Bitcoin Miners Signal Revolt Amid Sluggish Blockchain
bloomberg.com
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The beauty of it is how easy it is to switch mining pools. Miners come and go [3] so the large mining pools need to make sure they're keeping both the miners happy and the network users happy.
[1] https://blockchain.info/pools
[2] https://bitcoinmagazine.com/articles/problems-associated-wit...
[3] https://news.bitcoin.com/pools-diversifying-bitcoin-mining/
This is not about security mind you - this is about imposing the will where it takes 5-6 individuals or maybe one subpoena order from one government considering the physical location of these pools to force the rest of the blockchain to comply with you.
I would also point out that miners are heavily incentivized to keep the network valuable. If 80% of the miners got together and decided that transactions need a signature from the PBoC or an output to the IRS before being valid, everyone would sell, the price would plummet, and the miners will be left with a bunch of inefficient heating equipment and no more revenue. Miners need to stay engaged with the users if they are to force any kind of change onto the network, lest the rewards they get from mining turn to dust.
not sure what your point is - you saying there's no centralization? it's not as bad as it seems? something else?
This already happened in the past and looks like Ver and AntPool are trying to make it happen again. And they know full well that it's not that hard to do:
>>> "Ver says he plans to step up lobbying efforts, especially in China which is home to the majority of bitcoin mining."
and again this lobbying^^ will only need to be applied to a few concrete individuals again because of the extreme level of centralization of the hashing power.
I'm like, I vaguely get the "not under control of a .gov" and privacy concerns and all, but the thing seems literally backed 100% on faith, in contrast with (if only theoretically) the "we the nation" backing of fiat money.
Any odds an aficionado might be around to enlighten the uninitiated?
Incidentally, if you don't think gold should be worth $1200/oz, you probably don't think 1 BTC should be worth anything.
Of course, whether that value is $1 or $1000 depends on the number of people who believe in the currency enough to pay for the power to mine it.
Gold is a bit different since it has some baseline value from practical uses, but the store of value use case dominates those.
Lots of traditional banks are incompetent and set in their ways. Shaking anything up internally requires lots of (office-) political capital.
Having an internal 'blockchain' project might give people just enough leeway and direct backing from above to push through lots of needed but unsettling improvements. Even though those improvements might not have anything to do with blockchains, and might even be better done without.
(Of course, you can also lose a helluva lot of money, but then, to the person making millions off of bubbles, both the people who sell too late and the people who never buy are idiots.)
For these green pieces of paper, as long as its easiest to buy oil with them and that people depend on oil for energy, there will be people willing to buy these green papers. Because they trust they can exchange these papers for something valuable. So everyone that needs oil needs usd as of today (I think iran still sells thiers in euro and russia might start selling in rubbles. I haven't checked oil currencies in a while though, so if you're reading this, you should probably double check ;) )
I honnestly think that's why the us spends billions every year to secure the middle east. They have oil at home and they could easily massively move to renewable with the size of their territory and then export the tech.
But then people wouldn't be relying on oil for energy, and the dollar would lose it guarantee of value. And therefore its value.
Take Venezuela, their currency is/has collapsed because the people no longer have faith that it is valuable.
Typically, people just blindly trust authority, and that's why we believe green paper made from cotton to be valuable. We all agree it's valuable (except people who want a gold standard).
Similarly, we all agree Bitcoin is worth X. It's no different, except no one is telling us it's worth X. The market is saying it's worth X.
It's not really the first time a society agreed to use something arbitrary as valuable either. There are cultures that used salt, gold, silver, white stones, etc. as currency. The point is, once we agree something is worth X, we can trade for other goods at value X.
The advantage to Bitcoin is it's not centrally controlled so it's harder to mess up (see great depression, federal reserve basically made it 100x worse), or Germany post WWI. Further, you have an auditable history, some privacy (better than credit cards), and a truly global currency (similar to gold, without the need to lug it around).
I am waiting for someone to come up with a good solution for how to do fractional reserve banking with bitcoin (without relying on trust via eg government-sponsored courts to enforce human-readable contracts---because what would be the point of bitcoin then).
Just like fractional reserves cannot be done with gold, unless you trust a third party (and thus, receive "bank notes" for your gold deposit!).
I wonder whether bitcoin fractional reserve can live off reputation alone, or whether smart-contracts can / have to help?
You forget all the pointy sticks that the government has! For example the government can compel you to pay taxes in the currency of their choice. If failure to pay results in imprisonment or death the value proposition can be fairly compelling.
> Take Venezuela, their currency is/has collapsed because the people no longer have faith that it is valuable.
Almost all the devaluing there is because they keep making so much, not because of a lack of faith.
But that rings like nonsense to me. (No offense intended.)
A .gov is, at a basic level, the warrantor of property rights. It can confiscate at will. And it did so in the US itself, for all practical intents and of all places, when households were asked to hand over their gold holdings (during the Great Depression if memory serves?).
At any rate this ability of .gov to tax and confiscate wealth on demand to protect a currency (or for that matter, its ability to limit capital inflows and outflows like Iceland did in the aftermath of the 2007 crisis) is a much stronger guarantee than any crypto currency can offer.
Or maybe I'm entirely out something for assuming as much?
Markets, and money, have always been consequences of state power.
It's also the cheapest method to exchange and/or remit small amounts of money internationally. I frequently made a profit doing so vs paying 1.4% to 8% for traditional fiat to fiat methods. I wrote bots that did it for me, but even doing it manually is cheaper and faster than traditional methods.
Oh, and of course, it's great for buying drugs and gambling and whatnot.
bitcoin seems to be servicing three primary interests: a hedge currency with slightly more utility than gold, remittances (specifically in the B2B space but also some personal), and shopping online without having to enter personal information such as credit cards.
by far the most commonly reported on use case is investment. so if you like a roller coaster and a chance at a big upside, bitcoin or other digital assets are portfolio worthy.
the privacy/anonymous thing is relatively dead at this point.
this is a new asset class that retains qualities of several asset classes (currencies, commodities, and securities), while dropping all of those asset's limitations, and introducing its own unique limitations where people are positive they can all be fixed.
When you say
> the "we the nation" backing of fiat money.
what do you think that means?
First, I'll tell you what it doesn't mean: It doesn't mean that people are forced to accept it in the general case. It doesn't mean that the government guarantees it to have some value. (It's not even clear what that would entail.) It doesn't mean that if you undervalue a dollar, the army is going to come in and shoot you.
Here's what it does mean: First, the court can compel you to repay debts or settlements in that currency. That's the "legal tender" part. Second, you have to pay taxes in it (usually).
So what, exactly, do you think the advantage of "government backing" is? It's really not tremendously useful. It's also completely orthogonal from the value of the currency, which (along with its time derivatives) is a much more relevant property.
Here are a few reasons I think Bitcoin is better than USD for many applications:
* It's more private than anything but cash/barter, especially with mixing
* It's not subject to arbitrary freezes or confiscations (which has happened to me, without warning, after a paperwork error by the state comptroller)
* It's not subject to arbitrary export controls, so it's more convenient for international payments
* It's cheaper than most existing money transfer systems (Western Union, Paypal, etc.), even with the currently elevated transaction fees
* It's deflationary. You can argue all you want about whether this is good or bad for "the economy", however you define it, but all I know is that it's good for me, a person who wants a store of value. In this respect, it emulates a physical commodity like gold (although with gold, you have the substantial risk of asteroid mining saturating the market many years from now).
* Cash and gold has some of the advantages listed above. Advantages of bitcoin over cash and gold: Easier to move long distances, easier to carry large amounts without attracting notice, harder to steal. Advantages over cash alone: Harder to forge (or inflate). Advantages over gold alone: More fungible.
Forgive the assumptions and less-relevant questions, but I appreciated your points and you seem to have a good knowledge of the topic. Edited quickly for clarity.
However, I think you are right in that a small user base implies some level of volatility. A large user base is perhaps a necessary, but not sufficient, condition for stability. Bitcoin's instability is also generally overstated, in my opinion. There have only been a few instances where it was so volatile that you wouldn't want to use it for day-to-day transactions.
True. I don't think this negates your point, but it's worth noting that in each (or at least most) of these cases there's a feedback loop between the financial and socio/political collapse which might increase the currency's volatility. In fact, perhaps we see this even more strongly with Bitcoin vs. a state-backed currency due to the current speculatory climate, but this may be another false characterization of the current culture (I'm not sure).
> Bitcoin's instability is also generally overstated, in my opinion. There have only been a few instances where it was so volatile that you wouldn't want to use it for day-to-day transactions.
As someone who's only tinkered with Bitcoin and tends to otherwise read about it only in the news in situations like this, I think you're right.
I appreciate your reply!
By backing I meant a .gov's ability to tax or confiscate wealth, or for that matter impose capital controls. You incidentally - and intriguingly, at least to me - highlight the second point, if not also the third, as strong points for Bitcoin. Might I be missing something?
It's like, if shit hits the fan, my dollars are worth whatever US .gov and its taxpayers agree they're OK with, backed by .gov's ability to enforce (through all of the latter three points) that it's worth this or that.
In Bitcoin's case, or other crypto currencies', it seems like pure faith built-in with no ability to say "hey we've a taxpayer down the line". If the thing goes crashing to the ground, there's no guarantee anyone will pickup the tab - in steong contrast with fiat money, where a Nation's work output offers some guarantee on the value.
Neither of these are an advantage of a fiat currency. They are both very bad for users of the currency. These are precisely the reasons people prefer Bitcoin.
> Might I be missing something?
Yeah, although I can't imagine how. People don't like having their money stolen or messed with. That seems fairly clear to me. Bitcoin makes it a lot harder to do either of those things, which is an advantage.
> if shit hits the fan, my dollars are worth whatever US .gov and its taxpayers agree they're OK with
This statement doesn't make any sense. Can you please explain what your reasoning is here? Not to be condescending, but this sounds like you only have a very vague idea of what value is.
> backed by .gov's ability to enforce (through all of the latter three points) that it's worth this or that.
This is a very important lesson to absorb; a government cannot "enforce" a value. That doesn't even make sense. The closest thing they could do is kill people who use the market value, in which case all you're doing is devaluing other currencies by making them more dangerous to use. This catches up with you very quickly, when you can no longer afford to interact with external markets that don't have a crazy military trying to shoot the truth out of existence.
> with no ability to say "hey we've a taxpayer down the line"
Again, what does this even mean? The dollar doesn't derive its value from the existence of people who pay taxes in USD. Not even close.
> If the thing goes crashing to the ground, there's no guarantee anyone will pickup the tab
If the dollar goes crashing to the ground, no one will "pick up the tab either".
> fiat money, where a Nation's work output offers some guarantee on the value.
OK, this also doesn't make any sense. Fiat money doesn't entitle you to dividends sourced from tax revenue. There is zero relationship between the number of dollars and the "work output" of the US. What region's "work output" is gold tied to?
Again, I'm not intending to be condescending here, but I'm not sure how else to say this; I think you have a very deep and fundamental misunderstanding of what money actually is. Most of your arguments here "aren't even wrong", so to speak. They are just completely out of the ball park. There's no easy fix for this, and I can't recommend any particular reading. There are probably some good economics courses on coursera or something. But if you take nothing else away from this post, at least take this: having a dollar entitles you to nothing from the government. The government makes no guarantees about the dollar. The only relationship between the dollar and the US government is that it's the "approved" payment method for court-mandated debt repayments and tax payments, and enjoys a number of less significant legal privileges, especially w.r.t bank regulation and government debt instruments.
I personally like how cryptocurrencies are open protocols, so that I can manage money with open source or self-made tools. It annoys me on a deep level being forced to use banks and their payment systems when I can't even get my account balance from a shell script.
Actually, I don't, which is why I asked the question. I'm like... what on Earth are these miners thinking? Or more appropriately, those who store a Bitcoin balance.
There were insightful answers, mind you, but none (thus far reading) that give a compelling reason to think otherwise, at least to me.
Let me just say, if the price dropped tomorrow to 0.0000001 I'd buy hundreds of thousands of them happily, so the price isn't going to drop to zero tomorrow.
My actual price where I'd buy more than I already do right now is probably ~$200 (not terribly liquid right now), but I'm far from the only person who is still willing to buy these things at this moment, so there's pretty much zero chance that tomorrow bitcoin will drop down to zero in price.
So do you still think the value of BTC tomorrow will be zero? If you still try to assert that you think it will be zero, I can only assume that you are willfully an irrationally blinding yourself to reason, just so you can pretend that Bitcoin is worthless.
Everything else its currency (Dollar, Yen, Euro), in the history of mankind there has been hundreds of currencies, and at the end, all of them were worth nothing.That will happen sooner or later to the Dollar, and its going to be a big crisis.
Blockchain solves the currency problem of manipulation of volume (which is what causes at the end that currencies end up worth zero), it will be the currency of the future, but it does not look like Bitcoin will be the blockchain currency that will dominate.
Unfortunately, at least for now, bitcoin isn't a popular enough method of payment for the vast majority of merchants to worry about, let alone pass the savings they get from accepting bitcoin on to the consumers.
This is clearly not great for every use case, but it has some real advantages in certain verticals:
1. automated/machine payments and/or smart contracts, 2. non-reversible payments (preventing investors from backing out of a bad trade at a stockexchange), 3. countries in which the gov currency is not dependable (e.g. Venezuela), 4. paying for services across borders (e.g. Greek internet businesses paying for AWS when they can't wire money outside the country), 5. refugees who can't trust the government not to seize their savings after they leave the country.
As you are using this phrase in a context where I feel like you are bringing up reasons for Bitcoin, I feel the need to clarify: cash is private (only two people can see any transaction: the two people transacting), classic banks and credit cards are less private (three people can see your transaction: the two people transacting, and the bank), while Bitcoin is the opposite of private (literally everyone is required to see your transaction, whether or not they particularly care ;P).
You can try to hide your transaction by handing it to a mixer, but then the mixer is serving the purpose of a bank and is "fighting the current" by trying to pretend to offer a private service when their actions are also recorded in a public ledger, which means both that mathematicians might later find mistakes in timing that allow them to deanonymize your mixed transaction but also that small mixers are worse at this while larger more centralized mixers are more useful... the exact opposite property for what you want if you really didn't like the concept of a bank managing transactions.
And no matter what solution you come up with, fundamentally the transaction requires at least one other person to know that you are sending money as you need to use a public network to try to communicate with someone to tell them to tell others to eventually move the money by adding it to a mined block. The only way Bitcoin can even try to simulate the real and true privacy of cash is if you meet someone in person and hand them directly a slip of paper with the private key of some money on it... but then they have no way to know you don't have a copy, at which point they have to announce to the world they received the money in order to re-secure it with their own key.
A wise woman once said "If you don’t believe me or don’t get it, I don’t have time to try to convince you, sorry."
Upsides: Money/valuestore that is infinitely divisible, scriptable (m-of-n, "smart contracts"), reliably and inexpensively transmissible world-wide, offers financial services to third world and unbanked, potentially less volatile than some fiat currencies, potentially resistant (not immune) to manipulation by governments, potentially usable as backbone for "internet of value" applications (side chains, colored coins).
> Any odds an aficionado might be around to enlighten the uninitiated?
In principle, the big advantage of fiat money is that it's deeply enmeshed in a social and legal system, and you have a lot of protections with regard to loss, refunds, consumer guarantees, bank deposit protections, etc. If you deposit your USD into a US bank account, and the bank goes under, you'll be protected. It's all just numbers in the central bank, and as a society, we'll change those numbers to ensure a fair and equitable outcome (...in theory; actual results may vary). If that means zeroing out the account of someone we think shouldn't have some money, or just incrementing the account of someone who think should have it, creating currency out of thin air, then so be it.
In principle, the big advantage of crypto currency is that it's not enmeshed in those systems. There are no protections, there's no refunds. Nobody controls the system; nobody can decide that the numbers are unfair and change them. The downside is that, if your bitcoins are stolen, nobody can step in and return them. The upside is that, unless they're stolen, nobody can step in and take them. Even the concept of "theft" is kind of fuzzy. Instead of laws, we have code; if the code allows currency to be transferred between accounts, then that's what the code allows.
If you think it's great that credit card companies can reverse payments, you'll probably like the idea of fiat currencies. If you think it's horrible, you'll like the idea of crypto currencies.
As a practical matter, however, actual crypto currencies still exist in the real world. If I buy a coffee using bitcoin, and I get food poisoning, I can still ask you for a refund, and if you refuse I can sue you. The fact that a credit card company can't just reverse the transaction and move the money back into my account is merely an inconvenience; if a court rules you owe me a refund, you can protest all you like about the irreversibility of the blockchain, but you'll still end up jailed for contempt of court if you don't cough up the cash.
Plus, the people who actually run cryptocurrencies keep stepping in and retroactively changing the rules to prevent "bad" outcomes. When a bug in Ethereum allowed a huge amount of crypto currency to be "stolen" (scare quotes because, again, what does that even mean in the context of Ethereum?), the entire system was rolled back and forked to undo that result. Again, that's a lot less convenient than how a fiat currency would deal with it, but it's not a difference in kind.
TL;DR: In principle, crypto currencies are fascinating, amazing artifacts of a world of pure logic and reason. In practice they don't really work very well, because we live in a world of fuzzy laws and emotions.
Interesting reply overall but per my other replies, it seems to me that a .gov's ability to tax and confiscate wealth - not to mention enforce capital controls - to support a currency trumps pure faith.
If the USD goes to hell I can count on the US .gov and taxpayer to ensure my USD are worth something. If Bitcoin does, I've still no idea who the payer of last resort is.
Fiat money, at its pinciple, is debt first and foremost. Admittedly, some have given creditors a giant finger in the past. But still, crypto currency is, well... a financial UFO? :-)
You misunderstand my point: That's still faith; you have faith that they will support it and not, say, devalue it, change currencies, just decide that a bunch of money is no longer valid[0], etc. That power to confiscate wealth - which you're quite right, they could use to defend the currency - could also be used to destroy it.
> If the USD goes to hell I can count on the US .gov and taxpayer to ensure my USD are worth something.
You are very likely correct, but it's not a guarantee. History is littered with examples of currency which is no longer worth anything to anyone except collectors, and maybe not even then.
Which doesn't mean it's not a safe bet; I think it's clearly true that the USD is more likely to be a stable store of value than any crypto currency, and at least most fiat currencies. But if you think it's 100% safe, you're engaging in faith based thinking. :)
[0]: https://en.wikipedia.org/wiki/2016_Indian_banknote_demonetis...
To give an idea of what is happening, I'll try to explain what I know, which isn't lot.
Since last year, there's been an increase in fees that every transaction has to pay to get confirmation within a reasonable timeframe (the point at which your transaction is deemed a valid one). The reason for this is that, the Blocksize is capped at 1MB. Now, the problem is that people are disagreeing with the direct solution to this problem, which is increase the blocksize.
What that means is that only 1MB worth of transactions (I don't exactly know how many that is) will fit in a particular block, which is generated once every 10 minutes (the difficulty of 'mining' is actually adjusted to ensure this). So since there's been a lot of activity with bitcoin, a lot of people are having to wait longer to get their transactions confirmed because they usually have to wait for the second or third block after the transaction is sent out by the client. This makes confirmations slower.[1]
Now, to make confirmations faster, people have to pay more for the 'transaction fee' which directly goes into the pockets of the miner who includes the transaction in their block. So transactions which pay lower fees are pushed out of the block the miner is currently mining because, they obviously want more money. So the transaction usually occurs in the next block, if they're lucky.
The way I see it, the blocksize has to be increased, because it is ridiculous that I have to pay more in fees for sending bitcoin than using paypal. But, the party opposing it has some interesting arguments too. (The full pro-con list can be found here[2])
The strongest argument in my opinion is that making the blocksize larger would lower the transaction fees the client has to pay. Now, that is good for the client, because they pay less fees. But, bad for the miner because they get less money for all the work that they put in.
So there was talk about increasing the blocksize to 2MB. That never went through, because of some other problems with SegWit, which frankly I have not much knowledge of.
But then came the idea of Bitcoin Unlimited. Now the people behind this say that the blocksize should be WHATEVER the miner chooses and they want autonomy over the blocksize. What can happen in this scenario is that the big players can make a loss temporarily while the smaller players lose money. Eventually the smaller players (miners) close shop which would make bitcoin more centralized.
Very interesting arguments on both sides, and this will be much more interesting to watch than anything in recent history.
I'm actually surprised not many people are talking about this, and that there's more interest in whether Bitcoin is accepted as an ETF, which was a terrible idea in the first place.
If this continues for another year, I'll have to say bitcoin has severely failed to follow up on the promises it made, one of which is low transaction fees. Not >5%
It seems very clear to me that simply increasing the block size forever to keep under some arbitrary fee isn't going to work, though the reasons I have against running BU are mostly to do with its implementation.
It also doesn't help that BU forked from an old version of Bitcoin Core, which means it's missing some new features and is slower.
https://medium.com/@SegWit.co/is-segregated-witness-a-block-...
With the addition of AntPool, the total hash rate for BU is up to 38% now. So this seems to suggest otherwise. Unless your definition of economic majority is some entirely different.
As far as I can tell this claim is FUD from the Segwit side of the argument. There's no realistic mechanism by which it could happen.
[1] https://github.com/bitcoin/bips/blob/master/bip-0101.mediawi...
The whole idea behind socialism is that the means of production are controlled and owned in some democratic manner where everyone has almost equal ownership and control.
Bitcoin is more akin to Rothbard's capitalist utopia, with private ownership of property but no state.
“Say you haven’t had any water to drink for a day and a half, and you also need a haircut. Do you drink some water or go to the barber shop? SegWit is like going to the barber shop.”
fails to notice that this barber also provides free drinks...