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The resolution of the Bitcoin experiment (medium.com)
961 points by tptacek on Jan 14, 2016 | hide | past | web | favorite | 408 comments



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.

[1] http://gridcoin.us/ [2] http://boinc.berkeley.edu/


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 like the moral of this idea


> 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.


> That money can perverse moral incentives

This isn't something newly discovered, I hope.


Haha, I like the satire :-)


I was hoping gp was being sarcastic

> 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.


Money itself is a legal phenomenon, the laws can be changed to amend how money functions.


From the bitcoin.org FAQ:

>Isn't Bitcoin mining a waste of energy?

>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

This is just such a cop-out!


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.


In support of your points, I think it's worth remembering those "life in a bitcoin mine" videos that some journalists groups did

http://media.coindesk.com/2014/09/20140729120509_0210.jpg

The waste heat from these operations are not being reused. The energy most likely came from a coal fired power plant, or from a nuclear reactor.


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.


Given that XT was met with outright censorship, DDoS attacks, and other unethical and criminal behavior, I don't see what else you'd expect him to do.


And yet I can still go to Bitcoin XT repository, download it and run it if I wish: https://github.com/bitcoinxt/bitcoinxt

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.


If you want to be DDOSed, sure.


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.


And yet, miners still had the choice whether or not to run XT.

If enough did so, then isn't that a vote?

If Bitcoin can't survive without centralized control over miner software, isn't that a sign of broken decentralization?


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.


*Bitcoin, no capital 'c'


bit-coin


> things like digicash existed since the early 90s

Really? Were they actually usable/used? How/when/where?


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".

It's Bitcoin or bitcoin.

[1] https://bitcoin.org/bitcoin.pdf

[2] https://en.wikipedia.org/wiki/Bitcoin

[3] https://www.google.com/search?q=bitcoin&oq=bitcoin


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.


I don't know, it's a bit like writing a long winded post about what's wrong with FaceBook


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.


> I still believe in BitCoin, however.

What -exactly- does this mean?

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]

[1] Seriously, think about that for a second. :)


It can scale using federated techniques to merge sets of transactions using things like Lightning Network. But those aren't anywhere near done yet.


> 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


> 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.


Currency in Somalia was a complete failure until there was a federal government and a central bank again: https://en.wikipedia.org/wiki/Somali_shilling#Modern_history there is no currency without government, only commodities.


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!)

[1] http://www.amazon.com/Modern-Money-Theory-Macroeconomics-Sov... [2] https://www.youtube.com/watch?v=0zEbo8PIPSc


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.


> Doesn't this all seem a bit dramatic?

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.


Great summary of the current state of bitcoin.

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.

[0] https://bitcoinclassic.com/


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.

[0] https://blockchain.info/pools


Yeah but is there any group/business in bitcoin that doesn't consist of keyboard warriors on reddit?

https://www.reddit.com/user/anarchystar as a random example that comes to mind.

like, yay it fixes a technical issue, but I'm doubtful that a group that acts like children in forums has any long-term sustainability.


>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?


It sounds like a distance and power storage issue.


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:

http://coinmarketcap.com/

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.

[0] http://www.coindesk.com/bitfury-details-100-million-georgia-...


Wouldn't, say, a cryptocurrency that forces P2Pool solve this issue?


There are two errors in your logic:

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.


Yes, but, the article states

> ...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.


That's a false statement. Two chinese pools control 52%:

https://blockchain.info/pools?show_adv=no

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.


FWIW both of the pools are essentially ran by the same people too.


then bitcoin is already officially fucked.


(1) Get another more centralized pool to control 26%. (Or a cabal of them.)

(2) Take both pools offline.

(3) Profit.


The China mining percentage could change and is likely about to change: http://www.coindesk.com/bitfury-details-100-million-georgia-...


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.


True but not much more than those. I bet you de facto "control" of the US banking system could be said to exist in fewer than 20 entities.


At least some portion of which are elected or appointed by elected officials.


The big mining pools are also chosen by individual miners, who can change at any time.


This, which is amusing.


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.


Mike's resolution was apparently to join up with a consortium of banks back in November:

http://bravenewcoin.com/news/30-top-banks-and-mike-hearn-hav...

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.


Which alternate cryptocurrencies is he working with?


See link in the GP:

"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."


Thanks!


Is this comment intended to imply that Mike is being opaque with his intentions? The quote seems pretty much in line with the OP.


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.)


More proof that "clickbait" does not mean "a story that does not deliver on the headline's promise" but rather "something I don't like."


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.

The result is what we are now seeing.


>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!"


You can restrict the supply within a single system, and value follows the network effect due to fear and greed.

https://coinmarketcap.com/ lists 650 alternate value storages which take up 650 million dollars. Bitcoin alone takes six billion.


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.


Having a limited supply of money encourages hoarding. Hoarding does not an economy make. Bitcoin would fail there too.


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.


So an economy requires money in unlimited supply? That seems like dubious sophistry.


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.


It just strikes me as silly that an economy "requires" an infinite supply of money. I realize this is a commonly held belief, but I think it is wrong.


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.


This story also strikes me as being a post-facto justification for state-monopolized fiat currency.


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.


Not since the US left the gold standard, no. Plus fractional-reserve banking, and the amount of money in the world economy is always increasing.


Well, others call it saving and in the old times, when money was scarce, it was actually a prerequisite for giving out loans.


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 in prisons are used as money.

No. That's barter. Money has very specific characteristics. Cigarettes in prison fail these three: divisibility, durability and uniformity.

https://www.stlouisfed.org/education/economic-lowdown-podcas...


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.


The article you link yourself makes clear that those are desired, "ideal" characteristics, not the definition as you suggest.


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.


Slightly offtopic but they use commissary food for currency in prisons as smoking was banned years ago. http://www.wsj.com/articles/SB122290720439096481

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.


That's not strictly accurate. The lift-bros will eat it, as it is the cheapest source of protein. They are the ones that guarantee the marketability.

If it were truly the case that no one wanted it, it could not be used as money, as another good would quickly replace it.


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.


Very interesting!

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



You are of course correct. But Bitcoin is a fiat currency that exists without a state. That is rather (nearly) unprecedented.

All other decentralized money had demand other than for its currency purposes. Cigs in jail are in demand so they became a way to store value.

Bitcoin is the opposite. It has value because people are saying it's a currency. But it's monopoly money.


Prisons exist because of the state.

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.


7 Cities that have their own currency...

http://mentalfloss.com/article/55414/7-cities-have-their-own...

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.


Also the much beloved and hated Canadian Tire 'money':

https://en.wikipedia.org/wiki/Canadian_Tire_money


Ever heard of a CityState?


> Money is an artifact of the state; always has been, always will.

This is patently false. Money has existed before states, and it has existed without states.


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.


  The historical evidence shows that first came credit, then came money, then came barter.
Can I get a citation on this? Literally any citation that money came before barter will work.


David Graeber's Debt, The First 5000 years page 49-50. He has a bunch of citations in that manuscript which are fascinating as well.


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.

(For anyone who wants to follow along, the PDF can be found at https://libcom.org/files/__Debt__The_First_5_000_Years.pdf)


> Barter has been in use since at least 12000BC

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.


Where can one read more about this?


"The Ascent of Money" by Niall Ferguson is my favorite introduction to the subject. It may or may not support parent's claims.


Before credit was gold, which throws a wrench in your beliefs.

I don't know if livestock domestication would be said to be a precursor to gold in some places.


> Money is an artifact of the state

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.

[1] https://www.blueletterbible.org/esv/gen/23/16/s_23016


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.


Heh, the last sentence is debatable (as demonstrated). But to debate it misses the wider point of the first sentence:

> "The folly of BitCoin is to believe that technical problems are somehow orthogonal to social problems."

This. Or, to restate it, to mistake social solutions to 'money' as technical problems that need fixing.


What makes you think money didn't exist before the state?

http://szabo.best.vwh.net/shell.html


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.


Uhhh what about gold, which had been the world's currency for thousands of years up until Nixon was forced off the gold standard in the 70s.


"Information is an artifact of the state; always has been, always will." - people before the Internet


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].

[1] https://github.com/ElementsProject/elements

[2] http://lightning.network/


I've never seen Elements Alpha or heard of sidechains, that's a really interesting project! Thanks for the link.


Its no surprise that mining power is concentrated[1]. Activities across populations tend to have a power law distribution[2]

[1] https://www.blocktrail.com/BTC (scroll to "Pool Distribution", today more than half the mining capacity is in two pools)

[2] https://en.wikipedia.org/wiki/Rank-size_distribution:

"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.


This may be naive but why can't Bitcoin fork? Forks historically produced better results.

Why would switching to a cryptocurrency that is better designed be a bad thing?


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.


There have been hundreds of Bitcoin forks. XT is just another in a long list of failures.


> 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.


Maybe spending $121M of VC money whipping up hype about distributed mining...


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.

[1] https://bitcoin.org/en/bitcoin-core/capacity-increases-faq


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.


> The idea that hard forks are dangerous or irresponsible is a belief that is not well supported

bip99 - https://github.com/bitcoin/bips/blob/master/bip-0099.mediawi...

https://www.reddit.com/r/bitcoinxt/comments/3t21dh/dangerous...

https://www.reddit.com/r/Bitcoin/comments/3griiv/on_consensu...

> 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.


Mike, can you imagine any way to run a cryptocurrency so that growth doesn't threaten decentralization?

Could a cryptocurrency not be controlled by those who can afford to spend the most in CPU power (like governments)?

Could consensus occur by human power?


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.


Could one design against this?


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.


> It is not yet a problem.

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.

[1] http://gavinandresen.ninja/why-increasing-the-max-block-size...

[2] http://gavinandresen.ninja/the-myth-of-not-full-blocks

[3] http://hashingit.com/analysis/44-bitcoin-traffic-bulletin-re...

[4] http://forums.prohashing.com/viewtopic.php?f=11&t=679


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.


>notable possible downsides

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.)


Ok, so it's hypocritical on the 'transactions take too long' issue. Thanks for explaining.


I just saw https://www.reddit.com/r/Bitcoin/comments/41aocn/httpsbitcoi... and https://www.reddit.com/r/Bitcoin/comments/3urm8o/optin_rbf_i...

I think this paints Hearn's attack in a significantly worse light as I had previously thought.


> It is not yet a problem.

The original Medium post disagrees with this premise.


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


Sounds like some tried and then get DDOSed


This is Mike Hearn.

http://plan99.net/~mike/


What if the pro-fork community wanted to buy their way to the raised thresholds?

So we're at what, 0.9 Exahash?[1]

Say you want to force the change. You'd need to add three times that, or 2.7 EHash/s.[1]

Let's say you buy a ton of AntMiners to cover that, at 3.3 GHash/s/$.[2]

So that's a paltry, what... $820 Million?

Less if you just buy the factory in Shenzhen.

Basically just one winning Powerball ticket though.

[1] http://bitcoin.sipa.be/

[2] https://en.bitcoin.it/wiki/Mining_hardware_comparison#cite_n...

Caveat emptor: my ability to eyeball math in the peta-exa-yotta range is spotty at best. These results may be off by a factor of... any factor.


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.

[1] https://github.com/bitcoin/bips/blob/master/bip-0050.mediawi...



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.)


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?


[flagged]


This comment breaks the HN guidelines. Please post civilly and substantively, or not at all.

https://news.ycombinator.com/newsguidelines.html

https://news.ycombinator.com/newswelcome.html


I do indeed love a good socratic discourse.


As opposed to the people who derive their power & influence from traditional currencies?


you mean like these people?

http://www.seansoutpost.com/

Disclaimer: I raised bitcoin to work on open-source anticancer R&D


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.


It's not simple. Everyday usage is to an extent, but the system is actually very complicated.

The same can be said of Bitcoin though. Everyday usage is 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.


If bitcoin is such a disaster why is BTC price holding firm or even increasing?


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.


Because it's not. Most commenters here forget that bitcoin is not a fixed thing. It evolves. It forks.

All kinds of famous/important people predict Bitcoin's death every week, but it just keeps going.


And this medium.com post signals yet another of the hundreds of forks of bitcoin that have failed and not bitcoin itself.


To paraphrase an old saying about the Lisp programming language: Bitcoin is no deader than usual.


Anyone as famous/important (Bitcoin-wise) as Mike?


Bitcoin forking is generally considered an Extremely Bad Thing To Happen.


It has happened before with emergency fixes....


It will have to happen from time to time.


It's being manipulated by Chinese exchanges faking trade volumes


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.


It's possible to fake volume, maybe, but faking 'price' is just flushing money down the toilet.


Mtgox faked price too, remember those 1k+ days? because Gox was considered a leader other exchanges corellated their prices.


Scroll down to "Nobody knows what’s going on".


I did and it's FUD.


You could say the same about any bubble, though. If the price is driven by speculation a high price doesn't imply a healthy asset.


Obviously I don't really know the answer but maybe this is partly due to the 'no such thing as bad publicity' phenomenon.


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