China Cartel Shakedown — BU vs BTC
My how have times changed. Used to be, the worst thing that Bitcoin had to deal with were scammers and crooks infesting the ecosystem and giving the network a bad name. Now, we have potentially state-sponsored actors that are fighting to wrest control from the veteran Bitcoin developers and clients.
The first point in the argument is defined as a “blocksize” problem. This is not correct, but you’ll see plenty of back-and-forth about how blocks should be increased. This is a remnant of a decision long ago made by Satoshi Nakamoto, the reclusive genius behind Bitcoin.
When the network first started, 1 MB sized “blocks” were enough. Miners would act as transaction processors and put as many transactions, or TX’s, into a block as possible — up to the 1MB limit.
This worked for a long time, as the network was growing and overall usage patterns weren’t so high that the 1MB limit would be hit often. Then, way back, someone decided to do a “stress test”. (Some would equate this to a Denial-Of-Service attack, since it effectively delayed things.)
The “test” showed that yes, if you take a bunch of transactions and overwhelm the capacity of the block that the miner was working on, subsequent transactions would have to be left out until the next block. Oh no! The cry resounded, we must increase this!
Never mind that the “test” was completely out of sorts from typical usage patterns and any subsequent “test” is the same, just done at a later date.
There’s no argument that blocks would have to increase generally, its more the steps being taken to see that goal reach fruition that are a concern.
Enter the Chinese — Jihan Wu, (referred jokingly by some as “jihad” because of his single-mindedness on the issue), proprietor of a large ASIC producing firm and mining pool, (He makes chips that solve the hashing problems for Bitcoin miners, and runs a miner concern as well.) is pushing for a variant on Bitcoin called “Unlimited”.
There is also concern he may be Chinese state-sponsored, since his rhetoric has been rather arrogant and contentious. A manner that doesn’t describe the typical Chinese entrepreneur.
What Bitcoin “Unlimited” consists of is essentially a “fork” (or a copy, now altered) of an old Bitcoin 0.11 client that has a bunch of new rules spliced into its code. This can cause problems on a good day, and it takes a specific kind of developer to understand the implications of what they are doing.
When you make changes in the Bitcoin ecosystem, you have choices. You can “fork” your own client and try to get people to use it — or you can submit a BIP (Bitcoin Improvement Proposal) to have it considered by the team of Bitcoin contributors for implementation.
BU — Or Bitcoin “Unlimited” went further than just forking. They are actively colluding with other Chinese miners to control a large segement of hashing power. What this means, is that Jihan Wu and his collaborators Roger Ver (among others) are trying to actively bully the network into accepting their new changes.
So what? You might ask, isn’t this how things are done?
No, they aren’t. There is a specific procedure to “signal” for changes in the Bitcoin universe, and this requires “buy-in” from clients, miners and everyone running the software. Its a bit more democratic than the Mining Cartel being formed by Jihan Wu and company.
Ironically, BU has been having problems working with their own code. In one incident, they were told about a potential flaw and chose to ignore it — resulting in a significant number of their nodes (users running their software) to crash. This isn’t something you want to have happen, think what would happen if your ATM shut down mid-transaction. You wouldn’t be very happy or trust that bank very much afterward.
In the same month, after a “hotfix” was deployed, there was ANOTHER issue that caused nodes to drop off the BU network, yet again. And this is before they even get the hashing power needed to force this down everyone’s throats.
It does not bode well, nor lend confidence in the “team” behind BU.
Even the central tenet behind BU is incorrect, their max blocksize is 256MB, and to reach Visa-level transaction volumes (around 2,000 per second) you’d need a blocksize in order of 1TB or so. Not really doable on their network.
But what about Bitcoin? You might ask. There is a proposal called Segregated Witness (SegWit) and Lightning Payment Network (Lightning) that would enable transactions to be carried “off-chain” to allow higher throughput.
And this is what its really all about, honestly.
Cloaked in the blocksize debate is the real reason the Chinese Miner Cartels are forming — revenue. They are afraid that if Segwit/Lightning gets implemented, that they won’t make as much money off of a system that would use stuffing blocks (or on-chain transactions) full of TX’s.
So in one corner you have the scrappy and declared-dead-but-never-dying Bitcoin, and the other a mining behemoth rattling its chopsticks out of China.
It seems like an impasse, but there is hope. One, the BU team is hopelessly out of their depth. When confronted with a second node-crashing problem, they issued another “hotfix” that was an unsigned binary. This means, no source code so you could compile your own.
They made an announcement floating around that they’re moving away from open source code for their fixes. That seems like a foolish thing to do, but they’re simply afraid that their code wouldn’t do well up against professionals vetting their changes.
So combined with their overall incompetence, I personally doubt we’ll see enough traction to enact what would be a “fork” scenario for Bitcoin, where a modified client/miner software would make its own chain.
Even if it came to that, there are methods that can be used to protect the original chain, at the cost of the Cartel Miners hardware turning into hot-air heaters overnight — which I doubt they really want to do.
You’ll be hearing a lot about BU and Bitcoin in the coming weeks. They’ll call it a “civil war” or an “existential crisis”. But what this really is, and hasn’t been widely discussed, is simply greed run amok.
Grasping Chinese miners short-selling their future for a fraction of potential revenue. (And a potential state-level attack on the Bitcoin network, known as a factor in evading China’s capital controls.)
As a supporter of Bitcoin, I’m holding on to my coins and even have mining hardware set aside to turn on if the network needs it. I won’t make any money running them, its more about the principle of a global financial system that motivates me.
And it should motivate you, too — Financial freedom is at stake here, and your support can make all the difference.