BitCoin and the Byzantine General’s Problem (Holy Grail)

It’s the problem that most people in crypto who have a tad more knowledge than the average observer like to quote but few actually understand what it means.  That is because it is a metaphor which contains meaning on multiple levels, and just like Indiana Jones in the Temple of Doom, the answer, if you are true of heart you will find right in front of your face, but if you are not worthy, will never be able to understand.

When most people talk about the Byzantine General’s Problem, it is framed within the context of the problem faced by the the surrounding 10 vassal states of a central Byzantine empire, who were being oppressed, and wanted to overthrow the much larger Byzantium in the center.  The army of Byzantium was large enough to repel any attack, as long as it was mounted with the support of less than half of the surrounding kingdoms armies.  So if 5 out of the 10 vassal states army generals coordinated to attack Byzantium on the same day, they would lose, but if 6+ kingdoms coordinated, then they would be victorious and be able to divide up the central empire among the victors.  The risk each general faces is that, if you attack and lose, then the emperor will execute you and then divide up your lands and grant them to the other generals who did not support your attack.  So while a general attacking will gain much if he could mount a successful rebellion against the emperor, he stands to also gain if the rebellion fails to garner a majority of the generals support, and thus the revolting defeated generals lands will be bequeathed to them.

This is a classic computer science problem.  It is also a game theory problem. What most people don’t know is that it is also a political governance problem.

Bitcoin solved all three problems.

I shall introduce each problem category in turn.

The Computer science problem:

How to send a reliable message to many generals at once, that can not be corrupted?

Coordination is the Key, but no one is in command!

Clearly, if all the generals could somehow coordinate their attack strategy such that they all attacked with their full armies on the same day, then they would all be victorious, and the oppressive regime of Byzantium would be overthrown.

The issue is that generals communicated by messengers on horseback.  Even if they each sent out messages to each other which would look something like “Hi, this is General Klang of the Klingon kingdom, I propose we attack next month on the 15th“. The problem is that he would have to wait until he got responses from all the generals, and see how many agreed and how many disagreed.  If more than 5 agreed, he should clearly attack on the 15th.  But do you see the problem here? It is one faced by all decentralized systems.  One of a needed delegated coordinator.  Why? Because without a designated coordinator, EVERY general will be sending messages to all others at the same time.  And while our General Klang proposed 15th of the next month to all, before he got the responses from the others, he also got conflicting proposals from the other generals. For example, General Koo of the Glam Klan, who was a bit more prepared proposed next month on the 1st.  While General Tso of Chikan, was really anxious, and proposed next week Monday.  Our friend General Klang can’t possibly answer consistently to everyone while being consistent to his own initial proposal, because the messages are all coming and going out of order.

What we need is a time stamping service. Then at least we can tell everyone to include messages that they also received when they sent the message, who suggested which day according to them, and eventually, because we have a reliable time stamps on the messages, we can eventually converge to a consensus on the day to plan the attack.  Hurray!

Alas, no.

Game Theory Problem:

The problem with the situation so far, is that in addition to the proper sequencing of messages (the computer science problem) we have the Game theoretic problem. Namely, that generals may lie.  They may lie about the day of attack proposed, they may lie about the time a message was received, they may lie about which proposals that they had agreed to or disagreed with.  And why not? They have incentive to lie. If 5 generals with their armies (or less) try to attack, they will fail, and Byzantium will reward the generals that did not participate in the attack.  And even if they all managed to agree on a day to attack, come that day, they may decide not to show up due to bribes.

What you need is a way to commit each general to their proposed attack day. Which means that once an agreed day between 6 or more generals has been reached, that the armies will be forced to attack on that day, and no amount of bribery or treachery will change that decision.  And we can achieve this by making the writing of messages costly in time and energy, in a way that is impossible to cheat.

What we need is something that would make messages costly in a consistent way.

In our scenario, imagine if each general had a magic well in their kingdom, and at the bottom of the well, was a bottle of magic ink, which can be used to write messages to each other (and a message written without this magic ink would not be legible to any general).  Each general would need to draw 1000 buckets of water from a magic well to drain it, in order to retrieve the ink at the bottom in order to write messages to his neighbors.  Once he has written 10 letters, the ink runs out, and if he wishes to write more messages, he must once again go back to the well (which has re-filled with water, and new ink bottle — it’s magic!) empty the well of 1000 buckets of water again.

As long as the time it takes to drain the well is sufficiently long compared to the amount of time it takes a horse messenger to get the message across to the other generals, this system ensures that the general cannot afford to write false messages to the others, and if he did, he would have to drain the well and get more magic ink again to change his mind, and by that time, the other generals who didn’t lie will have already come to an agreement on the day of the attack.

This last part is what Craig Wright (as Satoshi Nakamoto) solved. Unfortunately for the generals, magic wells didn’t exist. But in present day computers, we can effectively do this.  Satoshi took something that was invented back in 1993, called “Proof of Work”(PoW) by Cynthia Dwork & Moni Naor (not Adam Back!) and applied it to Bitcoin. PoW meant that you can make your computer do a provable amount of work (draws from a electronic well) before you can send a message. If a message arrived without proof of sufficient work, you disregard the message. Voila!

Solving this need for commitment meant that Craig solved the famous double-spending problem in electronic cash systems in the past.  Double-spending is just spending the same coin twice. Sending a coin to A, then sending the same coin to B. Previous to BitCoin, if you wanted to prevent double-spending of coins, you needed a central coordinator with a ledger of who owns what. If you are an astute reader, you will realize that this is exactly the same problem when the generals would say “15th of the month” to one general, but “1st of the month” to another.  It solves the problem of lying, in a decentralized way, by making lying costly.

Hurray for Satoshi! He solved the computer science problem and the game theory problem at the same time!

But what of the third problem, the one of political governance?

Political Governance Problem:

How does Bitcoin solve that? Well, like Indiana Jones, with the holy grail right in front of him, the unassuming carpenter’s cup… the answer is crystal clear to those who have a pure heart and wisdom.

I shall give you a hint, and you can see whether or not you are worthy to understand the truth.

Going back to the scenarios with our Generals in circa 1200 Byzantium, IF they had a way, by which the surrounding vassal kingdoms could reliably coordinate an attack onto Byzantium, in a fool-proof way, each and every time, then wouldn’t that be a very strong incentive for the Emperor not to mistreat his subjects? Or his generals? And if the Empire ever got bigger than 5 of the vassal states put together, there would be an incentive for the 5 biggest generals to coordinate an attack, take over Byzantine, and divide up the land between the rest.  This would mean that the size of Byzantium would tend to never grow bigger (or more wealthy) than 50% of the rest of the kingdoms put together.

Think for a moment.

Whoa.

Did we just solve the problem of responsible democracy that self regulates?

We didn’t.
But Craig Wright might have.

(edit: upon permission, edited to name Craig Wright explicitly)

 

“End the Fed”? — Maybe Learn What the Fed Does First!

I was recently lurking on one of the online crypto forums where a bunch of ‘connectors’ and social media mavens use to bring developers and venture capitalists together with people who want to get involved in crypto but are not sure what they can do to help.

The topic turned (as it often does) to how we should ‘take down’ the fiat money system.  *sigh*. This is quite often the battlecry used by the crypto mavens to galvanize support from developers and armchair anarchists, as the anti-establishment theme seems to be able to rouse the most revolutionaries to action. (That, and free pizza seems to work equally as well).  The discussion spiraled into a lecture where I very calmly, coldly, explained how the Fed system of money works and why fiat money was already digital to people who didn’t understand how our money system works and was hell-bent on ‘fixing’ it with crypto money, because it was digital, and therefore, modern, new, and definitely what we want for Christmas. *sigh* (again).

The problem with the crypto space in general that has become very apparant to me is that people don’t really understand how the existing money system works, and yet, they proprose to have great solutions for it.  It’s likely listening to a fengshui guru try to design and architect your house for you.  He has neither the experience or qualifications to do any sort of structural engineering or design, but he thinks that this window definitely needs to face southwest otherwise your life will certainly suffer ruin and misfortune.

Making matters worse, a lot of the misinformation comes from people who have ostensibly worked in the financial sector, albeit likely were IT in a financial tech company like Bloomberg or some other ancillary industry to the finance sector.  Unfortunately, due to the speed at which the industry of crypto has grown, there are way too many instantly rich ‘lucky fools’ to who are the new breed of venture capitalists, and an even larger cohort of ‘lucky idiots’ who found themselves involved in crypto not because of their contributions to the art, but because they got into the space early enough to be seen as ‘experts’.

Take it from me, the ratio of true experts to charlatans in crypto is a very very small fraction.  Most of the experts in the field don’t have time to write blogs, lurk on forums and prostelitize on reddit.  (Which incidentally explains why the rate at which my blogs are updated these days has fallen drastically in recent months).  But I digress.  This blatent affront on the fiat system by charlatans which clearly did not understand anything about how the money system worked demanded that I rouse myself from my productive work to explain.  After I was done, I realized that perhaps it wasn’t all the fault of the mavens who speak as if they know but know not what the speak… maybe it was the simple fact that not many people know how banking and money really works. I thought back to how I learned about this, and it was through my own research while working at Goldman Sachs, coupled with a colleague who I worked with at JPM who worked as a treasury trader.  Certainly not the kind of information or experience that is easily digestable by laypeople.

So I thought, maybe it was high time that somebody explained, in SIMPLE terms, the basic misconceptions about our money system.

Firstly, know this: Although all its operations and structure of the Federal Reserve is public information, they don’t go out of their way to teach the general public about how money works.  This is, I believe, part of the design. If too many people knew how the money system works, then they would likely find fault and think it wasn’t totally fair to [some special interest group or demographic].  So when desiging a money system that is based on the general trust and belief that money is worth something of value, then it behooves the designers not to explain the details to everyone, as faith is much stronger a motivator than logic.

But you knew this already, otherwise you wouldn’t be a reader of my blog. You want the logical facts. You want to make up your own mind about things.  Good. So here comes the firehose. Brace yourself.

I will structure this lesson as a series of commonly misunderstood things about the fiat money system.

Misunderstanding #1 – The central banks (Fed) prints money. That is how fiat is created.

Truth: Not really. Well, that isn’t how most money is created anyhow.

Contrary to popular belief the Fed while actually creating the notes and bills that represent money, (literally printing the physical bills) they don’t actually CREATE the money it represents whenever they feel like it. Money is created by the Treasury Dept (government) selling bonds to the Fed, which creates money in order to buy them. So the government is the ones actually creating money from nothing (the hallmark of a fiat money system) when they decide to print and sell more bonds to the Fed. (usually because they need to fund government spending that taxes isn’t enough to cover).  The Fed actually makes a profit from the interest on these bonds, which is shared among the Fed’s shareholding banks. The Federal Reserve system (or simply central banking system for other countries) is that banks can have a lender of last resort, in case they find themselves in a shortfall for their liabilities.  This prevents economic downturns from making banks go bankcrupt, which may have a domino effect and cause more issues for other banks, causing a meltdown.

Misunderstanding #2 – The Fed is run by the Government

Truth: No. The Fed is actually a privately owned bank, which is owned by shareholder banks and some super secret entities (cue tin hat conspiracy theories here). They operate on a government mandate, but they are their own masters.  The only pull the gov has over the Fed is that the president gets to nominate the Chairman of the Board of the Fed. Effectively assigning its “CEO”.  But the shareholding parties also have their own governing board members and it acts very much like a bank.  Other central banks around the world may have different setups, but they are generally not directly controlled by the government.

Misunderstanding #3 – The government creates most of the money we use.

Truth: No. Actually your local bank that you get a loan or mortgage from is how most of the money in the system is created.

Both retail and commercial banks are the only ones that create money outside of the Gov issuing treasury bonds.  They do this by creating loans.  Every bank is allowed to have outstanding loans as a ratio to the actual cash reserves that they have on hand at their reserve bank accounts (an account which is held at a local Reserve Bank which is part of the Federal Reserve system). In accordance to this, e.g. if they accept $100 worth of deposits from customers they are allowed to create $900 of outstanding loans.  This 900 dollars is created from thin air, added as a cash credit to the borrowers account, and added as a loan asset on the banks balance sheet, balanced by a liability for the borrower.  This is how MOST money is created in the economy.  So the banks create money in response to the market’s demand for loans. This is a good thing, as it ensures that money is always ‘available’ to fund developments.  It is a bad thing, when too many banks given out loans to people to can’t actually repay them, which was the case in the financial crisis of 2007.

What? You mean banks can just create money they need to lend to people? But what about inter-bank loans? Overnight swaps? LIBOR swaps? And the whole FX market of derivatives? How can they just create all this ‘fake’ money? This leads us to the next one…

Misunderstanding #4 – Investment Banks and Commercial Banks are the same

Truth: False. Ever since the Glass Steagall act, they cannot be the same company. In fact, they were only licensed equally because of the obvious benefits of being the lender of money and also the facilitator of fund raising for companies.  Investment Banks cannot create money. Commercial Banks can.  Investment banks (the guys like Goldmans) who engage in the securities market activities have their primary purpose hedge risk, raise funds, and to do M&A and IPOs, acting as a ‘facilitator’ for businesses who need capital. Even though some of Glass Steagall has been since repealed, and the same company can be both a commercial bank and an investment bank, the point is still that the commercial banks are the parts that can create money via loans. Not the investment bank businesses. So banks cannot create money to pay for their debts to other banks.  They have to borrow money from other banks in order to fufill their daily cash settlement demands. This is one of the reasons why an overnight swap, spot, and forward markets exist (among others). Because if any bank (or company for that matter) cannot settle their daily liablitities, then they are technically in insolvancy. Not a fun place to be if you are a bank. (or any entity for that matter).

Misunderstanding #5 – Fiat money isn’t digital

This is actually how the debate on the online forum started.  Some person was adament that fiat money wasn’t digital.  They likely took an old Economist magazine front page headline a bit too literally. (and didn’t have the wherewithal to realize it).
Actually this is even where most people who you would think know better (even ones that worked in the industry) get it wrong.  Fiat money is >90% digital.  M0, which is the classification of money that is in the form of notes and coins, makes up for less than 10%.  And of that M0, 2/3 lives outside of the US.  All other forms of USD, live in bank account balances, which is reconciled up to the the top level Fed accounts.  Therefore, fiat currency is very much digital.  It’s just not cryptographically secured, nor is the supply of it metered by some algorithmic process as is the case with cryptos such as Bitcoin.  Instead the Fed system uses a hierarchical tree of double entry accounting books to reconcile from your bank account at your local bank all the way up to the accounts at the Fed and other central banks around the world.  The way this is structured is that each bank in addition to keeping the books for their clients must keep accounts for other banks they have dealings with.  This is the system of NOSTRO and VOSTRO accounts and it is necessary that each bank in order to have a banking license in a country must have a NOSTRO account at a bank further up the chain, ending with a bank that has an account with the Fed (central bank) itself.  Normally this layering is only 2 levels deep for the big banks, but smaller regional banks may have to bank with a larger bank who in turn will have a NOSTRO account with a bank which is directly part of the Federal Reserve network.  This is how all daily reconciliations are done, so that every penny is counted and the system is ties out. The only potential source of error to this balanced accounting system is due to the paper notes and coins that could be counterfeit or lost to the system.  Which is the reason why banks want to reduce the use of physical bearer instruments such as notes and coins as much as they can.  You can go look up the Fed’s balance sheet which is public and see for yourself, but knowing you are likely too lazy to click on the link and find it I’ll put it here for your convenience. You see that number under liabilities labelled “Federal Reserve notes in circulation”? that is the exact number of M0 money of USD that exists in the world, (excluding the exceptions mentioned). Yep. You read right. That is 1.6 trillion dollars in cash floating around in the system.  How can the fed possibly come up with this number in a reliable fashion if it were not reported back up to the Fed by the Reserve banks who have their master accounts at the Fed themselves?

Which leads us to the last one…

Misunderstanding #6 – Banks are evil because they can create money when they want to make loans, while at the same time when they need money they can always borrow from the Fed

Well, this is somewhat true.  Banks which are part of the Fed system that have accounts with the Fed directly CAN borrow money from the Fed through what is called the Discount Window.  This is supposed to be the lender of last resort. As such, the discount rate (interest charged) is not attractive nor meant to be.  Instead banks borrow from each other through what is called the Fedfunds rate. This is somewhat controlled (through a market process) by the Fed board of governors, but in practice this is just the average rate that depository institutions will lend to each other.  If too much or too little lending is happening at a given rate, then the Fed will step in with open market operations (buying or selling of treasury bonds or other instruments) to reduce or increase the amount of money in the system so that the Fedfunds rate move closer to what is targeted by the Fed’s board of governors.  What is borrowed needs to be repaid with interest, so it isn’t in a banks best interest to borrow more than they need, or to hoard cash and not lend.  Banks that borrow too much, or make too many bad loans and end up not being to meet their obligations will go bust.  (or should go bust).

The last point is really the main problem with the central banking system.  Banks need to be allowed to go bust if they, through the process of making too many bad business decisions, end up not being able to make their interest payments.  That, and simply the fact that by centralizing the management of money, a single failure in a system of highly inter-dependant banks, stands to have large scale systematic effects if any bank large enough (thus having many liabilities owed to other banks) were to fail.

Crypto may have some part to play in improving the system.  But I believe it will be more on the aspect of making financial transactions transparent, and accountable. Not simply from the fact that it will make things digital or more readily reconciliable.  The current system is already pretty good at accounting and keeping balances straight.  All that is needed is to make the system more transparent, and perhaps reintroducing the notion that banks should once more be in the business of raising capital, instead of simply creating it when needed.

/EOL

Update:

It works now!

Ouija Board Consensus – Decentralization Myths: Part 4

This is the fourth part of a multi-part series on the myths of decentralization. You can read the previous installments here:

Part 1 – Decentralization Redefined
Part 2 – Decentralization Myth
Part 3 – Decentralization comes with People

I’ve written quite a lot about the misconceptions and deliberate misdirection that some proponents in the Bitcoin community choose to spread around in order to shape the public perception of what makes Bitcoin valuable, and as a result change the fundamental value proposition of Bitcoin.  As you all should know by now, “Value does not exist outside the consciousness of Man” – Carl Menger.  So changing people’s consciousness by way of affecting their ideas, affects the value of Bitcoin.  Thus it is important that we re-evaluate our notions of why Bitcoin is valuable every so often with a huge dose of skepticism.ouija_board

In today’s article, I’d like to review what the fundamental security model of Bitcoin is, as intended by its mysterious creator, Satoshi Nakamoto, (at least in my interpretation of it) why that model is the best we can possibly hope for, and why any further attempts at adding extra layers of ‘security’ on top of this model just ends up making it less secure by making it more centralized.

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Bitcoin Fact: Smaller blocks => Financial exclusion => Censorship

I’ll just say it. Small blockers are elitists who want to censor out Bitcoin users who cannot afford to transact on mainchain.  I’ve lost count of how many times I’ve heard the old argument that scaling onchain damages decentralization, which in turn may damage the censorship resistance of Bitcoin.

Free as in Free speech and Free beer!

Free as in Free speech and Free beer!

It is important to realize the hypocrisy in this line of reasoning.  It is subtle, so I bet most of the proponents don’t even know that they are guilty of it.

Simply put, the fee market is a form of censorship. If you cannot pay for a bullet proof car in Mexico city, then you and your family is at risk.  If you cannot afford to install a home alarm system, then you have been prevented, indirectly, from keeping your property safe from burglars.  If you cannot afford insurance, then you are at risk of a fire, or an accident etc.  Similarly, if you cannot afford to pay for the privilege of transacting when you wish in the Bitcoin network, then you must be delegated to 2nd layer networks like Lightning to do your payments. Which will have centralized payment hubs to service you and collect fees from you. How is this any different from the current banking system that we have now?  Isn’t this form of slavery to debt one of the exact reason why Bitcoin was created in the first place to solve?  Why then should Bitcoin treat those of means different from those without?  Shouldn’t all the underserved be equal in the eyes of Bitcoin? Continue reading

Mining Centralization: The war on Bitcoin’s mining industry

We have all heard about the big problem of mining centralization in Bitcoin.  The deep set fears that somehow, if left unchecked, the miners will collude to defraud the network, and sabotage the whole system, all in order to satiate their own lust for profit.

This is often used as a reason to employ [central planned policy here] or to change the protocol to incentivize some other (more acceptable) form of behaviour.  Of all the ‘decentralization myths’ this one is the toughest to dispel; not because it is any more true than the other myths but because people have an inbuilt selection bias in that they often believe that a system not serving them directly must mean that system is broken, instead of realizing that they way they are interacting with the system may be at fault.  Mining has always been a very liquid market in Bitcoin, and has gone through several phases or generations, and as each new era came to an end there were very loud proponents in the industry that wailed and warned that this new change would mark the end of the network and everything would break.  Detractors said the same thing when mining moved from single CPUs to GPUs and experienced a 1000x increase in efficiency, then again when mining moved to FPGAs, and finally to custom ASICs.  The industry has seen hashrates go from MH/s, to GH/s, to TH/s.  That is a million times increase in just 7 years.  Every time, the complainers were the ones that had some entrenched interest in the current model and stood to lose money or competitiveness.  Maybe they had just bought 10 new Intel Xeon servers just to mine Bitcoins when some genius had the idea to move mining to GPUs.  Or maybe they had just bought $200,000 of GPUs when the first ASICs were released, and were caught holding the bag.  Needless to say, you can always identify the people who stand to lose something given a change by how loud they complain about it.  (Hint: take note on which miners complain about mining centralization the most)

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Bitcoin: Getting to the Moon 101

Easter weekend.  Family reunions, liturgical services, fasting for some, feasting for others, a time for renewal, time to dispel some crypto myths!

Everyone talks about “going to the moon” in crypto but few if any really knows what that means.  Cypherpunks care about privacy and censorship resistance, libertarians care about political ideology and businesses care about making money. But how many of them actually think through how to get there?

I don’t mean in a metaphoric sense, I mean pragmatically. What is the adoption roadmap? What do we mean by ‘moon’? Price?  Resistance to government usurpation? Censorship resistance? Self sustaining system without any oversight?

True, most people who say “To the moon!” are just pumpers or speculators trying to incite a windfall profit from the penny stock altcoin that they purchased for the express purpose of dumping it for a profit on unsuspecting suckers.  But let’s consider a moment the goal of Bitcoin –becoming a widely accepted alternate money to fiat currencies– how does Bitcoin get to there from where it is today?  What challenges and obstacles must it overcome?  What different stages of development and growth must it evolve through?

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The Decentralization Myth

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.

Network_topologiesThe 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.

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How do YOU measure Decentralization?

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.

decentralisation

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.

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Begun, this Bitcoin Clone War has!

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.  election-ahead-sign-375x250

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.

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The Mining Centralization Myth – Part 1

hqdefaultIn 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.

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