Comment by DennisP | Hacker News Reader

Comment by DennisP | Hacker News Reader

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The fact that bitcoins can be transferred is the only reason they have value at all. You have to be able to exchange them for something else or they're worthless.

The question then is whether 7 tx/sec really is sufficient to support broad global adoption, even if it's just for savings. Dollars and physical gold have no such limits. Other blockchains are vastly expanding scalability, as well as eliminating the energy usage.

Another issue is whether Bitcoin can maintain its monetary policy for the long term. Here's a paper from Princeton saying that if miner rewards are dominated by transaction fees rather than block rewards, the chain destabilizes, suffering frequent long rollbacks.

https://www.cs.princeton.edu/~arvindn/publications/mining_CC...

If they're right, some future generation of bitcoiners will have to choose between keeping the issuance schedule, and having a blockchain that functions reliably. There's no way for us to know which they will pick.

Personally, I think the right choice is a functioning chain. That last percent or two of inflation isn't a problem for maintaining value, because economies grow at the same rate. So does the supply of gold in the economy.

Theres a few issues here. One is that Bitcoin is largely a settling layer where batched transactions occur. Its not 1 transaction per tx even right now. Layer 2 networks of all kinds are handling the vast majority of traffic of bitcoin. More bitcoin moves on the ethereum blockchain than the bitcoin blockchain. And then we get cash app, paypal, the crypto exchanges, etc. Even hardware wallets like Ledger could batch transactions potentially in the future. So bitcoin frequent transactions largely run through top layer systems until its time to settle on the main chain which is infrequent/a small fraction of the total top volume. Also 95% of people who use bitcoin dont even have a hardware wallet, they just use the exchanges...for better or worse. Then you get into things like the lighting network.

As for the Princeton study...Ill have to look at it but I'm skeptical they consider things like more batched transaction volume per tx in the future which could be harnessed to also have a more concentrated fee structure providing stability to the chain. Also changes can be made through consensus if needed...like segwit.

> Other blockchains are vastly expanding scalability, as well as eliminating the energy usage.

The energy usage combined with proof of work is the backing. If you break that for Bitcoin als is left is trust. The energy used and consumed is like the USD tied to gold (which it is no longer since quite some time)

You can do proof of work based on random memory access for example rather than pure computation. The monetary cost ends up being identical, but it’s much better for the environment.

I haven't heard of this sort of proof of work before. Do you have a reference to it?

If you're referring to memory-hard hashing algorithms, I believe those are just resilient to ASICs/GPUs, but still require significant CPU energy. I'm not convinced those would be better for the environment, so if you're referring to those, do you also have an explanation for why they'd draw relatively less power?

Memory-hard hashing algorithms are basically the same idea.

They use less power simply because people are going to spend the same total amount of money in terms of compute hardware + energy, however RAM consumes less energy per per dollar spent on it than ASICs/CPU’s etc.

3W per 8GB of DDR4 is a reasonable baseline. https://www.crucial.com/support/articles-faq-memory/how-much...

>but it’s much better for the environment.

Why? If OPEX is reduced (lower electricity costs), it's logical to assume that it will be replaced with CAPEX, given how competitive mining operations are. If that's the case, that will mean electricity being used to power ASICs being replaced with chemicals required to fab semiconductors (along with electricity for those fabs). It might be better in terms of GHG emissions, it would be a wash for overall environmental impact.

Thinking about environmental issues abstractly aka energy vs chemicals doesn’t give you a basis for comparison. You need to dig into the details. In a green world you’re comparing X square feet of solar panels + Batteries with building RAM and environmentally building more RAM is less damaging.

It is hoped among Ethereum enthusiasts that moving from Proof of Work to Proof of Stake in Ethereum 2.0 will solve those massive energy usage problems without introducing vulnerabilities into the system.

>without introducing vulnerabilities into the system.

Did they end up solving the "nothing at stake" problem?

Yes. With Ethereum’s PoS system, you get penalized for voting in multiple forks.

See https://eth.wiki/en/concepts/proof-of-stake-faqs (I can’t link to the paragraph).

The "What is the “nothing at stake” problem and how can it be fixed?" proposes 2 solutions. Which one does ethereum use? The page itself is pretty long, and I can't find an answer with a quick skim.

The effort going into proof of work is the effect of Bitcoin's value, not the cause. Due to the difficulty adjustment, the total mining expense adjusts to be a little less than the real value of the reward offered.

“ The question then is whether 7 tx/sec really is sufficient to support broad global adoption, even if it's just for savings. Dollars and physical gold have no such limits.”

Yes they do, it takes even longer to move physical dollars or gold around and depending on where and who you are sending them too it might be impossible.

Sure in some mainstream cases you can send the digital derivative of gold and dollars to someone but those aren’t the actual asset just a representation issued by a centralized entity or a collection of them. Visas payment network isn’t moving dollars it’s moving digital dollars. Same with gold etfs. Let’s see them try to seize bitcoin and stop transfers it’s much harder

Their latency is high but they are massively parallel. There's no practical limit on global throughput.

To get low latency on dollars/gold you have to go with centralized digital representations, but Bitcoin has to do the same to get more than 7 tx/sec.

I might still be a fan if that were the only option, but with other blockchains eliminating this restriction I have a hard time seeing the long-term value proposition of Bitcoin specifically.

Yeah I agree, not a bitcoin maximalist. Things like wrapped bitcoin and renbtc open up new pathways for it to be successful though due in large part to its network effect and the underlying economics. It changed the whole off chain transaction narrative to just another chain transaction. L2 things like arbitrum make this even more compelling.

Others don't so much eliminate this restriction as they shift the problem to creating so much transaction history that it becomes impractical to run a node that fully verifies said history. In other words, they're significantly less decentralized.

Which is a bigger driver of decentralization? Running a node or adoption? I would think a universally adopted blockchain in the multi-TB would turn out more decentralized than a narrowly adopted multi-GB blockchain. # of potential business/research/government nodes >> hobby nodes.

That could be a serious issue if you're just relying on your nodes having beefy hardware.

It's a lesser issue if you can support a large number validating nodes using cheap hardware, they are frequently and randomly assigned to verify different portions of the history, and they always act as secure light clients of the other portions.

In fact, it might even compare favorably to the handful of major mining operations that mostly run Bitcoin, on expensive ASICs.

Out of interest, what would you say is a reasonable minimum amount of disk space for a user to have to devote to their bitcoin node, such that the number of nodes does not cause significant extra centralisation (over and above the centralisation of mining pools and development teams)?

Only an archive node needs to keep a copy of the entire chain. But every full node needs to download and verify all of it, so it's more a question of bandwidth and time. It would be nice to be able to so within a day.

That's interesting, thank you. As a quick calculation, the bitcoin blockchain recently[0] reached 300 GB which, spread over a day, would require a download speed of 27.8 MBit/s.

For comparison, "the global average download speed on fixed broadband is 85.73 Mbps as of September 2020"[1] so even if block sizes were triple their historic values it would still be possible for average global users to wait less than a day to complete the initial download.

[0] https://decrypt.co/42427/bitcoin-blockchain-grows-to-300-gig...

[1] https://worldpopulationreview.com/country-rankings/internet-...

Initial sync up of a full node doesn't need all 300 GB of chain history to be downloaded/validated.

A pruned state can be downloaded with no more trust assumptions than that required to trust the software distribution channel where you download the Bitcoin software from to actually serve Bitcoin.

Anyway, every one in the world doesn't need to run a full node. Even a few thousand geographically distributed full nodes is enough to offer resistance to network shut down, and there are more than a few million people that are capable of running a full node of a hypothetical Bitcoin with 1 GB sized blocks, which only requires downloading 1.67 MB/s of transactions to keep up with validation. That's a 1000 expansion of Bitcoin's throughput, letting Bitcoin become the world's most widely used currency.

The entire small block narrative is built on a shaky foundation that ignores the massive benefits of enabling more people to transact directly on the Bitcoin blockchain.

> A pruned state can be downloaded with no more trust assumptions than that required to trust the software distribution channel where you download the Bitcoin software from to actually serve Bitcoin.

Nonsense. Bitcoin software releases come with widely publicized checksums and signatures from reputable sources.

Couldn't those reputable sources also provide widely publicized checksums and signatures for a pruned blockchain state?

The pruned blockchain state changes every block.

More importantly, Bitcoin is ideologically opposed to the idea of checkpoints, as they run counter to the Longest Chain Rule that says the true state is whatever valid chain has the most cumulative work. Even if that chain is the result of a very deep reorg that invalidates the last checkpoint.

I am only including those "widely publicized checksums and signatures from reputable sources" in my definition of "software distribution channel".

You'd be surprised at the complexity involved moving 1-5MM USD across borders, even those without capital controls. And there is definitely a limit on global throughput of dollar movement, which is roughly the slowest processing rate of all the bank compliance divisions involved in the transfer. For complex cross-border transfers there may be more than 2 banks involved.

Greater amounts still would attract even more scrutiny due to AML and KYC regulations in most jurisdictions.

If you're dealing with capital controls, which many large economies now have, the complexity is exponentially higher. You're also assuming that telecommunications networks, physical infrastructure, particularly power, are in good working order when you want to do the transfer. That may be the case 99.99% of the time, but the edge case should also be a consideration.

>You're also assuming that telecommunications networks, physical infrastructure, particularly power, are in good working order

the same is true of bitcoin, right? I mean gold will continue to be gold in the absence of power, but will bitcoin even exist?

The most damning critique of bitcoin is that it requires power to be free and infinite.

Not necessarily if you are in possession of your own keys. Which admittedly most people today are not. A hardware wallet can be physically transported in the same way gold can.

The TSA will seize your phone if you don't hand over passwords and passcodes in many cases, you're saying you think it'd be a good idea to cross the US border with any amount of bitcoin on a hardware wallet? That's... optimistic.

You don't need a hardware wallet if you use the mnemonic phrase feature.[1]

https://en.bitcoinwiki.org/wiki/Mnemonic_phrase

Moving currency around is expensive and difficult, one of the reasons why credit cards exist.

I worked at a retail store that turned over lots of cash — as much as $1M on a holiday weekend. The costs, risks and time associated with dealing with that amount of currency was very real.

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