Stress Test Recap: Bitcoin
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* Micro-transactions.
* Replacing practically everything related to money in developing countries.
From this thread it is clear that many of those dreams are still very much dreams - the ever growing energy and resource requirements to participate significantly in the network is staggering, the amount of storage required for the blockchain is a burden to even tech-aware users (unless of course one would want to trust a third party...), and now it would seem that there are minimum bandwidth requirements which sit outside what is possible in even modest parts of the USA - impossible to achieve in places where the main link to the internet is a satellite.
If I was feeling particularly optimistic I would say that Bitcoin has been shown to be unscalable in it's current form. Further, the network itself tends towards centralization because of the ever growing storage, processing and bandwidth requirements.
I look forward to seeing where the future of crypocurrencies leads us- there is so much promise.
Bitcoin whitepaper was released in 2008. Before that even the concept of cryptocurrency hardly existed.
Digital currency was, as I understand, the application usually highlighted for secure (cryptography-based) distributed capability-based computing, as typified by the E programming language in 1997. Not sure if there are precedents going back further or not.
For the vast majority of people in the World the advent of the Internet was a completely ground-breaking, and completely original, idea. The predecessor technologies that provided similar utility for people (such as phone, fax, radio, television, libraries, social clubs, lunch meetings, etc.) were functions that didn't have a cohesive string that tied them all together and put them in one place. The Internet served that need by providing lots of perceived benefits to people; wide-spread adoption rapidly followed.
On the other hand, Bitcoin has a very specific utility right now -- it facilitates the transfer of value quickly and at (relative) low cost in a (reasonably) anonymous fashion without oversight.
While a significant number of people all around the World use the banking system, I'd wager that if you asked if their banks and investment accounts "worked well enough" that you'd hear a majority say that they do (and then you'd hear all of the caveats of what doesn't work and what they hate about it -- but not enough to seek out alternatives yet).
Bitcoin is still looking for it's toe-hold to convert that mostly satisfied majority. I believe it (or another blockchain-based technology) will find it, and sooner than later, but I am not blinded to the fact that it could end up being viewed in history as simply an interesting experiment that ultimately was ahead of its time.
How exactly? If you don't host a full node, you can only participate by going through someone who does.
> The resources required are not insane, so "normal" people (read: not power elite) are capable of running a node
The resources are formidable, and those in developing economies (except for the "power elite") have no hope of running a node.
> there is still enough decentralization so that no entity can corrupt the blockchain
Except that mining syndicates control huge swaths of the blockchain and it would only take the collusion of a few to control an absolute majority.
> the rate of transaction growth is slower than growth in bandwidth and disk space costs, so things will likely get better
Please explain the math on this. My understanding of network effects means that the problem will probably only get worse.
And yet, we observe centralisation.
And we have in fact had the single entity case, when GHash went over 51% (and had successfully conducted a 49% attack already), as you already know.
The hype has gotten in the way of building something that makes sense, and the continued belief in "Bitcoin" as the answer rather than some mew - perhaps maybe with a lot of further innovation - blockchain inspired tech, seems mostly tied up in the "investors" left who spent real dollars for the bits they're now watching depreciate, and can't bring themselves to admit an interesting, failed technology's digital coins are worth about as much as old Pokemon trading cards.
There is no other way to get a decentralized global ledger. Well, if there is, it would be a huge discovery, just like bitcoin was.
> It's become beyond obvious that existing Bitcoin blockchain technology has no real ability to scale
Once you have the ledger, you don't need to put every transaction on it. Lots of them can happen off the chain.
So yeah, your "obvious" is another word for "wrong".
We've had ledgers for quite a while, bitcoin wasn't the first digital ledger. I still don't understand the use case of a decentralized ledger, other than for illegal uses.
This technology gives mankind a new superpower: we can interact with anyone on the planet with predictable results and near-zero transaction costs. Interactions that only involve information, like financial markets, can be guaranteed to follow the rules of the blockchain, which will eliminate all financial middlemen you pay fees to today. Real world interactions can't be governed by software, but they can be guided by software. Reputation systems that run on blockchains will tell you exactly how likely you are to be satisfied with a real world interaction, so you can interact with complete strangers who live anywhere on the planet.
I think most trade will be blockchain-mediated in the near future.
Edit: I also disagree with 'reputation based blockchain'. Reputation based anything online is easy to beat, and given the massive amount of scams in bitcoin, it clearly doesn't work.
I am not talking about currency. Let's pretend the world will run on dollars indefinitely. Blockchains grease the skids of trade. You will trade with far more individual strangers than you do today. You will trade in new ways that weren't possible before blockchains let us encode the rules for interactions in a world computer.
Blockchains will reshape our world. I think our currencies will be defined by blockchains as well, but don't get distracted just because you don't believe that particular bit. Blockchains are bigger than currency.
So do miners.
Again, you haven't really given me any specific use cases, you've just made some vague statements about how blockchains will revolutionize everything.
If you mean smart contracts, they can be done more efficiently with a centralized service, without using a decentralized blockchain.
That eliminates counterparty risk, which is a big deal.
In particular, it creates an international payment system that is resilient to government interference.
Also, that there is a strict cap of 21 million bitcoins. All governments eventually manipulate their currency by expanding the supply, so that's a big deal in terms of the unique financial properties it has as an asset.
There we are back to what I said,
> I still don't understand the use case of a decentralized ledger, other than for illegal uses.
With international actions, there is also the additional concern that, with illegal (from the point of view of the law applicable where the transaction occurs) interference by some governments with actions involving foreigners that occur in other jurisdictions, there is less (if any) effective individual remedy than there would be with purely-domestic interference, and any remedy would be state-to-state with significant geopolitical ramifications.
I'm not a bitcoin fan, but I can certainly see at least conceptual utility in a mechanism which is resilient against interference by outside parties (or failure or compromise of any single of the parties providing infrastructure.)
I've been using it for about 9 months, and I've yet to run into any snags. If Bitcoin performed exactly as it does today, from now on, I couldn't be any happier.
The bitcoin transfer itself is pennies, but the challenge is getting local currency into bitcoin for a small amount of money. Though - the spread on simply buying US currency is pretty big as well.
Converting to currency is instant here and so are intranational bank transactions. It's also possible to pay utilities with BTC.
Cheaper and faster is enough to win me over regardless of historical price development.
Please explain how this argument does not also apply to Bitcoin, 'cos as far as I can tell at present it does. That altcoins are even scammier does not somehow mean Bitcoin is free of the same problems despite being first.
You can probably optimize that down to $3~4k or so by being smarter about the transactions you're DDOSing with. This is left as an exercise for the reader.
During periods of high network contention, an ordinary user can include a higher-fee to prioritize their transactions.
Correspondingly, the cost for attacking the network using spurious transactions will increase.
We already have altcoins. This might be an actually innovative altcoin. But it's not really going to be Bitcoin.
Dogecoin has the same thing. It was likely not free for you to send those coins (unless it was an off-chain transfer via a hosted wallet [think transferring money between checking accounts at USBANK])
Although, a hostile party would be able to stop transactions without fees from being processed simply by flooding them.
The idea is that in the long term as the block reward tends toward 0, the value of bitcoins rise and a tiny fee from each transaction compensates the miners as much or more than the current block reward does which will continue to incentivize them to be honest.
Currently, fees are essentially an anti-spam measure to keep people from creating millions of transactions with the same coin and DDoSing other transactions. I.e. without fees a single person could be issuing more transactions than this stress test did, for free, non-stop.
It is, however, true that microtransactions were heavily touted by Bitcoin advocates, until of course it became blindingly obvious that Bitcoin didn't scale.
And having two parties create paypal accounts and go through all the necessary verification steps to actually do that is most definitely hard.
Plus, bitcoin is not much use unless its converted to fiat.
Wallet security is pretty much the same you'd be practicing with your bank accounts, which you pretty much need to actually utilize paypal (And to be honest, sometimes to get bitcoins too).
Paypal barely has enough users worldwide to cover half of US population, so most people definitely don't have it. Of course bitcoin has even less users.
Pretty much 100% of my income is in bitcoins, about 90% of my expenses are paid for in bitcoins. I use bitcoins to pay for flights, groceries, rent and so on.
Of course my situation is rather unique, but it does go to prove that bitcoins aren't completely useless by themselves.
You mean the same blockchain.info which was making http requests to random.org to generate their rng, and when the http requests became a 301 redirect to https, it just used the first 32 bytes of the redirect message to generate the rng, hence producing the same random seed for all their wallets since may 2014 or such?
And all other online wallets also have problems. From what I've seen, using an online wallet is highly discouraged due to security risks.
> Wallet security is pretty much the same you'd be practicing with your bank accounts,
Frankly, that's bullshit. Wallet security is a really complicated topic, which often starts with, 'get a laptop disconnected from the net, and do a blank install of a linux VM'.
How exactly is wallet security any different from bank security? Bank transactions don't tend to be reversible either.
> How exactly is wallet security any different from bank security?
I don't need to start by installing a blank linux VM on a permanently offline computer, to have a secure bank account.
Why would you have to do that with bitcoins? How are bitcoins any easier to steal than your bank credentials?
"[SECURITY ADVISORY] All addresses made with the Android Blockchain.info wallet application since 1 May 2014 are potentially compromised, your funds are at a direct risk of theft."
I've answered your 2nd question already:
> I don't need to start by installing a blank linux VM on a permanently offline computer, to have a secure bank account.
This is incorrect, posted by some random guy on reddit. Check out the source code he links to, it should be obvious that on any sane platform the random.org generator is used in conjunction with /dev/urandom.
> I don't need to start by installing a blank linux VM on a permanently offline computer, to have a secure bank account.
I don't even know where to begin here, why would you have to do this with bitcoins? How is storing your bitcoins on your computer any different than using online banking? In both scenarios you risk losing everything if you get hacked.
Microtransactions were much-advocated by proponents as a Bitcoin use case for many years, until it became clear that wasn't feasible.
Likewise if there was a ubiquitous browser plugin to micropay bloggers for access to their articles and it was compatible with WP, Tumblr, etc, users could microtip to their hearts content and only need to reload once month via the blockchain.
I agree with you that they are wrong, though.
That's unnecessary. Miners can choose to include no transactions in blocks. They can also choose to include only transactions paying higher-than-average transaction fees if they want to make it more obvious to others that they are going for high fees.