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.)
I don't think an isolated internet is the solution. That's what North Korea has (to the extent they have internet), and it is a problem in every way. The problem isn't really China, it's there are only a handful of people with the keys to this castle.
Even if nobody in China were on the Internet, Chinese Bitcoin miners could conceivably mine over the telephone. I mean, that's how pure the hashing problem is and how small the amount of information that has to flow back and forth is. (They would need to have an agent in another country who was on the Internet and was willing to relay hex strings between the Internet-connected computer and the person at the other end of the phone call, but the amount of data that would have to be exchanged this way isn't beyond human capabilities by any means.)
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.
1) Mining power is still decentralized. It's not evenly distributed, true, but it is decentralized.
2) Just because some significant percentage of it is in China, doesn't mean it's controlled by one single entity like you're trying to present it here. It's still distributed across thousands of independent miners.
> ...the block chain is controlled by Chinese miners, just two of whom control more than 50% of the hash power.
That's a pretty unique situation.
If a predominant amount of hash power were concentrated in China, but distributed among some large (100+ to 1000+) number of miners, that would be fine. But a system of any kind is no longer decentralized the moment more than 49% of that network is entirely controlled by a small [enough] group of people.
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.
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.
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.
Bitcoin mining could be more decentralized if it better resembled a lottery, where huge numbers of people play for an expected loss.
In other words, the lack of people mining at a loss makes mining profitable and hence subject to forces of centralization.
There are several reasons why mining as a lottery substitute is rare, a major one being that commodity hardware is inefficient by many orders of magnitude,
making even a botnet next to useless.
Perhaps, if a proof of work, whose efficiency gap (with custom hardware) is at most an order of magnitude, were adopted (or slowly phased in), enough lottery players would arise to make mining unprofitable at scale.
Botnets should then just be welcomed as a modest increase in decentralization.
Yes there are several other cryptocurrencies that (at least attempt to) address this issue. Those solutions were disregarded as non-essential technical improvements, and any change to Bitcoin would bring instability. Now perhaps more people will see those as fundamentals to the currencies' goal.
You can see here many alternative coins and an estimated market cap:
A lot of altcoins came up as mere clones of another, pump-and-dump schemes, or with irrelevant or plain bad changes; but there were quite a few valid innovations. Bitcoin has barely changed in it's core protocol. I hope other projects get more exposure in the future (or Bitcoin becomes less afraid of change).
"You can't possibly get a good technology going without an enormous number of failures. It's a universal rule. If you look at bicycles, there were thousands of weird models built and tried before they found the one that really worked. You could never design a bicycle theoretically. Even now, after we've been building them for 100 years, it's very difficult to understand just why a bicycle works – it's even difficult to formulate it as a mathematical problem. But just by trial and error, we found out how to do it, and the error was essential." -- Freeman Dyson
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.
>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.
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.
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.
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.
> 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.
Why are these hydroelectric plants not connected to the main grid that powers Shanghai and Beijing? If the turbines are otherwise literally turned off, surely the transmission losses become irrelevant?
According to Wikipedia the distance shouldn't be an issue with HVDC lines and there's no need to store power, you can take some of the coal plants near the cities offline.
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.
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.
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.
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 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.
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.
In most countries AFAIK it is illegal to mint your own "currency" and call it as such, hence artifact of the state.
Bitcoin lets non-state actors create currency.. incidentally, those most equipped to fund the processing power, are state actors, hence artifact of the state.
You can make your own currency all you want. You just can't make currency and pass it off as state sponsored currency without permission from the state.
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.
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.
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.
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
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.
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.
So I just read the pages you cited, and everything there is talking about recorded history. Barter has been in use since at least 12000BC, according to archaeological records. Your citation doesn't really refute my statement.
The concept of debt predates the concept of barter a long time. Barter requires judging things of equal value. Debt however is easy to understand for humans regardless of ability to have the concept of possession (help me today and i help you tomorrow). I see no reason to believe that money or barter would become before debt in human development.
I fully agree with you about debt/credit. If I give you something without getting anything in return, that can be considered debt.
The point I'm specifically trying to come to grips with is the idea that money came before barter: considering that money is used as a token that is itself bartered for goods or services, I can't understand how money came before barter. It just doesn't make sense, using money is barter.
> The point I'm specifically trying to come to grips with is the idea that money came before barter
I had this discussion a few years ago and one thing that I found interesting as a thought is that barter is not something people like to do. It's generally only used if a token cannot be used because for instance the token is not stable in value. So in times of crisis people would fall back to barter as an alternative but when a stable token of exchange exists, barter does not play a role.
The first thing that develops in a new community is debt and credit but with regards to if money or barter came first there does not seem to be a lot of agreement. I personally feel that barter is quite an unnatural concept because one party will most likely always lose. I cannot imagine that it would come naturally because it's a step back from debt and credit. The only thing it would give you is the ability to trade with someone you don't trust. And that is probably when you tribe meets another tribe which I feel is something that would happen after establishing a local currency.
To me it seems more natural to assume that money would emerge from barter. Barter is only fair to a certain extent. As you (OP) mentioned, in bartering one party will "most likely always lose" while that isn't necessarily always true in pure black and white thinking eventually a barter system would become difficult to maintain in an economy (early or late). Now that would assume that one good or service in the exchange has more worth than the other end of the barter.
I see barter as an early, rugged form of money. Many early civilizations would trade goods such as cows or other animals in exchange for services or other goods. Technically those cows or whatever else WERE a currency. You could give someone 3 cows to help you do X, Y, Z. Replace cow with 300 gold coins and there isn't an enormous difference because each only has as much value as you allow it.
Eventually through barter you'd realize maybe you don't want to give all your cows away or perhaps people begin to realize that sure maybe now they have 3 cows since they did X, Y, Z for you but now the person they need stuff from doesn't need cows because they have 100 cows. Naturally I think currency (coin, paper money... etc) would develop from this to form a more "universal" token for barter so that it could then be more easily used by whoever receives it.
Read graeber. He this fallacious just so story quite thoroughly. in the old times happens pretty much only between tribes, in tense circumstances, not within them. Within a tribe, purposely ambiguous debt systems tend to be used. Also, there's a strong argument that money derives from ceremonial goods used to track the exchange of human lives, in marriage, murder, our slavery.
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.
Private property as you understand it did not precede law/rules, ancients would have not have any concept of private property as you understand it in the modern sense.
> 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.
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.
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.
>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.
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.
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.)
> Money is an artifact of the state; always has been, always will.
Abraham listened to Ephron, and Abraham weighed out for Ephron
the silver that he had named in the hearing of the Hittites,
four hundred shekels of silver, according to the weights current
among the merchants.
Gen 23:16[1]
This silver transaction that occurred thousands of years ago was weight out based on merchant standards. Abraham was a nomad at the time, not belonging to any state. The merchants seem to be the ones who set the weight of the silver currency.
Such a claim requires the Bible be taken at face value, which is not at all certain. It very well could have been written much later than the date it supposedly occurred by political authorities to promote a specific ethno-religious order.
>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.
It's been a good run with a lot of interesting observations. Upcoming iterations will likely solve a lot of the (truly compelling) problems that bitcoin failed to solve.
This "people problem," as Mike calls it, is undoubtedly a result of the mechanics of the blockchain. Slightly different rules may lead to dramatically different (and less insurmountable) people problems.
All of Mike's arguments have been addressed by multiple people.
More than any other individual, Mike has wasted the Bitcoin community's time and caused the most amount of harm to it.
If you want replies to everything he says, go read them on the Bitcoin developer's mailing lists, the various forums, the various reddit discussions, the various blog posts, the various interviews, etc.
Mike is very smart and he makes technical arguments that most people don't understand because most people don't understand the technicals of Bitcoin and all the various variables that are at play.
He introduces panic and drama where none should be introduced, proclaims a "solution", and doesn't tell you that his various solutions are centralized [1] and dangerous.
FYI to readers: a reply to the parent comment was posted but was hidden by the site when a mod decided to ban the account (probably without reading the information and concluding that it was a personal attack and not simply facts being presented).
It included a recommendation to read the information in the original link that was posted, which contains the requested counterarguments here:
It would be nice if when the mods decide to ban an account the site could at least make a note that a response in fact was given using a [removed] label or w/e.
I don't understand why the post you replied to was downvoted and flagged... It seems like censorship of (possibly) valid criticism - not unlike what Mike accused the other side of doing.
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.
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.
There are three types of people who are into Bitcoin:
1. People who are in it out of sheer curiosity.
2. People who are in it to get rich quick.
3. People who have been scammed into it.
The people who are in it out of curiosity are the people I don't take issue with. At its beginnings, I found Bitcoin to be a curious thing because it was a novel and new idea. However, as things progressed and I learnt more about how it all worked, I saw it as a cumbersome idea that wouldn't effectively replace anything and as a result now I'd rather make jokes about it than take anything about it seriously. I've never spent more than $20 CAD on Bitcoin and I have gotten it all back for that matter too.
People who get scammed into Bitcoin typically get scammed either one of two ways: they're either being coerced into using it because they've gotten something like malware on their machines (CryptoWall and its variants) or they see it as an investment alternative. The only times I've ever seen non-technical people experience Bitcoin is when I have to tell them that the malware on their computers will only release their unbacked-up data requires a payment using the cryptocurrency to get it all back. And that is really what a non-technical person's experience with Bitcoin is going to be: it's a way to pay thieves.
As for the get rich quick people, they tend to fall into the third category or they themselves are scammers.
Right now there are two forces dominating the Bitcoin community: the miners and those who are holding out on whatever magical unicorn rainbows makes the coins have value. The miners don't want to see changes to the software because it'll hurt their bottom line and the people holding and exchanging it want to see these changes so they can benefit. So as a result, Bitcoin has entered a war of attrition and is starting to show its problems. Mike Hearn's leaving is definitely a consequence of this problem.
Earlier yesterday [1], I made a quip about how it's insulting to suggest that we get those who are "unbanked" as a result of living at no-fixed-address (ie: "homeless") should eventually move on to Bitcoin as an alternative to mainstream financial institutions. It's really for the reasons that Hearn made: would you want to wait a random period of time ranging from maybe a few minutes to a few hours for your transaction to go through? It's already insulting enough that they're living at the bottom of society, so why would we want to get them to use a bottom-tier financial system? Why not instead suggest making it easier for them to participate within mainstream banking schemes?
I anticipate based on my last remarks that the responses to this post will consist of feckless anecdotes and pointless accusations that I and others have a "problem" with Bitcoin. I guess to a certain extent the statement of me having a problem is true, but at the end of the day Hearn is right.
Bitcoin is a failure and if you invested into it then you're getting what you deserve. If you think that it isn't a failure then you obviously didn't comprehend Hearn's writing.
>maybe a few minutes to a few hours for your transaction to go through?
Credit cards take 180 days for the transaction to confirm. Paypal is able to be clawed-back for up to almost the same amount of time. Cash can be counterfeited. Even some bank wires can be clawed back. Bitcoin works as a payment mechanism.
> Credit cards take 180 days for the transaction to confirm. Paypal is able to be clawed-back for up to almost the same amount of time. Cash can be counterfeited. Even some bank wires can be clawed back. Bitcoin works as a payment mechanism.
On average, an electronic transaction on your credit card will not be visible to the consumer for one or two days, depending on the merchant. This can be delayed if the merchant and all other parties are taking in a large volume of transactions, but it will show up. Other reasons include allowing for modifications to the transaction (such as merchants who wish to include tips which is a manual process), but if the transaction is electronic, it will appear visible to you within a day or two.
With EMV being in place in the majority of the world and also ignoring some of its security problems, merchants don't have to be concerned about a fake credit card being used as much as they once had to.
With Bitcoin, the merchant won't be able to tell if the transaction is approved without having to wait an onerous and unpredictable amount of time. If this is a restaurant, are we to expect that the person who's paying with Bitcoin will wait for the transaction to be received on the other end?
Credit card transactions run in the realm of 100,000,000,000 transactions per year globally [1], or 274,000,000 per day, or 3,200 per second. At best as of this current writing, Bitcoin can handle anywhere between one to three transactions per second. A delay of one or two days of a transaction on my Visa card to show a meal I had a restaurant is acceptable considering the volume per day, but being that Bitcoin takes anywhere between a few minutes to a half-day to just process the transaction when it operates at <1% the speed is just pathetic.
You cannot tell me with a straight face that compared to credit cards Bitcoin is able to scale and act as a "[workable] payment mechanism".
Surely, before claiming I could be lying you at least googled credit card chargebacks?
This is an example from Discover:
"If you have found a charge you believe is incorrect, you may request billing assistance. You have 120 days from the date of the transaction to open a dispute online. For disputes older than 120 days, please contact 1-800-DISCOVER. Most transactions can be disputed once the charge posts to your account, however, please wait until your first monthly statement after the transaction to report a missing transaction."
> Credit cards take 180 days for the transaction to confirm.
Now you're going on about chargebacks. Of course the window for a chargeback is going to have a lengthy period of time. Chargebacks involve a manual process where someone has to identify a payment that they wish to dispute.
What is with the attitude you have? I wasn't going on about anything, really. You brought up transaction times which are related to confirmation times. Anything other than bitcoin is molasses-like.
> What is with the attitude you have? I wasn't going on about anything, really. You brought up transaction times which are related to confirmation times. Anything other than bitcoin is molasses-like.
How is a credit card "molasses-like" when it is capable at this very moment you're reading this response of doing 1,000 times more than Bitcoin?
In the time it took to load this page (100 ms), at least 300 credit card transactions have successfully gone through whereas this cryptocurrency nonsense hasn't even completed one.
You don't get it. Every 7 or so transactions that bitcoin has processed in that couple or so seconds cannot be clawed back, as in NEVER, unless there is a flaw in very popular and important cryptographic technology which in of itself would mean a whole lot worse things can/will be happening besides your 0.01 BTC coffee being clawed back. Those 300 credit card transactions can be clawed back for up to 100+ days. If you are a fraud, you can sit back and relax for a few months before scamming someone.
> Every 7 or so transactions that bitcoin has processed in that couple or so seconds cannot be clawed back, as in NEVER
Normal people read this and hear “if you don't notice theft instantly there's nothing you can do”. This is not the persuasive sales pitch which you seem to think it is.
To clarify my stance: I am not pitching bitcoin to anyone on hackernews (this is not a Show HN). The ability to not claw back bitcoin is a reality, unless there are flaws in the technology behind bitcoin. I believe this is a feature and society could manage to change its ways regarding transacting as a result of that reality.
So … how does anti-fraud work? There's no third party to process charge backs and unlike physical currency a theft can cross international borders near-instantly.
This sounds like wire transfers but everyone is exposed by default and there's no third-party monitoring for fraud. How am I wrong for thinking that sounds like everyone having to pay for their own private security service?
You are responding to a parent poster who wants "society ... to change its ways regarding transacting". They are directly arguing that society is wrong and needs fixing.
You cannot convince someone making that argument by invoking empathy.
Credit card transactions are reversible by a third party that is supposed to only exercise such power when it believes the original transaction is fraudulent, and is in turn accountable to a very robust legal system.
With reversible bitcoin transactions, the person paying can unilaterally reverse the transaction in a definitive way, without any way to appeal the reversal.
I think it's clear we are talking about fairly different threat models, even if you are all for fully irreversible transactions without any centralized control.
This is precisely it. The idea that Bitcoin is going to work better than credit cards because you cannot claw transactions back and saying it leads to leads to less fraud is absurd. As a consumer, I like knowing that if I purchase something via my credit card that I have the ability to claw back my payment should I find that I have been defrauded.
What is being missed by this person is that with Bitcoin there is no option for this and it relies on the honesty of all parties involved which does not make for a good model.
I mean, in many contexts I would ok to pay in a way that cannot, under any circumstances, be reversed. Specially if the other side of the transaction is equivalently irreversible (that's the whole idea behind smart contracts). For the things where reversing payments is a desired feature, you can build that on top of crypto-currencies (e.g. by using an escrow), so is not like it has to be the wild west. You can get reversible payments or irreversible payments (after confirmation) depending on what the transacting parties need. This flexibility is a good thing.
The problem is that this recent change, allows you to claw back your payments without any third party signing off on it, and without your counterpart being able to appeal the claw back. It is also a "feature" most people don't know about, because it is the consequence of the low level implementation of something designed to solve another problem altogether. This change existing and being unknown will lead to more fraud vs plain old "irreversible" transactions. And it is strictly worse than being able to claw back your transactions by appealing to the credit card processor, even if under Bitcoin the payment becomes "fully irreversible" earlier than under card processor rules.
The argument for why this is not a bug, is that even before this change, a transaction could be reversed via a double spend with a certain probability. However, this change makes unilaterally reversing a transaction trivial and certain for multiple hours after it was originally created.
> For the things where reversing payments is a desired feature, you can build that on top of crypto-currencies (e.g. by using an escrow), so is not like it has to be the wild west.
As it stands with credit cards, it's 180 days maximum for a chargeback; meaning that the consumer has six months to make up their mind on any transactions they may not deem acceptable.
How long should it be in escrow if we're to switch to Bitcoin? I don't see how merchants will want to wait six months for them to see any payments and I don't see how consumers will want to see the timespan lessened.
The only people affected are those who accepted 0-conf transactions. If you accept them, either you trust the person, or you accept the risk. In the first case, this change makes no difference. In the second, you should be checking for the flag that says the payment was opted in to RBF.
>However, this change makes unilaterally reversing a transaction trivial and certain for multiple hours after it was originally created.
This is false: it is trivial until accepted into the blockchain. That usually happens for normal transactions far sooner than several hours.
> The recent change is entirely opt in. [...] In the second, you should be checking for the flag that says the payment was opted in to RBF.
Do you know if most common bitcoin wallets and payment processing APIs accept or reject payments which have opted in to RBF? It might be a configuration issue, but how big a deal this is depends entirely on what the default configuration is. Still, thanks for the clarification. From the article I assumed all transactions were RBF capable now, without any way to disable it.
> This is false: it is trivial until accepted into the blockchain. That usually happens for normal transactions far sooner than several hours.
Fair enough. The point is that confirmation might take several hours. If I want to accept 0-conf transactions for say, my Bitcoin-powered public coffee machine (not an actual product, but should be...), then I feel a bit safer if canceling 0-conf payments is hard to do and unreliable, even if I don't have any strong guarantees. Waiting even a few minutes for confirmation before brewing coffee might result in grumpy sleepy customers ;)
>Do you know if most common bitcoin wallets and payment processing APIs accept or reject payments which have opted in to RBF? It might be a configuration issue, but how big a deal this is depends entirely on what the default configuration is.
I don't know. Any serious business (which, unfortunately, doesn't describe many bitcoin ones) should be monitoring them, and frankly, as I said above, if you're accepting 0-confs and not checking for the flag, and sending irreversible products, you're beyond my sympathy. Official guides to accepting bitcoin always say to wait several confirmations, and anyone accepting zero confs has make that decision deliberately.
> If I want to accept 0-conf transactions for say, my Bitcoin-powered public coffee machine (not an actual product, but should be...), then I feel a bit safer if canceling 0-conf payments is hard to do and unreliable, even if I don't have any strong guarantees.
As far as I can see, this is entirely alleviated by the opt-in part. Just reject any transactions that opt in.
I've seen people complain that users will opt in by default and be turned off if they need to wait, but that's a problem with whatever wallet they're using. If I was designing a wallet, I'd make an "enable undo?" button, with a warning that said "if this is checked, you can undo until it posts, which usually takes a few minutes. Be aware that some merchants won't accept such transactions, so if you're buying something instantly then make sure the merchant is ok with it.", and merchants should have signs telling people to turn off the undo feature.
> Credit cards take 180 days for the transaction to confirm.
I've worked on batch settlement software and never heard of this. The payment processor has very strict timelines that must be followed for each phase (auth, submission, clearing, settlement). Funds usually appear in bulk the next business day after settlement.
> Cash can be counterfeited.
And easily spotted (in the US). This is more an issue for people than retailers because the banks will almost certainly notice it.
> Even some bank wires can be clawed back.
This is really fucking hard and easily mitigated by immediately wiring the money to another account at a different bank.
The purchaser can only unilaterally reverse if 1: they opted in to that, in which case the recipient shouldn't accept a zero-conf and 2: it hasn't hit the blockchain yet.
A credit card user can declare the card stolen within a day or two and all transactions will be cancelled. Sure, if the merchandise was shipped to his house or otherwise traceable to him, they might go after him legally, but you can go after a bitcoin user legally as well. You can't really fight a "card was stolen" fraud, except that eventually a credit card company will catch on and blacklist you.
> Funds usually appear in bulk the next business day after settlement.
That's not a confirmation, that's you temporarily being loaned the funds; confirmation is when charge back is no longer possible and you actually for sure have the funds.
But if you defraud someone of bitcoin and they can't reverse the transaction, you may have possession of it but you don't have the legal right to it.
The credit card and paypal systems have evolved to place most of the risk on the merchant because the merchant is generally both better able to prevent fraud and better able to bear the cost of it, while having merchants defrauding customers is extremely unpopular and ruins adoption of the system.
Bitcoin does it the other way round: all the risk falls on the customer. Unsurprisingly this makes fraud, loss and counterparty risk big problems for bitcoin adoption.
Yes, but most fraud is hitting merchants via charge back and they don't like it. Bitcoin reduces merchant fraud, and that's the point; it's cash, when you buy something with cash you don't get to take it back after you get home. Cash is always more risky for the customer, but you can build up escrow systems on top of said cash system to handle customer fraud issues. Bitcoin solves the merchant fraud problem by giving them an option besides the fraud ridden and unsafe credit card system and the evil charge back that hurts so bad. It's hard to sell things online when you have to deal with card fraud and charge backs.
This notion that "customers" must have fraud protection is false; people use cash every day without any fraud protection. The credit card companies have sold people on the idea of fraud protection because it's necessary in a system when you give your private key (card number) to every merchant you deal with and your private key is often stolen. Credit card protection is a solution to a badly designed pull based credit card system; it solves a self created problem. A cash based system like bitcoin does not require fraud protection, it's cash.
it's cash, when you buy something with cash you don't get to take it back after you get home
Well, sometimes you do, consumer protection law guarantees that if it's defective or not as described.
It's hard to sell things online when you have to deal with card fraud and charge backs
How widespread is this, quantitively?
people use cash every day without any fraud protection
Yes - in face to face transactions where you can inspect beforehand and complain afterwards. And people are advised not to send cash through the mail because - guess what - it'll get stolen.
The credit card and a bunch of related non-cash systems like traveller's cheques were invented because travelling with or doing large cash transactions is a risky hassle.
Anecdotelly, I work in online retail, fraud is always a problem and we turn away business to avoid iff'y situations because of it and get attacked by streaks of stolen cards from time to time. Fraud is a real problem for merchants; you can't fight a charge back, you're out the money and the good and you just have to eat it and say thank you while getting killed on credit card fees. Credit cards suck for merchants, we accept them because we must, everyone prefers cash.
>it's insulting to suggest that we get those who are "unbanked" as a result of living at no-fixed-address (ie: "homeless") should eventually move on to Bitcoin as an alternative to mainstream financial institutions.
What about Africans who have no access to a bank but have access to a cellular device?
Meanwhile, you give your credit card number to someone and they can just pull money out of it. The $15 transaction you agreed on is more like a gentlemen's agreement just like unticking the "auto-renew my subscription" checkbox. As you use your credit card, over time you give more and more people a direct line of access to your credit until it expires or gets revoked. That you might notice on your statement if someone abuses it or that you might remember to cancel that 14-day free trial only makes it slightly less precarious.
Both methods of payment have their uses, but a pull-based system isn't the default model I want for 99% of my payments.
Until I can generate credit card numbers on the fly with one-time-use amounts of money, Bitcoin helps solve the problem by giving me push payments.
> Meanwhile, you give your credit card number to someone and they can just pull money out of it
Here's a Bitcoin private key: 5JcgxNrn4WFcA8trEix7ComAyLNEsDEyBqYVjEo8JaaXWQQNg1u
Now you have the ability to drain whatever coins are in that wallet and I'll never see them again unless you somehow decide to return them to me.
You can probably convince a layperson to give you their private key through the same means you could ask them to tell you their passwords or whatever personal information they should not divulge.
> As you use your credit card, over time you give more and more people a direct line of access to your credit until it expires or gets revoked.
Credit cards are a form of payment. I go and pay my bill for using that credit card. A month before the card expires, the issuer sends me a new card. Provided I don't neglect to pay my bill and don't abuse it, my credit card will almost always allow the transaction to go through immediately.
> Until I can generate credit card numbers on the fly with one-time-use amounts of money, I'll have a use-case for Bitcoin.
"To access the ShopSafe service, sign in to Online Banking and choose Use ShopSafe from your credit card Account Activity screen. Enter your spending limits and the ShopSafe service will automatically generate a temporary 16-digit account number, with expiration date and security code, that allows you to complete your purchase while protecting your privacy."
"When shopping online or by mail order, you can use a randomly generated Citi card Virtual Account number instead of your real account number. Simply click Enroll in/Get below to begin using Virtual Account Numbers.
All purchases made with your temporary number will appear on your monthly statement with your other purchases and will include the Virtual Account Number that was used for each transaction."
> Here's a Bitcoin private key: 5JcgxNrn4WFcA8trEix7ComAyLNEsDEyB...
Notice that it's a private key that's paired with a public key. You give a hash of the public key to accept payment, and revealing your private key is the doomsday event in its security model.
Meanwhile, with most credit cards, the entire interface is that you hand out the secret directly. Maybe they'll even make a carbon copy of it with a click clack machine depending on where you live, and this is acceptable. So acceptable that here in 2016, on-the-fly credit card numbers is a niche service offered by a few companies and you need to install a desktop Adobe Flash app to even use it.
> Meanwhile, with most credit cards, the entire interface is that you hand out the secret directly. Maybe they'll even make a carbon copy of it with a click clack machine depending on where you live, and this is acceptable. So acceptable that here in 2016, on-the-fly credit card numbers is a niche service offered by a few companies and you need to install a desktop Adobe Flash app to even use it.
You're overlooking something here.
Ignoring the fact that the merchant won't typically see the credit card number if I am using it physically, you are correct that I have to offer it up to them if I am using an online store. However, there is an important distinction between a credit card number and a Bitcoin private key that you're neglecting to look at here.
A credit card number is just a reference to an account between the card holder and the issuer. In a situation where the credit card number becomes exposed via negligence not on the part of the card holder, the card holder themselves in almost all situations is not liable for the charges incurred that were not of their own. So if Target for example gets breached like they did in 2014 where millions of credit card numbers were exposed, the account holders of those affected cards are not on the hook for any purchases that they did not make. In fact, issuers and payment processors were largely able to determine who was affected and issued new cards very quickly.
The only situation I can easily recite where you are on the hook for your credit card number being exposed is if you willfully expose it to a third party. It is at this point that the credit card issuer can tell you to effectively "buzz off" and pay for the undesired purchases.
In the situation where the card becomes compromised, the solution for the issuer is to issue a new credit card number and then to deny all use of the previous number going forward. All charges are then reversed and it's a matter between the payment processor and the merchant to flesh things out. In a few days the consumer will have a new card and even in extreme cases with certain classes of credit cards, they'll have a card hand-delivered to them within 24-hours.
With Bitcoin, if the private key becomes exposed (and there are many, many ways for this to occur), then there is no recovery nor any third party to rely on to get the coins back. You're effectively out of luck and must then generate a new private key and public key and start anew.
Also with Bitcoin you need to install a third-party application on your phone or computer in order to make use of it. I can easily send a payment via credit card via telephone, Internet, or in person.
What about the people who know just enough to be both sour and aggressively, passionately wrong when they seek validation from other people about how bitcoin 'has failed'.
Bitcoin is literally working right now. I order food with it, avoid currency conversions with it, buy blankets with it...
When people say it has failed it is pretty obvious they have some sort of emotional investment and are not objective.
The Zimbabwe Dollar was literally working in the sense you mean it too. You could buy goods like bread with trillions of it, etc. So I think a currency's definition of success is more than that.
The Zimbabwe dollar was centrally controlled by a government which was printing it as fast as they could, and it only worked under the most extreme cases. Anyone holding any amount of dollar would see it's value destroyed by the government who was in sole control.
In any event he said 'bitcoin has failed' which is ridiculous.
I don't know about bitcoin, but your logic is flawed: "The Titanic is working right now. I'm floating in the middle of the ocean, drinking wine, listening to great live music" and we know how that went.
The titanic wasn't a decentralized piece of software being run by hundreds of thousands of people. Many people are constantly trying to manipulate and attack it. It isn't sitting serenely in the ocean. If the Titanic had ice bergs smashed into it constantly and then suddenly sank it would be a different story.
"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.
As an outsider, the only thing I can take from this is a certain sad feeling that it's a demonstration of a pure wild west unregulated and uncontrolled economy devolving into utter tyranny. You've got your oligarchs, your civil war, your rent seeking, and maybe you'll end up in a year or two with an outright winner. At which point that winner might as well cancel bitcoin, declare themself king and issue a central coinage.
Well, that and "Bitcoin has become garbage, avoid at all costs".
Pretty good article, and a great overview of the blocksize controversy.
Also a great exhibit of some stereotypical programmer social problems; we don't get a lot of middle ground, most programmers are either openly hostile and combative or so deathly afraid of confrontation and responsibility that they give away their authority so that they don't have to handle the pressure. Gavin should've kept control. Bitcoin is learning exactly why a strong central authority is so desirable in money exchange: it keeps the value of the currency stable by preventing panic and confusion over issues like this.
Many discussions of Bitcoin claim that this power is transferred to "the network" to make the final decision, which sounds very egalitarian and democratic, but Bitcoin failed to provide the controls that would prevent power hoarding and ensure that the people who depend on bitcoin were fairly represented. This is one reason why modern democracies are structured within the framework of a republic. This is probably one of bitcon's hardest to solve problems, since the hardware to get respectable hashrates is unobtainable for quite literally everyone who doesn't have access to their own microfabrication facilities. Even if one of the specialty bitcoin hardware makers had a really good, cheap chip, why would they share it? They'd hoard all the hashpower for themselves. Litecoin attempts to address this by hasing with scrypt, under the belief that it's harder to hoard power with custom hardware if the algorithm uses a lot of processing power and memory instead of just a lot of processing power.
Mike failed to mention one incentive that exists to prevent increasing the block size: miners get the transaction fees attached to each block they mine. If the block size is large, there is little contention for space in the blocks, and ergo there is not much reason to incentivize miners to include your transaction in the next block. By keeping the artificial constraint on the block size, people who own a lot of hash power will be gaining a lot more bitcoin for themselves.
I don't think this crisis is insurmountable. So much money has been sunk into bitcoin that I can't believe people are just going to let this cabal take it out. BitcoinXT will gain notoriety through the mainstream press and the resultant sell off among casual investors will freak the big players out and force them into running XT nodes.
> Mike failed to mention one incentive that exists to prevent increasing the block size: miners get the transaction fees attached to each block they mine. If the block size is large, there is little contention for space in the blocks, and ergo there is not much reason to incentivize miners to include your transaction in the next block. By keeping the artificial constraint on the block size, people who own a lot of hash power will be gaining a lot more bitcoin
If the blocks are bigger, doesn't that mean they can hold more transactions and thus get more fees total? Or are you assuming the relative scarcity of transaction space would push fees high enough to overcome that?
>are you assuming the relative scarcity of transaction space would push fees high enough to overcome that?
Yes.
The blocks always contain approximately 10 minutes' worth of transactions because the network periodically adjusts mining difficulty to approximate that target.
Right now, the issue is that there are times when 10 minutes' worth of bitcoin transactions are occupying more than 1MB of space in the completed blocks, which means a processing backlog is formed. Miners prioritize transactions by their attached transaction fee, since they get that fee if they find the block. Thus, users are effectively placing a bid for the network hash power to verify their transaction.
When a backlog forms, customers that want their transaction processed quickly have to outbid others to get a miner to start working on it. If there's not a backlog, their transaction will be included with only a token fee attached because something is better than nothing. Going from 1MB to 8MB means that bitcoin would need 8x more transaction volume per 10 minute block to get back into a transaction backlog, which is the only time that users will attach a meaningful transaction fee to their transactions.
So if the block size goes up from 1MB to 8MB today, there will still be a block every ten minutes, but since transaction volume will presumably remain nearly the same, space in each block won't be scarce and the bidding war won't take off. It'd be a long time before we got back into the same predicament, meaning miners would have to wait a lot longer to start collecting meaningful transaction fees. That's why some people with heavy investments in mining want to keep the block size artificially low: they're trying to instigate a bidding war for their hash power.
It should be noted that this eventuality was always part of bitcoin's design. Bitcoin is programmed to stop "minting" around 22 million coins. At that time, the network will not issue any reward to the miners that find a block (the reward will cut itself down until that number is reached, targeted for approximately 2022 iirc). The solution to this has always been "users will have to incentivize miners with transaction fees".
It's just that the assumption was always that we wouldn't have to deal with that until the network itself stopped attaching rewards to mining. In practice, however, we're in that situation now due to the artificial constraint on the size of a block (which, afaik, is mostly accidental and was never intended to be permanent). The debate is over whether bitcoin should remove the artificial block size constraint and keep its fees negligibly low or whether it should keep the constraint and "allow" miners to start charging more for processing transactions.
I am not surprised to see this first attempt at radically changing how we think of currency is having trouble. I'm surprised that the Winklevoss Twins bought so heavily into it. Hopefully the investors in this industry can take the reigns away from China.
It's kinda sad, but it's gotten to the point that heavyweight players are going to be needed to fix the problem.
I just really hope that the banks either don't figure out how to make everything go in their favor, or that the hands they play work out for the good of everyone.
Really? OP just wished him well and to never see him again (obviously in the context of Bitcoin). English is not my first language, so I may be missing something here.
Although, I remember similar comments when Ballmer left Microsoft and no one was banned nor censored IIRC.
I do think you're missing something. The comment took the form of wishing someone well, but no one who primarily wished to express that would express it that way.
> But Bitcoin Core is an open source project, not a company.
It has some of the shape of an unincorporated association, though. There's a lot of caselaw dealing with disputes arising in those, usually from reluctant courts that were dragged into particularly petty and poisonous disputes.
Given the amount of actual money involved, people might start asking courts to settle some of these questions before too long.
(But don't ask me to do it, I'm not a lawyer and this isn't legal advice).
Guys like Wladimir, Pieter, Gavin, Cory Fields, Gregory Maxwell and Luke Jr have a voice because they’ve contributed many thousands of lines of code. (Lines of code are only a proxy for impact).
You may have noticed Mike Hearn isn’t in the top 100 contributors list. He is the primary author of the Java implementation of a bitcoin library:
https://github.com/bitcoinj/bitcoinj
He started it in 2011, definitely early. But a substantial amount of bitcoin core work had already set the path. There are also similar implementations in many different languages but they are not the primary reference implementation for full nodes.
According to Hearn’s blog post:
“I’ve talked about Bitcoin on Sky TV and BBC News. I have been repeatedly cited by the Economist as a Bitcoin expert and prominent developer. I have explained Bitcoin to the SEC, to bankers and to ordinary people I met at cafes.”
Being cited by journalists is not the same as being a primary contributor.
The disagreement between Hearn and the other developers isn’t about whether to increase capacity, it’s about how. Many of the primary full-node contributors believe a hard-blockchain-fork is a risky approach. Lots of work is being done to explore better options, like segregated witness (http://gavinandresen.ninja/segregated-witness-is-cool).
Mike Hearn tried to (very aggressively) push the idea of increasing the block size with a hard fork. In fact the patch allows node operators to vote and 75% adoption is needed. When it looked like that wasn’t going to pan out, he created Bitcoin XT where “Decisions are made through agreement between Mike and Gavin, with Mike making the final call if a serious dispute were to arise.”
So the claim that Hearn not being able to take over decision making power for the bitcoin community is evidence that bitcoin has failed seems to show something slightly different. It shows that open source software methodology of forking and adoption lets the best implementation win and prevents hostile takeovers.
Mike Hearn is not as impactful to bitcoin development as he or recent news would indicate. Mike leaving the bitcoin community has little impact on the future success or failure of bitcoin.
To be clear, Mike Hearn's unilateral fork doesn't switch over to the new rules when 75% adoption is achieved, or even when 75% of mining is done by supporters - it switches when 75% of the last 1000 blocks indicate support, which can quite easily happen with less than 75% support just by random chance. This is an astonishingly aggressive threshold, and if he succeeded it's almost certain that Bitcoin would fork into two different, conflicting versions of the transaction history for a substantial length of time.
The random chance is very very low. For simplicity, let's say that 50% of the hashing power agree and 50% of the hashing power disagree. Then the probability of getting 750 blocks is 7*10^-59 ( http://www.wolframalpha.com/input/?i=binomial+distribution+n... ) There are approximately 50000 blocks in a year, so the expected time is a lot of millions of years.
This changes when most of the hash power agree. If the 74% agree then the chances are 24% ( http://www.wolframalpha.com/input/?i=binomial+distribution+n... ). The calculation is more complicated because the intervals may overlap, but this would take less than a year.
So, when more than 70% of the hash power agree, it's time to upgrade, but 70% is a clear majority.
(Just for curiosity: With 75% hash power you get a 52% chance. With 76% hash power you get a 78% chance.)
>it switches when 75% of the last 1000 blocks indicate support, which can quite easily happen with less than 75% support just by random chance.
I was astonished when I read this 'consensus' code in the Bitcoin repository. I recommend removing it or deploying an old version of the Bitcoin server. It is a reckless and deceitful (how many users actually understand the tacit consent they are granting by running this code?)
> conflicting versions of the transaction history for a substantial length of time.
Indeed if a new block size is 'forced' with a fork, it essentially creates a new currency. I doubt the new big-block Bitcoin will stand on its own.
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].
This a pretty rude comment. My comment didn't make an argument either way; it just added some context to the thread. You're arguing so aggressively that you've hijacked it in order to slam him.
Could you maybe delete that comment and make it a top-level comment instead? Then I'll delete this one, and the thread will be cleaner.
When the context and information you posted is so obviously a one-sided ad-hominem list of information (that includes the argument of "OMFG, he might have connections to some state intelligence agency"), its quite rude IMO.
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."
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.)
Whether or not Mike might profit from Bitcoin failing (in favor of the alternate cryptocurrencies he works with), the picture he paints is one of inherent instability, mismanagement, and censorship, and it seems like a solid argument. I'm skeptical of where his money comes from, and I don't think he's unbiased enough that I would short BTC just on this article alone. But I'm certainly less bullish on its future than I was.
"The use cases they are looking at and requirements they have cannot be met with the Bitcoin protocol, it just doesn't have the things they need. They are actually spending a lot more time looking at Ethereum than Bitcoin, as it's more obvious how to apply it to their use cases."
Guys like Wladimir, Pieter, Gavin, Cory Fields, Gregory Maxwell and Luke Jr have a voice because they’ve contributed many thousands of lines of code. (Lines of code are only a proxy for impact).
You may have noticed Mike Hearn isn’t in the top 100 contributors list. He is the primary author of the Java implementation of a bitcoin library:
https://github.com/bitcoinj/bitcoinj
He started it in 2011, definitely early. But a substantial amount of bitcoin core work had already set the path. There are also similar implementations in many different languages but they are not the primary reference implementation for full nodes.
According to Hearn’s blog post:
“I’ve talked about Bitcoin on Sky TV and BBC News. I have been repeatedly cited by the Economist as a Bitcoin expert and prominent developer. I have explained Bitcoin to the SEC, to bankers and to ordinary people I met at cafes.”
Being cited by journalists is not the same as being a primary contributor.
The disagreement between Hearn and the other developers isn’t about whether to increase capacity, it’s about how. Many of the primary full-node contributors believe a hard-blockchain-fork is a risky approach. Lots of work is being done to explore better options, like segregated witness (http://gavinandresen.ninja/segregated-witness-is-cool).
Mike Hearn tried to (very aggressively) push the idea of increasing the block size with a hard fork. In fact the patch allows node operators to vote and 75% adoption is needed. When it looked like that wasn’t going to pan out, he created Bitcoin XT where “Decisions are made through agreement between Mike and Gavin, with Mike making the final call if a serious dispute were to arise.”
So the claim that Hearn not being able to take over decision making power for the bitcoin community is evidence that bitcoin has failed seems to show something slightly different. It shows that open source software methodology of forking and adoption lets the best implementation win and prevents hostile takeovers.
Mike Hearn is not as impactful to bitcoin development as he or recent news would indicate. Mike leaving the bitcoin community has little impact on the future success or failure of bitcoin.
Not knowing who he was I didn't get the impression he was trying to say Bitcoin would be in serious trouble without him, only that he had enough involvement to have a good handle on the issue (ignoring if his view was pro/con).
Yeah that's exactly what I think. Software forking (and even blockchain forking) allow us to "vote with our feet" so we don't need to mandate central control.
> You may have noticed Mike Hearn isn’t in the top 100 contributors list.
I've also noticed, there are no any Satoshi Nakomotos in the list of contributors. Does that mean he (Satoshi) was "not impactful to the development"?
P.S.: I'm not following the Bitcoin news. Is Satoshi a nickname of one of those top contributors or the initial author just didn't use version control system? Or am I missing something?
Yeah I was using that as a transition to talk about Mike's other contributions. His bitcoinj contributions are hundreds of thousands of lines. Also I said "Lines of code are only a proxy for impact" and unfortunately there's probably no realistic measure.
I'm not a bitcoind contributor and this is more of a generic observation about how open source projects are controlled in general.
Satoshi Nakamoto is a pseudonym used by Bitcoin's creator and first developer. Anyway, I believe that if Nakamoto never made a GitHub account then they wouldn't show up in the list, even if they had commits.
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?
OP probably means it's a bunch of libertards, charlatans and crazies. Is your post some type of Socratic method to tease out rational discourse or do you really not know that the Bitcoin community is full of insane people?
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.
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.
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.
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)
I'm not an economist, but I suppose that yes, in a sense it's true. An economy requires the value of money to be stable or very slowly decreasing in time. To obtain this, the amount of money in circulation must roughly match the amount of wealth. Since wealth is usually increasing, so has to be the total amount of money for its value to remain stable.
If you want an economy that encourages investment and trade then you want people to have some inherent motivation to spend money rather than hold on to it. The easiest way to do this is by introducing small amounts of inflation. At the very least we know that more people are being produced in the world, and people desire money, so merely by the practice of reproduction we are creating more demand for the same amount of money over time.
It's a nice story, but it's unconvincing. I would agree that a fixed supply of money might become more valuable as human population increases.
But I'm utterly unconvinced that 'prices can only increase' for the economy to work. For example, in electronics prices for hardware have generally fallen in nominal and real terms and yet it's still a pretty big industry.
"Nice story": it's not like I'm making up stories to convince people.
Think of a house: would you buy one if you knew that just by waiting a year its price would be 80% of what it is now? And the year after 65%? You'd probably just wait. If you waited long enough, you could buy one for, literally, today's peanuts.
Electronics sounds like a good counterexample, but electronics are also developing at extremely high speed. The price of a given device decreases very rapidly in time, but new more powerful devices come on the market every day. Sure, you could have waited five years to buy an iPhone 1, but that piece of electronics is now almost worthless compared to the other options you have on the market.
451 comments
[ 3.1 ms ] story [ 437 ms ] threadhttp://plan99.net/~mike/
(We plan to build something to aggregate URLs so this will become less of an issue.)
Is it a problem for the rest of the world?
And I wasn't talking about Bitcoin in particular.
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.
1) Mining power is still decentralized. It's not evenly distributed, true, but it is decentralized.
2) Just because some significant percentage of it is in China, doesn't mean it's controlled by one single entity like you're trying to present it here. It's still distributed across thousands of independent miners.
> ...the block chain is controlled by Chinese miners, just two of whom control more than 50% of the hash power.
That's a pretty unique situation.
If a predominant amount of hash power were concentrated in China, but distributed among some large (100+ to 1000+) number of miners, that would be fine. But a system of any kind is no longer decentralized the moment more than 49% of that network is entirely controlled by a small [enough] group of people.
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.
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.
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.
(2) Take both pools offline.
(3) Profit.
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.
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.
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
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/
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.
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.
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.
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
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.
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.
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.
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...
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.
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.
[0] http://www.coindesk.com/bitfury-details-100-million-georgia-...
http://szabo.best.vwh.net/shell.html
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/
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.
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.
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.
https://en.wikipedia.org/wiki/Canadian_Tire_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...
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.
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.
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
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.
This is patently false. Money has existed before states, and it has existed without states.
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.
(For anyone who wants to follow along, the PDF can be found at https://libcom.org/files/__Debt__The_First_5_000_Years.pdf)
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.
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.
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.
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.
Private property as you understand it did not precede law/rules, ancients would have not have any concept of private property as you understand it in the modern sense.
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.
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.
I don't know if livestock domestication would be said to be a precursor to gold in some places.
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.
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."
This. Or, to restate it, to mistake social solutions to 'money' as technical problems that need fixing.
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.)
[1] https://www.blueletterbible.org/esv/gen/23/16/s_23016
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.
This "people problem," as Mike calls it, is undoubtedly a result of the mechanics of the blockchain. Slightly different rules may lead to dramatically different (and less insurmountable) people problems.
https://lobste.rs/s/82pz7r/curated_links_to_understand_dange...
This appears to be the 89th obituary for Bitcoin?
https://99bitcoins.com/bitcoinobituaries/
More than any other individual, Mike has wasted the Bitcoin community's time and caused the most amount of harm to it.
If you want replies to everything he says, go read them on the Bitcoin developer's mailing lists, the various forums, the various reddit discussions, the various blog posts, the various interviews, etc.
Did you click the first link I posted and read all the links within it? If not, start there:
https://lobste.rs/s/82pz7r/curated_links_to_understand_dange...
You have to understand, responding to Mike's posts is literally a full time job:
https://jasonapril.files.wordpress.com/2014/06/bpgpidiigaafj...
Mike is very smart and he makes technical arguments that most people don't understand because most people don't understand the technicals of Bitcoin and all the various variables that are at play.
He introduces panic and drama where none should be introduced, proclaims a "solution", and doesn't tell you that his various solutions are centralized [1] and dangerous.
[1] https://www.youtube.com/watch?v=7S1IqaSLrq8
It included a recommendation to read the information in the original link that was posted, which contains the requested counterarguments here:
http://pastebin.com/TuTdggVe
As well as in the comments and links within the original link: https://lobste.rs/s/82pz7r/curated_links_to_understand_dange...
It would be nice if when the mods decide to ban an account the site could at least make a note that a response in fact was given using a [removed] label or w/e.
All kinds of famous/important people predict Bitcoin's death every week, but it just keeps going.
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.
================================================
There are three types of people who are into Bitcoin:
1. People who are in it out of sheer curiosity.
2. People who are in it to get rich quick.
3. People who have been scammed into it.
The people who are in it out of curiosity are the people I don't take issue with. At its beginnings, I found Bitcoin to be a curious thing because it was a novel and new idea. However, as things progressed and I learnt more about how it all worked, I saw it as a cumbersome idea that wouldn't effectively replace anything and as a result now I'd rather make jokes about it than take anything about it seriously. I've never spent more than $20 CAD on Bitcoin and I have gotten it all back for that matter too.
People who get scammed into Bitcoin typically get scammed either one of two ways: they're either being coerced into using it because they've gotten something like malware on their machines (CryptoWall and its variants) or they see it as an investment alternative. The only times I've ever seen non-technical people experience Bitcoin is when I have to tell them that the malware on their computers will only release their unbacked-up data requires a payment using the cryptocurrency to get it all back. And that is really what a non-technical person's experience with Bitcoin is going to be: it's a way to pay thieves.
As for the get rich quick people, they tend to fall into the third category or they themselves are scammers.
Right now there are two forces dominating the Bitcoin community: the miners and those who are holding out on whatever magical unicorn rainbows makes the coins have value. The miners don't want to see changes to the software because it'll hurt their bottom line and the people holding and exchanging it want to see these changes so they can benefit. So as a result, Bitcoin has entered a war of attrition and is starting to show its problems. Mike Hearn's leaving is definitely a consequence of this problem.
Earlier yesterday [1], I made a quip about how it's insulting to suggest that we get those who are "unbanked" as a result of living at no-fixed-address (ie: "homeless") should eventually move on to Bitcoin as an alternative to mainstream financial institutions. It's really for the reasons that Hearn made: would you want to wait a random period of time ranging from maybe a few minutes to a few hours for your transaction to go through? It's already insulting enough that they're living at the bottom of society, so why would we want to get them to use a bottom-tier financial system? Why not instead suggest making it easier for them to participate within mainstream banking schemes?
I anticipate based on my last remarks that the responses to this post will consist of feckless anecdotes and pointless accusations that I and others have a "problem" with Bitcoin. I guess to a certain extent the statement of me having a problem is true, but at the end of the day Hearn is right.
Bitcoin is a failure and if you invested into it then you're getting what you deserve. If you think that it isn't a failure then you obviously didn't comprehend Hearn's writing.
[1] - https://news.ycombinator.com/item?id=10898408
Credit cards take 180 days for the transaction to confirm. Paypal is able to be clawed-back for up to almost the same amount of time. Cash can be counterfeited. Even some bank wires can be clawed back. Bitcoin works as a payment mechanism.
On average, an electronic transaction on your credit card will not be visible to the consumer for one or two days, depending on the merchant. This can be delayed if the merchant and all other parties are taking in a large volume of transactions, but it will show up. Other reasons include allowing for modifications to the transaction (such as merchants who wish to include tips which is a manual process), but if the transaction is electronic, it will appear visible to you within a day or two.
With EMV being in place in the majority of the world and also ignoring some of its security problems, merchants don't have to be concerned about a fake credit card being used as much as they once had to.
With Bitcoin, the merchant won't be able to tell if the transaction is approved without having to wait an onerous and unpredictable amount of time. If this is a restaurant, are we to expect that the person who's paying with Bitcoin will wait for the transaction to be received on the other end?
Credit card transactions run in the realm of 100,000,000,000 transactions per year globally [1], or 274,000,000 per day, or 3,200 per second. At best as of this current writing, Bitcoin can handle anywhere between one to three transactions per second. A delay of one or two days of a transaction on my Visa card to show a meal I had a restaurant is acceptable considering the volume per day, but being that Bitcoin takes anywhere between a few minutes to a half-day to just process the transaction when it operates at <1% the speed is just pathetic.
You cannot tell me with a straight face that compared to credit cards Bitcoin is able to scale and act as a "[workable] payment mechanism".
[1] - http://www.paymentssource.com/statistics/
Surely, before claiming I could be lying you at least googled credit card chargebacks?
This is an example from Discover:
"If you have found a charge you believe is incorrect, you may request billing assistance. You have 120 days from the date of the transaction to open a dispute online. For disputes older than 120 days, please contact 1-800-DISCOVER. Most transactions can be disputed once the charge posts to your account, however, please wait until your first monthly statement after the transaction to report a missing transaction."
https://www.discover.com/credit-cards/help-center/statements...
> Credit cards take 180 days for the transaction to confirm.
Now you're going on about chargebacks. Of course the window for a chargeback is going to have a lengthy period of time. Chargebacks involve a manual process where someone has to identify a payment that they wish to dispute.
You're comparing apples and oranges here.
What is with the attitude you have? I wasn't going on about anything, really. You brought up transaction times which are related to confirmation times. Anything other than bitcoin is molasses-like.
How is a credit card "molasses-like" when it is capable at this very moment you're reading this response of doing 1,000 times more than Bitcoin?
In the time it took to load this page (100 ms), at least 300 credit card transactions have successfully gone through whereas this cryptocurrency nonsense hasn't even completed one.
Normal people read this and hear “if you don't notice theft instantly there's nothing you can do”. This is not the persuasive sales pitch which you seem to think it is.
This sounds like wire transfers but everyone is exposed by default and there's no third-party monitoring for fraud. How am I wrong for thinking that sounds like everyone having to pay for their own private security service?
You cannot convince someone making that argument by invoking empathy.
With reversible bitcoin transactions, the person paying can unilaterally reverse the transaction in a definitive way, without any way to appeal the reversal.
I think it's clear we are talking about fairly different threat models, even if you are all for fully irreversible transactions without any centralized control.
What is being missed by this person is that with Bitcoin there is no option for this and it relies on the honesty of all parties involved which does not make for a good model.
The problem is that this recent change, allows you to claw back your payments without any third party signing off on it, and without your counterpart being able to appeal the claw back. It is also a "feature" most people don't know about, because it is the consequence of the low level implementation of something designed to solve another problem altogether. This change existing and being unknown will lead to more fraud vs plain old "irreversible" transactions. And it is strictly worse than being able to claw back your transactions by appealing to the credit card processor, even if under Bitcoin the payment becomes "fully irreversible" earlier than under card processor rules.
The argument for why this is not a bug, is that even before this change, a transaction could be reversed via a double spend with a certain probability. However, this change makes unilaterally reversing a transaction trivial and certain for multiple hours after it was originally created.
As it stands with credit cards, it's 180 days maximum for a chargeback; meaning that the consumer has six months to make up their mind on any transactions they may not deem acceptable.
How long should it be in escrow if we're to switch to Bitcoin? I don't see how merchants will want to wait six months for them to see any payments and I don't see how consumers will want to see the timespan lessened.
"Most people don't know about"
The only people affected are those who accepted 0-conf transactions. If you accept them, either you trust the person, or you accept the risk. In the first case, this change makes no difference. In the second, you should be checking for the flag that says the payment was opted in to RBF.
>However, this change makes unilaterally reversing a transaction trivial and certain for multiple hours after it was originally created.
This is false: it is trivial until accepted into the blockchain. That usually happens for normal transactions far sooner than several hours.
Do you know if most common bitcoin wallets and payment processing APIs accept or reject payments which have opted in to RBF? It might be a configuration issue, but how big a deal this is depends entirely on what the default configuration is. Still, thanks for the clarification. From the article I assumed all transactions were RBF capable now, without any way to disable it.
> This is false: it is trivial until accepted into the blockchain. That usually happens for normal transactions far sooner than several hours.
Fair enough. The point is that confirmation might take several hours. If I want to accept 0-conf transactions for say, my Bitcoin-powered public coffee machine (not an actual product, but should be...), then I feel a bit safer if canceling 0-conf payments is hard to do and unreliable, even if I don't have any strong guarantees. Waiting even a few minutes for confirmation before brewing coffee might result in grumpy sleepy customers ;)
I don't know. Any serious business (which, unfortunately, doesn't describe many bitcoin ones) should be monitoring them, and frankly, as I said above, if you're accepting 0-confs and not checking for the flag, and sending irreversible products, you're beyond my sympathy. Official guides to accepting bitcoin always say to wait several confirmations, and anyone accepting zero confs has make that decision deliberately.
> If I want to accept 0-conf transactions for say, my Bitcoin-powered public coffee machine (not an actual product, but should be...), then I feel a bit safer if canceling 0-conf payments is hard to do and unreliable, even if I don't have any strong guarantees.
As far as I can see, this is entirely alleviated by the opt-in part. Just reject any transactions that opt in.
I've seen people complain that users will opt in by default and be turned off if they need to wait, but that's a problem with whatever wallet they're using. If I was designing a wallet, I'd make an "enable undo?" button, with a warning that said "if this is checked, you can undo until it posts, which usually takes a few minutes. Be aware that some merchants won't accept such transactions, so if you're buying something instantly then make sure the merchant is ok with it.", and merchants should have signs telling people to turn off the undo feature.
I've worked on batch settlement software and never heard of this. The payment processor has very strict timelines that must be followed for each phase (auth, submission, clearing, settlement). Funds usually appear in bulk the next business day after settlement.
> Cash can be counterfeited.
And easily spotted (in the US). This is more an issue for people than retailers because the banks will almost certainly notice it.
> Even some bank wires can be clawed back.
This is really fucking hard and easily mitigated by immediately wiring the money to another account at a different bank.
A credit card user can declare the card stolen within a day or two and all transactions will be cancelled. Sure, if the merchandise was shipped to his house or otherwise traceable to him, they might go after him legally, but you can go after a bitcoin user legally as well. You can't really fight a "card was stolen" fraud, except that eventually a credit card company will catch on and blacklist you.
That's not a confirmation, that's you temporarily being loaned the funds; confirmation is when charge back is no longer possible and you actually for sure have the funds.
The credit card and paypal systems have evolved to place most of the risk on the merchant because the merchant is generally both better able to prevent fraud and better able to bear the cost of it, while having merchants defrauding customers is extremely unpopular and ruins adoption of the system.
Bitcoin does it the other way round: all the risk falls on the customer. Unsurprisingly this makes fraud, loss and counterparty risk big problems for bitcoin adoption.
This notion that "customers" must have fraud protection is false; people use cash every day without any fraud protection. The credit card companies have sold people on the idea of fraud protection because it's necessary in a system when you give your private key (card number) to every merchant you deal with and your private key is often stolen. Credit card protection is a solution to a badly designed pull based credit card system; it solves a self created problem. A cash based system like bitcoin does not require fraud protection, it's cash.
Well, sometimes you do, consumer protection law guarantees that if it's defective or not as described.
It's hard to sell things online when you have to deal with card fraud and charge backs
How widespread is this, quantitively?
people use cash every day without any fraud protection
Yes - in face to face transactions where you can inspect beforehand and complain afterwards. And people are advised not to send cash through the mail because - guess what - it'll get stolen.
The credit card and a bunch of related non-cash systems like traveller's cheques were invented because travelling with or doing large cash transactions is a risky hassle.
Anecdotelly, I work in online retail, fraud is always a problem and we turn away business to avoid iff'y situations because of it and get attacked by streaks of stolen cards from time to time. Fraud is a real problem for merchants; you can't fight a charge back, you're out the money and the good and you just have to eat it and say thank you while getting killed on credit card fees. Credit cards suck for merchants, we accept them because we must, everyone prefers cash.
Clearly, anyone who disagrees with you just doesn't get it. No room for disagreement here, I see.
4. People who need to circumvent capital controls and want to move money out of countries like China and Venezuela.
6. Online businesses with business models that generate frequent chargebacks, so can benefit from an irreversible payment method.
What about Africans who have no access to a bank but have access to a cellular device?
http://qz.com/462044/the-battle-between-africas-mobile-phone...
As someone who has been robbed by PayPal I find bitcoin to be quite useful.
So I buy a service with Bitcoin and it ends up being fraudulent, how do I get my Bitcoins back?
If I buy a service with my credit card and it ends up being fraudulent, how difficult is for me to get the charges reversed?
One of them relies on the fraudster having a change in heart and the other may not necessarily be fun but is more than likely to happen.
Both methods of payment have their uses, but a pull-based system isn't the default model I want for 99% of my payments.
Until I can generate credit card numbers on the fly with one-time-use amounts of money, Bitcoin helps solve the problem by giving me push payments.
Here's a Bitcoin private key: 5JcgxNrn4WFcA8trEix7ComAyLNEsDEyBqYVjEo8JaaXWQQNg1u
Now you have the ability to drain whatever coins are in that wallet and I'll never see them again unless you somehow decide to return them to me.
You can probably convince a layperson to give you their private key through the same means you could ask them to tell you their passwords or whatever personal information they should not divulge.
> As you use your credit card, over time you give more and more people a direct line of access to your credit until it expires or gets revoked.
Credit cards are a form of payment. I go and pay my bill for using that credit card. A month before the card expires, the issuer sends me a new card. Provided I don't neglect to pay my bill and don't abuse it, my credit card will almost always allow the transaction to go through immediately.
> Until I can generate credit card numbers on the fly with one-time-use amounts of money, I'll have a use-case for Bitcoin.
https://www.bankofamerica.com/privacy/accounts-cards/shopsaf...
"To access the ShopSafe service, sign in to Online Banking and choose Use ShopSafe from your credit card Account Activity screen. Enter your spending limits and the ShopSafe service will automatically generate a temporary 16-digit account number, with expiration date and security code, that allows you to complete your purchase while protecting your privacy."
https://www.cardbenefits.citi.com/products/virtual-account-n...
"When shopping online or by mail order, you can use a randomly generated Citi card Virtual Account number instead of your real account number. Simply click Enroll in/Get below to begin using Virtual Account Numbers.
All purchases made with your temporary number will appear on your monthly statement with your other purchases and will include the Virtual Account Number that was used for each transaction."
Meanwhile, with most credit cards, the entire interface is that you hand out the secret directly. Maybe they'll even make a carbon copy of it with a click clack machine depending on where you live, and this is acceptable. So acceptable that here in 2016, on-the-fly credit card numbers is a niche service offered by a few companies and you need to install a desktop Adobe Flash app to even use it.
You're overlooking something here.
Ignoring the fact that the merchant won't typically see the credit card number if I am using it physically, you are correct that I have to offer it up to them if I am using an online store. However, there is an important distinction between a credit card number and a Bitcoin private key that you're neglecting to look at here.
A credit card number is just a reference to an account between the card holder and the issuer. In a situation where the credit card number becomes exposed via negligence not on the part of the card holder, the card holder themselves in almost all situations is not liable for the charges incurred that were not of their own. So if Target for example gets breached like they did in 2014 where millions of credit card numbers were exposed, the account holders of those affected cards are not on the hook for any purchases that they did not make. In fact, issuers and payment processors were largely able to determine who was affected and issued new cards very quickly.
The only situation I can easily recite where you are on the hook for your credit card number being exposed is if you willfully expose it to a third party. It is at this point that the credit card issuer can tell you to effectively "buzz off" and pay for the undesired purchases.
In the situation where the card becomes compromised, the solution for the issuer is to issue a new credit card number and then to deny all use of the previous number going forward. All charges are then reversed and it's a matter between the payment processor and the merchant to flesh things out. In a few days the consumer will have a new card and even in extreme cases with certain classes of credit cards, they'll have a card hand-delivered to them within 24-hours.
With Bitcoin, if the private key becomes exposed (and there are many, many ways for this to occur), then there is no recovery nor any third party to rely on to get the coins back. You're effectively out of luck and must then generate a new private key and public key and start anew.
Also with Bitcoin you need to install a third-party application on your phone or computer in order to make use of it. I can easily send a payment via credit card via telephone, Internet, or in person.
Bitcoin is literally working right now. I order food with it, avoid currency conversions with it, buy blankets with it...
When people say it has failed it is pretty obvious they have some sort of emotional investment and are not objective.
In any event he said 'bitcoin has failed' which is ridiculous.
[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"
Well, that and "Bitcoin has become garbage, avoid at all costs".
Also a great exhibit of some stereotypical programmer social problems; we don't get a lot of middle ground, most programmers are either openly hostile and combative or so deathly afraid of confrontation and responsibility that they give away their authority so that they don't have to handle the pressure. Gavin should've kept control. Bitcoin is learning exactly why a strong central authority is so desirable in money exchange: it keeps the value of the currency stable by preventing panic and confusion over issues like this.
Many discussions of Bitcoin claim that this power is transferred to "the network" to make the final decision, which sounds very egalitarian and democratic, but Bitcoin failed to provide the controls that would prevent power hoarding and ensure that the people who depend on bitcoin were fairly represented. This is one reason why modern democracies are structured within the framework of a republic. This is probably one of bitcon's hardest to solve problems, since the hardware to get respectable hashrates is unobtainable for quite literally everyone who doesn't have access to their own microfabrication facilities. Even if one of the specialty bitcoin hardware makers had a really good, cheap chip, why would they share it? They'd hoard all the hashpower for themselves. Litecoin attempts to address this by hasing with scrypt, under the belief that it's harder to hoard power with custom hardware if the algorithm uses a lot of processing power and memory instead of just a lot of processing power.
Mike failed to mention one incentive that exists to prevent increasing the block size: miners get the transaction fees attached to each block they mine. If the block size is large, there is little contention for space in the blocks, and ergo there is not much reason to incentivize miners to include your transaction in the next block. By keeping the artificial constraint on the block size, people who own a lot of hash power will be gaining a lot more bitcoin for themselves.
I don't think this crisis is insurmountable. So much money has been sunk into bitcoin that I can't believe people are just going to let this cabal take it out. BitcoinXT will gain notoriety through the mainstream press and the resultant sell off among casual investors will freak the big players out and force them into running XT nodes.
If the blocks are bigger, doesn't that mean they can hold more transactions and thus get more fees total? Or are you assuming the relative scarcity of transaction space would push fees high enough to overcome that?
Yes.
The blocks always contain approximately 10 minutes' worth of transactions because the network periodically adjusts mining difficulty to approximate that target.
Right now, the issue is that there are times when 10 minutes' worth of bitcoin transactions are occupying more than 1MB of space in the completed blocks, which means a processing backlog is formed. Miners prioritize transactions by their attached transaction fee, since they get that fee if they find the block. Thus, users are effectively placing a bid for the network hash power to verify their transaction.
When a backlog forms, customers that want their transaction processed quickly have to outbid others to get a miner to start working on it. If there's not a backlog, their transaction will be included with only a token fee attached because something is better than nothing. Going from 1MB to 8MB means that bitcoin would need 8x more transaction volume per 10 minute block to get back into a transaction backlog, which is the only time that users will attach a meaningful transaction fee to their transactions.
So if the block size goes up from 1MB to 8MB today, there will still be a block every ten minutes, but since transaction volume will presumably remain nearly the same, space in each block won't be scarce and the bidding war won't take off. It'd be a long time before we got back into the same predicament, meaning miners would have to wait a lot longer to start collecting meaningful transaction fees. That's why some people with heavy investments in mining want to keep the block size artificially low: they're trying to instigate a bidding war for their hash power.
It should be noted that this eventuality was always part of bitcoin's design. Bitcoin is programmed to stop "minting" around 22 million coins. At that time, the network will not issue any reward to the miners that find a block (the reward will cut itself down until that number is reached, targeted for approximately 2022 iirc). The solution to this has always been "users will have to incentivize miners with transaction fees".
It's just that the assumption was always that we wouldn't have to deal with that until the network itself stopped attaching rewards to mining. In practice, however, we're in that situation now due to the artificial constraint on the size of a block (which, afaik, is mostly accidental and was never intended to be permanent). The debate is over whether bitcoin should remove the artificial block size constraint and keep its fees negligibly low or whether it should keep the constraint and "allow" miners to start charging more for processing transactions.
http://fortune.com/2015/10/05/gemini-winklevoss-bitcoin/
I just really hope that the banks either don't figure out how to make everything go in their favor, or that the hands they play work out for the good of everyone.
I wish mike well and to never see him again.
Honest question.
>Honest question.
There are a number of reasons, but frankly they don't matter anymore.
I truly wish him all the luck in the world.
Although, I remember similar comments when Ballmer left Microsoft and no one was banned nor censored IIRC.
The article being linked is quite literally nothing more than a series of personal attacks.
It has some of the shape of an unincorporated association, though. There's a lot of caselaw dealing with disputes arising in those, usually from reluctant courts that were dragged into particularly petty and poisonous disputes.
Given the amount of actual money involved, people might start asking courts to settle some of these questions before too long.
(But don't ask me to do it, I'm not a lawyer and this isn't legal advice).
Guys like Wladimir, Pieter, Gavin, Cory Fields, Gregory Maxwell and Luke Jr have a voice because they’ve contributed many thousands of lines of code. (Lines of code are only a proxy for impact).
You may have noticed Mike Hearn isn’t in the top 100 contributors list. He is the primary author of the Java implementation of a bitcoin library: https://github.com/bitcoinj/bitcoinj
He started it in 2011, definitely early. But a substantial amount of bitcoin core work had already set the path. There are also similar implementations in many different languages but they are not the primary reference implementation for full nodes.
According to Hearn’s blog post: “I’ve talked about Bitcoin on Sky TV and BBC News. I have been repeatedly cited by the Economist as a Bitcoin expert and prominent developer. I have explained Bitcoin to the SEC, to bankers and to ordinary people I met at cafes.”
Being cited by journalists is not the same as being a primary contributor.
The disagreement between Hearn and the other developers isn’t about whether to increase capacity, it’s about how. Many of the primary full-node contributors believe a hard-blockchain-fork is a risky approach. Lots of work is being done to explore better options, like segregated witness (http://gavinandresen.ninja/segregated-witness-is-cool).
Mike Hearn tried to (very aggressively) push the idea of increasing the block size with a hard fork. In fact the patch allows node operators to vote and 75% adoption is needed. When it looked like that wasn’t going to pan out, he created Bitcoin XT where “Decisions are made through agreement between Mike and Gavin, with Mike making the final call if a serious dispute were to arise.”
So the claim that Hearn not being able to take over decision making power for the bitcoin community is evidence that bitcoin has failed seems to show something slightly different. It shows that open source software methodology of forking and adoption lets the best implementation win and prevents hostile takeovers.
Mike Hearn is not as impactful to bitcoin development as he or recent news would indicate. Mike leaving the bitcoin community has little impact on the future success or failure of bitcoin.
And those who want to understand Mike better should read this: https://lobste.rs/s/82pz7r/curated_links_to_understand_dange...
This changes when most of the hash power agree. If the 74% agree then the chances are 24% ( http://www.wolframalpha.com/input/?i=binomial+distribution+n... ). The calculation is more complicated because the intervals may overlap, but this would take less than a year.
So, when more than 70% of the hash power agree, it's time to upgrade, but 70% is a clear majority.
(Just for curiosity: With 75% hash power you get a 52% chance. With 76% hash power you get a 78% chance.)
I was astonished when I read this 'consensus' code in the Bitcoin repository. I recommend removing it or deploying an old version of the Bitcoin server. It is a reckless and deceitful (how many users actually understand the tacit consent they are granting by running this code?)
> conflicting versions of the transaction history for a substantial length of time.
Indeed if a new block size is 'forced' with a fork, it essentially creates a new currency. I doubt the new big-block Bitcoin will stand on its own.
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/
https://lobste.rs/s/82pz7r/curated_links_to_understand_dange...
Could you maybe delete that comment and make it a top-level comment instead? Then I'll delete this one, and the thread will be cleaner.
There's no ad-hominem in that link btw.
EDIT: I value truth over downvotes, so downvote away if you want, but I ain't deleting these posts.
(This has nothing to with any opinion on Bitcoin.)
We detached this subthread from https://news.ycombinator.com/item?id=10905126 and marked it off-topic.
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."
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.
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.)
"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."
In open source communities, impactful contributions yield influence. Here are the top 100 bitcoin contributors: https://github.com/bitcoin/bitcoin/graphs/contributors
Guys like Wladimir, Pieter, Gavin, Cory Fields, Gregory Maxwell and Luke Jr have a voice because they’ve contributed many thousands of lines of code. (Lines of code are only a proxy for impact).
You may have noticed Mike Hearn isn’t in the top 100 contributors list. He is the primary author of the Java implementation of a bitcoin library: https://github.com/bitcoinj/bitcoinj
He started it in 2011, definitely early. But a substantial amount of bitcoin core work had already set the path. There are also similar implementations in many different languages but they are not the primary reference implementation for full nodes.
According to Hearn’s blog post: “I’ve talked about Bitcoin on Sky TV and BBC News. I have been repeatedly cited by the Economist as a Bitcoin expert and prominent developer. I have explained Bitcoin to the SEC, to bankers and to ordinary people I met at cafes.”
Being cited by journalists is not the same as being a primary contributor.
The disagreement between Hearn and the other developers isn’t about whether to increase capacity, it’s about how. Many of the primary full-node contributors believe a hard-blockchain-fork is a risky approach. Lots of work is being done to explore better options, like segregated witness (http://gavinandresen.ninja/segregated-witness-is-cool).
Mike Hearn tried to (very aggressively) push the idea of increasing the block size with a hard fork. In fact the patch allows node operators to vote and 75% adoption is needed. When it looked like that wasn’t going to pan out, he created Bitcoin XT where “Decisions are made through agreement between Mike and Gavin, with Mike making the final call if a serious dispute were to arise.”
So the claim that Hearn not being able to take over decision making power for the bitcoin community is evidence that bitcoin has failed seems to show something slightly different. It shows that open source software methodology of forking and adoption lets the best implementation win and prevents hostile takeovers.
Mike Hearn is not as impactful to bitcoin development as he or recent news would indicate. Mike leaving the bitcoin community has little impact on the future success or failure of bitcoin.
And by community I mean "Users, miners, wallets, and exchanges".
I've also noticed, there are no any Satoshi Nakomotos in the list of contributors. Does that mean he (Satoshi) was "not impactful to the development"?
P.S.: I'm not following the Bitcoin news. Is Satoshi a nickname of one of those top contributors or the initial author just didn't use version control system? Or am I missing something?
I'm not a bitcoind contributor and this is more of a generic observation about how open source projects are controlled in general.
https://news.ycombinator.com/newsguidelines.html
https://news.ycombinator.com/newswelcome.html
http://www.seansoutpost.com/
Disclaimer: I raised bitcoin to work on open-source anticancer R&D
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.
(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.)
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.
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.
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.
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.
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.