I am always wary of any piece of writing that starts with, “This is just my opinion”. We know its your opinion, humble author. This is normally an indication that whoever the writer is, he is going to try to lie to you, or unleash a torrent of fallacies.
The block size debate has entered into another phase since the rage quit of Mike Hearn, who has managed to annoy just about everyone.
Ben Davenport is the CTO at BitGo a rational, serious and well mannered man, not prone to trolling or tough talk on Twitter.
People on both sides of the Bitcoin capacity split agree that using the New York Times to declare Bitcoin “dead” when he personally chided others for discussing Bitcoin in any context other than vanilla use cases is a good indication of Hearn’s character. Having said that, he is of course, free to say whatever he likes. It doesn't matter what he says. Software cannot care about what people think or say, and this is about software only, not anyone’s personality, opinion or politics. The people who sold their Bitcoin on reading the New York Times do not understand the nature of what they own, and in the long history of Bitcoin are nothing more than a blip.
People’s reactions do not matter. Only the software matters.
People’s opinions do not matter. Only the software matters.
Your training in any field doesn't matter except one; software, and then inside that subset, there are other high bars to pass before what you say should be listened to, and even then if the listener is not a machine, what you have to say is irrelevant.
This is the age of machine mediated human interactions. The men who write the instructions for those machines matter, and no one else.
The endless, iteration and classification and placating of the different groups on each side of this issue is pointless. It pads out writing and produces nothing. What is needed here is software, not discussion about moving a slider to the left or right by people who couldn't write a “Hello World” programme, let alone conceive of or see the need for Bitcoin.
Saying that, “Bitcoin has issues” is meaningless. Bitcoin is software and a network that is currently in a state where it operates as specified. Because the people who use it are increasing in number and demanding more data to pass into and around it, there will come a point where the network as it currently stands will not be able to handle the throughput. There is a solution to this problem. What that solution is is the debate.
Now a brief interruption for recursion. The article you are reading is not a “defence of Bitcoin”. Bitcoin does not need to be defended, any more than arithmetic needs to be defended. It does what it is designed to do, and rational men are not in an “Arithmetic Camp”; they simply accept that 1+1=2. It is exactly the same with Bitcoin. Now of course, you can join a club called “Bitcoin is Dead” if you like. Its prominent members are listed at the Nakamoto Institute. That does not change the nature of math, software or Bitcoin. No matter what you choose to believe.
Bitcoin is a scarce resource, and like any scarce resource, it has a price. This is true of Bitcoin when it imitates money, and the price of processing the transactions. In the real world, when something is scarce, its price goes up in the market. Socialists cannot accept this, and want something for nothing. If there is a scarcity of money in the economy, “Just Print More!” is their answer. They do not take into account the consequences of printing money (impoverishing the poor, stealing value from savers and wage earners and debasing the currency a.k.a. “theft”) they use the printing press as a blunt instrument without any understanding of what money is, its function in a market or even the history of money printing (inflation) which always ends in currency collapse.
The fees in Bitcoin are a market device to control allocation of a scarce network resource. If something is cheap, anyone can use it and flood the network. If however it costs a dollar to spend a dollar, no one will use Bitcoin to send a dollar. They will use it to send 100 dollars because that is still cheaper than Western Union. In this example, higher transaction fees raise the bar, shutting out the utility of Bitcoin for any transaction under a dollar, but Bitcoin itself remains unchanged, and entirely useful.
Increasing the fees payable to send Bitcoin would mean that micro payments would eventually become uneconomic. One camp claims that, “Bitcoin was not designed for buying coffee at Starbucks”, and they are correct. Bitcoin’s explicit mission is much bigger than that; it was designed to destroy government fiat currency forever. Taking this into account, its clear that it may be the best solution in terms of the Bitcoin creator’s philosophy is to use another currency on top of or along side Bitcoin to facilitate your urge to buy coffee.
Like the Birmingham Button Makers who minted private currencies in the 1700s
these “sub Bitcoin” tokens could be created and circulated in very profitable services, and large Bitcoin reconciliation done on a nightly basis between services. Its very easy to come up with “solutions” of that nature, and of course, they are mere thought experiments that only have value if they are transformed into software. That being said, the company Blockchain could actually do something like this right now.
Blockchain could create a new type of transaction in their service, which is “Blockchain to Blockchain”. If two Bitcoin users are both Blockchain users the Blockchain system will be able to detect this and then move the display balance between the two instantly, because it is a MySQL UPDATE command and not a Bitcoin transaction on the Blockchain proper. That balance could be withdrawn to the outside world seamlessly from a pool Blockchain holds to facilitate outgoing transaction requests from their users.
What I just roughly described does two things. It creates an advantage for merchants to select Blockchain as their platform over other companies. Instant guaranteed reconciliation is something people complain about in Bitcoin, and what I outlined would solve it for Blockchain users. If you use Blockchain in this idea, your Bitcoin balance is guaranteed to instantly “confirm”. Users know that when they receive Bitcoin there will be no delay, and they can always transfer out to the live network as an option if they need to. Bitcoin would be better on Blockchain than being exposed to the live Bitcoin network. This would drive adoption of Blockchain as a platform, for merchants and users without it becoming another walled garden.
The solutions to this problem do not necessarily need to be solved by changing Bitcoin; this is something that is not very well understood, and which represents a large market opportunity to build software that mitigates the transaction scarcity in the current running network. Coming up with ideas to solve difficult problems is hard. Writing the software that implements those rare ideas is even harder. This is why so many people, who are not very good thinkers and who cannot even write software, are supporting simplistic “just move the slider to the right” quick fixes.
Bitcoin does not “have issues”. Hysterical people “have issues”. Also, and this is very important, complex underlying software design decisions are not something that can be put to a democratic vote. Software is not about politics, and your experience in politics, the law or any other field is completely irrelevant to software logic. The only thing that matters is the performance of the software and nothing else. This is how the Linux Kernel is developed, very successfully, and the same principles apply to Bitcoin development.
Some people think that collective decision making is part of Bitcoin, and that somehow good manners makes good software. This is not true. Bitcoin was written by either one man or a small group of men with a single well defined goal. They did not consult with the pubic for their opinion, and did not seek anyone's pet economic theories, input or advice. They just did what was required to meet the narrow specification, and then released their software. Nothing has changed in Bitcoin. Its ethos and reason for being has not changed simply because some people from some State sanctioned profession are “stoked about the possibilities” of this “technology” not even understanding that they are talking about software, not a new technology. I have a strong suspicion that these people are about to be taught a big lesson about who has the real power in Bitcoin...I could be, wrong, of course.
Collective decision making does not confer or impute legitimacy or technical correctness into anything. The people who think that it does are brainwashed.
Voting for a new interface feature at the invitation of an app developer is not the same as voting for a change in the fundamental workings of a protocol that is owned by no one, and anyone that understands this would never accept that a vote is the way to resolve a matter of pure logic.
This is the root problem of the idea of “The Bitcoin Community”. Users of software are not qualified to make decisions about how software is written at the source code level. Its as absurd as asking the public to vote on the software in IPV6. The public has no idea how these deeply complex systems work, and of course, the way programmes interact with each other in a dynamic system can exhibit emergent properties and behaviour that even developers cannot predict will happen.
This is why bugs keep being found in large complex software systems. The idea that the public making a decision can lessen the chances of disasters, bugs, mistakes or unforeseen consequences of complexity by dint of a vote is absurd on its face. It is only through slow, methodical, properly tested and incremental changes by experienced and talented developers well versed in the way complex software systems work that a project like Bitcoin can be held in a robust state while boosting capacity.
Increasing the costs of sending transactions does not change the nature or underlying source of the network, and it manages capacity through market forces. Bitcoin may not have to change if this method is chosen as the way to mitigate the problems caused by the built in limitations of the protocol.
Alot of noise is being made about 42. No, not that 42, “The Answer to the Ultimate Question of Life, The Universe, and Everything”. I’m talking about the number of banks that are joining “R3CEV” aka “Hearn’s folly”.
It comes as a shock, thanks to a video of a private meeting at The Brookings Institute,
that R3CEV has no concrete plans, designs, patterns or basic concepts for integration any software of any kind. Their explicit business model is to ask the banks what it is that they want and then to build that. Imagine that you are an inventor of Henry Ford class, and you have just invented the refrigerator. You go to the biggest ice distributor in the country and ask him, “What would you like me to do with my new invention, the electric ice box?”
LOL!
I almost fell of my chair when I heard their representative say they have nothing. Literally nothing. I would love to see the text of the document these 42 banks have actually signed up to. Wouldn't you?
More disturbingly, this R3 representative knew in advance the subject and text of the New York Times hit piece that was just about to be published.
This was in every way a PR stunt by definition. It was planned in advance and coordinated. Furthermore, Mike Hearn knew that a price affecting public statement was about to be made, and he sold his Bitcoin in advance of the statement. In the stock market, this class of act falls under, “Insider Trading” and is illegal. Even if it were not illegal, who would want someone in their project who was willing to “scorched earth” what they have been working on because they are disgruntled? Only a fool.
Remember; many people use Bitcoin, thousands of developers work on it, and many men have put their life’s savings into it. By publishing a false article, and relying on people’s perception of him being a top authority on Bitcoin, Mike Hearn damaged many people with his irresponsible, false, and despicable outburst. Even if he believed that what he was saying was true, he should have had consideration for “The Community” that he was leaving rather than trying to burn it to the ground with everyone in the building. For a man who thinks anarchism is “jive” and selfish, Hearn has certainly wasted no time looking after his own interests and lust for vengeance at the expense of all Bitcoin users globally.
Back to BankCoin. We must remember that at the senior level, banks are staffed 100% with computer illiterates. Their ATMs are running Microsoft Windows
and at the low level, their systems are still running on COBOL. They are only taking Bitcoin seriously now because newspapers are not ridiculing it, and there is a glimmer of realization that this might be, “The Big One” the earthquake that destroys them forever. The reality is that they have absolutely no understanding about anything to do with Bitcoin. We know this is true, because immediately after the announcement Hearn made in the New York Times, the Bitcoin price fell dramatically. Anyone who understands Bitcoin would have known that Mike Hearn saying, “Bitcoin has Failed”, is meaningless drivel, and would not have run to their trading terminals to sell their Bitcoin. The fact that they did, shows they do not understand the fundamentals of Bitcoin. Bitcoin is not a machine that Mike Hearn has to manually crank to keep it going. Just how stupid can people be?
All the breathless chatter about R3CEABCDEFG is nothing more than hot air. They have no software, no plans for any software, and even if they did have a running platform right now, it will be at least a decade before it is completely rolled out. In software, a decade is three lifetimes. There is no way that banks can survive Bitcoin intact. Even without Bitcoin, the banking industry is rapidly transforming, closing its street branches, and then excluding people from entering branches if they do not have the correct level of account. They are restricting cash customers, routinely abusing them and behaving in hostile ways to entrepreneurs and in many areas, acting like an empire in its last days. R3 or no R3 Banks will not be able to adapt to Bitcoin quickly enough. They are held back by the computer illiterate crony capitalists who run them and by the State that regulates them.
Ideally, Bitcoin should not be about the wishes of the owners of any single company. It should be like the Internet, where you can build any service you want on it, set your own rules in software that uses its protocol, and then invite the public to use your service so you profit. In absentia of that, if Bitcoin must have a benevolent dictator, it should be a man of the correct character, philosophy and type.
A man of the incorrect type, is one that thinks it is ethical to block people’s accounts from the entire network because their lifestyle and market choices are unpopular. I’m talking about blocking the accounts of people who want to buy goods like plants or metalwork. Bitcoin is a purely technical challenge, and has nothing to do with the uses to which it is put. Its as insane as blaming the telephone company for crimes or adultery or obscenity spoken over telephone calls. The separation of the basic function of the Bitcoin network and the uses its users put Bitcoin to is crucial to understand, and has precedent in other areas (the Common Carrier exemption) and whoever becomes the Bitcoin Dictator should have a clear appreciation of this, and shun the idiotic wishes of people who want to cripple Bitcoin services.
As I have said before, the occupation of the man addressing Bitcoin is the lens through which he assesses it. Lawyers see a Regulatory Problem, Policy Wonks, policy wonkery, Economists see a money supply problem, the police see a crime problem and so on.
Just because your background is the law, this does not mean that your assumptions have anything to do with Bitcoin, the nature of software, or people’s right to write software and send messages to each other via a network. Your opinion has no validity, and no ability to influence how software works. Services will always route around you and your ideas. You will never catch it, cannot grasp it, and are doomed to fail. The unregulated internet changed “the environment” without you uttering a single word, holding a single conference, or anyone asking for your opinion or permission, and the changes have been entirely beneficial. The same is true for Bitcoin, and will be true for it going forward. You can either choose to fight it and lose, or go along with it and prosper. These are your only choices. There are no other choices for you.
Some are ridiculing the idea of “be your own bank”. Using Bitcoin actually does do away with the need for traditional financial services that banks routinely provide. That is one of the reasons why it was written and why people are building bank destroying services on top of it. There is nothing you cannot do with an iPhone and a Blockchain account that you could not do with a bank, and its completely unregulated and does not require your consent or approval. This is the true underlying objection that some types are making about he disruption of banks; a whole swathe of industries and opportunities to charge fees through management and ancillary services are being swept away by Bitcoin in the hands of millions, and the very thought of this makes them sick to their stomach.
What you think are appropriate services and their shapes and rules is binding only on you and your business; what someone halfway across the world does on their own server on the net is none of your business. You need to unlearn the thinking of a lifetime and accept the reality of Liberty; what people do with their own property is not your concern or the in the remit of the State to control. Again, there is nothing you can do about it, and you will never be able to change it.
Bitcoin companies that do it right and banks are not in a similar business. Banks and properly run Bitcoin companies like Blockchain are highly differentiated. Blockchain allows users to instantly sign up and receive and send and receive an unlimited amount of money to anywhere in the world in the blink of an eye. Their users do not have to identify themselves, do not have to attend anywhere in person, do not have to sign a contract. The difference could not be more stark.
It is also a huge mistake to believe that the current crop of Bitcoin businesses in their present incarnations are going to be the default going forward. Anyone with even a cursory knowledge of the history of the internet knows this.
HotBot and Lycos seemed like forces of nature when they were online, and now they are gone. AOL for millions was the internet. After a stage of being the butt of jokes, its now not even that. The Bitcoin companies in the market today are by no means safe from complete disruption and elimination, and the ones that are most likely to be disrupted are those whose processes and thinking mimic the banks. The exchange that recently banned all Russian users, in absentia of any new law is a perfect new example. It is that banking, regulation obsessed model that is dead, and anyone imitating it is doomed to fail.
Blockchain on the other hand, is radically different. They actually post instructions on how to revoke your Bitcoin from them and leave the service; they make it easy. They do not claim to be the custodians of your Bitcoin, unlike other bankish services that do exactly that. How anyone can miss the differences between banks and these new companies is beyond me. Some companies may be modelling themselves on banks, but the ones who will ultimately disrupt on a global basis are actively shunning the bank model.
In conclusion, Bitcoin cannot “calm down” it is not a living person, and the people who use it and what they think has no bearing on anything other than the time at which they make a signature on it. The engineering problems that Bitcoin is facing are going to be resolved, probably by a mixture of warfare and software and gentle persuasion. That is how things are done on the internets. People who are not used to this, who think computers are Microsoft Windows, will have a hard time understanding what is going on. This is regrettable, however in order to protect Bitcoin its evident that these things need to be done.
Xiao Long Bao, on a Sunday afternoon↴
