> If all transactions using Bitcoin were conducted inside a network of micropayment channels, to enable 7 billion people to make two channels per year with unlimited transactions inside the channel, it would require 133 MB blocks (presuming 500 bytes per transaction and 52560 locks per year).
Notice the 2 channels per year. These 2 channels will be opened with a supernode (operated by eg- Coinbase, Gemini, Blockstream etc). I glanced through the document but they don't seem to acknowledge the requirement for these supernodes.
It's hard to cut through all the FUD, trolling, memes and propaganda to get to the meat of the debate, so I'm not too sure my understanding is accurate, feel free to correct me.
In a layer 2 or lightning network, there may be hubs operated by e.g. Coinbase that handle millions of users, but the hub will need an open payment channel with each of those users in order to minimize the required trust. That means that the scaling bottleneck described in the top post is still an issue.
It's useful to draw a distinction between decentralization of network topology and decentralization of power (the ability to decide who has how much money). If Coinbase runs a lightning network hub with millions of users, the network topology is centralized, but if the system has been designed correctly, Coinbase
cannot steal any of the lightning network funds (power is decentralized). They could require KYC and would be able to temporarily block a user's transactions. But if people aren't happy with how a hub is behaving, they can just stop using it, and switch over to a different one.
It's possible to hand complete custody of your coins over to a third party, and let them manage transactions internally. This scales really well, but then it's not really a lightning network anymore (power is centralized; they or people who hack them can run off with everyone's money).
Ethereum (not Bitcoin) has plans to scale their base chain via improvements from proof of stake, and eventually via sharding the base chain. Block size increases factor in as well. These improvements can each multiply with the large factor provided by lightning-network-like things (Ethereum's equivalent is http://raiden.network/). Much of this is still undergoing active research, so it's not all a given. I haven't estimated the numbers, but this all eventually could take us quite a bit beyond 20m users.
This is an interesting theory. Why don't money transmitter laws apply to standard bitcoin nodes which authenticate more than $10,000 of transactions a year?
These changes shouldn't happen, there are lots of companies who provide services where it doesn't make sense for them to act like money transmitters. For instance, BitGo is a 2-of-3 multisig wallet where they hold one key. They aren't a money transmitter because they can't send funds without your approval nor can they prevent you from sending funds.
American law draws two circles. One is for entities with know your customer (KYC) requirements. The other is for entities with a fiduciary duty to their clients. The second circle is inside the first. Lots of entities with no client fiduciary requirements are required to know their customers.
TL; DR If you’re handling others’ money, or helping others transmit money, directly or indirectly, you have a KYC liability under current law.
Disclaimer: I am not a lawyer. This is not legal advice.
Maybe it was just a general concern about centralization resulting in easy targets for regulation.
1. Bitcoin nodes have no special knowledge of transactions. There is nothing that you can get from a subpoena of my Bitcoin node that you cannot get from blockchain.info.
2. Bitcoin nodes can't meaningfully object to transactions that they're not party to. You could refuse to validate a block that contained an illegal transaction, but that would have no effect unless pretty much everybody did the same thing.
3. These laws don't make sense applied to Bitcoin nodes. For example, there's a law saying that transactions over $10,000 must be reported to the government. There are several thousand Bitcoin nodes. Does that mean that FinCEN wants to receive 5000 copies of a report saying that a high-value transaction just appeared? No, of course not.
In contrast, lightning nodes do have meaningful non-public information about transactions, and they can refuse to relay a transaction.
KYC is regulated by FinCEN. FinCEN requires every “Money Services Business” to register with them and do KYC.
If maintaining a supernode is so costly that only businesses will do so, to make a profit, then supernodes might require KYC. If supernodes run non-profit, they don’t need to.
If you're skirting KYC requirements on the basis of this belief, you should seek legal counsel.
A business is considered to be a type of entity (just like a person) that gets different tax treatment.
Anyone who transfers money, by any manner including, but not limited to, electronic, financial, debt ledger, cash or traditional methods like hawala, hundi, fei ch'ien, and chit is considered to be a "Money Transmitter."
Money Transmission classification and registration varies by state, to receive money from, or transfer money to someone in said state (regardless of your jurisdiction) you must register with the state and usually put up an insurance bond.
Then you must also register with FinCEN and enact an appropriate AML policy that would include KYC.
Non-profit status is given by the IRS, allowing the entity to avoid taxes. It doesn't change the underlying entity's structure.
NB: I'm not a lawyer.
I have a btc holding in cold storage of ~$350. I value the security and control of controlling my private keys+being on the main, trustless, chain. I suspect many people have a similar situation. What are we to do when txn costs rise as you describe?
I know plenty about the Bitcoin protocol, but I havent had time to do DD on Segwit or LN.
The entire "transaction fees are high" narrative is a combination of profitable miner spamming the system (to support the big blocker takeover narrative) and wallets having terrible fee estimation programs so that the wallet makers don't have to deal with the tech support when a transaction isn't in the very next block.
History does not support this claim.
> If you aren't in a hurry
Unfortunately almost all commerce is in a hurry.
The entire "high transaction fee" narrative is due to miners profitably spamming the network to drive up transaction fees -- which they could only do with ASICBOOST and pre-segwit.
Can you clarify what this means? Last I read, Lightning was 18 months out. But not really, that's just a number tossed to a crowd. The preview tech published a month ago is nowhere near being ready for use.
Anyways you're right that maybe I was a bit too optimistic. Bitcoin is getting popular as a store of value faster than it can handle the scale of being an easy-to-use currency. The blocksize drama will probably keep on going :(
Over the next 5 years LN has the potential to really explode in capability and capacity.
At this point all of those transactions haven't been broadcasted to the network, it's private between you and the lighting node. Normally you need both parties to agree to send a transaction but even if the lightning node is malicious they can't spend any Bitcoins and if they don't broadcast the highest transaction they got from you then at the end of the lock period you can take all of your Bitcoins back.
Basically neither party has to trust each other, the worst that a malicious lightning node could do is make you wait until the channel closes to get your remaining balance back.
Lightning is also not meant to replace all bitcoin payments, for now channels are limited to something like .1 btc to promote decentralization.
(By comparison, Visa does close to 2000 transactions per second on average, and can handle 20000 peak.)
What tech has to get better exactly?
It's also worth noting that segwit transactions are more efficient and segwit paves the way for even more efficient transaction formats in the future, so that 225byte average transaction size will go down over time.
SegWit was just activated in August. The core client that utilizes it is still in testing (or was recently released) so segwit is still very early in its adoption stages.
Along with Lightening Network and side chains (a whole other form of scalability) and other layer 2 solutions, SegWit contains multiple layer one scalability solutions, not just SegWit itself and the block size increase, but efficiencies across the board-- and over the past 2 years core has been making bitcoin more efficient, and scalable, with many releases and many optimizations... none of which are talked about in the "scaling debate" because its really a "I want to be king fo bitcoin" debate.
https://www.civic.com/ is based on the Bitcoin protocol. It's a service for putting signed information about a user in a block chain, so that you don't need to implement your own verification of adresses, phone numbers, e-mails, etc being real, as long as you trust the signer of that information in the Civic block chain. This is a read heavy, not write heavy, block chain - reads of signed information is more common that writes of the signatures.
It's definitely my favorite block chain based technology that isn't a currency.
If any of the proofs changes, it puts it on a timeline. If your account has a hard reset it notifies all your followers.
Basically its safeish key sharing in the modern world.
If I don't want to give keybase my private key, which I obviously don't, how can it sign my tweets?
What is even the use case of signing my tweets? Presumably if I can access my account, t's me. There's only two alternative scenarios: someone hacks my account, or twitter is trying to screw me. Is there really a use case for this? Other than a few very high risk individuals, I don't think there's a point in signing tweets.
One of us (or both) is missing something here :D
In addition, it also has some additional features to make cryptography slightly easier for the layperson, such as support for PGP through a web UI: this is why you might want to upload your private key, though they make it clear this is a bad idea in high-security situations. For all of the core service, Keybase generates various 'device keys' which sign these identity verifications, the private keys for which never leave the users' computers.
The idea is that you tweet a message that's signed with your PGP key, then publicly register the URL of your tweet on the Keybase server. Later, when somebody requests your public key on Keybase, the Keybase client also requests that URL from the Keybase server, then scrapes it, verifies the signature, and tells that user what your Twitter handle is. That way the user knows that the owner of that private key is the same person who owns your Twitter handle.
Obviously this isn't secure by itself against a compromise of your Twitter account, but if you do this with multiple social media profiles (and/or domain names, and/or various other things), then the proof of identity becomes stronger. And there are some additional security measures based on timestamping and cross-signing.
You don't sign all of your tweets. Just one which proves that the person who owns the keybase account also owns the twitter account in question. Through transitivity, you can then prove that you are the same person who owns a particular facebook/github/HN account if you also sign a post on those services.
> Presumably if I can access my account, t's me.
That proves the person logged into the account is authorised to log in, not that the owner of the account is a particular person or the same person that owns another account on another service.
Keybase can't know who the person logged into the account is either. But they can tweet, and so keybase will tell everyone that the twitter account which has signed tweets using my private keep is tweeting.
This is true. In the scenario where the account is compromised you are supposed to revoke the signature.
(to be explicit: the problem being solved isn't the "double spend" problem, it's the "make the founders rich with minimal effort" problem)
On top of that, payment channels would actually allow your employer to pay you even by the hour, no need to have your paycheck monthly anymore.
The reason employers don't pay more frequently comes down to admin overhead (or other non-banking-network reasons)
Money is a measuring stick, sending price signals throughout the economy. It should be a stable channel through which information is sent.
Rising and falling money supplies corrupts this. I contend, because of not inspite of BTC being finite, if other currencies are pegged or influenced by BTC this will be a befefit economically vs inflationary fiat.
That's not "deflation".
Further, money holding its value is a good thing. The only people who profit from inflation are governments with fiat and miners with bitcoin.
The people always suffer. The only reason bitcoin is going up in value despite inflation is its use case and technological ability is going up faster, and of course it started at zero.
Whatever school of economics you subscribe to, 99% of the time somebody says "inflation" or "deflation", they are not referring to the "money supply" of currency in existence. Instead, they are referring to a change in proportion between that money supply versus how much "economic stuff" people want it for.
Bitcoin will continue to follow its past deflationary pattern as long as the supply of Bitcoins does not keep up with the underlying growth of everything else... And it's hard to see a future where "Number of coins mined this year" grows while "Size of human economy" shrinks.
What you're actually describing is the purchasing power effects of minting more money.
Second paragraph I agree with.
You may not think those gatekeepers care about you, but that's one reason the banking system doesn't rush to adopt bitcoin. They don't want to be at the mercy of the mining pools when it comes to moving billions of dollars between banks. That's why they are instead adopting Ripple and Hyperledger.
What? What part of "there's no counterparty-risk in layer2" didn't you understand?
The only thing they could do is become uncooperative, and the worst thing that this could cause is that you need to wait for your payment-channel to expire to claim your locked deposit, but you would eventually get your money back, and then decide not use that payment hub anymore, and use one that doesn't employ censorship to you.
Take bitcoin. Is it actually decentralized? You need someone to record your transaction on the blockchain. There are, in practice, like 5 gatekeepers - the minkng pools. You are lucky that they currently accept your transaction, but you already see they jacked up the fees. The fees will only get larger as there is more transaction volume and as the # of bitcoins awarded to miners goes down. There you go. You are once again back to paying the miners to be your trusted financial intermediaries. It's just called "miners" instead of "banks" but the database is nearly centrally controlled by a group of five mining pools who have most of the hash rate. Arms races always lead to centralization!
PS: sure you are protected in terms of current ownership, which is valuable, but at any time your account can be frozen.
Which means, every opportunity to try to censor someone will make them not be able to get the fees from that act of censorship. Are you really bringing up a conspirancy in which 5 big entities such as the main mining pools would conspire against some certain bitcoin address? (Remember: in an HD wallet you control many addresses, not one, so it would be really difficult that they actually can identify all addresses of the certain person/entity they want to censor; let alone get together and conspire against that person at the same time.)
> PS: sure you are protected in terms of current ownership, which is valuable, but at any time your account can be frozen.
If you keep saying a lie a thousand times, it will not become truth.
You think this is the first time cartels have figured out they can raise fees to participate in a network?
Look at the Chinese government able to shut down exchanges to prevent people from exchanging bitcoin for yuan.
Look at ICE shutting down websites via a simple takedown note to a domain registrar or an ISP.
Many governments are concerned about money laundering via Bitcoin, or North Korea's stash etc.
Do you really think five mining pools can't be easy targets for freezing someone's account? Come on.
Now, as far as diversifying your holdings into many accounts and currencies -- this is, and has ever been -- the way to try and escape the State seizing / freezing all your assets. Nothing new under the sun.
Just because you call it a lie and downvote me doesn't make it so. Use substantive argument and tell me why the five mining pools CAN'T freeze someone's account, rather than just calling it a lie. Having many anonymous accounts is a different matter -- and it's not easy to keep many anonymous identities totally separate btw.
You know, I really do think permissionless currencies are possible. A database is permissionless to the extent that at least ONE entity authorized to enter your transaction will do it, in a reasonable amount of time. If there are many independent such entities (call them miners, banks, whatever) then the chance that one will "defect" and let you pay someone is higher. It's just that Proof of Work is a terrible way to make that happen sustainably because, as I said, arms races always lead to centralization. (In fact that's how states and empires formed in the first place!)
And since Bitcoin had Proof of Work, it was inevitable that it would come to be controlled by some mining pools in an area where energy is cheap. And I also told you that while you as an individual may not be interesting to China, the BANKS do not want to tie up billions of dollars in a medium where it could be frozen by a few foreign entities. This is not even talking about the volatility etc.
As for you as an individual, the ability to deny you access to pay someone (ie add a transaction to the blockchain) is represented by the rising fees. It's not 0 to Frozen in one step, it's what an intermediate step looks like organically. They can make the fees really high so as to make small transactions infeasible.
Now, you want to be really permissionless? Use credit-money, like Ripple or Trustlines.network . There is no double-spend problem and no need for third parties to approve any transactions between two people. However, credit can only take you so far. Large payments will require a ledger of some kind. Many good protocols exist now that are far more permissionless than bitcoin. Why is bitcoin the best? It just has the most money invested in it for now (market cap). That's like saying MySpace is the best because it's the first.
And if they win the 2x by getting hash power, bitcoin will fork to a new PoW and render their millions in ASICS worthless.
Bitcoin don't care.
The only times they have done that, AFAIU, is when they wanted to pump altcoins (such as Ethereum when there was a lot of uncertainty over bitcoin scaling and community seeing segwit not adopted; or such as BCash when the UASF was coming). Everytime they've done this, they have had to spend a lot of money to do it. We will never know if it payed off, but right now fees are really low.
> Look at the Chinese government able to shut down exchanges to prevent people from exchanging bitcoin for yuan.
Sorry, what does this have to do with blockchain?
> Do you really think five mining pools can't be easy targets for freezing someone's account? Come on.
Not all mining pools are in the same country, so it's not so easy to do that unless you're the NWO. And even if you managed to make the main 5 mining pools censor your transaction, from time to time there are smaller mining pools that mine some block, so if you put a high-enough fee for them, you would eventually move your money.
> Just because you call it a lie and downvote me doesn't make it so. Use substantive argument
I only called any sentence from you as a lie when you were not providing arguments, just FUD. As for me, I tried to back my arguments with reasons all the time. Also I cannot downvote comments that I reply to, so it's not me downvoting you actually.
> Now, as far as diversifying your holdings into many accounts and currencies
I never mentioned "many currencies", and I never mentioned "many accounts". With HD wallets, you have many addresses which all belong to the same account.
> and it's not easy to keep many anonymous identities totally separate btw.
Wrong, please study HD wallets, they are a thing, and it's usage is automatic and not complex.
> They can make the fees really high so as to make small transactions infeasible.
Fortunately, we have Layer2 to save us. Fees will be much lower thanks to that.
> Now, you want to be really permissionless? Use credit-money, like Ripple or Trustlines.network .
I knew all your FUD had some motivation behind it :) Go pump your altcoins elsewhere. Ripple is premined by the banks so using it is like letting the same fiat-money players be the kings of the game again.
No, I don't own any Ripple and I don't care to pump any coins - even if I did why would I do it in an obscure comment thread on a forum somewhere lol.
Or one executive order to block a couple of ports on the great firewall of China (I'm oversimplifying but not by much actually).
if that's not centralized I don't know what is.
the only argument I can think of here is that BTC isn't currently used for "important"/"mission critical" stuff, tx volumes are negligible compared to fiat methods of payment and ppl who use it are mostly crypto enthusiasts, so if hypothetically these pools go offline and it takes forever for their txs to be processed these users would be ok with that. Along the lines of what happened couple of years ago during the DDOS attack.
If my employer pays me in bitcoins from their coinbase account to my coinbase account, that transaction doesn't touch the chain. I can then send bitcoins from my coinbase account to another coinbase account, again without touching the chain.
Why wouldn't the employer pay wages in the layer 2 system to begin with?
Very few employers pay wages denominated in bitcoins. If you're lucky enough that an employer is willing to pay a part of your wage within a layer 2-system, you're right. For all the people who receive their wages in national currency (of whichever country they live in), they have to go via the blockchain, and thus run into this limit.
Also, it seems to me that, if layer 2 protocols want to solve Bitcoin scalability in order to increase adoption, it doesn't make sense for it to depend on everyone having adopted Bitcoin already (which, I would argue, would be the case if most people received their wages as bitcoins).
Very few merchants accept payment denominated in bitcoins, either. And these two statements are clearly tied together. If, upon bitcoin scaling up in the economny, more merchants accepted bitcoins, then it follows that more employers would pay wages denominated in bitcoins.
If the state of affairs remains the same as it is today, then there is no need for me to buy into layer 2 protocols monthly. My monthly spend in bitcoins will remain a fraction of my monthly wage. I could afford to buy into layer 2 annually easily enough.
If more of the economy moves into bitcoins, then employers will pay wages in bitcoins by definition. And at that stage, it will be feasible for them to pay in layer 2.
Either way, I think this exposes a vital flow in your chain of reasoning.
Side note, would the wage be (initially or periodically) agreed upon expressed in US Dollars or Euro (or a local currency) or directly in Bitcoin?
I.e. do you see your employer agreeing on giving you 2,500 US$ /week or 1 Bitcoin/week, and on the other side, would you agree to be paid 4,000 US$/week or 1 Bitcoin per week?
edit: obviously someone got that idea before; my point was meant to be that it would be a shame to use a centralised solution like the services of private companies.
If the structure models current banks in most ways except that the currency isn't in their control, then it will be a massive improvement.
So let's say things have exploded: transaction fees are twice my salary. If I get stiffed on L2 I'll have to pay more in fees than my salary. So my recourse will be to sue my employer into paying the transaction fee
Obvious answer to this: L3
Bitcoin was a cryptography research project that became popular outside of the usual circle of people interested in such things mostly due to these three somewhat overlapping groups: get-rich-quick types, criminals, and people who have deluded themselves into believing that Bitcoin will usurp the world's major currencies.
One those three, only the last group have any interest in massively scaling up blockchain technologies. Those looking to speculate on Bitcoin markets have no such concern, and the criminals are just feeding off Bitcoin's popularity for this rather than having an interest in making it scale; besides, they'd prefer a more anonymized cryptocoin to be popular rather than something that makes public the entire transaction history.
The 'true believers' of Bitcoin are outnumbered not only by these other two groups, but also by the general population who have no use case for Bitcoin at all.
This is why scalability is such a fringe issue for Bitcoin and other blockchain protocols - they're all just solutions looking for mass-scale problems.
Do only the 1st and 4th group hold? The 2nd manipulates the market best they can, and only the 3rd and maybe some in the 1st are actually using it?
May I ask - What do you think are hallmarks of the usual people or the true believers of Bitcoin?
It's not a big upgrade. Any exec at Facebook, Snapchat, Uber, etc. would laugh you out of the room if you suggested that we should have a company-splitting and devastating debate that sidetracks development for 2 years over scaling the platform from 20 million to 40 million users. It just doesn't make sense.
Which is one of the big reasons the small blockers resist the 2mb hardfork. For all the pain that this debate has brought about, there's very little upside in the grand scheme of things. We scale Bitcoin from an insignificant number of users to still an insignificant number of users.
If we find a scaling solution, it's going to come from somewhere else.
The block-chain does not scale, DAG coins suffer form various issues, the only DAG-coin with semi-trustless distributed "consensus" is Byteball.
The implementation sucks, the algorithm is nice and innovative.
SPECTRE  is pretty good, not implemented in any cryptocurrency yet.
They can, but how large a part of the world's work force do you think is able to get their employer to pay out their wage within a Bitcoin layer 2 system? If layer 2 systems only support people who receive their wages within that layer 2 system already, how useful is it really at increasing the adoption of Bitcoin?
Also, as far as I can see, it would require us to redefine what a "bitcoin" actually is. Right now, it constitutes something in the Bitcoin blockchain, whereas some proponents of layer 2 protocols seem to wish that we redefine it to include unconfirmed Bitcoin transactions. I'm not saying this can't become the case, at some point, but right now no one considers the holder of an unconfirmed Bitcoin transaction to be in possession of bitcoins. So, at one level or another, something needs to change.
> The idea of the Lightning Network (which I assume you are referring to) is that you can execute off-chain transactions without needing to trust anyone.
Being off-chain, a LN transaction is not a bitcoin by your definition. While LN might be trustless, it's not the case than an LN-transaction is as good as a bitcoin in the blockchain. With LN, there's a race against time, whereby a node can lose funds received through LN, if it fails to settle on the blockchain. So the two (blockchain-tx vs LN-tx) are definitely not equivalent, but it's possible that future schemes can close that gap.
Timeouts are a necessary part of payment channels, since if you just send your bitcoins to a 2-of-2 multi-sig address willy nilly, the owner of the other key can hold your funds hostage unless you give him half. Hence the timeout, after which funds sent to the 2-of-2 multi-sig address can be redeemed by just a single public key (the sender's). The receiver needs to publish a transaction (that redeems the same 2-of-2 multi-sig output) to the blockchain before this point in time, or the funds received through the channel are up for grabs.
If the employer is willing to only pay fiat, then there is no new problem, is there?
Ehrm, what? So Layer1 is not money for you either? Explain...
PS: I'm not agreeing with that "this is reinventing fiat money" comment.
Like Mt. Gox?
So blockchain transactions only ever happen when someone wants to open a new payment channel (which is only relatively rarely), when someone they directly have a payment channel open with attempts to cheat, and in the rare occasions that someone wants to hold "actual" bitcoins rather than a cryptographic promise of bitcoins.
There's no entity within this system which has central control over currency that goes through this system, and all cheating is detectable with rollbacks in place when it happens, so it's not like a bank, exchange, or even a traditional payment processing network at all.
Note: I have my own qualms with cryptocurrencies and the human layer, but you've got to admit the technological backing is sound within reasonable parameters.
An other new technology to watch is IOTA ( https://iota.org ) not blockchain based, no fees and scalable.
Depending on whether you believe the author, either they did it
intentionally for the implied purpose of attacking competing forks (as
they claim), or unintentionally because they're incompetent. Neither situation sounds good to me.
IOTA also relies on a closed-source "coordinator" for consensus. They
call it "training wheels". Who knows if their "tangle" will actually work in production. Crazy to me that people are pumping so much
money into it w/o any due diligence.
Stop judging things by what they were, unless of course you think the aerospace industry is a space where 2 brothers can build a plane out of wood and push it off a cliff...
Bitcoin is very new, created in 2009, didn't see any real usage until 2010/2011, Mt. Gox blew up in early 2014, and now in 2017 most exchanges follow KYC laws, are built on real trading systems, and can't be compared to Mt. Gox any more than you can compare a Boeing 777 to the wood gliders that mankind first flew on.
Key differences between Mt Gox and the Wright Brothers are that a) the financial industry was well established in 2010, and b) the Wright Brothers were not offering commercial flights to a general audience on their wooden gliders.
The first means that Mt Gox was run by idiots who ignored all of the established best practices around running a financial company. (And was given money by same.) The second means that even if you were right, that Bitcoin was just too new to do well, then they were grossly negligent in offering services to the general public and managing hundreds of millions of dollars in assets.
Of course, the incompetence at scale continued long after Mt Gox. E.g., https://en.wikipedia.org/wiki/The_DAO_(organization)
You may be right that there are now some adults running well-regulated businesses. But that doesn't mean the space isn't full of scam artists, Dunning Kruger goofs, and wide-eyed technoutopian marks. We only have to look at the latest ICO announcements to see that, at best, enthusiasm has run ahead of competence.
But at the same time nobody else was taking it seriously. Look back over the history of banks. Do you really think no "bank" ever lost significant amounts of money? Do you really think there aren't still scam artists and assholes trying to steal people's money? Just the other day my mother got called again by people asking for her social to "fix her credit", does that mean that the incompetence of the financial industry is still at an all time high?
Cryptocurrencies have a lot in common with traditional finance industries, but they are different enough that the previous systems don't work. It's very much the "wild west" right now (which i'll point out there were established "governments" at the time of the "wild west"). The space is still new, and if you are risk averse you should stay away from it, but painting the entire industry as idiots and children makes you look like the idiot.
It's true that Mt Gox might have lost some money even if they had been following known best practices. You're right that Bitcoin is new, and presents new risks. But they wouldn't have been driven out of business with hundreds of millions of dollars of losses. Money given to them by people who were just as credulous, just as believing that the old rules didn't apply.
Yes, there will always be fools and financial scammers. But the proportion and the scope in the cryptocurrency world is much, much larger. In the short reign of the *coins, there have already been enough disasters that somebody has managed to fill a book with them: https://www.amazon.com/Attack-50-Foot-Blockchain-Contracts-e...
And I'll note that I'm not saying the entire space is "idiots and children". Just that the tolerance for incompetence and scam artistry is much, much higher. Which, given that you defend it as being the "wild west", you apparently agree with.
I think Bitcoin was a great experiment since it brought us the blockchain, but with the exception of being a store of value (i.e. digital gold, and thus not having to worry too much about high transaction fees) I don't see it going anywhere. But since gold is worth about $8.2tn globally, that might be sufficient.
Ethereum on the other hand.. by the looks of it that does seem to have a bright future. It improves upon and fixes many of the flaws Bitcoin has.
The scalability properties of Ethereum are dozens of times worse from a raw resource usage perspective, with each transaction on the Ethereum network taking more space to store, more clock cycles to process + verify, and with the whole system being much harder to parallelize.
Ethereum made a lot of long term sacrifices to achieve their short term advantages, and it's already falling apart around the edges. One or two more iterations of hardforks + block size increases (gas limit increases) and your average desktop computer won't be able to keep up with the chain anymore, let alone catch up if starting from scratch.
And that's just one of the many ameture compromises.
1. Do you really want the average desktop computer to sync and verify the entire Blockchain? These things have gotten so huge, even for Bitcoin it's not really reasonable anymore to store the entire chain on a desktop computer.
I think the answer here is no, but I could be wrong.
2. It probably goes against the decentralized idea behind blockchain, but I believe it is good that Ethereum has a clear leader. Someone who can actually (sort of) dictate the path -- at least until the project has gotten to where it wants / needs to go.
Bitcoin would be in a better place if the founder were around.
3. Bitcoin is already falling apart. Once you have to make a transaction, the pain (generally) starts..
4. One of the downsides of Ethereum is the size of the blockchain, but see 1.
I think at least for Ethereum the potential is still there for it to be good, once they fix their issues. This (to me) seems doable, but if you have things to share on why not, please do!
With Bitcoin, you know what the issues are, they are massive and have been around for a while, and they're only getting worse / not getting fixed because people can't reach a consensus. I believe it would be easier to reach consensus if there was a leader.
Most of these things however don't matter if we just see it as a store of value.
Take a look a the following scenario where Bob works for Company A and has a monthly salary of 1.5btc:
- CompanyA opens a 100btc channel with Amazon
- Bob has an 2btc channel opened with Amazon
Now lets say, that at a start, channels look like this:
- Company A 100btc -> Amazon 0btc
- Bob 2btc -> Amazon 0btc
As the month goes through, Bob starts spending his money on Amazon and other stores that have channels opened with them. Company A also spends their money paying suppliers and other expenses. After 2 weeks, channels look like this:
- Company A 40btc -> Amazon 60btc
- Bob 0.75btc -> Amazon 1.25btc
Its the end of the month, many Clients have payed their bills, and Bob has almost consumed all his salary.
- Company A 95btc -> Amazon 5btc
- Bob 0.5btc -> Amazon 1.5btc
Now its time for company A to pay salaries. And we go back to step 1. Rinse and repeat.
But I think you are right on one thing. Eventually the 1mb block limit has to be raised.
I'm not sure what you mean by this. A transaction can have lots of inputs, yes, but they take up space -- in fact they are the largest part of the transaction, since they contain signature (~72 bytes), public key (~33 bytes), as well as redeemed txid+input index (32+4 bytes).
The 224-byte transaction used as an example has a single input and two outputs (one destination address; one change address). A standard (pay-to-pubkey-hash) transaction with two inputs and two outputs is ~373 bytes. A 400-input (2-output) transaction would be roughly 60KB.
(I am presuming there is a reason bitcoin was originally designed as peer-to-peer and not client-server i.e. it was not an arbitrary decision.)
The silver lining of the bitcoin movement, if there is one, could be that it provides internet users with reasons to want the network to reliably operate peer-to-peer. Not to mention reasons to want to understand and use asymmetric cryptography.
Bear in mind that, in order for all users to keep a full copy of the blockchain, every time a transaction is carried out every single copy of the blockchain needs to be updated. Beyond a certain level that simply isn't scalable, as it has a big impact on performance. The only pragmatic way to scale the network beyond that point is to only have some nodes having a full copy of the blockchain, at which point you've got more of a client-server model.
This blog post would make sense if it talked about why incrementing block-size is not feasible, which is feasible. Storage gets cheaper every year and block-size has no effect on compute power.
Scaling is a huge point of interest when considering building on top of BTC or ETH.
Maybe dpos will win e.g steemit kevin ross just joined