that must be followed for each phase (auth, submission, clearing, settlement). Funds usually appear in bulk the next business day after settlement.
> Cash can be counterfeited.
And easily spotted (in the US). This is more an issue for people than retailers because the banks will almost certainly notice it.
> Even some bank wires can be clawed back.
This is really fucking hard and easily mitigated by immediately wiring the money to another account at a different bank.
> Funds usually appear in bulk the next business day after settlement.
That's not a confirmation, that's you temporarily being loaned the funds; confirmation is when charge back is no longer possible and you actually for sure have the funds.
But if you defraud someone of bitcoin and they can't reverse the transaction, you may have possession of it but you don't have the legal right to it.
The credit card and paypal systems have evolved to place most of the risk on the merchant because the merchant is generally both better able to prevent fraud and better able to bear the cost of it, while having merchants defrauding customers is extremely unpopular and ruins adoption of the system.
Bitcoin does it the other way round: all the risk falls on the customer. Unsurprisingly this makes fraud, loss and counterparty risk big problems for bitcoin adoption.
Yes, but most fraud is hitting merchants via charge back and they don't like it. Bitcoin reduces merchant fraud, and that's the point; it's cash, when you buy something with cash you don't get to take it back after you get home. Cash is always more risky for the customer, but you can build up escrow systems on top of said cash system to handle customer fraud issues. Bitcoin solves the merchant fraud problem by giving them an option besides the fraud ridden and unsafe credit card system and the evil charge back that hurts so bad. It's hard to sell things online when you have to deal with card fraud and charge backs.
This notion that "customers" must have fraud protection is false; people use cash every day without any fraud protection. The credit card companies have sold people on the idea of fraud protection because it's necessary in a system when you give your private key (card number) to every merchant you deal with and your private key is often stolen. Credit card protection is a solution to a badly designed pull based credit card system; it solves a self created problem. A cash based system like bitcoin does not require fraud protection, it's cash.
it's cash, when you buy something with cash you don't get to take it back after you get home
Well, sometimes you do, consumer protection law guarantees that if it's defective or not as described.
It's hard to sell things online when you have to deal with card fraud and charge backs
How widespread is this, quantitively?
people use cash every day without any fraud protection
Yes - in face to face transactions where you can inspect beforehand and complain afterwards. And people are advised not to send cash through the mail because - guess what - it'll get stolen.
The credit card and a bunch of related non-cash systems like traveller's cheques were invented because travelling with or doing large cash transactions is a risky hassle.
Anecdotelly, I work in online retail, fraud is always a problem and we turn away business to avoid iff'y situations because of it and get attacked by streaks of stolen cards from time to time. Fraud is a real problem for merchants; you can't fight a charge back, you're out the money and the good and you just have to eat it and say thank you while getting killed on credit card fees. Credit cards suck for merchants, we accept them because we must, everyone prefers cash.
The purchaser can only unilaterally reverse if 1: they opted in to that, in which case the recipient shouldn't accept a zero-conf and 2: it hasn't hit the blockchain yet.
A credit card user can declare the card stolen within a day or two and all transactions will be cancelled. Sure, if the merchandise was shipped to his house or otherwise traceable to him, they might go after him legally, but you can go after a bitcoin user legally as well. You can't really fight a "card was stolen" fraud, except that eventually a credit card company will catch on and blacklist you.
> Still, all is not yet lost. Despite everything that has happened, in the past few weeks more members of the community have started picking things up from where I am putting them down. Where making an alternative to Core was once seen as renegade, there are now two more forks vying for attention (Bitcoin Classic and Bitcoin Unlimited). So far they’ve hit the same problems as XT but it’s possible a fresh set of faces could find a way to make progress.
It is rather naive assumption that valuable assets (and bitcoin is a digital asset, not digital currency) would not be seized by elites, because very essence of elitism is the ability to sieze and control distribution of valuable assets, be it Chinese govt or too big to fail US financial institutions.
Simply have 5 servers running that as a network server and you won't need proof of work, nor will you need a blockchain. Homomorphically encrypt a basic ledger with an encrypted backend, and throw away the key. Done/done.
One might say encrypting 52 integers in 36 hours is somewhat less than acceptable performance, but how does it really compare to bitcoin in total effort ? This is certainly good enough that anyone with a decent pc could run it. Hell, you might even reward them for running it just like bitcoin does. And it ought to be a lot cheaper to run than bitcoin.
Really? OP just wished him well and to never see him again (obviously in the context of Bitcoin). English is not my first language, so I may be missing something here.
Although, I remember similar comments when Ballmer left Microsoft and no one was banned nor censored IIRC.
I do think you're missing something. The comment took the form of wishing someone well, but no one who primarily wished to express that would express it that way.
This a pretty rude comment. My comment didn't make an argument either way; it just added some context to the thread. You're arguing so aggressively that you've hijacked it in order to slam him.
Could you maybe delete that comment and make it a top-level comment instead? Then I'll delete this one, and the thread will be cleaner.
When the context and information you posted is so obviously a one-sided ad-hominem list of information (that includes the argument of "OMFG, he might have connections to some state intelligence agency"), its quite rude IMO.
Even if nobody in China were on the Internet, Chinese Bitcoin miners could conceivably mine over the telephone. I mean, that's how pure the hashing problem is and how small the amount of information that has to flow back and forth is. (They would need to have an agent in another country who was on the Internet and was willing to relay hex strings between the Internet-connected computer and the person at the other end of the phone call, but the amount of data that would have to be exchanged this way isn't beyond human capabilities by any means.)
I don't think an isolated internet is the solution. That's what North Korea has (to the extent they have internet), and it is a problem in every way. The problem isn't really China, it's there are only a handful of people with the keys to this castle.
I don't understand why the post you replied to was downvoted and flagged... It seems like censorship of (possibly) valid criticism - not unlike what Mike accused the other side of doing.
Need something like npm. Open semantic modules and you vote on modules with your feet. Use something like web assembly (which is actually an abstract syntax tree format) and you get support for many programming languages and architectures.
I am not surprised to see this first attempt at radically changing how we think of currency is having trouble. I'm surprised that the Winklevoss Twins bought so heavily into it. Hopefully the investors in this industry can take the reigns away from China.
It's kinda sad, but it's gotten to the point that heavyweight players are going to be needed to fix the problem.
I just really hope that the banks either don't figure out how to make everything go in their favor, or that the hands they play work out for the good of everyone.
It seems like powerful people in the ecosystem (Chinese miners?) really do not want the block size increased.
Why would this be? Are they hoping for increasing transaction fees and therefore increasing mining profits?
In any case increasing the block size seems like a no brainer from a technical point of view, at least if your interest is in Bitcoin itself and its growth and future.
This isn't correct either. All miners pretty much agree with a 2MB limit, but it has to come from core. Chinese miners don't want to switch to alternate clients because of cultural reasons. If the core developers issue a raise to the blocksize tomorrow, the fork would happen and the controversy would be over. The core developers have a commercial incentive to not fix this issue.
Basically, the Chinese miners don't want to increase the blocksize because they are very bandwidth-limited.
Larger blocks mean longer propagation time, during which time another pool with more bandwidth could hash and propagate their own block, causing the Chinese block to be orphaned.
If 2 miners mine a block around the same time, it's a race to see who gets to a majority of other nodes first. The more data inside a node, and the further you are out in the boondocks, the slower it travels.
Since the major miners are out in the boondocks and they don't like losing $11,000 (the proceeds from a block), they would prefer a smaller block size.
Of course, the miners could simply refuse to accept transactions. There is nothing stopping them from creating empty blocks, or ones with few transactions, which would zip around the network faster (besides the loss of transaction fees, which is at the current time, very small).
Why they don't do this is that it is a delicate power play. If they upset the market too much by doing controversial stuff such as this, the market may turn on them. Therefore, it's in their best interest to lobby for the rules in their favor rather than acting contrary to the utility of the bitcoin network.
Apart from bandwidth limitation: the Chinese miners presumably make and value their profit in traditional money, by converting mining rewards. (If nothing else, they need to pay for the mining operation somehow.) A fall of the value of Bitcoin in traditional currency, e.g. due to a lack of market confidence, impacts their profits very directly. Miners, typically, don't want to hold Bitcoin positions themselves.
So they are incentivized to be extremely risk-averse to anything that could affect the Bitcoin exchange rate, and will only be excited about code changes when not changing would be clearly worse.
> But Bitcoin Core is an open source project, not a company.
It has some of the shape of an unincorporated association, though. There's a lot of caselaw dealing with disputes arising in those, usually from reluctant courts that were dragged into particularly petty and poisonous disputes.
Given the amount of actual money involved, people might start asking courts to settle some of these questions before too long.
(But don't ask me to do it, I'm not a lawyer and this isn't legal advice).
As an outsider, the only thing I can take from this is a certain sad feeling that it's a demonstration of a pure wild west unregulated and uncontrolled economy devolving into utter tyranny. You've got your oligarchs, your civil war, your rent seeking, and maybe you'll end up in a year or two with an outright winner. At which point that winner might as well cancel bitcoin, declare themself king and issue a central coinage.
Well, that and "Bitcoin has become garbage, avoid at all costs".
I've been fascinated and appalled in equal measure at the fanboy community, at the intolerance of criticism that sprang up very quickly, and how strong feelings ran (likely because of financial investment in the tech).
It's also been interesting watching it go from simple CPU mining, to multiple GPU rigs in dorm rooms, all the way through FPGA and then to massive installations of custom ASIC miners.
But I've always hoped it wouldn't go mainstream for two reasons - limited supply with weighting in favour of early adopters, and the massive electricity costs of the 'mining' and transaction validation process. Scalable, competitive proof of work systems for a widespread currency are an ecological disaster in the making, and deflationary currency with a handful of early users controlling a huge proportion of the total currency supply... these aren't "features".
I'll be very interested in what happens next, and for the reasons given I hope it's not just a BTC clone with better governance.