The Bitcoin Apocalypse Is Coming in Mid-November
blog.rongarret.infoThis author confuses a hard fork for a github fork:
> The bitcoin chain has been hard-forked at least five times, [1]
[1] https://en.wikipedia.org/wiki/List_of_bitcoin_forks
Ouch! Those aren't hard forks— they are forks of the github repo!
In reality Bitcoin has only been hard-forked twice. Once, to fix the bug as described in BIP 50, and once for Bitcoin Cash.
Here's a better resource: http://homepages.cs.ncl.ac.uk/patrick.mc-corry/atomically-tr...
A common mistake made by "self-appointed" bitcoin experts and IMHO a good indicator for more red flags.
> On one side are those who believe that Bitcoin is … money, currency, …. On the other side are those who believe that it is a commodity, ….
That is the other red flag: Trying to construct two different exclusive camps. This goes along with not mentioning the Lightning Network (LN). Some people still don't see that LN could enable bitcoin to be both: A currency and a commodity.
LN has been vaporware for a long time, and it's always 18 months before it's ready. Recently the developers openly admitted they don't know how to scale it beyond 10000+ channels, because they don't know how to solve distributed routing.
https://www.reddit.com/r/btc/comments/719vis/lightning_dev_t...
https://medium.com/@jonaldfyookball/mathematical-proof-that-...
That is a very pessimistic view on the current state of LN. There are three independent open-source LN implementations [1, 2, 3] out there that are being worked on and already implement basic functionality. All three contribute to an document, called Basics Of The Lightning Network (BOLT) [4], which forms an open standard for LN.
I wouldn't call it vaporware. Yes, there are unsurprisingly open questions. But nothing which can't be solved.
1: https://github.com/lightningnetwork/lnd 2: https://github.com/ACINQ/eclair 3: https://github.com/ElementsProject/lightning 4: https://github.com/lightningnetwork/lightning-rfc
In the broad terms, how do you even imagine LN to work? Let's say I want to buy a $3 coffee at some random Starbucks I'm walking by. Do we have to first open and fund the channel? How much will it all cost just for that one off purchase?
Give particular figures please, no vague nonsense I hear all the time.
As for these implementations, I will believe it when I see it. You didn't even try to address the particular issue I mentioned.
You could be transacting your coffee with any crypto that Starbucks supports, and which is compatible with the lightning network. Litecoin will work for this example.
So Starbucks ask you to pay via Litecoin, which is fine by you even though you don't have a Litecoin balance. Atomic swaps over lightning network funded by some bitcoin you own, converted to Litecoin, is how you'll pay for your coffee.
What if they only accept bitcoin? That's the case for most businesses accepting cryptocurrencies.
Both of you are suspiciously avoiding a direct and simple question. How does LN work on Bitcoin in this case?
LN needed the transaction malleability fix in Segwit, so LN development stalled when Segwit was blocked for years.
Please tell us when LN will launch. Not some half-baked beta that chokes on 10000 channels, but the real thing.
Beyond what olegkikin mentions, the Lightning Network requires you to put stake (the total amount of bitcoin that can be used within those off-chain transactions). The illiquidity opportunity costs of that stake is greater than any value that the LN provides. There's a reason why we don't use pawn shops to buy groceries every week. Further, there isn't really a use case where you want to put some money at stake to do some transactions really quickly. Also, as Nakamoto† mentioned before, you can determine if a transaction is valid with very high probabilistic guarantee within a few seconds (with less risk than credit cards) without any change to the current network.
If for some reason you don't believe that, then there will always exist credit card companies that could provide instant transactions with guarantee as a middle man. Alternatively, there exists solutions like BitNotes.
†https://bitcointalk.org/index.php?topic=423.msg3819#msg3819
The bug behind BIP 50 caused a fork, however the bugfix wasn't a hard-fork. By definition a hard-fork is a fork that require all Bitcoin nodes to be updated. In the case of that bugfix only some nodes had to be updated (the ones run by miners making up a majority of the hash power) then the rest of the non-updated nodes automatically reorg'd to the right chain, the one with the most work.
This strongly reminds me of an old joke stating that the end of the world had to be postponed yet another time.
My mistake - I would delete this comment - but now I cannot.
Your source is also not quite on the spot - it is about hard forks - but there were also soft forks.
BCC was a hard fork
> I am fully cognizant of the perils of making bearish predictions about new technology.
> But, to quote another well-worn and wholly unreliable aphorism, this time it's different. It really is.
and
>... because the only other alternative is chaos, and probably the end of the whole Bitcoin experiment.
I'm very much a Bitcoin skeptic, but, I'm not sure this time is different, or that Bitcoin will die.
For the last 8 years, various sources have been predicting a Bitcoin collapse over and over again. It's still here, alive and well and quite high.
3 years ago: Business Week - Bitcoin Is Collapsing => https://news.ycombinator.com/item?id=8893616
4 years ago: latimes.com - Bitcoin virtual currency is on verge of collapse => https://news.ycombinator.com/item?id=7306035
6 years ago: theatlantic.com - The Bitcoin Economy Is Collapsing with No Sign of Recovery (2011) => https://news.ycombinator.com/item?id=8431092
6 years ago: Bitcoin & Gresham's Law - the economic inevitability of Collapse => https://news.ycombinator.com/item?id=3623549
In one sense, it's already dead.
In theory, Bitcoin is supposed to be a payment system, digital cash. But that seems to be pretty much dead. Consider the opinion of Fred Wilson, a big Bitcoin booster, who has stopped using it for payments: http://avc.com/2017/08/store-of-value-vs-payment-system/
Merchant acceptance is actually in retreat: http://www.businessinsider.com/merchants-arent-accepting-bit...
It is still being used for speculation, of course. And for some crime. But the 2010 vision of a digital cash that replaces Western Union, Visa, etc? It certainly hasn't arrived, and it seems farther off than ever.
It was set to die by design.
Bitcoin has a predetermined graph of coin production with time that converges soon. In 2022, 90% of all bitcoins will be produced, and the ideal inflation will be lower than most fiat currencies.
But inevitably, people die, and the knowledge of their private key with them, removing bitcoins from circulation. The amount of bitcoin will therefore decrease impredictably
All in all, it will be as volatile as currently traded gold (which is not as good a long-term store of value as fiat money as a result), and slower to use in transactions (in November, the European Central Bank will launch SCT Inst, a SEPA mechanism that provides transactions in less than 15 seconds, which is better than Bitcoin's recommended 2 hours).
Beating the improvements of traditional systems will require new cryptocurrency designs.
> But inevitably, people die, and the knowledge of their private key with them, removing bitcoins from circulation. The amount of bitcoin will therefore decrease impredictably
Maybe a bit late, but you finally understood why Bitcoins get more valuable over time: their number grows slowly or maybe decreases, while the number of people wanting them increases.
That's why Bitcoin is the best Store Of Value ever devised.
"their number grows slowly or maybe decreases, while the number of people wanting them increases."
Yes - you are right to point out that as BTC's disappear, it's not such a bad thing.
But why do you assume people would continue wanting them?
"That's why Bitcoin is the best Store Of Value ever devised."
It's currently one of the worst 'stores of value' possible.
It's massively volatile, and inherently risky: governments could decide to regulate it tomorrow - or even ban it. It's highly susceptible to popular whims. It has massive chunks owned by individual investors who could 'change their minds' on something.
If you have $X USD and want to 'diversify' and have 'strong store of value' - there are many other better options. Real estate being on the top of the list. Over the long-haul, there are innumerable places in the world where real estate will hold it's value for hundreds of years. Baskets of commodities, currencies, decent bonds.
Bitcoin is a very speculative asset, which makes it the 'opposite' of a 'store of value'. And if it's not a currency, then why are we using it again?
Let me put it differently:
In 200 years - do you think there will be demand for real estate in London? There has been for 1000 years. What about Tokyo? Shanghai? Of course there will. Maybe less, but certainly some, and probably more.
Will there be demand for BTC in 100 years? It's hard to say. Possibly, but there's a decent chance nobody will know what it is then.
I'm not sure why this is being downvoted. It seems spot on to me. People argue that Bitcoin is a great investment because it's going to go up, up, up! And people argue that it's a good store of value. But they can't both be true.
Reward and risk are strongly related. Nobody should know that better than startup people.
"I'm not sure why this is being downvoted. It seems spot on to me. "
Bitcoin is a religious subject among the tech crowd.
The most fascinating thing about BTC has nothing to do with 'block-chain' - it's the manner in which it has created hype among tech circles.
Techies look at it from a tech perspective, financial types from a financial perspective.
From a financial perspective, BTC is downright bizarre. Even the 'threat of disruption' aside, it doesn't make a whole lot of sense.
But from a tech perspective, is uber-cool.
So it's hard to have a discussion about BTC because almost nobody talks about it as a financial instrument - it's always about tech.
The amount of systematic hype is surreal - constant streams of articles etc. etc..
It's going to get bigger before it gets smaller as the hype is just starting to reach mainstream.
Excellent point.
I am really impressed with it as a technology. It's absolutely brilliant.
But when I put on my business hat, I'm still not seeing it. For quite a number of years I've been asking for proof of daily use among significant market segments. For just as many years, I've been getting, "OMG THINK OF THE FUTURE!!!" as an answer.
I have some hope that we're at peak BTC hype, though. A lot of the enthusiasm (and the bigger scams) seem to have moved on to smart contracts, ICOs, etc. It's much harder now to ignore Bitcoin's years of not being very useful.
BTC valuation is pretty strongly correlated to it's Google Search popularity.
There are an amazing number of people who own a little BTC and are in on the hype.
And this is like Facebook 2007, where I already thought 'everyone was on it'. No. The 'rest of America' is just learning about it - then the 'rest of the world' - and then the other 3 billion or so people who are barely on the Internet. FB grew for quite a very long time after 'we thought we all were on it'.
BTC though is tricky to access, my Mother is on FB, she will never buy a Bitcoin.
But I do believe BTC has a lot of popular hype to ride yet.
I suggest it will start to wane quite a long while after the press stops talking about it daily. A lot of people will just 'hold' so I don't think we'll see a crash though.
There are caveats:
The press is notorious for flipping on things. They could turn on BTC and make enough noise. Since it's highly speulative, it's easy to see a flood of people rushing out to 'cash in'.
And of course governments: A Scandinavian country could opt to regulate it, or treat it like 'real currency' and require transparency etc. - which for any other currency would be 'great' because it's validation, but really, the whole point of BTC is anonymity etc. - esp. for black market transactions, so really, it's not a good thing.
It's a brilliant and fun excercise we're going through, but since it's doubtful BTC can ever be an actual currency or medium of exchange, I really wish we would 'move on' because it's not really a useful thing in the end.
Somebody may come along with an actually useful crypto - but i don't think that BTC or the ICO's we're seeing are it.
People also don't appreciate that Bitcoin is infinitely divisible, so the total numbers are meaningless. At the same time, inflation is super low and decreases over time, giving it more and more edge over nation-state currencies.
Isn't inflation strongly negative? In the link I posted above, Fred Wilson exhibits behavior typical of deflationary times: people hoard the currency.
That's a strong disadvantage vs nation-state currencies, which have clear inflation targets (generally in the 0-2% range) and the ability to hit them. It may be great for speculation, but it's terrible for a medium of exchange. For that, you want the value to be constant or very slightly decreasing.
And I don't think that's fixable. If the Bitcoin supply is limited but those tokens are used in a world of continuous economic growth, then Bitcoin will always be deflationary.
Bitcoin is NOT infinitely divisible. Each Bitcoin is divisible into 10^8. There were reasons to choose this number and isn't arbitrary [1].
[1] https://bitcoin.stackexchange.com/questions/31933/why-is-bit...
It is arbitrarily divisible. Fitting inside 64 bits is convenient, but hardly an insurmountable engineering challenge. There's libraries that handle this sort of thing with ease.
Ok put your entire life savings in BC, i will put mine in the SP500. Lets see how things look in 40 years?
Honestly, and this is coming from a Bitcoin bear, it will probably generate outsized returns in comparison to the S&P500 over the next 2 to 4 years. If it truly is a bubble then it will have a long way to run. The market cap at the moment is tiny, but probably too high to disregard now, and if institutional money starts buying in, it can probably easily go 10-20-30x again.
Don't forget it's still relatively hard for average folk to purchase crypto. But once you have acceptable ETFs and funds that you can purchase at a click of a button through your brokerage account -- a lot of people (and pension funds!) will probably allocate 1-2% of their portfolio to crypto. That is 1-2% of $300tn or so, or 30 to 60 times the amount of money in the space today (in terms of market cap).
If you think this bubble will run for a while, then I also think it's not unreasonable to assume you can multiple your initial investment by 10x by investing in either Bitcoin or Ethereum. But that's my opinion (and this is obviously not investment advice).
Whether it'll be around in 40+ years, I don't dare make that bet. But no one is saying you can't move money around to the better investment opportunity at a specific time.
How has the SP500 compared to BC since its inception in 2009?
That is the wrong measure. The counter argument to that is something like "How did going 100% all in to pets.com in 2000-2001 go?"
You cannot judge future performance by past results. That is the fundamental thing you need to understand before investing. Zoom in on the right part of 2000, and pets.com and a really nice upswing. There have been other stocks that had a nice and steady growth for years and years.. before exploding.
The SP500 has been growing consistently, has for quite a long time, and it's a bet on the future growth of the American economy. There will be ups and downs, but by enlarge, steady growth.
BTC has been on a wild ride, and could evaporate at any moment. I don't think it will, but it could, since there's no reason for anyone anywhere to own it.
There's no question the safer bet is S&P 500.
Now - in the range of outcomes, admittedly, the BTC owns the higher end of the spectrum - no doubt, there are possibilities where BTC completely outraces the S&P, however, it also owns the lower end of the spectrum of outcomes, where a lot of those outcomes are 0.
It surprises me to see this downvoted.
One fundamental of investing is that stocks represent an economically productive asset. In contrast, commodities just sit there. If I buy a chunk of a company, that company is working to become a bigger, more effective, more value-generating company. If I buy an ounce of gold, it stays an ounce of gold.
Index funds represent a broader bet still. Because they're composed of many things, volatility is lower and you're betting on whatever the common factors of the index are. So buying an SP500 index fund could easily be said to be a bet on the American economy.
And in many ways, Bitcoin is worse than gold. The historical value of gold is known. Bitcoin is new. Gold's floor price is set by the practical use value of it, both industrial and decorative. Bitcoin's floor price is that of bits. That is, zero. The gold market is broad, with producers and consumers all over the world, and open markets in many countries. Bitcoin is effectively controlled by a relatively small number of people and requires careful long-term cooperation of those people.
So it seems pretty obvious to me that Bitcoin is much higher risk. Which can mean higher reward. But as anybody who has shares in a failed startup knows, higher risk doesn't guarantee higher reward.
I beg to differ with regards to your valuation of Bitcoin. It, like gold, has a practical use value. It, also like gold, has a value attributed to it due to it's rarity. However, Bitcoin has an advantage over gold, in that it can be traded without having to be transported _at cost_. This is why so many people are bullish on it.
Oh, and so many people "who are in control of it" have too much of their own money invested into it to allow it to fail.
The advantage of gold over Bitcoin is that you can evaluate the non-"it's gold!" uses of gold and make a good guess of its floor value, what it'd be worth if people weren't hoarding it, and say something like "it might be 2-3x overpriced right now, but probably not more than 10x overpriced right now". So you can say, worst case, you probably won't lose more than half the money you put in gold, and almost certainly not all of it.
What is the floor price of Bitcoin, once you eliminate all speculation/hoarding?
Sorry, I missed this in all the noise.
Gold has use value in that even if the commodity speculation activity drops to zero, I can still turn the gold into jewelery and sell that. Or I could sell it to somebody who needs it for industrial purposes. Heck, I could sell it to the people who put gold leaf on candy.
Bitcoin has no such intrinsic floor. It only has exchange value. If people stop accepting it as a medium of exchange, you're left with bits. Bits are approximately free.
Ya. As per my comment below, it's a) the dissonance between a 'tech view of BTC' and an 'economic/financial' view of BTC and b) the religious nature of BTC hype. And by 'religious' I don't actually mean 'religious' rather, the old 'religious arguments over programming languages and frameworks' kind of trope.
Commenting against BTC is sure to get you down-voted.
It's ok though, it's just one of many HN quirks we're all used to :)
It doesn't surprise me. HN is very pro tech, even when they don't understand the foundation of what they are betting on.
I own 1 share of a SP500 ETF. That gives me an actual fractional ownership of Apple. That gives me an actual cut of the dividends of real american companies. It has an actual meaning of what you own.
What does 1 BTC give you? What is the fundamental purpose of a BTC?
Tulips went up in price too, but they were not a very smart investments. Tulip chases do not win in the long term.
What if you owned a US dollar (an actual dollar bill)? That gives you an actual fractional ownership of what? An American government? No. You have a currency, a store of value that can be used to pay a debt.
Owning a BTC is the same as owning a dollar, functionally. The main difference is that dollars, on the whole, tend to lose value, and that BTC tends to gain.
Having your life savings in BC is just as stupid as having no cryptocurrency at all.
Having your life savings in cold fusion juice presses is just as stupid as having no stock in the above at all.
You need to think of the reason for an investment. If you are set for life, and want to gamble on it... cool, buy BC. You could also go to vegas, or bet on horses, or start a HFT trading shop. All are reasonable ways to gamble for fun and possibly profit.
If you are looking to build a nest egg to retire when you are old, it is very unlikely that BTC is a good route for that ;)
Investing in BTC is like investing in startups. And a lot of people are making money with that. And so are a lot of people in BTC.
Please don't compare this to Vegas, where the odds are known to be against you.
Have a small/tiny % of your investment in cryptocurrency is a smart move.
> Investing in BTC is like investing in startups.
So something that only people with significant incomes and the ability to lose 98% of their investments should touch it? I am fine with that definition. Not sure most BTC investors would qualify to invest in a startup though (see qualified investors law)
> Please don't compare this to Vegas, where the odds are known to be against you.
The odds are against you in many markets. I would argue the odds are against you in BTC. It is a zero sum game, and there are many people looking to steal or scam. In a zero sum game with scammers, your EV is negative unless you yourself also want to steal or scam (which is a different conversation to head down.
> Have a small/tiny % of your investment in cryptocurrency is a smart move.
Why? Should you put a tiny % of your investment in horse races? For most people, a small bet with an unknown payoff is not something they should touch.
> only people with significant incomes and the ability to lose 98% of their investments
If you only invest 1%, you can only lose 1%. And with bitcoin, you can invest at $1 if you want.
> I would argue the odds are against you in BTC.
Seems that in reality they weren't.
> Should you put a tiny % of your investment in horse races?
Still talking about Vegas? In that case you don't seem to understand risk-return. NOBODY should invest in horse races or Vegas, or the lottery. Nobody! Not rich, not poor. Why? Because the risk-return ratio is known to be < 1. Why? Because casino's and bookmakers make sure it is < 1.
The risk-return of Bitcoin is not known to be < 1, and neither are that of startups. Therefore people can actually make money investing in these high risk things, by averaging them out.
Let me put this in another way, if you place a huge amount of Vegas bets, you average out the risk-return, and you will end up with < 1 return. If you place a huge amount of 'bets' on startups and similar investments, you can end up with > 1. That's why people are making money with it.
Instead of arguing with me, maybe you should consider that there might be a tiny bit in truth to all of this. And then maybe that wisdom can make you some decent money in the future. But I won't lose any sleep over it if you don't. I have a sane, pretty conservative investment strategy, and it's doing fine.
Deflationary assets can be good investments but are terrible mediums of exchange. The Fed has an inflation target and not a deflation target for a reason. Or did I miss the sarcasm here?
Yes, the number of coins in circulation decreases over time.
But the precision can be increased from the current 8 decimals. Even if all but 1 Satoshi/0.00000001 BTC is lost, it could still be split into smaller units, or used to bootstrap a chain with higher precision. It can be fixed as required.
Volatility decreases as the number of users and therefore liquidity increases. It should decline further with rising use of the network for payments instead of a pure store of value.
I agree that "viability as a payment system" is where Bitcoin is stuck right now, but scaling the system is the stated goal of all current Bitcoin developer groups. One of them will get it right eventually.
«Merchant acceptance is actually in retreat»
Wrong. Bitcoin payments processors report growth, eg. BitPay processes $1 billion in payments per year, up 328%! https://blog.bitpay.com/bitpay-growth-2017/
The source you quoted is laughably bad: it tries to estimate payment growth by looking at how many of 500 retailers accept Bitcoin. That's like saying "out of 500 persons only 3 own (not bought) a Porsche this year compared to 4 last year, so worldwide Porsche sales are down."
No, they are looking at merchant growth by looking at use among top retailers. It's a perfectly fine metric if what you care about is daily consumer use for common transactions.
If you're saying, as the blog post says, that it's getting used more for other things than typical ecommerce, that's a different argument.
Yes there is a difference between acceptance and payment use. However they extrapolate that it's declining based on a way too small sample size: 2 retailers stopped accepting BTC so they infer global acceptance is declining... That's just ridiculous.
For all we know the JPMorgan report making this claim could be wrong, as it doesn't even list which 500 retailers it studied, and which are the 2 that dropped Bitcoin. I wouldn't expect quality Bitcoin research coming from JPMorgan anyway, as their CEO is staunchly anti-Bitcoin, so their analysts are probably not enticed or instructed to spend that much time and effort studying it.
The largest 500 retailers is an excellent representation of the largest 500 retailers. I think it's also a fine proxy for mainstream ecommerce.
That's certainly a metric that Bitcoin advocates would have been happy with, say, 5 years ago. Then they were agitating for major retailers to accept it as the obvious coming thing.
The fact that new major merchants are not joining and old merchants are going to the trouble of taking it out is a sign that earlier vision was flawed.
The largest 500 retailers are a poor representation of all retailers. Especially because Bitcoin tends to be more often accepted at small—as opposed to large—retailers.
And again the sample size is way too small. Two (2!) retailers dropping it means nothing, in particular because other larger more significant data points contradict this small sample size: BitPay doing 1B/yr at +328% growth... hardly a sign the "vision was flawed".
You seem to be working very hard not to understand their point. Or mine.
The largest 500 retailers is an excellent representation of major retailers. It's also a reasonable indicator to use for general consumer behavior, because what makes retailers the largest is their use by consumers.
You could claim that a loss of 2 retailers isn't significant proof of decline, although since it's 2 of 5, a 40% decline seems notable to me. But regardless, having less than 1% market penetration in this segment (and declining) is a pretty good sign that it is not currently successful. If you pitched some VC partners with that as proof of traction, they'd laugh you out of the room.
The BitPay post is definitely interesting, but they're cagey enough about their numbers that it's hard to tell what's actually growing. You might be able to use it to make an argument that BitPay is succeeding in some other segment. But it definitely doesn't prove mainstream consumer ecommerce success. Which apparently isn't interesting to you, but to major ecommerce companies, it's very interesting indeed.
«isn't significant proof of decline, although since it's 2 of 5, a 40% decline seems notable to me»
Any percentage value is irrelevant because a change of ±2 among 500 retailers is statistically insignificant. If it was ±20 it would be significant.
What if we went from 1 to 2 accepting BTC, would you say "acceptance went up 50% among top 500 retailers?" It would be highly misleading and improper to report it as such.
Taking the one bit you want to argue with but ignoring the meat of my point certainly isn't something I'm finding useful. I'll take my leave here.
If they went from 1 to 2 accepting BTC, I would say "acceptance went up 100%".
This might still change, but you're likely right; as a payment system it's probably not going anywhere anytime soon.
It's other description, as a form of digital gold, applies now more than ever though and I think that's how the market is treating it: largely as a hedge and store of fungible value.
Ah yes. Bitcoin died 172 times: https://99bitcoins.com/obituary-stats/
Like the latter part of an actuarial mortality table, it seems Bitcoin dies more often as time passes.
While bitcoin is no longer a good currency, it's still the best store of wealth - the crypto version of gold, due to massive PoW mining infrastructure.
While other cryptocurrencies may give you near perfect anonymity or sub-second transaction times with no fees, none of them are so secure and dependable.
To be fair, the SEC losing their patience with ICOs and turning on the whole sector would do it.
Edit To replies: It does if the SEC decides the concept of cryptocurrency is one which fundamentally exists to bypass regulations for the purpose of fraud. I’d disagree, you’d disagree, but only their agreement matters.
What does that have to do with bitcoin?
The current price of Bitcoin is mostly driven by the fraud taking place within the Ethereum ecosystem. Let's see where the price is after a few rounds of SEC crackdowns.
It would suffer a temporary drop then inevitably climb back up again. Bitcoin is global at this point. No one jurisdiction is going to shut it down.
Here’s a thought experiment. Yes Bitcoin is global but like all other distributed systems, the CAP theorem applies. When there is a network partition, you can only choose between consistency and availability. Now what if tomorrow the Chinese government decided to totally block Bitcoin traffic, just like they block Facebook, Twitter, NYT, Tor and VPNs? Losing either consistency or availability would be a heavy blow. It’s either going to stop working at all, or fork into a Chinese and non-Chinese version. I don’t see how either of them inspires confidence.
I think it would be pretty difficult to block a P2P network at that layer of the stack to effectively partition the network. The list of peers is dynamic, so it would always be one step ahead of The Great Firewall.
Packet Inspection?
It wouldn't matter at all. It would inconvenience Chinese holders of Bitcoin. You can't really block Bitcoin traffic. There's ways around firewalls. For example, I could embed a bitcoin address into a JPG image, certain XY positions would contain the bits which could be decoded into an address or key. That could then be routed to the Bitcoin network once outside of China. As long as you can send bits, you can send bitcoin.
You can arrest people and seize their assets.
There is nothing inevitable about it, but even if it were, the SEC has a long arm.
https://en.m.wikipedia.org/wiki/Long-arm_jurisdiction
https://en.m.wikipedia.org/wiki/Disgorgement
http://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?arti...
http://www.scotusblog.com/2017/04/argument-preview-long-arm-...
> Bitcoin is global at this point. No one jurisdiction is going to shut it down.
Especially as countries like Japan are embracing cryptocurrencies. That must make other countries wonder whether trying to attack cryptocurrencies will end up leaving them at a competitive disadvantage.
That's kind of an absurd claim to make. What exactly is your reasoning?
The price is 5x since after the ETH hype started a few months ago. Literally just look at the price history.
Correlation does not imply causation. Did I really have to tell someone on HN this?
You asked for reasoning, not evidence, so it might be helpful not to move those goalposts.
Reasoning can't have or be evidence?
They’re two words with different meanings, and I don’t find semantic arguments engaging, sorry.
Even though your whole contribution to this discussion was semantic.
The definition of reasoning is: "the action of thinking about something in a logical, sensible way."
As if evidence could not be a component of reasoning that leads one to logic and sense.
The only reason why you don't want to engage this further is because you knew your quip was fruitless from the start.
Have a nice life.
Or could the frothy ICO market be due to successful cryptocurrency investors throwing money at anything to try to "diversify" their portfolios?
> To be fair, the SEC losing their patience with ICOs and turning on the whole sector would do it.
They are already doing just that in the last couple of months, and bitcoin remains unaffected.
The SEC have only cracked down a handful of obvious scams from the pool of obvious scams. That’s worlds away from a global crackdown on the entire space, or worse, congressional action. Whether or not you agree with said action, I’m sure you can think of reasons, stated or otherwise, that such action might Be taken.
No they’ve been calling just about everyone operating in their jurisdiction. Many ‘reputable’ ICOs have halted their fundraising as a result of phone calls their lawyers received from the SEC. They’ve only filed suits agains the obvious scams so far, but that’s just a matter of priorities and the fact that they try to be soft handed with non-scams.
I believe it and a very good point. But do you have a source?
Not a quotable one no, although some like colony.io have blog posts explaining why they are changing the terms or schedule of their ICO. Others have refunded their ICO. But it is Back channel sources that tell me the others have received calls too (I work in this industry).
In that case, I doubly appreciate you sharing the info, it does fit with how the SEC likes to operate too.
«would do it»
The SEC only has jurisdiction in the US. I don't see how this would impact Bitcoin's use in the rest of the world. Bitcoin is a phenomenon that's worldwide.
That has no effect on Bitcoin.
"For the last 8 years, various sources have been predicting a Bitcoin collapse over and over again. It's still here, alive and well and quite high."
It's 'high' mostly because there are a large number of holders who are just sitting there on it.
If it's not being used as a currency, than I can't see how in the long term, people consider it to be a 'store of value' when it could be regulated, deemed illegal, or declared all sorts of things by regulatory bodies which fundamentally change it's nature.
And as an arbitrary store of value? We have tons of 'stores of value' available to us already that are considerably less volatile and more liquid.
So what is the point again? What problem does it solve, and why should anyone want it for a material reason?
I too agree that it will be around for a very long time, but what happens when the very speculative press - and even HN readers get 'bored' of all the news? When the Google queries start to wane (and BTW I think BTC will enjoy a huge surge in interest by 'everyday folks of the world' for a while before it wanes), but eventually, people will lose interest if it's just a 'store of value'.
As a Bitcoin fan (and someone who owns a little), I think it's a pretty good article.
Some more tidbits of information from my perspective:
>The anti-2Xers argue that the NYA should not be binding because it was negotiated behind closed doors, and that a change of this magnitude needs to be more carefully considered before it is adopted.
No active developers were part of the NYA. Some in the NYA have said that they agreed because they believed Core was party to the NYA.
>But there is another school of thought, which is that Bitcoin is (or should be) a currency rather than a commodity, primarily a medium of exchange rather than a store of value. These are the folks who want you to be able to buy a cup of coffee at Starbucks with Bitcoins.
I don't think anyone, including Core, is against that (higher transaction throughput). But on-chain scaling alone can't get you very far, and it has large costs that need to be carefully considered. The (backward-compatible) Segwit capacity upgrade just happened, and it takes time for people to update their software to make the newer more-efficient transactions. (... If the consensus was that Bitcoin really was urgently hurting for transaction capacity, you'd expect people to be updating to Segwit transactions faster than they are now.) The idea that another capacity upgrade should be rushed so soon immediately after Segwit is kind of silly. The idea that it should be decided so soon behind closed doors by a few CEOs is sillier.
>The 2X advocates have refused, citing the NYA, and secure (at least apparently) in their belief that enough people will update their code that there will be no doubt that 2X is the One True Chain.
Let's be clear about the word "update": it means to switch their software to a fork that none of the active community Bitcoin developers contribute to and that none plan on contributing to. Many have said that if Bitcoin "fails" after the fork, they have no interest in contributing to the Segwit2x fork's software. (The big-blocker anti-segwit movement stalled work for years, politicized the Bitcoin space, and contributed to making many of the core devs be the target of harassment; imagining that unpaid volunteers are going to switch to working on a project made by the latest iteration of that is ... to call it wishful thinking seems too kind.)
A block size increase is in fact very urgently needed. 99% of blocks are maxed out at ~4M weight DESPITE segwit, because segwit's adoption is too low (7%). Adoption isn't happening faster not because it's unneeded, but because of inertia among wallet developers. Consequently, full blocks and high fees have caused Bitcoin to lose many users to alts (LTC, ETH, ETC, DASH...) All this user loss and tx market loss has been happening over the last year, so we urgently need a block size increase, since we can't magically accelerate segwit's adoption rate.
I think you fail to envision how the dynamics will play out if Segwit2x wins. Core will simply merge the ~1k lines of code that make up the segwit2x features, and mostly everyone will be back to business running Bitcoin Core instead of BTC1, since the two code bases would be equivalent. That's it. No big war. No mass resignation of Core devs. No ceding the control of Bitcoin to "another group". Most Segwit2x supporters want a smooth "reintegration" scenario like that to take place. We don't want to "fire Core" or such nonsense you might read on r/Bitcoin.
Things would be a lot simpler if Core simply agreed to double the block size. That's all we want. A one-time block size increase, to give the blockchain some breathing room while we all continue to work on off-chain scaling (NimbleWimble, LN...) that we all already agree are the proper long-term solutions.
> 99% of blocks are maxed out at ~4M weight DESPITE segwit
Hasn't been true since July: https://blockchain.info/charts/avg-block-size
> full blocks and high fees have caused Bitcoin to lose many users to alts (LTC, ETH, ETC, DASH...)
What's the evidence for this? All my friends own btc and alts... but none of them transact in it. They own them only for investment purposes. I don't think anybody is using alts for their higher throughput.
«Hasn't been true»
Yes it's true. I said WEIGHT not SIZE. A distinction few understand. Check the kWU column at https://blockchain.info If a full node has built a 4Mweight/1MB block, it is full, because non-segwit txs have wasted the 4M weight quota and prevented the block from growing over 1MB. If segwit adoption stays low, blocks WON'T be able to grow much beyond 1MB.
In fact the problem is that the rate of adoption of segwit is too low compared to the rate of increased txs that Bitcoin needs to be able to support. Therefore blocks are going to continue to stay at or near the ~4M weight quota.
As to evidence for users moving from Bitcoin to alts because of full blocks:
The tx rate of ETH, LTC, and other alts started sharply increasing in March/April 2017, which is exactly when Bitcoin blocks reached capacity (~250k tx/day)
> block size increase is in fact very urgently needed [...] segwit's adoption is too low (7%)
7% in two months. What kind of adoption had you expected? Everyone won't switch over night, that's the whole problem behind why flag dates in distributed systems are hard, and why many people adocate backwards compatible changes whenever possible.
> if Core simply agreed to double the block size
Core is the name of the Bitcoin software. Perhaps you mean the Bitcoin community? The functionality needed to roughly double the block size was released last year and finally took effect in August. If that's too slow for your use case, then you are probably on the edge of where Bitcoin is useful anyway. It's hard to imagine any sort non-contentious hard fork planned and executed in less time than that, without endangering other people's money.
Ethereum has pulled off several hard forks, which they ran within weeks of finalizing the software. There's no reason Bitcoin couldn't do the same, especially for non-contentious forks.
Absolutely, and Bitcoin sort of had too. That knowledge isn't very helpful for managing changes today unfortunately. Today people actually buy stuff for Bitcoin and it's not very helpful to ask all economic activity to cease until a fork has settled down.
None of this is very relevant to the uptake of segwit transactions however, unless as a what-if scenario had segwit been done as a hard fork instead. That was the original intent of the proposal, if I remember correctly, and there was a lot of discussion at the mailing list exactly how this should best be deployed. Looking back at it, it is quite clear it could have been deployed quicker had another mechanism been chosen.
There's no need for economic activity to cease; hard forks can be very smooth. I agree that segwit should have been a hard fork.
We could double the block size. Then the capacity would raise from about 10 million users to about 20 million users. I'm sure that would solve all of Bitcoin's scaling issues for a long time.
You missed: «while we all continue to work on off-chain scaling (NimbleWimble, LN...) that we all already agree are the proper long-term solutions.»
the only reason the blocks have bene full is from malicious actors filling the blocks with nonsense transactions ( miners pumping fees, and seditious big blockers trying to dissolve core )
No. It's a myth that keeps being repeated. Check the "Moby Dick" spam report: attacks stopped in Jan 2017. Since then tx growth is purely legitimate. Or use common sense: consider that 5000 BTC are paid in tx fees per month... no one pays $20 MILLION a month just to be able to say "hey look blocks are full".
Just for some balance, the Hong Kong Agreement (which is absent from the article) is really important in this timeline - in Feb 2016, an agreement was reached with miners and signed by a few Core devs (however, possibly under duress?) to work on Segwit _and_ a safe hard fork.
The NYA happening with a few CEOs "behind closed doors", was pretty much a result of the year and a half of no progress on the safe hard fork part. Also remember the miners aren't really a fan of cheap transactions, which eats into their profits, and does fundamentally alter their ROI.
Segwit2X was originally sold as a compromise. Activate SegWit for the future since it requires software updates as you noted for the additional transaction formats, and schedule a 2X HF to help the network grow immediately.
> The big-blocker anti-segwit movement stalled work for years, politicized the Bitcoin space, and contributed to making many of the core devs be the target of harassment
I agree sadly, but unfortunately it was the same story on the reverse side. Look at the ridicule and scorn Mike Hearn and Gavin got for their big block proposals in 2015.
I believe the core devs agreed to make a proposal, and then the proposal got rejected by the other devs.
Is the proposal publicly available somewhere?
That's the Hong Kong agreement, which I already know about. I was asking for the proposal tfha mentioned.
> No active developers were part of the NYA. Some in the NYA have said that they agreed because they believed Core was party to the NYA.
They were invited but declined: https://www.reddit.com/r/btc/comments/74ow7f/erik_voorhees_o...
> I don't think anyone, including Core, is against that (higher transaction throughput). But on-chain scaling alone can't get you very far, and it has large costs that need to be carefully considered.
Meanwhile, no one has yet provided a believable scenario how miners can get paid in the long term that isn't high transaction volume at low cost.
> The idea that another capacity upgrade should be rushed so soon immediately after Segwit is kind of silly.
This debate is ongoing since almost four years. I wouldn't call that rushed.
> The idea that it should be decided so soon behind closed doors by a few CEOs is sillier.
See above, regarding invitations.
> Let's be clear about the word "update": it means to switch their software to a fork that none of the active community Bitcoin developers contribute to and that none plan on contributing to.
And many others see 2x as the first real sign of the incentive system actually working.
Also, one of the problems with the NYA is that the creation of Bitcoin Cash - which is essentially a hardfork of Bitcoin that increases the block size and removes Segwit - left questions over whether some of the pro-hardfork side of the agreement actually intended to uphold it. In particular, it lead to speculation that they might just use the inevitable disruption to Bitcoin to encourage the adoption of the Bitcoin Cash fork, which they had backed and which was closer to what they wanted.
Another interpretation is that Bitcoin Cash is the necessary credible threat to get the rest of the folks onboard 2x.
> they have no interest in contributing to the Segwit2x fork's software. (The big-blocker anti-segwit movement stalled work for years, politicized the Bitcoin space, and contributed to making many of the core devs be the target of harassment; imagining that unpaid volunteers are going to switch to working on a project made by the latest iteration of that is ... to call it wishful thinking seems too kind.)
So just merge (or reimplement) segwit2x's consensus changes back into Core and continue as if nothing happened?
Opt-in replay protection was merged in a few days ago. https://github.com/btc1/bitcoin/commit/a3c41256984bf11d95a56...
In any case, if you believe Bitcoin's main value proposition is as a great store of value, then replay protection simply doesn't matter that much. You wouldn't be transacting enough to matter.
You are right, I suppose because we don't trade gold much, it doesn't make sense to ensure that it's secure when we transfer it. We transfer it so infrequently, there's nothing to worry about...
For the opt-in replay protection, that is a proposal which requires people to update their software to protect themselves. That's unacceptable, many people are unlikely to even know that a fork happened. Replay protection needs to be automatic for un-upgraded nodes.
If you're transacting with an exchange or a merchant and accidentally send both coins (as a result of a replay attack) instead of one, they're going to give it back. It's not nearly the disaster this article makes it out to be.
The only case where this is a problem are business to consumer transactions and p2p txs both of which you rarely do, if ever if you use BTC as a store of value.
It's not that simple. Once a transaction gets confirmed on one chain, it's permanently able to be spent on the other. If, due to fees or other reasons, that transaction is not confirmed quickly, the merchant may not be able to return the funds.
Also, automated system may have no way of handling it if those automated systems are not upgraded. Which means a merchant could end up with thousands of payments that they have to manually fix. And, those merchants will be forced into adopting the new software to correct the issue, they will have no choice to o ignore it.
It FORCES every deployed system in the entire ecosystem to upgrade, even systems that don't consent to the change. That's absolutely unacceptable.
> Once a transaction gets confirmed on one chain, it's permanently able to be spent on the other.
That's simply not true. If the utxo gets spent on the other chain, the two coins are permanently split.
> Also, automated system may have no way of handling it if those automated systems are not upgraded. Which means a merchant could end up with thousands of payments that they have to manually fix. And, those merchants will be forced into adopting the new software to correct the issue, they will have no choice to o ignore it.
And incur legal liability? Businesses will gladly do lots of manual work to avoid thousands of lawsuits.
Fact is, it's really only a problem for the businesses and even without any replay protection, they can very easily split coins by using either post-split coinbase coins or any coins ever mixed with any post-split coinbase coins.
> And incur legal liability? Businesses will gladly do lots of manual work to avoid thousands of lawsuits.
Pretty sure that forcing thousands of businesses to upgrade their systems to avoid defrauding users is grounds for a lawsuit itself.
Imagine if Google, Apple, and Microsoft teamed up to make an incompatible change to web browsers that broke all existing websites and exposed all of the users of those websites to risk of finical loss of the website admins did not perform an upgrade.
Who is liable? The admins who didn't even realize an upgrade was required, or Google, Microsoft, and Apple for creating the situation?
This is a good write-up. There is an insane amount of FUD surrounding Bitcoin, and not all of it is unfounded. I certainly hope that Bitcoin gets its act together, because the volatility makes driving adoption significantly harder than it would otherwise be.
It has been very interesting to see how he Ethereum has handled many of these same problems. I would be interested in seeing analysis about the impact to alternative crypto currencies such as Ethereum and Litecoin, if Bitcoin ends up blowing up over this.
«the volatility makes driving adoption significantly harder»
Adoption increases market depths, which in turn decreases volatility. And volatility is sharply decreasing: https://mobile.twitter.com/lsukernik/status/8649208737189519...
I may not be as technical as the author but I truly believe Litecoin is the future. Charlie Lee is about the best face of a digital currency as possible. He's and ex-googler, MIT grad, with a clear vision and an outstanding team. Like VC's bet on people and not always ideas, he is the one to take us to the next step.
to be fair, part of the reason why there's so much drama with bitcoin is because it's biggest by market cap. when there's more at stake, people show their true intentions.
Very true, people often point out that Litecoin will suffer the same growing pains as Bitcoin as volume increases, and there is definitely an element of true to this. I trusted Gavin to help guide Bitcoin and since his departure I have not felt reassured of anyones true intentions in the Bitcoin community. With Litecoin, Charlie wanted it to be as fair as possible from the beginning. He refused to pre-mine the coin and repeatedly encourage critical thinking of coins in general and even advocated for Bitcoin above the coin he created!!! With the recent events in the Bitcoin community you can understand why people have flocked to Litecoin. His leadership is direct and highly visible.
Bitcoin was having drama like this well before it reached the market cap that Ethereum has now. So far Ethereum is remarkably drama-free. There was the DAO controversy last year, but the chain split seems to have resolved that nicely.
I'm skeptical of hero worship in general. Why does any of that matter for a commodity?
Ultimately a cryptocurrency needs a functional governance model to survive - it has to be possible to update the code, and so people have to decide somehow on which version is valid, and this creates the opportunity for a power structure to exist, and where there is such an opportunity, someone will fill it. Having a "hero" in charge is not the best way but Bitcoin is a fucking mess right now.
Heard of delegated proof of stake? The inventor moves on and the project is still alive and thriving
No hero needed just honest nodes
Nodes will always be able to organize outside of the mechanisms provided by the code. Managing this phenomenon is what governance is all about.
The implementation is guided by Charlie. Litecoin had SegWit months before bitcoin because the team doesn't have competing factions. He isn't a "leader" in the tradition since, he is the worker, hands on keyboard writing the code.
Sure, but that sidesteps the question: why does that matter?
The answer isn't inherently obvious. Bitcoin seems to be doing just fine without a leader and with competing factions. The November issue will probably resolve itself just like all the issues that came before.
And there are a lot of advantages to Bitcoin's model. Having a face means tying the fate of the currency to that face, one way or another. Their word starts to matter much more.
I agree with your general sentiment for sure, why should any of this matter?
On a personal basis I feel much more secure knowing a respected member of the community has enough faith in their product to tie their identity to it. Litecoin also has features that bitcoin doesn't. Faster block generation time, different hashing algorithms, larger supply. Charlie gives me confidence that the leadership of Bitcoin has not.
The other question is, if LTC ever becomes as relevant as BTC is in the marketplace (BTC has 30x marketcap), could Charlie still retain enough power to continue to be the guiding hand?
Gavin Andresen was that force in Bitcoin for years, as lead developer and chief evangelist, but now he plays a minor role; recently with big $$ in play and the big community split, not to mention the insane personal attacks, it is much harder to maintain influence.
I guess only time will tell. The thing I respect about Charlie is that he seems completely aware of the difference between being a guiding hand vs. totalitarian ruler with absolute power. He's mentioned numerous times that Litecoin is not "his" although people are free to ask him directly of his intention. Even in the little ways he articulates himself as the "benevolent dictator," as well as publicly speaking to the negatives that come with that is something that is refreshing. Not only does he have the right individual background to lead LTC to great things (whatever that actually ends up being), he has the right relations with people/stakeholders in different communities to make it happen as well.
Personally I’m of the opinion that Bitcoin is already “too big to fail”: there are so many interested parties and stakeholders who want it to succeed that it will be kept alive through sheer will, despite internal politics.
So you think Chinese government cant afford to corner the mining hashes?
if you're taking 2009 as a reference point, you have to wonder whether Bitcoin is the CDO market, or the banks investing in those markets.
Both failed, only one was bailed out.
The main thesis of the article is outdated and now wrong - as someone pointed in its comments: https://github.com/btc1/bitcoin/commit/a3c41256984bf11d95a56... All the rest might be interesting to someone completely new to the subject - but it also contains many mistakes. One is confusing git forks of the source code with the blockchain forks. Another is his claim that "everyone agrees that the capacity of the Blockchain needs to be increased" - bitcoin needs capacity increases - but it does not need to be on-chain - there are proposals like Lightning Network that would do that off-chain.
Bitfinex allows you to bet on the outcome of this whole situation[1]:
> Bitfinex is introducing new CSTs that will allow traders to speculate on the potential activation and mining of the Segwit2x consensus protocol. We are designating these CSTs as BT1 (Incumbent Bitcoin Blockchain) and BT2 (Bitcoin Segwit2x).
Anyone who wants to invest there should read the T&C very carefully.
See also: https://www.reddit.com/r/btc/comments/74mgka/why_bitfinexs_c...
The interesting thing is that unlike in July where the price crashed, this time the price is completely stable despite the fact that it's a much bigger clusterfuck. It seems like perhaps the "you can't bet against the apocalypse" rule is being applied.
> fact that it's a much bigger clusterfuck
Why is it that people so quickly jump to "markets be crazy" as an explanation rather than "perhaps I don't understand the situation and have been sold an exaggerated version by people who profit from clicks or chaos"?
Because it’s more exciting / entertaining. Remember that for most people following these discussions is basically a hobby they do in their free time.
There's still over a month to go until this one happens. I think the press about it will build up in the coming weeks like it did with the last one. I think it will be fine, personally. So many people support it now, even if it decreases a bit in value there will still be the community even if they have different opinions. The market will decide.
Probably complacency, and people refusing to sell because they think Bitcoin always recovers. The same happens in stocks.
The rule only applies to global apocalypses.
You can easily bet against local apocalypses.
You can't trade, on a market, on the market ceasing to exist. You can of course trade on other markets against the first market, if they're connected.
That's because there's enough people with enough money now willing to buy the crypto-assets at the higher price. They all understand the game they're playing. This batch of speculators just need to keep the value stable long enough that others will start to trust it could be a good way to profit, and then those people putting in money now maintaining the price will sell at a higher price.. This is the cycle that will have existed since inception.
As the deadline gets closer, more companies are reconsidering their support. It's too early to see how much wind comes out of the sails, but much like earlier attempted Bitcoin hardforks, the support appears to have been greatly overstated.
These companies have definitely lost users due to their support of 2x, and that hasn't gone unnoticed.
Despite all the histrionics about 2X -- just read r/bitcoin -- nobody in the 2X movement is a bad actor, they're people who've come to some different conclusions about what needs to be done.
It's funny to think what an _actual_ bad actor could do to the platform. Every time I hear the cryptocurrency people crowing about the amazing un-censorable power of the technology I just smile.
> ... no obvious way to tell which is the One True Chain.
One obvious way - whether you agree with it or not - is to use hashrate. It's quite unlikely that both chains will have a nearly-equal hashrate for a sustained period of time.
That's probably a bad idea - miners target profits. There was a lot of oscillation in hashrate when BCH split - and it had a lot less support. It briefly exceeded Bitcoin's hashrate. http://fork.lol/pow/hashrate
I disagree with this logic. Plenty of people said that SegWit was going to cause issues and it didn’t. If Bitcoin fails it will be from external market pressures, not internal politics.
SegWit was an upgrade though, this is more like a coup.
SegWit2x is basically the mining faction stealing the network away from the Core development group, forcing everyone in Bitcoin to switch software if they still want their transactions confirmed.
Not that I really disagree with them - as _something_ needed to happen, as demand (whether real or manufactured) has led to 100% full blocks for months, resulting in long transaction delays and high fees, and the rise of competing currencies, fracturing the market.
We will see if one side backs down before the HF, but due to both incredibly entrenched positions I think we are going over the edge.
I think that 2X will destroy a lot of confidence in Bitcoin, as it proves that the network can be stolen away to change the rules, and would be managed by a much smaller dev group.
Though, the Bitcoin network can survive as a zombie forever with just a couple miners and zero devs. So it may not 'fail' in that sense, just become very stable.
The "mining faction" is just carrying out the governance model described in Satoshi's Bitcoin paper:
"The proof-of-work also solves the problem of determining representation in majority decision making. If the majority were based on one-IP-address-one-vote, it could be subverted by anyone able to allocate many IPs. Proof-of-work is essentially one-CPU-one-vote. The majority decision is represented by the longest chain, which has the greatest proof-of-work effort invested in it."
https://bitcoin.org/bitcoin.pdf
Just because one group of devs calls themselves the arbitrators of all things Bitcoin doesn't make it so.
Obviously, this refers to how automated ‘decisions’ are made by the software, and does not mean that hash power gives you weight in social decisions in the real world. More importantly, there are two levels of decision making that people tend to conflate.
Hash power is relevant to 'regular' forks, as the longest chain that follows the rules will be followed. However hash power is not relevant for deciding what those rules are. That is done by full nodes, whether miners or not, and doesn’t depend on costly work or anything else. Nodes that don’t agree on the rules just stop talking to each other, and the network splits.
Then, the final decision about which network and chain trades as “BTC” is made by ordinary real world consensus, probably mainly among exchanges, wallets, and users in general.
Edit: Changed 'soft fork' to 'regular fork' because a soft fork is a protocol change. POW chain-following doesn't even rise to that level.
I actually have a lot of sympathy with this point of view. But there's a counterargument: if one fork has much greater hash power than another, then the minority is vulnerable to 51% attack from a fraction of the majority. So it's not like we can just ignore mining power, unless we make a fork that changes the hash function.
For Bitcoin, the difficulty adjustment would also need to be sped up, to keep the minority chain from being very slow for a while.
This is all true. The way I think about it is this would be just like any other 51% attack, except that the motivation is specifically to compete by killing the former network. But game theoretically, it's still an attack, not a valid way to achieve consensus. So, as you say, the correct response is for the original network to hard fork.
To be clear, I'm not saying 2X is itself an attack (IMO, awfully close to crossing the line, though). I'm assuming that in your scenario, some mining faction is spending part of its compute on running 2X, and part on explicitly 51% attacking the original network.
> SegWit2x is basically the mining faction stealing the network away from the Core development group
That language is very revealing: It never belonged to 'the Core development group' in the first place.
That is technically true, but the Core group has been stewarding Satoshi's original client since the genesis block. So a switch to another code base (even if it is a semi-recent code fork) is still a major event in Bitcoin's history.
> stealing the network away from the Core development group
In theory, the "economic majority" controls the consensus rules, not miners or developers. https://en.bitcoin.it/wiki/Economic_majority
I'm guessing Core will be prepared to reluctantly merge segwit2x's consensus rules and release a new version in the case that segwit2x succeeds. Core wouldn't lose much market share if they act quickly.
Segwit wasn't a hardfork, which makes it very different from this situation.
> Segwit wasn't a hardfork, which makes it very different from this situation.
How so?
the dumb money isnt even all in yet, so how can it be coming to an end? stuff like pension funds, mutual funds, there isnt even a bitcoin etc yet. Until this happens it will rise even more.
Pension funds will not even consider Bitcoin until it becomes much more stable. Pensions are an obligation and therefore demand much lower risk -- if a 5% change in value in a single day is not considered newsworthy there is no way pensions will make that investment.
What makes you think the end cannot come before pensions and mutual funds start investing? What if panic selling triggers a deep loss in value, which then triggers miners to shut down as the mining reward falls below the energy cost; if enough miners shut down, someone could pull off a double-spending attack, and when people see that it will further reduce their confidence in the system. The result could be that confidence in Bitcoin never recovers.
Or Bitcoin could just be a fad that slows unwinds and fades away, and twenty years from now we'll all be laughing about it over drinks. I can think of a few other technologies that were "definitely going to take over" and are barely remembered today...
I don't understand quantitative finance, but I had the impression portfolio theory can find a place for any amount of volatility. If the volatility is very great or it's correlated with the rest of your portfolio, then your appetite may be small, but high returns may make it still worth buying some. Is that wrong? I also have the impression that bitcoin's volatility has been relatively uncorrelated with other asset classes, so that'd be a plus. (Maybe I'm wrong about that too.)
No, you're right. For portfolios It's all about the covariance matrix. Having said that, there is probably still the more banal reality of pensions or institutional funds actually needing a portfolio manager to go out and buy bitcoin, which probably would be a publicitly/legal nightmare if done poorly, or if the first person to do it gets burned.
On the other hand, if one pension starts a trend, there might be big benefits to being first in. How do does one fit such outcomes into the volatility calculation...
Why would a pension fund get into this? They look for assets that over the long term will create significant economic value. E.g., VCs who fund startups. But buying Bitcoin and holding it is like holding gold: the asset isn't doing anything useful while you're holding it, so you're really just making a bet about future scarcity.
If a pension fund were bullish on Bitcoin, I think they'd be much better of going long a VC fund that is investing in the space.
Call me old-fashioned, but I think that type of institutional money going into inflated tech stocks is a completely different ball game than that kind of money going into something like bitcoin, that weird "internet money" thing most people don't really grok, or understand how to use or indeed what exactly the use is.
dot com stocks themselves may have been a lot of hype but at least they had the precedence of several hundred years of capital market infrastructure around them to lend some credence.
Can you elaborate on why the price will stagnate or drop once these entities are in play?
There's Bitcion ETF's and ETN's
bitcoin ETF != institutional investors, which is what gp was talking about
>stuff like pension funds, mutual funds
Folks, I give you the disruptive infinitely scalable technology the likes of which the world has never seen. It will bring down the entrenched losers like Visa and cash-based economy.
Just hold on tight, let's see if it can survive protocol upgrades and get more than 4 transactions a second.
The article correctly notices that the market was more worried around the time of the BCH fork, but misses some of the reasons why. The BCH was a more credible threat to the value proposition of Bitcoin because the market could be convinced it was like a dividend to the BTC chain, the market cap of the latter was clearly at risk.
The design of B2X is based on getting every user of Bitcoin to switch software before November. If commerce continues on the legacy chain, the value proposition falls in its entirety. B2X has no replay protection to speak of and no emergency difficulty adjustment is possible. The market correctly reflects the probability that B2X will replace BTC. Feel free to bet on it should you disagree, Bitfinex offers futures trading on BTC/B2X.
Interesting article, but doesn't explain why the situation is anything close to an apocalypse.
My only piece of advice is that while it's fine to take money off the table before such events, pay very close attention to what is going on and NEVER PANIC SELL. Anyone who has done so before (myself included) has regreted it.
Bitcoin has been pronounced dead many times before and yet is very well alive.
There are Segwit2x and Core futures, as well as shorts with high leverage. If the author is so confident of the coming apocalypse, he stands to make an absurd amount of money if he's right (or lose if wrong).
He should put his money where his mouth is (but of course he probably won't).
With estimates of a majority of hash power being from Chinese miners, I wonder how the recent change in attitude by the Chinese government will affect the outcome of this battle.
I haven't been keeping up lately, but I would guess that whichever camp the Chinese miners were in is going to lose, since Chinese mining itself may be headed for rapid decline.
“Disclaimer: I am not an expert in Bitcoin” -> close tab.
Bitcoin doesn't have a real world use case, the fees is too high and it's too slow 10 mins
I just went to steemit blog network, now my grandma can use a blockchain