1. 4

    As usual, David apparently fails or refuses to understand how and why PoW is useful and must attack it at every opportunity (using his favorite rhetorical technique of linking negatively connoted phrases to vaguely relevant websites).

    That said, the article reminds me of a fun story - I went to a talk from a blockchain lead at <big bank> a while back and she related that a primary component of her job was assuring executives that, in fact, they did not need a blockchain for <random task>. This had become such a regular occurrence that she had attached this image to her desk.

    1. 10

      What would you consider a useful situation for PoW? In the sense that no other alternative could make up for the advantages in some real life use-case?

      But otherwise, and maybe it’s just me, since I agree wuth his premise, but I see @David_Gerard as taking the opposite role of popular blockchain (over-)advocates, who claim that the technology is the holy grail for far too many problems. Even if one doesn’t agree with his conclusions, I enjoy reading his articles, and find them very informative, since he doesn’t just oppose blockchains from a opinion-based position, but he also seems to have the credentials to do so.

      1. 1

        Relying to @gerikson as well. I personally believe that decentralization and cryptographically anchored trust are extremely important (what David dismissively refers to as “conspiracy theory economics”). We know of two ways to achieve this: proof of work, and proof of stake. Proof of stake is interesting but has some issues and trade-offs. If you don’t believe that PoW mining is some sort of anti-environmental evil (I don’t) it seems to generally offer better properties than PoS (like superior surprise-fork resistance).

        1. 13

          I personally believe that decentralization and cryptographically anchored trust are extremely important

          I personally also prefer decentralised or federalised systems, when they have a practical advantage over a centralized alternative. But I don’t see this to be the case with most application of the blockchain. Bitcoin, as a prime example, to my knowledge is too slow, too inconvenient, too unstable and too resource hungry to have a practical application, as a real substitute for money, either digital or virtual. One doesn’t have the time to wait 20m or more whenever one pays for lunch or buys some chewing gum at a corner shop, just because some other transactions got picked up first by a miner. It’s obviously different when you want to do something like micro-donations or buying illegal stuff, but I just claim that this isn’t the basis of a modern economy.

          Cryptography is a substitute for authority, that is true, but I don’t belive that this is always wanted. Payments can’t be easily reveresed, addresses mean nothing, clients might loose support because the core developers arbitrarily change stuff. (I for example am stuck with 0.49mBTC from an old Electrum client, and I can’t do anything with it, since the whole system is a mess, but that’s rather unrelated.) This isn’t really the dynamic basis which capitalism has managed to survive on for this long. But even disregarding all of this, it simply is true that bitcoin isn’t a proper decentralized network like BitTorrent. Since the role of the wallet and the miner is (understandably) split, these two parts of the network don’t scale equally. In China gigantic mining farms are set up using specialized hardware to mine, mine, mine. I remember reading that there was one farm that predominated over at least 10% of the total mining power. All of this seems to run contrary to the proclaimed ideals. Proof of Work, well “works” in the most abstract sense, that it produces the intended results on one side, at the cost of disregarding everything can be disregarded, irrespective of whether it should be or not. And ultimately I prioritise other things over an anti-authority fetish, as do most people -which reminds us that even if everything I said is false that Bitcoin just doesn’t have the adoption to be significant enough to anyone but Crypto-Hobbiests, Looney Libertarians and some soon-to-fail startups in Silicon Valley.

          1. 5

            there was one farm that predominated over at least 10% of the total mining power

            There was one pool that was at 42% of the total mining power! such decentralization very security

              1. 5

                To be fair, that was one pool consisting of multiple miners. What I was talking about was a single miner controlling 10% of the total hashing power.

                1. 7

                  That’s definitely true.

                  On the other hand, if you look at incident reports like https://github.com/bitcoin/bips/blob/master/bip-0050.mediawiki — the pool policies set by the operators (often a single person has this power for a given pool) directly and significantly affect the consensus.

                  Ghash.io itself did have incentives to avoid giving reasons for accusations that would tank Bitcoin, but being close to 50% makes a pool a very attractive attack target: take over their transaction and parent-block choice, and you take over the entire network.

              2. 0

                But I don’t see this to be the case with most application of the blockchain.

                Then I would advise researching it.

                One doesn’t have the time to wait 20m or more whenever one pays for lunch or buys some chewing gum at a corner shop

                Not trying to be rude, but it’s clear whenever anyone makes this argument that they don’t know at all how our existing financial infrastructure works. In fact, it takes months for a credit card transaction to clear to anything resembling the permanence of a mined bitcoin transaction. Same story with credit cards.

                Low-risk merchants (digital goods, face-to-face sales, etc.) rarely require the average 10 minute (not sure where you got 20 from) wait for a confirmation.

                If you do want permanence, Bitcoin is infinitely superior to any popular payment mechanism. Look into the payment limits set by high-value fungible goods dealers (like gold warehouses) for bitcoin vs. credit card or check.

                Bitcoin just doesn’t have the adoption to be significant enough to anyone but Crypto-Hobbiests, Looney Libertarians and some soon-to-fail startups in Silicon Valley.

                Very interesting theory - do you think these strawmen you’ve put up have collective hundreds of billions of dollars? As an effort barometer, are you familiar with the CBOE?

                1. 10

                  Please try to keep a civil tone here.

                  Also, it’s hard to buy a cup of coffee or a steam game or a pizza with bitcoin. Ditto stocks.

                  1. -4

                    It’s hard to be nice when the quality of discourse on this topic is, for some reason, abysimally low compared to most technical topics on this site. It feels like people aren’t putting in any effort at all.

                    For example, why did you respond with this list of complete non-sequiturs? It has nothing to do with what we’ve been discussing in this thread except insofar as it involves bitcoin. I feel like your comments are normally high-effort, so what’s going on? Does this topic sap people’s will to think carefully?

                    (Civility is also reciprocal, and I’ve seen a lot of childish name-calling from the people I’m arguing with in this thread, including the linked article and the GP.)

                    Beyond the fact that this list is not really relevant, it’s also not true; you could have just searched “bitcoin <any of those things>” and seen that you can buy any of those things pretty easily, perhaps with a layer of indirection (just as you need a layer of indirection to buy things in the US if you already have EUR). In that list you gave, perhaps the most interesting example in bitcoin’s disfavor is Steam; Steam stopped accepting bitcoin directly recently, presumably due to low interest. However, it’s still easy to buy games from other sources (like Humble) with BTC.

                    1. 6

                      IMO, your comments are not very inspiring for quality. As someone who does not follow Bitcoin or the Blockchain all that much, I have not felt like any of your comments addressed anyone else’s comments. Instead, I have perceived you as coming off as defensive and with the attitude of “if you don’t get it you haven’t done enough research because I’m right” rather than trying to extol the virtues of the blockchain. Maybe you aren’t interested in correcting any of what you perceive as misinformation on here, and if so that’s even worse.

                      For example, I do not know of any place I can buy pizza with bitcoin. But you say it is possible, but perhaps with a layer of indirection. I have no idea what this layer of indirection is and you have left it vague, which does not lend me to trusting your response.

                      In one comment you are very dismissive of people’s Bitcoins getting hacked, but as a lay person, I see news stories on this all the time with substantial losses and no FDIC, so someone like me considers this a major issue but you gloss over it.

                      Many of the comments I’ve read by you on this thread are a similar level of unhelpful, all the while claiming the person you’re responding to is some combination of lazy or acting dumb. Maybe that is the truth but, again, as an outsider, all I see is the person defending the idea coming off as kind of a jerk. Maybe for someone more educated on the matter you are spot on.

                      1. 5

                        There is a religious quality to belief in the blockchain, particularly Bitcoin. It needs to be perfect in order to meet expectations for it: it can’t be “just” a distributed database, it has to be better than that. Bitcoin can’t be “just” a payment system, it has to be “the future of currency.” Check out David’s book if you’re interested in more detail.

                  2. 8

                    In fact, it takes months for a credit card transaction to clear to anything resembling the permanence of a mined bitcoin transaction. Same story with credit cards.

                    But I don’t have to wait months for both parties to be content the transaction is successful, only seconds, so this is really irrelevant to the point you are responding to, which is that if a Bitcoin transaction takes 10m to process then I heave to wait 10m for my transaction to be done, which people might not want to do.

                    1. -1

                      Again, as I said directly below the text you quoted, most merchants don’t require you to wait 10 minutes - only seconds.

                    2. 5

                      Then I would advise researching it.

                      It is exactly because I looked into the inner workings of Bitcoin and the Blockchain - as a proponent I have to mention - that I became more and more skeptical about it. And I still do support various decentralized and federated systems: BitTorrent, IPFS, (proper) HTTP, Email, … but just because the structure offers the possibility for a decentralized network, doesn’t have to mean that this potential is realized or that it is necessarily superior.

                      Not trying to be rude, but it’s clear whenever anyone makes this argument that they don’t know at all how our existing financial infrastructure works. In fact, it takes months for a credit card transaction to clear to anything resembling the permanence of a mined bitcoin transaction. Same story with credit cards.

                      The crucial difference being that, let’s say the cashier nearly instantaneously hears a some beep and knows that it isn’t his responsibility, nor that of the shop, to make sure that the money is transfered. The Bank, the credit card company or whoever has signed a binding contract lining this technical part of the process out to be what they have to care about, and if they don’t, they can be sued since there is an absolute regulatory instance - the state - in the background. This mutual delegation of trust, gives everyone a sense of security (regardless of how true or false it is) that makes people spend money instead of hording it, investing into projects instead of trading it for more secure assets. Add Bitcoins aforementioned volatileness, and no reasonable person would want to use it as their primary financial medium.

                      If you do want permanence, Bitcoin is infinitely superior to any popular payment mechanism.

                      I wouldn’t conciser 3.3 to 7 transactions per second infinitely superior to, for example Visa with an average of 1,700 t/s. Even it you think about it, there are far more that just 7 purchases being made a second around the whole world for this to be realistically feasible. But on the other side, as @friendlysock Bitcoin makes up for it by not having too many things you can actually buy with it: The region I live in has approximately a million or something inhabitants, but according to CoinMap even by the most generous measures, only 5 shops (withing a 30km radius) accepting it as a payment method. And most of those just offer it to promote themselves anyway.

                      Very interesting theory - do you think these strawmen you’ve put up have collective hundreds of billions of dollars? As an effort barometer, are you familiar with the CBOE?

                      (I prefer to think about my phrasing as a exaggeration and a handful of other literary deviced, instead of a fallacy, but never mind that) I’ll give you this: It has been a while since I’ve properly engaged with Bitcoin, and I was always more interested in the technological than the economical side, since I have a bit of an aversion towards libertarian politics. And it might be true that money is invested, but that still doesn’t change anything about all the other issues. It remains a bubble, a volatile, unstable, unpredictable bubble, and as it is typical for bubbles, people invest disproportional sums into it - which in the end makes it a bubble.

                      1. 0

                        The crucial difference being that, let’s say the cashier nearly instantaneously hears a some beep and knows that it isn’t his responsibility, nor that of the shop, to make sure that the money is transfered.

                        Not quite. The shop doesn’t actually have the money. The customer can revoke that payment at any time in the next 90 or 180 days, depending. Credit card fraud (including fraudulent chargebacks) is a huge problem for businesses, especially online businesses. There are lots of good technical articles online about combatting this with machine learning which should give you an idea of the scope of the problem.

                        makes people spend money instead of hording it,

                        Basically any argument of this form (including arguments for inflation) don’t really make sense with the existence of arbitrage.

                        Add Bitcoins aforementioned volatileness, and no reasonable person would want to use it as their primary financial medium.

                        So it sounds like it would make people… spend money instead of hoarding it, which you were just arguing for?

                        I wouldn’t conciser 3.3 to 7 transactions per second infinitely superior to, for example Visa with an average of 1,700 t/s.

                        https://lightning.network

                        as @friendlysock Bitcoin makes up for it by not having too many things you can actually buy with it

                        This is just patently wrong. The number of web stores that take Bitcoin directly is substantial (both in number and traffic volume), and even the number of physical stores (at least in the US) is impressive given that it’s going up against a national currency. How many stores in the US take even EUR directly?

                        Anything you can’t buy directly you can buy with some small indirection, like a BTC-USD forex card.

                        It remains a bubble, a volatile, unstable, unpredictable bubble

                        It’s certainly volatile, and it’s certainly unstable, but it may or may not be a bubble depending on your model for what Bitcoin’s role in global finance is going to become.

                        1. 5

                          Not quite. The shop doesn’t actually have the money. The customer can revoke that payment at any time in the next 90 or 180 days, depending

                          You’ve still missed my point - it isn’t important if the money has been actually transfered, but that there is trust that a framework behind all of this will guarantee that the money will be there when it has to be, as well as a protocol specifying what has to be done if the payment is to be revoked, if a purchase wishes to be undone, etc.

                          Credit card fraud (including fraudulent chargebacks) is a huge problem for businesses, especially online businesses.

                          Part of the reason, I would suspect is that the Internet was never made to be a platform for online businesses - but I’m not going to deny the problem, I’m certainly not a defender of banks and credit card companies - just an opponent of Bitcoin.

                          Basically any argument of this form (including arguments for inflation) don’t really make sense with the existence of arbitrage.

                          Could you elaborate? You have missed my point a few times already, so I’d rather we understand each other instead of having two monologues.

                          So it sounds like it would make people… spend money instead of hoarding it, which you were just arguing for?

                          No, if it’s volatile people either won’t buy into it in the first place. And if a currency is unstable, like Bitcoin inflating and deflating all the time, people don’t even know what do do with it, if it were their main asset (which I was I understand you are promoting, but nobody does). I doubt it will ever happen, since if prices were insecure, the whole economy would suffer, because all the “usual” incentives would be distorted.

                          https://lightning.network

                          I haven’t heard of this until you mentioned it, but it seems like it’s quite new, so time has to test this yet-another-bitcoin-related project that has popped up. Even disregarding that it will again need to first to make a name of it self, then be accepted, then adopted, etc. from what I gather, it’s not the ultimate solution (but, I might be wrong), especially since it seems to encourage centralization, which I believe is what you are so afraid of.

                          This is just patently wrong. The number of web stores that take Bitcoin directly is substantial (both in number and traffic volume),

                          Sure, there might be a great quantity of shops (as I mentioned, who use Bitcoin as a medium to promote themselves), but I, and from what I know most people, don’t really care about these small, frankly often dodgy online shops. Can I use it to pay directly on Amazon? Ebay? Sure, you can convert it back and forth, but all that means it that Bitcoin and other crypto currencies are just an extra step for life stylists and hipster, with no added benefit. And these shops don’t even accept Bitcoin directly, to my knowledge always just so they can convert it into their national currency - i.e. the one they actually use and Bitcoins value is always compared to. What is even Bitcoin without the USD, the currency it hates but can’t stop comparing itself to?

                          and even the number of physical stores (at least in the US) is impressive given that it’s going up against a national currency.

                          The same problems apply as I’ve already mentioned, but I wonder: have you actually ever used Bitcoin to pay in a shop? I’ve done it once and it was a hassle - in the end I just bought it with regular money like a normal person because it was frankly too embarrassing to have the cashier have to find the right QR code, me to take out my phone, wait for me got get an internet connection, try and scan the code, wait, wait, wait…. And that is of course only if you want to make the trip to buy for the sake of spending money, and decide to make a trip to some place you’d usually never go to buy something you don’t even need.

                          Ok when you’re buying drugs online or doing something with microdonations, but otherwise… meh.

                          How many stores in the US take even EUR directly?

                          Why should they? And even if they do, they convert it back to US dollars, because that’s the common currency - there isn’t really a point in a currency (one could even question if it is one), when nobody you economically interact with uses it.

                          Anything you can’t buy directly you can buy with some small indirection, like a BTC-USD forex card.

                          So a round-about payment over a centralized instance - this is the future? Seriously, this dishonesty of Bitcoin advocates (and Libertarians in general) is why you guys are so unpopular. I am deeply disgusted that I have ever advocated for this mess.

                          It’s certainly volatile, and it’s certainly unstable, but it may or may not be a bubble depending on your model for what Bitcoin’s role in global finance is going to become.

                          So you admit that is has none of the necessary preconditions to be a currency… but for some reason it will… do what exactly? If you respond to anything I mentioned here, at least tell me this: What is your “model” for what Bitcoin’s role is going to be?

                  3. 14

                    Why don’t you believe it is anti-enviromental? It certainly seems to be pretty power hungry. In fact it’s hunger for power is part of why it’s effective. All of the same arguments about using less power should apply.

                    1. -1

                      Trying to reduce energy consumption is counterproductive. Energy abundance is one of the primary driving forces of civilizational advancement. Much better is to generate more, cleaner energy. Expending a few terrawatts on substantially improved economic infrastructure is a perfectly reasonable trade-off.

                      Blaming bitcoin for consuming energy is like blaming almond farmers for using water. If their use of a resource is a problem, you should either get more of it or fix your economic system so externalities are priced in. Rationing is not an effective solution.

                      1. 10

                        on substantially improved economic infrastructure

                        This claim definitely needs substantiation, given that in practice bitcoin does everything worse than the alternatives.

                        1. -1

                          bitcoin does everything worse than the alternatives.

                          Come on David, we’ve been over this before and discovered that you just have a crazy definition of “better” explicitly selected to rule out cryptocurrencies.

                          Here’s a way Bitcoin is better than any of its traditional digital alternatives; bitcoin transactions can’t be busted. As you’ve stated before, you think going back on transactions at the whim of network operators is a good thing, and as I stated before I think that’s silly. This is getting tiring.

                          A few more, for which you no doubt have some other excuse for why this is actually a bad thing; Bitcoin can’t be taken without the user’s permission (let me guess; “but people get hacked sometimes”, right?). Bitcoin doesn’t impose an inflationary loss on its users (“but what will the fed do?!”). Bitcoin isn’t vulnerable to economic censorship (don’t know if we’ve argued about this one; I’m guessing you’re going to claim that capital controls are critical for national security or something.). The list goes on, but I’m pretty sure we’ve gone over most of it before.

                          I’ll admit that bitcoin isn’t a panacea, but “it does everything worse” is clearly a silly nonsensical claim.

                        2. 4

                          Reducing total energy consumption may or may not be counterproductive. But almost every industry I can name has a vested interest in being more power efficient for it’s particular usage of energy. The purpose of a car isn’t to burn gasoline it is to get people places. If it can do that with less gasoline people are generally happier with it.

                          PoW however tries to maximizes power consumption, via second order effects , with the goal of making it expensive to try to subvert the chain. It’s clever because it leverages economics to keep it in everyone’s best interest to not fork but it’s not the same as something like a car where reducing energy consumption is part of the value add.

                          I think that this makes PoW significantly different than just about any other use of energy that I can think of.

                          1. 3

                            Indeed. The underlying idea of Bitcoin is to simulate the mining of gold (or any other finite, valuable resource). By ensuring that an asset is always difficult to procure (a block reward every 10 minutes, block reward halving every 4 years), there’s a guard against some entity devaluing the currency (literally by fiat).

                            This means of course that no matter how fast or efficient the hardware used to process transactions becomes, the difficulty will always rise to compensate for it. The energy per hash calculation has fallen precipitously, but the number of hash calculations required to find a block has risen to compensate.

                      2. 6

                        We’ve been doing each a long time without proof of work. There’s lots of systems that are decentralized with parties that have to look out for each other a bit. The banking system is an example. They have protocols and lawyers to take care of most problems. Things work fine most of the time. There are also cryptographically-anchored trust systems like trusted timestamping and CA’s who do what they’re set up to do within their incentives. If we can do both in isolation without PoW, we can probably do both together without PoW using some combination of what’s already worked.

                        I also think we haven’t even begun to explore the possibilities of building more trustworthy charters, organizational incentives, contracts, and so on. The failings people speak of with centralized organizations are almost always about for-profit companies or strong-arming governments whose structure, incentives, and culture is prone to causing problems like that. So, maybe we eliminate root cause instead of tools root cause uses to bring problems since they’ll probably just bring new forms of problems. Regulations, disruption, or bans of decentralized payment is what I predicted would be response with some reactions already happening. They just got quite lucky that big banks like Bank of America got interested in subverting it through the legal and financial system for their own gains. Those heavyweights are probably all that held the government dogs back. Ironically, the same ones that killed Wikileaks by cutting off its payments.

                    2. 8

                      In what context do you view proof-of-work as useful?

                      1. 11

                        You have addressed 0 of the actual content of the article.

                      1. 4

                        Last month, I had to install a package manager to install a package manager.

                        owwww

                        1. 3

                          The advice I’ve always given applies now more than ever: use a hardware wallet. Besides dumb shit like this, there’s also the risk that any keys you keep in RAM get swiped by the new set of side-channel attacks.

                          Electrum has good hardware wallet support too! It’s just like normal except you have to approve transactions on the device before they go through. I’ve tried both the Trezor and the Ledger. They are highly cross-compatible and both good designs.

                          1. 12

                            Then you have to trust the hardware vendor’s security design - oh look, here’s someone breaking into a Trezor.

                            Or that the guy you buy the hardware from isn’t just a crook.

                            The more general problem is that cryptocurrency security is vastly harder than any normal user can be expected to achieve - because every mistake or theft is utterly irreversible, by design. “Be your own bank” means be your own financial institution Chief Security Officer, with deep system knowledge.

                            The solution we use in the wider world is division of labour, and financial institutions that are trusted but regulated in law. This turns out to work usably well for running a modern economy, in a way that “everyone has to know everything in depth or LOL too bad” doesn’t.

                            When someone in the Philippines got my credit card number and attempted to spend £600 on it, the first I knew about it was when my bank called me to ask about it. I verified it wasn’t me, and the charge was reversed and they sent me a new card. This is a ridiculously better level of service than I could ever get using a cryptocurrency, and the level of service that normal people in society expect from their financial services vendors.

                            (I know you personally don’t think that level of reversibility is important, but I think you’re incorrect on this one.)

                            Unfortunately, trusting centralised institutions - exchanges - with your crypto hasn’t worked out so well either in far too many cases. There’s reasons the conventional currency system went to insured banks with a lot of regulation.

                            Pervasive irreversibility at all levels was the fundamental design decision of cryptocurrency - and it’s turned out to be a bad one.

                            1. 3

                              oh look, here’s someone breaking into a Trezor.

                              Manually sideloading a custom firmware isn’t even remotely in the same realm of vulnerability as “exposed unauthenticated RPC port”

                              the guy you buy the hardware from isn’t just a crook.

                              If someone’s dumb enough to dump $34,000 into someone else’s private key, they’re definitely dumb enough to lose their money in more traditional ways.

                              When someone in the Philippines got my credit card number… This is a ridiculously better level of service than I could ever get using a cryptocurrency

                              The “level of service” you get with a cryptocurrency is that some random dude in the Phillipines can’t just go and steal your money in the first place. It seems insane to me that you can interpret this story in a positive way. As a counter-anecdote, the only unauthorized transaction I’ve ever had was when the government took money from my account due to a paperwork error and Wells Fargo charged me a “legal fee” for this privilege. Someone else should not be able to take my money without my permission, full stop. If I have to lose the ability to bust transactions in exchange, so be it.

                              We had basically the same argument last time; you’re of the opinion that financial systems should cater to the lowest common denominator, and I just want a system that doesn’t suck. These are both at least somewhat reasonable but they’re inherently incompatible.

                              There’s reasons the conventional currency system went to insured banks with a lot of regulation.

                              Yes, there are valid historical reasons, but “boy, I sure hate non-repudiation” isn’t one of them.

                              and it’s turned out to be a bad one.

                              You can say that as much as you want, but (as of now) over $800,000,000,000 begs to disagree.

                              1. 4

                                $800,000,000,000

                                That’s $800B. I wondered where that number comes from, and actually googling “800,000,000,000” gives this link, which states

                                Its official, total market cap now over 800,000,000,000 dollars! (sic)

                                What does that number represent?

                                It’s simply this algorithm:

                                • For each coin/token listed on Coinmarketcap.com, take the latest price listed
                                • multiply the price with outstanding tokens
                                • add them together

                                Anyone who believes that $800B represents real, actual money is, in my opinion, delusional. As an example of magnitude, the government income of Sweden, an industrialized country of 10M people, was $128B last year.

                                1. 5

                                  For comparison, what was the “market cap” of the Beanie Babies market in July 1999? Where did all that value go when it crashed? Nowhere, it was an illusion.

                                  1. 1

                                    Not quite an illusion but perhaps a representation of the volume of funds transfer from one set of people to another set? At the point of crash, many people lose their money but there are many other people who have cashed out prior and effectively got that money from the first set.

                                    1. 4

                                      Nope, not even that. It represents only (last transaction) * (total number of tokens). This is not money put in, money you could get out, money you would pay to take it over (which is meaningful for a stock but not a crypto), etc. It is a meaningless number that looks good in headlines.

                                      (I basically need to write a blog post on why “market cap” of a crypto is a completely bogus measure.)

                                      1. 0

                                        Where do you think the last transaction price comes from?

                                        Please do, I’d love to read it.

                                    2. -1

                                      Where does the value “go” when Apple drops 0.4%? The answer is that you’re asking a nonsensical question. There’s no such thing as conservation of value - it can be spontaneously created and destroyed. It’s disappointing that someone can comfortably profess opinions about economic value without this being apparent.

                                    3. -1

                                      How do you think market cap is normally calculated? I’m not really sure what you’re trying to express with your insinuation that this figure is “not real” - it is, in fact, the total value of all instances of the asset as determined by the market. Multiplying volume weighted price by number of units is only a first order approximation, but it’s usually reasonably close.

                                      1. 3

                                        I am aware how market cap is calculated in the common usage of a stock. The question is, can you equate a cryptocurrency token with an equity stake in a company?

                                        If someone buys all the stock in a company, they attain legal rights to everything pertaining to that company: employees, physical assets, patents, etc etc.

                                        If someone buys all the bitcoins, what do they gain?

                                        1. -1

                                          If someone buys gold bars, what do they gain?

                                          1. 2

                                            A hunk of metal?

                                            1. 2

                                              I think @wyager is suggesting that buying either gold or Bitcoin is speculation in a market driven mostly by group behaviour, so it sounds like you are in agreement. (Whereas buying stocks is different, as both you and I have suggested in this thread.)

                                    4. 3

                                      You can say that as much as you want, but (as of now) over $800,000,000,000 begs to disagree.

                                      Maybe you can help me understand what exactly people are investing into? I’m trying to understand this, but so far I haven’t been able to figure it out from reading and talking to a couple of people.

                                      From what I understand so far, people aren’t investing into an asset (since Bitcoin doesn’t have intrinsic value), and they can’t be investing into the potential of Bitcoin to replace the traditional financial system (transaction fees are high, there’s apparently a hard limit on the rate of transactions, the interface to traditional currencies has issues with trustworthiness). So what is it that they are investing into? And can Bitcoin scale to replace a country-sized or world-sized financial system?

                                      1. 4

                                        Most cryptocurrencies have the potential to be used in the black market (online drug sales, illicit/illegal digital goods such as carding and CP), as well as for more legitimate privacy-enhancing goods, such as VPNs. This represents, in my opinion, a base value for crypto in general (not specifically Bitcoin, this use case is relatively fungible).

                                        The rest of the valuation is speculative.

                                        To be charitable, people are working on proposed solutions to the issues that Bitcoin is facing right now - the latest fad is the “Lightning network”, that adds a layer on top of the BTC blockchain. This would transform BTC into literal digital gold and give rise to a new class of institutions working to provide services based on its value.

                                        1. 2

                                          Thanks for the information. I read a little bit about the Lightning network. It sounds like it might alleviate the scalability issues, but I still don’t understand how it makes the blockchain a replacement for gold. The blockchain is still a distributed transaction database with nice properties rather than an asset with its own commonly accepted value. Do you think you could clarify this further for me?

                                          1. 6

                                            I’m a card-carrying Bitcoin skeptic.

                                            Apart from the above “real usage”, I don’t believe there’s any value in the currency at all.

                                            “Blockchain” as a tech is mildly interesting in a distributed database kind of way, but the currency form is rooted in outdated economic theories bolstered by wild conspiracy theorizing.

                                            1. 2

                                              Got it, thanks :)

                                        2. 0

                                          since Bitcoin doesn’t have intrinsic value

                                          This is a dogwhistle for economic confusion, and “not even wrong”. There’s no such thing as “intrinsic value”. Nothing derives its economic value from any intrinsic property. All value is extrinsic. For example, where is the “intrinsic” values of dollars, or abstract financial instruments?

                                          1. 2

                                            I’m certainly not an economics expert, which is why I’m asking.

                                            I think I have a distinction in my mind between investing (eg into shares) and speculation/trading.

                                            I’d say that nobody “invests” into currencies or, say, derivatives, but people trade/speculate with them instead. Eg currencies are not expected to keep going up in price indefinitely.

                                            Shares, on the other hand, are an income-generating asset (via dividends), have a soft lower bound on price (net asset value of the company), and their price has some relation to the company’s activity. Buying shares or bonds is what I call investing.

                                            So I guess you’re saying that people who buy Bitcoin are traders/speculators. Fair enough, but in that case, my question is: why do they think the price will keep going up? What drives the upward trend in price, other than a lot of people piling on cash?

                                            1. -1

                                              Good point. No one invests in currencies because they’re a bad investment - by design. Current institutional economics de rigueur mandates that currencies should be inflationary. This is a policy decision, not an inherent property of currencies in general. If the policy were different, people might treat currencies more like government bonds.

                                              On the other hand, people (and institutions) actually do invest into derivatives. One could argue that ETFs (generally considered the best choice for passive investors) are a kind of derivative, although mostly for PR reasons ETF providers reject that classification. Typically people mean some nonlinear contract on an underlying, like an option (also a perfectly reasonably investment depending on your goals).

                                              Gold doesn’t issue any dividends, but people (and companies, and governments) still invest in it. Where does its value come from? I’ll leave that to you to think about.

                                              Bitcoin is interesting because it has some properties of both commodities (like gold) and currencies. It arguably has most of the beneficial propterties of gold, as well as the property of (nominally) being substantially easier to handle and transfer.

                                              1. 2

                                                Aside from having some sort of a lower bound on price because it has uses as a metal, the difference with gold is that it has the benefit of being widely (practically universally) accepted as something of value. Presumably it also has relatively low price volatility (I’m not sure).

                                                Is the idea then that Bitcoin will also become universally accepted as an “investment” akin to gold, and have a somewhat stable price? Is that at odds with multiple competing cryptocurrencies in existence, especially in the situation where new cryptocurrencies can be added without limitation? Do you think there will be a small number of “investment grade” cryptocurrencies?

                                                1. 4

                                                  the difference with gold is that it has the benefit of being widely (practically universally) accepted as something of value.

                                                  Fun fact! In The Silk Road Valerie Hansen talks about how trade worked along (drumroll) the silk road. Merchants and armies would use both notes and gold as a medium of exchange. However, in more remote areas or areas in economic or military chaos, everybody used dry food or bolts of cloth as a medium of exchange. There’s a relatively thin band of instability where fiat currencies are not accepted but gold is. Usually you either can buy and sell currency anyway, or nobody wants your gold anyway.

                                                  Presumably it also has relatively low price volatility

                                                  Gold swings pretty wildly.

                                                  1. 5

                                                    There’s a relatively thin band of instability where fiat currencies are not accepted but gold is.

                                                    Compared to the silk road days, I wouldn’t be surprised if the band has gotten even narrower, since USD in many places now serves as a kind of universal backup currency in preference to gold. It’s quite common for people in countries with political and/or economic unrest that’s led to a loss of faith in the national currency to turn to black-market dollars for day-to-day trading, while turning to gold for that purpose is pretty rare.

                                                    1. 3

                                                      I agree that the ability of gold to be a fallback currency is very questionable. Considering the price swings, I’m not sure how comparing Bitcoin to gold presents Bitcoin in a positive light.

                                                      So what I’m left with is that both gold and Bitcoin speculation is entirely driven by group behaviour dynamics.

                                                  2. 2

                                                    No one invests in currencies

                                                    Depending on how one uses the words “invests” this is not actually true. Currency speculation happens with fiat just like it does with cryptos. It’s probably not popular with the retail market in USA, but it happens elsewhere

                                                    1. 3

                                                      That’s exactly the distinction I was drawing: investing vs speculation. Currency speculation is of course done a lot.

                                            2. 2

                                              I’d like to have edited my comment below, but it’s not possible any longer.

                                              Anyway, current total “market cap” is now $684B, a “loss” of $116B compared to the high water mark of 800B.

                                              Why?

                                              Because Coinmarketcap.com decided to remove South Korean exchanges from their calculations.

                                              1. 1

                                                This is a fair complaint; a more accurate notion of market cap accounts for regional liquidity limits and sources of friction. This occurs in any region with capital controls, and isn’t unique to cryptocurrencies.

                                                1. 2

                                                  True. A big issue in cryptocurrency in general is the interface (i.e. exchanges) between crypto and nationally-backed fiat currencies. This is where the scamming, fraud, and dishonest trading happens.

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                                          What am I looking at?

                                            1. 3

                                              We don’t discuss all of our security processes and technologies in specific detail for what should be obvious reasons

                                              isn’t that worrisome?

                                              1. 5

                                                When it’s related to spam mitigation it’s not unusual.

                                              2. 2

                                                That’s a little worrisome. They built an auto nuker, but didn’t think about what next? Whether it’s a false positive or not, “what if it’s republished?” should be part of the checklist. What if it really were malicious? I just keep retrying until I find a version that sticks.

                                              3. 4

                                                The left-pad thing happened again.

                                                1. 2

                                                  Somebody left padded the safeguards meant to prevent left padding? “no, no, we totally fixed it by adding a ‘are you sure you want to fuck everybody?’ confirmation to the delete command.”

                                                  1. 1

                                                    Has anyone written up the impact this time around?

                                                1. 6

                                                  JSON RPC server on localhost with wide-open CORS and no password or any other restriction

                                                  Edited for additional, important details.

                                                  I’d ask what they were thinking, but they obviously weren’t.

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                                                    The venture capitalist says: “Holy crap, that’s the worst idea I’ve ever heard! What’s the act called?”

                                                    The anarchocapitalists reply: “The Blockchain!”

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                                                    I don’t have any research papers off hand, but I would love to read some criticisms of the blockchain/cryptocurrencies (in terms of technology rather than economics).

                                                    1. 6

                                                      This piece is pretty good.

                                                      1. 13

                                                        No, that piece is actually uniquely terrible. I mean, if you want to simply read a piece which throws cold water then sure, read it, but you’re probably looking for informed pieces. The linked article is written by somebody who doesn’t understand the space; it makes claims which can be trivially disproved by reading the relevant literature. (For example, he seems to think that systems like Filecoin are proposing we store bulk data directly onto a blockchain)

                                                        This one is much better.

                                                        Attack of the 50 foot blockchain, both the book and the blog, are also great. They go less into technical details and more into pointing out the crazy claims some people are making and the crazy schemes they’re proposing.

                                                        1. 6

                                                          This one is much better.

                                                          That looks like it might be worth including on the list. I’ll try to review it tonight.

                                                          1. 6

                                                            I thought it was a pretty good piece. Main factual errors are: eight years not ten, and bitcoin transactions haven’t been four cents since early 2015.

                                                            But I think his central thesis is sound: all of this is a series of very impressive solutions to things that aren’t in fact the problem. Key quote:

                                                            In conversations with bitcoin entrepreneurs and investors and consultants, there was often a lack of knowledge or even interest in how the jobs were being done today or what the value to the end user was.

                                                            The more general problem is that “blockchain” the buzzword has less and less to do with the weird trick Satoshi Nakamoto came up with. e.g. Hey, Estonia’s all Blockchain now! Everything there is on blockchains! Is this Good News for Bitcoin?? well, not quite, because their esteemed Guardtime KSI Blockchain isn’t actually, er, a blockchain. That sort of thing.

                                                            1. 2

                                                              Oh, it’s cool that you’re here. First off, thanks for the book, it gave me a very lovely Saturday!

                                                              In conversations with bitcoin entrepreneurs and investors and consultants, there was often a lack of knowledge or even interest in how the jobs were being done today or what the value to the end user was.

                                                              If this was his main point I would agree that it was a decent piece, but all of his examples really are terrible. He focuses on b2c applications; almost all of his reasons are how consumers already have much better alternatives than anything blockchain-powered currently provides.

                                                              I agree, however (1) there’s much more to the world than just b2c, (2) b2c is usually built as a wrapper on top of unfriendly systems. Dropbox, one of his examples, is built on top of s3, which isn’t much friendlier than Filecoin would be, if it succeeds. Filecoin has the promise of being much cheaper though, so you can imagine, 5 years from now, using a Filecoin-powered-Dropbox which gives you all the same features but is less than half the cost. I know that doesn’t sound revolutionary, but before I lose your interest by claiming even bigger things I wonder if you agree the above is possible.

                                                              He then prematurely generalizes, and claims that these failings prove the entire class of blockchain protocols are doomed. Again, I totally agree that consumers prefer airline miles to whatever libertarians mean by “sound money”. However, I think things like storage markets, prediction markets, incentivized mesh networking… all of these take time to build; and the author of this piece seems to think that because he can’t imagine them then they must surely not exist.

                                                              The more general problem is that “blockchain” the buzzword has less and less to do with the weird trick Satoshi Nakamoto came up with.

                                                              This is, in some circles, completely true. It’s something Matt Levine has written about; blockchain is often code for “let’s get decision makers to approve fixing some of our infrastructure by giving the work a sexy name”. You’re reading your own opinions into his piece though, I don’t think he ever argues this :)

                                                              1. 6

                                                                I probably am reading my own opinions into his paper to a degree, then agreeing with myself, yes :-) I was reading it as a businessperson’s frustration with fountains of BS that never quite work out.

                                                                I do think, though, that eight years in, the burden of proof is firmly on the blockchain promoters. I have no patience any more for purported blockchain systems that don’t exist yet, because their track record of achieving existence is really bad.

                                                                Hypotheticals in the blockchain space are so cheap as to be worthless. “Could” or “will” are words meaning “doesn’t”.

                                                                The bitcoin press don’t really help in this. CoinDesk in particular never seems to have seen a hypothetical it doesn’t like; all you need is to make your thing slightly blockchainy and they’ll post a piece of journalistic stenography about it. Its failure to eventuate six months later will never be noted. This is a big problem because the mainstream media assume good faith, that this is specialist press rather than boosterism press …

                                                                Try this yourself! Take any of these hype-filled proposals and replace “could” with “doesn’t”. I’ve got here a blockchain in healthcare paper - peer-reviewed!! though in a journal that made Beall’s List - that has “could” 81 times, all for things that DON’T EXIST. Perhaps one day they will! But the fact that they DON’T EXIST is in fact an important point.

                                                                The Lightning Network is one personal bugbear on this point. I have had this argument, live on video with a bitcoin advocate (they didn’t put that bit up, for some reason … though I still have my video) where I pointed out bitcoin’s utter failure to scale and got back “but look, the Lightning Network! (laugh)” as if that was a slam-dunk refutation. I had to point out the fact that LN’s been coming any moment now in 2015, 2016, 2017 and for 2018, and the most important thing about it is that it DOESN’T EXIST. And, y’know, its repeated failure to happen might be relevant to its value as a solution to the problem.

                                                                (Rant time: I just had another go-round recently with LN advocates. I am pleased to say the actual devs are much better to talk to than the advocates. There is now LN code! The crippling flaw of the whole LN design remains the path-finding algorithm, to go from arbitrary node A to arbitrary node B - which is the same problem as trying to solve a UUCP bang-path. What was the best that the most motivated computer scientists and sysadmins of the 1980s could manage? Either compute it by hand, or download monthly maps of the entire network and pathalias it. And they all ran screaming for DNS as soon as they had proper Internet. So to do a proper mesh network, rather than just a few hubs closely resembling the Visa-Mastercard-PayPal triumvirate, LN actually requires new computer science. The present alpha code uses “broadcast every channel and transaction to the whole network”, which is I think O(n^2) and scales to literally tens of nodes. And then, even if it all worked, the economics of the LN can’t possibly work and would seize up immediately. But as far as I can tell, they literally don’t have a planned or anticipated economic model; certainly there’s nothing in years of dev list messages referencing any sort of thing they’re aiming for, which any reasonable person would think was something that might be needed … gah. Hyped vaporware. I tire of it.)

                                                                so yeah. I have no patience for hypotheticals in the blockchain space any more. Call me when the thing exists and works. There’s too much BS and too many BSers.

                                                                I did just ask an actual mathematician working in related areas to write a section-by-section takedown of that TimeCube-in-LaTeX white paper IOTA put up. I hope they have something I can link or post soon.

                                                                1. 2

                                                                  I do think, though, that eight years in, the burden of proof is firmly on the blockchain promoters. I have no patience any more for purported blockchain systems that don’t exist yet, because their track record of achieving existence is really bad.

                                                                  I really can’t argue. I do think that these things take time. Many of the potential “could” and “will” applications assume things like low transaction fees or a lightning network or decentralized storage. Until we figure out how to scale these things those applications are likely to be out of reach.

                                                                  I’ll have to begrudgingly agree with you if we go another 8 years without any big breakthroughs but for now I’m hopeful, ethresear.ch has some cool ideas which are just crazy enough to work. It took a surprisingly long time for the steam engine to become practical.

                                                                  And then, even if it all worked, the economics of the LN can’t possibly work and would seize up immediately

                                                                  Do you have any references I could go read? I have my doubts on Lightning Network, it feels like there need to be hubs, and the channels between those hubs need to be massive to hold all the payment volume, but that’s just my idle speculation. I’d love to see some math.

                                                                  I did just ask an actual mathematician working in related areas to write a section-by-section takedown of that TimeCube-in-LaTeX white paper IOTA put up. I hope they have something I can link or post soon.

                                                                  Yes, IOTA is an unmitigated disaster. I also would love to have something I can link to.

                                                                  1. 3

                                                                    No, I was trying to put one together, but that really requires the LN to be an actual thing that could be talked about. It’s hard to make specific and pointed critiques of a nonexistent network. I mean, proponents can easily say “that’s not a problem because (spurious justification)” because the network doesn’t exist yet

                                                                    Though here’s someone writing several obvious arguments against it. Also, Jorge Stolfi on Reddit (/u/jstolfi) has critiqued it at length and in detail.

                                                                    Whenever I’ve seen someone raise economic arguments, LN devs and proponents go silent. I’m also pretty sure you can get credit - the promise of money that would be as usable as money - out of it, though the notion is anathema to bitcoiners because credit is evil therefore doesn’t exist. Etc., and on.

                                                                    The LN is very un-blockchain in nature. One of the big things, actually, that worries me about the LN is that I don’t think there’s been a system like it in financial history. And people have tried just about everything, so that’s actually a point against it. I asked one finance history buff, and the only thing they could think of was Bretton-Woods and large quantities of gold. And B-W eventually faded away as people stopped pretending they cared about the actual gold.

                                                                    I’m seriously starting to think they were desperate for something, anything to deal with the Bitcoin transaction clog and seized upon this half-formed LN payment channels idea, didn’t think it through at all, and still haven’t.

                                                                    The LN on the testnet is pretty elaborate. Buuuut the testnet doesn’t have $50 transaction fees to set up a channel.

                                                                    1. 2

                                                                      Thanks for making your points in this thread. They’re well-stated and express some of the concerns I’ve had while evaluating various possibilities for the current project I’m working on, better than I could have.

                                                            2. 3

                                                              The first is pretty good esp on speed, flexibility, and energy use. If it’s on the list, one might want to include prior and alternative work that uses traditional tech with audit ledgers, byzantine databases, securities built on multiple stable commodities/currencies, nonprofits solving for-profit transaction issues via charter + contracts, and so on. Lots of possibilities that reuse everything from proven security or software methods to well-understood laws and business models.

                                                              Strange enough, echo chamber is so strong on bitcoin that anyone bringing up stuff like that just fixing centralized methods or decentralizing without blockchains gets pushed to bottom of thread. Meanwhile, the newly popular thing is still failing while the traditional methods still mostly work.

                                                              1. 3

                                                                Fairly sure David Gerard is a fellow crustacean. (He and I seem to end up in all the same internet places for some reason.)

                                                              2. 3

                                                                That’s more an argument about the business side than the core technology, though.

                                                            1. 4

                                                              This is news, and in this case the backing reddit link nor the post have technical analysis as to what design/architecture challenges led the ETH blockchain to this issue.

                                                              I don’t think this is fit for lobste.rs - I don’t mean to be accusatory, I’d like to hear your thoughts and maybe we can open a meta thread for discussion. Thanks!

                                                              1. 1

                                                                eh, fair enough and sorry :-) I thought it was relevant enough that this network, that so many people are building on, could literally be clogged by cat pictures …

                                                              1. 2

                                                                Excellent article. I particularly liked his warning to look for evidence of IBM PR whenever blockchain is mentioned in the press, because they’re the gorilla testing this out in a bunch of places where it might or might not make sense.

                                                                1. 1

                                                                  it’s terrible, even in sources that should know better like the FT.

                                                                  There’s a press-release news article for every Blockchain(tm) pilot launch, but very few for reports on how the pilot went. I found the report for one, ECB and Bank of Japan testing Hyperledger, where they called it “immature” and “not a solution”.

                                                                  1. 1

                                                                    I see that we have discovered what is clearly the ultimate use for smart contracts, i.e. cat pictures on the Blockchain. That are popular enough to clog Ethereum. https://www.reddit.com/r/ethtrader/comments/7haqky/i_think_cryptokitties_is_clogging_the_network/

                                                                  1. 8

                                                                    As yakshaves go, TeX might outdo the one where Ken and Dennis wrote an operating system for that spare PDP-7 at the back of the lab, so they could play Space Travel.

                                                                    1. 3

                                                                      We’re probably going to run out soon, then, huh? 😛

                                                                      1. 2

                                                                        Super Bitcoin explores the exciting new field of altforks, where they do a full-history fork and donate themselves a swingeing premine …

                                                                        1. 2

                                                                          remember: always pay a proper artist/designer!

                                                                          1. 1

                                                                            oh wow, someone spotted the font. comment on my blog: “FWIW, the ‘B Cash’ logo uses the free (beer+speech) font ‘Ubuntu Medium’. They really did just phone that in. Or perhaps they couldn’t figure out how to change the font in Gimp.”

                                                                              1. 3

                                                                                I linked to it in the linked discussion. :-)

                                                                              2. 4

                                                                                Matthew did post a bit about this months ago: https://twitter.com/mjg59/status/850025146567901184

                                                                              1. 8

                                                                                This post glaringly omits the actual relationship, which is Hayek -> Austrian school -> anarchocapitalism -> Bitcoin. All steps of this are firmly established. So of course Bitcoiners are going to reach back to something they can prop themselves up with.

                                                                                1. 3

                                                                                  I read Golumbia’s book and while I don’t doubt the general thrust of his thesis it was written in a polemical style that I don’t associate with “academia”. Maybe it’s a US thing, maybe the fact that it’s a university imprint doesn’t really imply it’s “impartial”, but I feel that some general readers might be put off by the default left-wing view of the author.

                                                                                  1. 2

                                                                                    Not non-standard for his field, I think, but definitely not what techies expect. Nevertheless, he nails down every dot of his thesis. And it’s hardly an observation unique to Golumbia - the cypherpunks list was explicitly, by name, “anarcho-capitalist” (usually with a hyphen). They were very upfront about their ideology and where they were coming from; there’s no reason why saying “Bitcoin comes from anarchocapitalism” should get the automatic response “Golumbia” as if the claim originated with him. It’s not in any way a controversial or reasonably disputable statement.

                                                                                    Chapter 2 of my own book dealt with this stuff, but I was facing a ridiculous amount of work tracing and nailing it all down if Golumbia’s hadn’t done my homework for me ;-) I still recommend his book to everyone who wants to know WTF about Bitcoin.

                                                                                    1. 3

                                                                                      I didn’t mean the thesis that Bitcoin ideologically flows from right-wing/anarcho-capitalist ideas was first articulated by Golumbia. He did a good job tracing it even further back to the John Birch society etc. I picked up and read the book precisely because I wanted a better overview of the landscape than scattered reading on the internet would give me.

                                                                                1. 2

                                                                                  The original version has a couple of paragraphs of technical detail on the Audiocoin and Blockpool blockchains and the details of Blockpool’s business offering, should you care. I cut them from this version as being relevant only to the deeper crypto crowd.

                                                                                  1. 3

                                                                                    irreversibility, an essential design feature of cryptocurrency blockchains, is the fatal flaw of cryptocurrency that is responsible for most cryptocurrency and smart contract disasters

                                                                                    If people wanted repudiation, they would use PayPal.

                                                                                    Repudiation is one of the worst parts of the existing financial system, because it encourages horrendous failure-prone system design (since we can just roll it back no problem!). On a practical level, repudiation is fundamentally incompatible with the goals of a trustworthy, mechanized, objective finance system.

                                                                                    (Although arguably it makes sense for ethereum since they’ve already given up on all three of those things by manually reversing the DAO “hack” even though it was a perfectly valid contract. So much for “code is law”.)

                                                                                    On a philosophical level, Bitcoin is all about giving you more control at the expense of no one holding your hand. That’s the way it was designed, and that’s the way we want it. Repudiation fundamentally means loss of trust or loss of control. If anyone can reverse their own transactions, we lose trust. If there’s some centralized party that can choose to reverse transactions, we lose control.

                                                                                    1. 5

                                                                                      as long as human will build computer system, you will have to have way to recover against human errors. The only systems that don’t support this recovery system is human endangering systems which are gambled to be error free.

                                                                                      1. 6

                                                                                        Yes, I’m saying that’s unworkable for anyone who just wants to move value around in a money-like manner and isn’t ideologically committed to dealing with the brittleness of the resulting system.

                                                                                        1. 0

                                                                                          Is cash unworkable? It has basically the same non-repudiation properties as Bitcoin, and yet people seemed to do OK with it for a long time (and before that, same deal with specie, and before that with commodities, etc.).

                                                                                          The existence of repudiation is a consequence of the emergence of unreliable credit systems, not something people sought out.

                                                                                          1. 13

                                                                                            Actually no, repudiation in the sense of contracts existed long before unreliable credit systems. Courts would “rollback” a contractual transaction for various different reasons. Among them failure on one party to understand what the other party meant in the wording of a contract. This could be due to one or both parties interpreting the language of the contract differently. This is a feature and not a bug of contract law.

                                                                                            As the bugs in smart contracts indicate it’s frequently possible for both the author of the contract and the counterparties to not fully understand what the contract actually says. This is for most people a bug and not a feature. Only idealists and thiefs would look at it as a feature. The idealist is willing to sacrifice assets for the ideal of an unbiased contract enforcer. The other likes the idea that they can take money from people who didn’t think it was possible with no consequences.

                                                                                            Thiefs were exploiting the legal system long before this of course but since smart contracts are obviously capable of quite serious bugs. You’ve just traded one group of exploiters for another which certainly hasn’t moved us in a direction of progress, and may in fact have moved us a few steps backwards since the smart contract by definition doesn’t allow for any kind of remediation of the exploit.

                                                                                            1. 0

                                                                                              Contract invalidation risk is related to, but not the same as, counterparty and settlement risk in trading.

                                                                                              Modern credit systems didn’t exist until the late 1600s. Credit existed long before this, but its scope was strictly limited. Fungible obligations, short selling, futures, and all the other staples of modern trading are for the most part less than 500 years old.

                                                                                              As the bugs in smart contracts indicate it’s frequently possible for both the author of the contract and the counterparties to not fully understand what the contract actually says

                                                                                              You can’t blame human failures on the system they’re failing with. It’s not a “bug”, it’s the entire point.

                                                                                              1. 10

                                                                                                You can’t blame human failures on the system they’re failing with. It’s not a “bug”, it’s the entire point.

                                                                                                The entire point of systems engineering is to understand how system design leads to human failures.

                                                                                                1. 9

                                                                                                  Fungible obligations, short selling, futures, and all the other staples of modern trading are for the most part less than 500 years old.

                                                                                                  That’s not true. The ancient Babylonians had grains futures markets. Credit instruments, in many cases, predate cash.

                                                                                                  1. 8

                                                                                                    You can’t blame human failures on the system they’re failing with.

                                                                                                    You can when literally Gavin Wood can’t write a contract that won’t lose him literally tens of millions of dollars. This strongly suggests the ideological imperative in question fails when it hits reality. “[ideology] cannot fail, it can only be failed” is the stuff of cults.

                                                                                                    1. 0

                                                                                                      You can when literally Gavin Wood can’t write a contract that won’t lose him literally tens of millions of dollars.

                                                                                                      Sounds like Gavin Wood is one of the original developers of ethereum, which is exactly the sort of person I would expect to lose tens of millions of dollars due to lack of rigor.

                                                                                                      “[ideology] cannot fail, it can only be failed” is the stuff of cults.

                                                                                                      Are mathematics and formal logic cults?

                                                                                                      That’s what this comes down to; I agree ethereum in particular is unsuitable as a financial system, but all that means is that we have to increase our expectations of formality in financial system design.

                                                                                                      1. 5

                                                                                                        Are mathematics and formal logic cults?

                                                                                                        No, but the idea of wiring them into a financial system in a way that quite efficiently separates less-rigorous people from their investments sure is. People have a hard time dealing with formalized logic systems, and get tremendous value from a squishy financial system with chargebacks and courts and mutable rules.

                                                                                                        1. 4

                                                                                                          Also, we’re really bad at doing math good :(

                                                                                                          1. 0

                                                                                                            Good thing grandma doesn’t need to write a proof every time she sends Bitcoin; only expert imementers need to care about this stuff.

                                                                                                            1. 6

                                                                                                              This is categorically not true. Because when Grandma wants to send money via a smart contract on a blockchain she must either trust that the writer of the contract was a benevolent expert or be an expert herself. This continued insistence that math will protect less math savvy people from more math savvy people is why every conversation with the idealist breaks down.

                                                                                                              Grandma isn’t an idealist. She just wants to be one of the parties in a smart contract. But grandma can’t safely do it. Period.

                                                                                                              1. 4

                                                                                                                A good example is the EtherDelta hack. Approximately 0 crypto users can audit their software, let alone do audit it; they trust that someone else has done the security legwork to decompile and inspect a smart contract or a huge pile of minified JavaScript.

                                                                                                                One could then answer “well they deserve what happens to them, doing that in cryptocurrency” - but then you’re back to the problem that this is substantially only a problem if you insist on using cryptocurrency for things that are currently done without it. The primary use case is ideological, ‘cos it sure isn’t practical.

                                                                                                      2. 4

                                                                                                        A bug is code that doesn’t work they way you meant it to. Blame lies with the Humans absolutely. But that’s the whole problem. Humans have to write the contracts. Humans also have to trust the contracts. Since Humans have to write them Humans also can’t trust them.

                                                                                                        This make smart contracts considerably more risky. That is the entire point of their critics.

                                                                                                        1. 0

                                                                                                          Humans have to write the contracts. Humans also have to trust the contracts. Since Humans have to write them Humans also can’t trust them.

                                                                                                          This would all be true in the absence of formal methods, which people whom I actually trust to build a working financial system are currently trying to fix.

                                                                                                          I agree that existing “smart” contract systems suck, but the fundamental idea is perfectly sound.

                                                                                                          1. 4

                                                                                                            We probably would need to agree to disagree. I suspect the above would still be true even if you had formal methods.

                                                                                                            1. 2

                                                                                                              I think so too. The issue here seems to have been a combination of the following:

                                                                                                              1. code sharing (“external library”) to reduce deployment cost in the form of gas
                                                                                                              2. not knowing or realizing the library was actually a multi-sig wallet contract and thus vulnerable to the previously fixed vulnerability
                                                                                                              3. not considering the ill effects of calling a “kill function” on such a wallet
                                                                                                            2. 3

                                                                                                              formal methods only prove what you specified. usually the way to hack formal proven programs is to play on unspecified things.

                                                                                                      3. 4

                                                                                                        Is cash unworkable? It has basically the same non-repudiation properties as Bitcoin, and yet people seemed to do OK with it for a long time

                                                                                                        The widespread use of cash is actually a pretty recent invention. “Cash” as we currently conceive of it (paper money, gold coins, silver bars, etc) has not historically been the primary financial instrument in people’s lives. The primary financial instrument has been credit. Historically, people would ring up a tab, and then pay it off. Even as late as the 1600s, it was possible for English kings to recall all of the coins in circulation and have it reminted with their likeness.

                                                                                                        This was workable because people lived in close-knit communities, and social and legal remedies could be effectively used against people who failed to pay off their debts. Cash was used when trading with people who could not be trusted, usually because they were merchants who were from outside the community.

                                                                                                        It’s only as we move to a more atomized, anonymous society that cash becomes more widely used. But even in a highly cash-oriented society, if you actually looked at the transactions, most “large” transactions were conducted in a repudiable medium, like cheques or bank transfers.

                                                                                                        1. 3

                                                                                                          I’d rather trade some repudiation potentially happening to having to lug around gold coins when I want to buy something. I find the arguments against repudiation a bit overblown. There was no lack of fraud, insolvency or straight-up moral hazard in the “good old days” of the gold standard.

                                                                                                          1. 0

                                                                                                            I’d rather trade some repudiation potentially happening to having to lug around gold coins when I want to buy something.

                                                                                                            Bitcoin allows you to keep both. It’s easy to transport and non-repudiable. That’s the point.

                                                                                                          2. 4

                                                                                                            Two problems with the cash analogy:

                                                                                                            1. Someone can’t pick your pocket from the other side of the world.
                                                                                                            2. Bitcoin acts much more like a balance in an electronically-accessible bank account. Except with no customer service and a terrible user experience. And ridiculously high fees. And long transaction delays.

                                                                                                            It combines the worst of both worlds.

                                                                                                            The existence of repudiation is a consequence of the emergence of unreliable credit systems, not something people sought out.

                                                                                                            This is completely historically false, as zaphar points out below.

                                                                                                            1. 3

                                                                                                              Actually, bitcoins have lot of less problems than ethereum. It has an only point of failure which is to keep the private key secret. (There is several variation on how this secret key can be stolen, but it is far smaller problem than the way bug can be introduced in smart contract)

                                                                                                              1. 2

                                                                                                                Someone can’t pick your pocket from the other side of the world.

                                                                                                                Someone also can’t steal your cryptocurrencies from the other side of the world unless you’re acting stupid and trust a third-party wallet service.

                                                                                                                Bitcoin acts much more like a balance in an electronically-accessible bank account.

                                                                                                                “Cash acts much more like a balance in a physically-accessible bank account.” What are you trying to communicate with this statement?

                                                                                                                Except with no customer service

                                                                                                                You don’t need one; anything that’s possible you can do on your own. Sure, if you’re totally clueless it might be harder for you, but it’s a massive improvement for people who know what they’re doing.

                                                                                                                and a terrible user experience.

                                                                                                                Right, because banks score so highly for customer satisfaction. The reason I tried bitcoin was because banks kept fucking me over in ridiculous ways. The state comptroller stole thousands of dollars from my Wells Fargo account because of a paperwork error (not possible with bitcoin), and after I got it fixed and had the money refunded, Wells Fargo charged me hundreds in “legal fees” for the pleasure of helping the government steal my money.

                                                                                                                And ridiculously high fees.

                                                                                                                Compared to what? Even with the current insane transaction volume, it’s still cheaper than PayPal or credit cards, for any purchase over, say, $50. It’s only going to get cheaper as we find ways to take the pressure off (a la lightning network).

                                                                                                                And long transaction delays.

                                                                                                                I thought you were the one who liked repudiation? A transaction “going through” just means it’s no longer repudiable. Bitcoin transactions clear to the level of a credit card transaction instantly, and to the level that credit card transactions do after ~6 months on an average of ten minutes.

                                                                                                                This is completely historically false,

                                                                                                                No, it’s really not. For some historical context look up Hawala (early credit system) and then read about the emergence of modern financial instruments in the Netherlands in the late 1600s, including modern notions of settlement.

                                                                                                                1. 5

                                                                                                                  Someone also can’t steal your cryptocurrencies from the other side of the world unless you’re acting stupid and trust a third-party wallet service.

                                                                                                                  Except the article in question is exactly that with no one acting stupid. A contract had an unintended effect that allowed someone playing around to accidentally revoke access to assets guarded by that contract. That is demonstrably the entire thing that a smart contract is for. Are you suggesting that your money is safe as long as you don’t use a smart contract and don’t be stupid? I would agree but the context of this conversation isn’t crypto-currency. It’s smart contracts.

                                                                                                                  1. 6

                                                                                                                    Someone also can’t steal your cryptocurrencies from the other side of the world unless you’re acting stupid and trust a third-party wallet service.

                                                                                                                    see, you say this, but it turns out that “be your own bank” also means “be your own financial institution chief security officer”, and that turns out in repeated practice to be really hard, hence the repeated tales on /r/bitcoin of people losing their holding to user error or computer mishaps.

                                                                                                                    Here’s the Bitcoin Wiki guide to being your own bank: https://en.bitcoin.it/wiki/Securing_your_wallet Give that to your favourite nontechnical relative and see how they do.

                                                                                                                    it’s still cheaper than PayPal or credit cards, for any purchase over, say, $50.

                                                                                                                    This is entirely false in the UK.

                                                                                                                    The rest of your post is a Gish gallop of non sequiturs.

                                                                                                                    1. -1

                                                                                                                      hence the repeated tales on /r/bitcoin of people losing their holding to user error or computer mishaps

                                                                                                                      Yes, you expect some level of failure in a population of millions.

                                                                                                                      Give that to your favourite nontechnical relative and see how they do.

                                                                                                                      Any idiot can use a phone app like Mycelium and be sufficiently secure. Give them a Trezor if you’re really worried.

                                                                                                                      This is entirely false in the UK.

                                                                                                                      Are you claiming that credit cards don’t charge fees in the UK?

                                                                                                                      The rest of your post is a Gish gallop of non sequiturs.

                                                                                                                      Everything I said was a direct response to one of your points, so I think you mean “I don’t know how to refute what you said so I’m going to dismiss it instead”.

                                                                                                          1. 9

                                                                                                            smart contract coding is so difficult and unforgiving that even one of the primary developers of Ethereum can’t do it without losing hundreds of millions of dollars to human error.

                                                                                                            Crypto advocates need to take the next logical step, and admit the possibility that irreversibility, an essential design feature of cryptocurrency blockchains, is the fatal flaw of cryptocurrency that is responsible for most cryptocurrency and smart contract disasters. Pervasive irreversibility has turned out to be a bad and stupid idea.

                                                                                                            The argument presented rests on the premise that smart contract coding is too difficult and unforgiving. But surely it must be possible to produce a coding contract language that produces programs that are easier to reason about that the current spate of Ethereum contracts.

                                                                                                            1. 10

                                                                                                              https://blockstream.com/simplicity.pdf

                                                                                                              This is essentially exactly what I’d been imagining doing if I had infinite time to work on side projects. A transaction language that’s actually good from a language design standpoint, not just some acceptably serviceable DSL (bitcoin script) or a horrendous, clueless hack (solidity)

                                                                                                              Check out the paper, it’s pretty sweet.

                                                                                                              1. 3

                                                                                                                the language is so simple that I have no idea of what can be done with it. The only example given is a full adder.

                                                                                                                1. 8

                                                                                                                  That’s not true. The end of the paper gives this example:

                                                                                                                  The basic signature program that mimics Bitcoin’s basic signature program

                                                                                                                  basicSigVerify b c := comp (pair (witness b)
                                                                                                                      (pair pubKey (comp (witness c) sighash)))
                                                                                                                      (comp (pair checkSig unit) (case fail unit))
                                                                                                                  

                                                                                                                  Other, more complex programs can be built to perform multi-signature checks, to implement sophisticated smart contracts such as zero-knowledge con- tingent payments, or to create novel smart contracts.

                                                                                                                  It is possible that this example program is so succinctly expressed in the language that you missed it skimming the paper.

                                                                                                                  We have written the SHA-256 block compression function in Simplicity. Us- ing 256-bit arithmetic, we have also constructed expressions for elliptic curve operations over the Secp256k1 curve [9] that Bitcoin uses, and we have built a form of ECDSA signature validation [23] in Simplicity.

                                                                                                                  Not only have they been implemented, but using Coq and verified implementations of the algorithms, their implementation in Simplicity has been proven correct.

                                                                                                                  Did you read section 4 where they extend the core language to add combinators that would be needed to make contracts work? Namely sighash, witness, assertl and assertr, and checksig.

                                                                                                                  In addition, it is stated explicitly a number of times that Simplicity is not meant to be used directly, but should be the compiled target of a higher level language.

                                                                                                                  Simplicity is designed as a low-level language interpreted by blockchain software. We anticipate higher-level languages will be used for development and compiled to Simplicity. […] For the time being, generating Simplicity with our Haskell and Coq libraries is possible.

                                                                                                                  Also, from the theoretical perspective

                                                                                                                  While Turing incomplete, Simplicity can express any finitary function, which we believe is enough to build useful “smart contracts” for blockchain applications.

                                                                                                                  Soooo, yeah, it seems it can get where it needs to go within the domain of smart contracts.

                                                                                                                  1. 3

                                                                                                                    thanks a lot, totally missed this part

                                                                                                                2. 4

                                                                                                                  That paper was, indeed, very sweet!

                                                                                                                3. 4

                                                                                                                  I think about a year ago I was quite active in one of the Ethereum gitter channels.

                                                                                                                  It’s possible yes. You don’t even need provers or anything fancy. I reasoned that a simple state machine is everything you need for most contracts. And state machines, especially deterministic, finite ones are easy to reason about. You can prove things about them, like that they never loop endlessly or that they are the most efficient and smallest implementation.

                                                                                                                  I lacked the expertise to write an actual compiler but I think that might be a good direction in which to develop smart contracts. But, I wrote some documents and I think I have a small pseudo code around in which a compiler for this language could tell wether a contract can get stuck. Ever.

                                                                                                                  On the other hand, DFSM’s are very simple machines and aren’t well suited for making complex things. They lack the complexity.

                                                                                                                  1. 3

                                                                                                                    what are the reasoning you can have about simple state machine ?

                                                                                                                    1. 6

                                                                                                                      You can statically determine that from each state, the final/exit state is reachable. You can also determine that there are no loops in the machine that last forever (but it’s more complicated). You can also prove that the given state machine is the simplest (fewest states) machine possible and if not, optimize it to such.

                                                                                                                      Lastly, DFSM’s are very simple constructs that don’t really have a concept of anything outside themselves, in that regard they are very close to purely functional languages and you can build a lot of easy compiler checks (types) that makes the machine safer.

                                                                                                                      Compared to doing the same with proper, turing complete languages, you have less work and more, mathematically proven, securities.

                                                                                                                  2. 4

                                                                                                                    Nick Szabo proposed a formal example language that wasn’t Turing-complete (that I can see).

                                                                                                                    The trouble is, Ethereum wanted uptake, so they leveraged “worse is better”. This resulted in Solidity being the language people actually use for smart contracts, on the platform people actually use for smart contracts.

                                                                                                                    The results are … less than great, given how utterly unforgiving immutable smart contracts are.

                                                                                                                    Thankfully they’re proposing various new EVM languages that are less of a horror show. But it’s still overwhelmingly Solidity. You can propose things that will theoretically work better - and many are obvious - but then you need to get anyone to use them. Solidity coders in practice don’t even follow the many official guidelines to not making their code into Swiss cheese.

                                                                                                                    Even then, I’m not convinced any human can program well enough to deal with smart contracts in an immutable environment, unless they’re coding like NASA for spacecraft. When not even Gavin Wood can write a smart contract that doesn’t proceed to lose him literally tens of millions of dollars, we might have a problem here.

                                                                                                                  1. 0

                                                                                                                    The “plan” is the Lightning Network, which is completely unlike Bitcoin. It’s presently a two-year-old white paper, a byte-level protocol spec in progress and some sample code.

                                                                                                                    They don’t seem to have anything official documenting how the economics of it are supposed to work or feel from the user or merchant perspective. I’m still trying to make sense of the latter (the devs get very defensive when asked about it), but I’m pretty sure the hub nodes turn into something that’s functionally a bank, and you can get credit (the promise of money being approximately usable as money) out of the system, making it even more unlike Bitcoin. I have no idea why anyone will want to adopt this thing, rather than, e.g., just use an altcoin that isn’t clogged (e.g., the drug market increasingly adopting Monero). But I eagerly await more details.

                                                                                                                    1. 3

                                                                                                                      So… what’s the plan to deal with expensive transactions? Are they ever going to increase the block size limit, or should we all just switch to Bitcoin Cash?

                                                                                                                      1. 3

                                                                                                                        lightning.network. “If we all just switch to Bitcoin Cash” would not make anything better. “All switching” would result in high fees on Bitcoin Cash. If they raise the blocksize to handle “all” it would simply be a very expensive version of PayPal, which is silly.

                                                                                                                        1. 1

                                                                                                                          Isn’t the lightning sidechain not yet ready? Bitcoin fees are going hockey-stick as of 2017, and the blocksize limit appears to be the obvious culprit.

                                                                                                                          With 1MB blocks, and six blocks per hour, you can only achieve about half a million transactions per day. Maybe sidechains are the future, but we need a solution to high transaction fees soon. Every other coin’s fees are way lower.

                                                                                                                          1. 2

                                                                                                                            Your hockey stick plot is outdated. Currently it swings wildly: https://bitinfocharts.com/comparison/bitcoin-transactionfees.html

                                                                                                                            If the blocksize limit is the culprit why does it swing so much? It should stay high, no?

                                                                                                                            1. 2

                                                                                                                              Here’s a chart where you can also see the fee for BCH: https://fork.lol/tx/fee

                                                                                                                              Here’s the current fee percentage collected by miners: https://fork.lol/reward/feepct

                                                                                                                              The “problem”[1] is that fees are set in token (BTC, BCH, etc) terms. If the token’s value in fiat appreciates, fees get proportionally larger, in a way that’s not always beneficial. So the fee increase is both a reflection of greater network utilization (=more transactions are vying for inclusion in blocks) and that the price of the token has increased dramatically - at least for BTC.

                                                                                                                              Because the transaction size of moving $3 worth of BTC isn’t appreciably smaller than moving $3,000,000, small transactions get hit by proportionally larger fees. In a traditional fiat economy, small transactions (whether by cash or checking account or just sending via a mobile) is “subsidized” by the larger economy (or borne by merchants and priced into the products they sell).

                                                                                                                              [1] “problem” in quotes because the system is working just as designed. After seigniorage ends fees are going to be the only incentive for miners to keep adding transactions to blocks.

                                                                                                                              1. 1

                                                                                                                                That is a better chart, thanks.

                                                                                                                                Volatility aside, transactions are way more expensive than they used to be. One year ago, transactions cost $0.25 apiece. Today they they cost well over $2, often as high as $6, even $9 in August.

                                                                                                                                I’d hypothesize that the average fee rises whenever there’s a backlog of transactions. Higher fees allow you to get higher priority in line. As the backlog diminishes, the fees go down again.

                                                                                                                                A larger block size would have greater maximum throughput, keeping the backlog short. The only downside I see to increasing the block size is that it would require faster internet to keep up to date.

                                                                                                                              2. 2

                                                                                                                                Isn’t the lightning sidechain not yet ready?

                                                                                                                                What? Lightning doesn’t have a sidechain. You’re probably thinking of Elements, which … is where the Bitcoin devs play around and experiment with new ideas. Since SegWit’s adoption Lightning is now fully compatible with the main chain.

                                                                                                                                1. 3

                                                                                                                                  Oh, lightning allows on-chain scaling? How does that work?

                                                                                                                                  1. 0

                                                                                                                                    Oh, lightning allows on-chain scaling? How does that work?

                                                                                                                                    No. Once you start trolling, I stop taking your questions seriously.

                                                                                                                                    1. 3

                                                                                                                                      I solemnly swear that I never intentionally troll, on this forum or otherwise. There’s a lot of conflicting information flying around, particularly with all the forks this year.

                                                                                                                                      Last year, there was only one Bitcoin chain, and fees were cheap. In 2017 the scaling debate intensified, and as far as I can tell there are basically two sides: “big-blockers” who want on-chain scaling, and those who want off-chain scaling with sidechains, which segwit is supposed to enable.

                                                                                                                                      Now, many of the big-blockers got fed up with Bitcoin development, and hard-forked to create Bitcoin Cash. In theory the 8MB blocks would allow it to support over 2 million transactions per day, but it’s hard to test that theory since BCH doesn’t have as many daily transactions as BTC.

                                                                                                                                      The canonical BTC project seems strongly against increasing the blocksize for reasons I don’t understand. I expected them to follow the “New York agreement” compromise: implement segwit now, and double the blocksize later. Apparently they’ve reneged on the blocksize doubling.

                                                                                                                                      What I don’t understand is, why would anyone want to cripple Bitcoin by limiting it to half a million transactions per day? It’s causing huge backlogs and fee spikes. What is so spooky about 2MB blocks? The paranoid answer is that the blocksize is intentionally being kept small in order to strangle BTC with high fees, or drive people into profiteering sidechains.

                                                                                                                                      I don’t know anything about Lightning except that it’s supposed to solve everything and doesn’t exist yet.

                                                                                                                                      Edit: I’m reading the link you posted in another comment, and I’m still left confused. The UI says “Lightning payments will be instant, while on-chain Bitcoin transactions will require at least one confirmation”. If lightning isn’t on-chain, doesn’t that mean it’s a sidechain?

                                                                                                                                      Edit2: Apparently this confusion (thinking Lightning is a sidechain) is common. https://bitcoin.stackexchange.com/questions/58064/does-a-segwit-based-side-chain-like-the-lightning-network-allow-for-fractional-r

                                                                                                                                      1. 0

                                                                                                                                        The main thing you are right about is “there’s a lot of conflicting information flying around”, and I can see it’s creating a lot of confusion.

                                                                                                                                        To help you understand what’s going on, I would have to spend like an hour with you, based on the reply you’ve just given. I’d be happy to do that … but I couldn’t justify the time given:

                                                                                                                                        • You’re probably not going to pay me for it
                                                                                                                                        • The core developers have answered your questions very clearly in multiple places across the web, and at this point it is not their fault for not being clear enough, but others fault for not putting in the effort to understand how Bitcoin (and decentralized consensus systems in general) work.

                                                                                                                                        So, if you want to pay for an hour of my time, send me a PM. Otherwise, I recommend spending a weekend on the subject.

                                                                                                                                        If it helps you get started, here’s what you’re confused about:

                                                                                                                                        • “off-chain scaling with sidechains” <- sidechains are on-chain (edit: on another chain)
                                                                                                                                        • “The canonical BTC project seems strongly against increasing the blocksize for reasons I don’t understand” <- at least you’re aware of what you don’t know, that’s better than many
                                                                                                                                        • “Apparently they’ve reneged on the blocksize doubling” <- they didn’t reneg on anything
                                                                                                                                        • “why would anyone want to cripple Bitcoin by limiting it to half a million transactions per day?” <- they are not crippling it, they are protecting it from attack
                                                                                                                                        • “The paranoid answer is that the blocksize is intentionally being kept small in order to strangle BTC with high fees, or drive people into profiteering sidechains.” <- just, no.
                                                                                                                                        • “I don’t know anything about Lightning except that it’s supposed to solve everything and doesn’t exist yet.” <- apparently you don’t know anything about Lightning, period. It doesn’t take much effort to READ
                                                                                                                                        1. 2

                                                                                                                                          I can work with a todo-list of topics, thanks :)

                                                                                                                                          1. 2

                                                                                                                                            Keeping up with blockchain news is harder than clearing out a Skyrim questlog.

                                                                                                                                            Here’s a collection of (hopefully correct) things I’ve learned today:

                                                                                                                                            • Increased blocksize is one way to scale, but comes with increased bandwidth and storage costs.
                                                                                                                                            • Increasing the blocksize above 1MB requires a hard-fork, whereas segwit was implementable with a safer soft-fork.
                                                                                                                                            • The terms “on-chain” and “off-chain” are muddled and there’s no real consensus on definitions.
                                                                                                                                            • A “sidechain” is a separate blockchain, attached to BTC using a 2-way peg to ensure no fraudulent coins are created, and the value remains stable across chains.
                                                                                                                                            • In a sense, sidechains allow off-chain transactions (not part of the main BTC chain), but they are settled on-chain.
                                                                                                                                            • Exchanges like Coinbase manage their own books. These are truly off-chain transactions and are not cryptographically secured.
                                                                                                                                            • Lightning attempts to provide scaling without using more bandwidth.
                                                                                                                                            • Lightning is not a sidechain. It uses conditional payments to tie-up BTC in hubs/channels which support cheap micropayments. It’s a pretty elegant hack.
                                                                                                                                            • Lightning does not support credit. You must deposit BTC into a hub before you can spend within that channel.
                                                                                                                                            • Lightning’s architecture benefits from large hubs. Too many hops between hubs will likely be prohibitively expensive.

                                                                                                                                            Still unclear:

                                                                                                                                            • How does limiting BTC’s transactions per day protect it against attack?
                                                                                                                                            • People say large blocks give more power to miners. How does that follow?
                                                                                                                                            • When will I be able to use Lightning?

                                                                                                                                            In short, there is more than one approach to scaling Bitcoin. Blocksize is the obvious approach but 1) requires a hard-fork to implement, and 2) isn’t a long-term solution to the scaling problem.

                                                                                                                                            1. 2

                                                                                                                                              Since you actually went out and researched stuff on your own (note: not endorsing all of your conclusions, but they’re considerably less problematic now), I will answer your remaining questions:

                                                                                                                                              How does limiting BTC’s transactions per day protect it against attack? People say large blocks give more power to miners. How does that follow?

                                                                                                                                              Read:

                                                                                                                                              When will I be able to use Lightning?

                                                                                                                                              Soon, hopefully. Since they’ve got software that they’re testing now on the test net (which you can download and test yourself), I assume it will be out sometime in 2018, but we’ll see.

                                                                                                                                              1. 2

                                                                                                                                                For posterity, I found a comment which explains the point well.

                                                                                                                                                [Big blockers] think all they have to do is plug a 10 tb hard drive into their miners and boom, problem solved right? The problem is that you would have to then be capable of validating more memory and it has to be done before the new block comes out. Eventually you will get to 1 gig blocks and for something to process 1 gig per block EVERY 10 minutes would need much more powerful hardware to validate the network. Making the network harder to validate reduces the network’s security and most importantly decentralization.

                                                                                                                                                People are easily fooled because increasing block size instantly relieves congestion in the network and speeds are fast again and fees are low which is what I want too but increasing the block size is no different from a bail out. Its going in the wrong direction. If possible we want to make the 1 mb smaller so more and more devices can validate bitcoin’s network thus making bitcoin’s security indestructible and way more decentralized. Sure this doesn’t relieve pressure to the network but increasing block size is very risky hoping our hardware will keep up and even if it does, that means EVERYONE would have to keep up to reduce centralization, and again you cant just go to your local Best Buy and buy a hard drive, your hardware would have to process all that memory in under ten minutes. 24/7. Eventually this will lead to only a few players being able to validate blocks and boom there’s your 51% attack.

                                                                                                                                                We have no choice to find another solution for the sake of decentralization. The network must become easier to run, not more demanding.

                                                                                                                                                1. 2

                                                                                                                                                  Nice find, thanks for sharing that.

                                                                                                                              3. 3

                                                                                                                                The “plan” is the Lightning Network, which is completely unlike Bitcoin. It’s presently a two-year-old white paper, a byte-level protocol spec in progress and some sample code.

                                                                                                                                They don’t seem to have anything official documenting how the economics of it are supposed to work or feel from the user or merchant perspective. I’m still trying to make sense of the latter (the devs get very defensive when asked about it), but I’m pretty sure the hub nodes turn into something that’s functionally a bank, and you can get credit (the promise of money being approximately usable as money) out of the system, making it even more unlike Bitcoin. I have no idea why anyone will want to adopt this thing. But I eagerly await more details.

                                                                                                                                1. 0

                                                                                                                                  but I’m pretty sure the hub nodes turn into something that’s functionally a bank, and you can get credit (the promise of money being approximately usable as money) out of the system, making it even more unlike Bitcoin.

                                                                                                                                  No no no no!

                                                                                                                                  Banks own your money.

                                                                                                                                  Lightning Network preserves the ownership aspect of Bitcoin. Hubs cannot steal your Bitcoins (without a lot of extreme collusion and very sophisticated network attacks going on).

                                                                                                                                  They don’t seem to have anything official documenting how the economics of it are supposed to work or feel from the user or merchant perspective.

                                                                                                                                  Yes they do!

                                                                                                                                  Here:

                                                                                                                                  1. 3

                                                                                                                                    Banks own your money.

                                                                                                                                    If you make a deposit at a bank, the bank owes you money.

                                                                                                                                    Deposits are liabilities, loans are assets from a bank’s perspective.

                                                                                                                                    1. 0

                                                                                                                                      Yeah, that’s what the banks say. What is said, what is written, what is promised, is quite different from real ownership.

                                                                                                                                      In the real world, accounts are frozen, assets are stolen by the custodian, and banks, along with hundreds of companies, track and approve your every purchase. Bitcoin demonstrates the difference between “ownership” and ownership.

                                                                                                                                2. 1

                                                                                                                                  Bitcoin Cash for sure

                                                                                                                                  1. 2

                                                                                                                                    For a “cash” fork, BCH has put no apparent effort into merchant adoption, its supposed use case. Not even the drug market is interested in BCH.

                                                                                                                                    1. 1

                                                                                                                                      Why not both?

                                                                                                                                  1. 2

                                                                                                                                    what’s behind Björk’s cryptocurrency album project

                                                                                                                                    Greed?

                                                                                                                                    1. 10

                                                                                                                                      I’d go with marketing. Crypto is so hot right now!

                                                                                                                                      1. 5

                                                                                                                                        yeah, nobody’s going to make a bundle directly from this (not even the promoters of Audiocoin, given cashing out is near-impossible). But it was the first place I heard Björk had a new album about to come out, for example, and it’s had a bit of press.

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                                                                                                                                      ASCAP is terrible, though.

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                                                                                                                                        Collection societies are really good at not making friends with their actual base, it’s true. Which is disconcerting when they should be the good guys. (A lot of the trouble is that in most countries the collection society is a statutory monopoly, not mulitple competitors as in the US. The US is weird like this.) But I’d still trust them as an organisational structure over Ujo.