As the ongoing debate in Bitcoin between the Core and the Classic camp rages on, early signs of tentative order emerging spontaneously from the un-orchestrated chaos can be seen. For one, most of the intelligent proponents on either side finally seem to have recognized the fundamental irreconcilable differences of opinion on either side of the divide, having spent the last 3 months weeding through the army of trolls and sycophants which always seem to amass around idealogical movements.
The industry has started to look upon itself in a satirical way, from high profile jokers like Samson Mow, to the absurd display at the Miami Satoshi RoundTable, organized by Bitcoin Foundation Bruce Fenton, which sported such medieval artifacts as an actual suit of armour and a Bitcoin Magna Carta which would make 45 year old AD&D live roleplaying nerds giddy. The industry has certainly reached its apogee of insanity, absurdity and self flagellation, and it can’t possibly get any worse, and thus, we should expect to see things starting to come back to reality very soon.
Several promising things have been happening recently that give me cause to be hopeful that we may yet see the end of this “Rite of Passage” in the life of Bitcoin:
Core has started to consider a hard fork proposal themselves.
Interest in Bitcoin has been re-kindled in the form of 2000+ (as of writing) new nodes added to the network.
Mining pools have started to implement miner voting systems within their constituents.
New consensus tools have emerged which help bring visibility to and encourage people get involved in, the decentralized crypto-governance process.
A total of 4 past attempts at securing industry participants into binding agreements have all failed to produce consensus.
I have often observed that disagreements between smart people inevitably devolve into a difference of opinions based on assumptions which are either ignored by one or both sides or insufficiently proven, which leads to the construction of a belief system built on top of nothing more than reasonable guesses. Because of this, it takes a long time before one can peel away the layers of conditional truths before you reach the core assumptions over which the principle disagreement is erected upon. (one needs to look no further than the renewed flat earth movement to see how you can rewrite your entire belief system to support your theory). Over the last month as I have debated with the decentralists on the foundations of their “decentralization is the most important thing about Bitcoin”* argument, I believe I have finally discovered the crux of the dispute, the mistaken assumption, upon which all other conclusions are derived upon, the genesis block of the debate, if you will.
The problem comes from the fact that the term decentralization has been overloaded to mean so many different things. From topological point of view the old graphic from Paul Baran (1964) (inset right) may seem to provide a good enough definition but only from the perspective of a network topology which is certainly not the common usage of the term today. More recently some folks have improved upon the definition to more clearly indicate that it is the notion of control (the little puppet master hands in the diagram) of the network nodes that make them more or less decentralized.
The disagreements between the ‘big blockers’ and the ‘small blockers’ in Bitcoin are heating up. Bitcoin Classic is poised to release its first client to compete with Bitcoin Core, and Bitcoin Unlimited has had its first vote on its new feature set. It is a time of peril in the galaxy…
Now as the credits fade into the star field background picture a big wedge shaped Star Destroyer with the banner reading “Decentralization” filling the screen. This word is really the Battle Cry of most crypto-currencies, and as I have written in the past, it is so poorly understood.
Everyone wants it, but few know what it is
It is a repurposed term, that simply describes a quality of network topology, transformed into a rallying call of rebellion. The problem is that almost everyone that I read or encounter in the industry uses this term as a panacea for all the problems that they see in the world today, without actually knowing what it truly means. They believe it because of faith from authority, and through basic reasoning, that it is good and thus must be fought for without actually knowing why. This is dangerous, as this is how cults start. The Cult of Decentralization.
I ask you, dear reader, please forgive me. I am going to break from my normal “impartial observer” commentary on the Bitcoin space and speak personally about a project that I am involved in, because I believe it matters.
There is an election going on in Bitcoin space. At least this is what the media is going to call it very shortly (perhaps in a months time, after it is all settled, as mainstream media is apt to do… always late to the party). This election, like any, is political. It is a battle of wills, of differing philosophies, of ways of thinking. But like all elections, I believe that the will of the people, the majority, will determine the results.
Bitcoin Classic, is an implementation headed by Gavin Andreson, Jeff Garzik, Jonathan Toomim and others, which aims to deliver an alternative implementation of Bitcoin, aimed at addressing the demands of the users and businesses in Bitcoin.
DISCLAIMER: this is an OpEd piece. Opinions expressed are my own. Do not take it as or use it as advice on investments.
In part 1 of this article, I discussed how decentralization is really a measure of security in the network and having a more secure network means having one that costs more to corrupt it than to work within its rules. This in turn results in a system that is trust-minimized, which means you need to trust 3rd parties less to ensure everyone plays by the rules. This is the basis of why Bitcoin can actually work as a currency, but you have been reading my blog, so you already knew that, right?
In this segment, I would like to breakdown and explain the components that comprise the Bitcoin price, in terms of economic drivers. I will apply some high level fundamental analysis on Bitcoin, to see if we can tease out what factors affect it’s price, and whether or not that price is stable.
The current market Bitcoin price is composed of 4 components:
Mining economics Value
Medium of Exchange Value
The first people valued it for ideological reasons, from libertarian anarchists to those from the Austrian school of economic thought. These are the hoarders and will be the last to sell.
In this 2-part article, I have decided to address some of the very commonly spread myths in Bitcoin space, namely that of mining centralization, and its effects on the BTC price valuation. At the end of reading this I hope that you will have a better understanding of the complicated topic of decentralization in terms of economic factors, and also how everything is perfectly reflected in the BTC price. Also, I hope that you would have a new found appreciation that BTC price is going to continue to fluctuate wildly and even may go to zero, under certain certain scenarios.
But first, to the often repeated, and universally unsubstantiated claim: That Bitcoin is suffering from miner centralization. First off, I want to stave off all the thoughts that the proponents of this opinion are thinking now: “You must not have heard of this thing called the Great Firewall of China!”, “You must not understand what the propagation delays are and its affect on orphan rate!”, “You must not know about the mining relay network!”, or my favourite, “Maybe you haven’t heard, but they have this corrupt oppressive government over in China!”. Rest assured, I know, I have heard all the arguments, and I have well connected business associates in China.
Nobody votes to adopt anarchy, it just happens. It is emergent, it is organic, and that is exactly the way it should be.
If you asked anyone what was the most innovative thing about Bitcoin, you would likely get an answer such as “censorship resistance” or “financial disintermediation” or “deflationary money”. But the truth is that the biggest innovation of Bitcoin is the fact that it is headless. In fact most of what makes Bitcoin capable of delivering on the aforementioned promises is the fact that there is no company owning Bitcoin, no CEO to sue, or entity to hold accountable. Bitcoin is simply a protocol. Unlike previous protocols like TCP/IP however, this is a protocol that can represent money directly, and as such is likely to have a lot of politics embroiled with its implementation. In the project’s nascency it was just Satoshi who maintained the software, and after his disappearance that torch was placed on Gavin Andresen, and subsequently Wladimir van der Laan. As the project grew in popularity and media coverage, more developers came forth taking on more active roles in its development and maintenance. This is a good thing. The progression went from solo designer, to committee stewardship during the first 5 years of it’s life. Like any committee tasked with such a heavy burden of safeguarding over 6 billion dollars in value, bureaucracy does what bureaucracies are arguably designed to do, slow down innovation in the name of conservatism. For example, the current standing feature change policy enacted by Wladimir, is intended to only allow non-contentious features to be brought into the code base. While this protects the status quo, it also effectively means that the system will cater to the lowest common denominator and prioritize preservation over dynamism and progress.
“Bitcoin will either grow to a million dollars per BTC, or go to zero…”
This is a fine opinion that any person or group is entitled to have, but certainly to impose that ideology onto the network would be in itself an act of oppression, yet we find ourselves presently with a dearth of viable alternatives should we choose to disagree with the conservatism of the Bitcoin Core team (a few of which work for Blockstream).
The WordPress.com stats helper monkeys prepared a 2015 annual report for this blog.
Here’s an excerpt:
The concert hall at the Sydney Opera House holds 2,700 people. This blog was viewed about 12,000 times in 2015. If it were a concert at Sydney Opera House, it would take about 4 sold-out performances for that many people to see it.
It seems the row between the Bitcoin conservatives and the Bitcoin progressives are widening much as you would expect Liberals to disagree with Conservatives, Democrats against Republicans.
I am a pragmatist first and foremost. The only thing that I am vehemently against is fanatics and zealots. Unfortunately you will find them in either camp in spades. I suppose that is the curse of politics. It is the science of influence and manipulation after all (if I may be excused in dirtying the word ‘science’ in that manner for but one illustrative instance).
I will be upfront. I really didn’t like XT. I thought Gavin was a bit cheeky in the way he just left the table and tried to convince many exchanges and wallets providers to support Mike Hearn’s upstart rebellious XT fork of Bitcoin. It seemed rash, unwarranted, and generally an attempt to ‘rock the boat’.
Several months ago I reposted an article about the troubles that Ethereum were facing. At the time I thought that it may still be possible to salvage something out of this generic turing complete smart contract platform. Well, I finally spent a some time to figure out how Ethereum works in order to convince myself about it’s technical merits. I had in the past spoken to its technical head Gavin Wood, and on occasion debated some economic issues with Vitalik on social forums but I had never really put in the time to learn about Ethereum myself, so refrained from making any critical opinions on it. After having done some preliminary research, I am of the opinion that it may be too late to save it. Too ambitious of goal(s), too complex a system to get it done, and too much money squandered on someone who has little business experience. [every miner runs every contract in the platform in strict order without any concurrency? How is this efficient? How can this scale?] And what we pay for in the loss of efficiency is … erm… censorship resistance? Additionally, I don’t see how a trust-less smart contract is practical, considering you always need a trusted third party to mediate disputes and settlement of the contract. (when we are talking about settlement in anything other than the native token).
This excellent article by Gideon Greenspan pretty much sums it up succinctly with a lot more background and supporting links than I can give. 😉