http://blog.malwarebytes.org/fraud-scam/2013/11/potentially-unwanted-miners-toolbar-peddlers-use-your-system-to-make-btc/

You're already used to "desktop toolbars" and similar downloaded crap that use a lot of CPU and memory and slow your machine to a crawl.  Now some folks are taking it to the next level.

You download their app, it does some minor trivial thing badly for you, does the usual spyware thing where it reports your web surfing and shopping habits to the home base, and also downloads mining software in the background and then spends 99% of your CPU/GPU mining bitcoin.  Not that you actually get anything if it hits a block; that all goes back to the guys distributing the app. 

So...  This is a trickle of hash power in a big bucket considering the ASIC farms that are out there, but the fact that they're trying to be sneaky about it and weaselwording their EULA so it could be construed to give them permission to do so is new. 

Yep, that's my take on it. 

To do the things Bitcoin doesn't do all that well (speed in transactions per second, low latency, micropayments, scaling to tens of millions of full nodes) will require an alt with a fundamentally different design.  These just aren't things you can do with the same basic design of Bitcoin. 

But an altcoin that could do all of them would overtake Bitcoin.

Yah. 

Something that scales to millions of transactions per second and has easy/cheap transfers of vending-machine size transactions  is gonna win.  But whatever it is (and it might even be a redesign of Bitcoin), it won't work exactly like Bitcoin works now.

Right.  The plan as I understand it is that miners will announce the blocks with a list of tx, and then the rest of the network (who already have most of these tx in their memory pool) will assemble the blocks to store in the local blockchains themselves.  

That reduces the size of blocks (for propagation purposes only) by 90%, making inclusion of a particular tx only about 10% as expensive in orphan costs as it is now.  It has no effect on the size of the stored blockchain, unfortunately.

And it was a straight-up waste of bandwidth to fix:  as matters are every client is downloading every transaction twice (once when it's made and once when it's included in a block) so something like 40% of bandwidth is wasted. Kudos to Gavin for working on fixing that, but he can only fix it once.


3.3 millibitcoins per kilobyte:  https://bitcointalk.org/index.php?topic=339505.msg3648359#msg3648359  He estimates that it ought to be easy to get a factor of 10 or 20 by optimizing the protocol.  But that won't change the way it scales.  That will only change the ratio of scale to performance.  And we need more than one order of magnitude in performance to get where we need to be, so that's critical.

This is the cost to them of the increased chance of losing the 25BTC mining award.  Reduce the award by half, and that reduces their lost opportunity by half.  As Moonshadow said, it's based on a lot of assumptions - but the assumptions amount to "a typical miner today."  

Changing the scaling means redesigning.  If bandwidth, storage, and compute requirements grow linearly at *EVERY* client with the growth of the network, the scaling will fail.  And with every node checking every transaction, that's what's happening now.  We need a different design where the growth of bandwidth, storage, and compute requirements at each client are either constant, or grow at a sublinear rate like logN, with growth of the network.  Right now that is fundamentally impossible unless bitcoin changes its operation completely.


Nope.  The size of the blockchain on local storage would remain the same.  We're only talking about eliminating some wasted bandwidth in the protocol.

The 7TPS limit *is* there mainly to keep people from abusing the blockchain for data storage and transport layers for other protocols.  But they're doing it anyway.  Further, the 7tps limit cannot just be "switched off" allowing scaling to VISA levels. Lifting that limit involves changing the blocksize, changing the rate at which the blockchain grows eating local storage and bandwidth, and convincing miners that it won't reduce their profits to include these transactions in blocks.  


Yes, and that's a good idea too.  It enables people to check the blockchain from most recent back, rather than from the genesis block forward.  It doesn't change the size of the locally stored blockchain, nor the bandwidth it requires to download it.  It greatly enhances convenience but doesn't address the way the underlying limits limits scale.


All true, and all good, and will make a much faster, better-behaved client. And so will pruning transactions after all their txout are spent.  But unless we can get it down to where it's under the curve of Moore's Law, it's going to continue getting harder instead of easier.  


And in the long term, I think that both mining and running a full node needs to be easy and provide no-one any reason to not do it.

Okay, the limits I'm talking about are this.   Currently there's a maximum block size that won't allow more than 8 transactions per second.  And in practice blocks are mostly limited to about 250k by the miners.  They're limiting size because bigger blocks are more likely to be orphaned, so they'd lose the block reward. It's not worth it to them to include tx above that limit without fees of $3.30 per tx according to Gavin's figures.

So he's working on a plan to reduce block size by 90% which ought to reduce the miners disincentive to include tx in a block.  That would reduce the risk of an orphaned block by 90% but it wouldn't change the tx per second limit.

We've already given up on doing micropayments.  That's a huge opportunity lost. But there's no way the current protocol can do it cheaply enough.

And it wouldn't eliminate the disincentive.  It would just reduce the fee level needed to overcome it.  To about ten times what people are paying now.

The block chain is already a barrier to entry for running a full node. It's huge. Downloading it takes a week with the current protocol.  You might get lucky and get a high bandwidth peer to download from but most people don't.

The block chain can come down to a tenth of that time by optimizing the protocol but that's still too long. And the block chain is growing faster and faster.

The client eats a lot of upstream bandwidth and currently allows no way to throttle it,  so nodes drop out of the network and catch up every so often.  That turns them into a drag on the network rather than an asset.

The client can be made better behaved, but bandwidth will continue to scale with the number of transactions.  Even a better behaved client will still crumble under a transaction volume that justifies Bitcoin's current price.

I'm seeing all of these things as protocol design problems.  People are optimizing but optimization won't fix design issues.

Crap.

This issue might be addressed by making sure all blocks propagate equally slowly.  I read in another thread where someone is proposing forcing all blocks to be exactly 1M in size so they propagate at the same speed, but that's a waste of bandwidth.

No matter how you slice it though, failure of transactions to go through in a timely way looks like a service failure to actual users of bitcoin.

And it matters.  If bitcoin doesn't scale smoothly up past 100 tx/second with minimal tx expenses, then it will die within weeks after that limit starts to inconvenience people.  Investors will drop it like a rock and crash the market the minute they see that this isn't a system which can replace VISA, MasterCard, and Western Union while enabling micropayments and lowering costs by at least a factor of five to compensate for basic distrust of a new system.  That's what they thought they were buying into, after all. 

So, an order of magnitude faster block propagation gets us what?  Closer to the current theoretical max of less than 8 transactions per second, and still an active deterrent for miners to add tx to blocks unless  they pay at least $0.30 in fees.  All blocks propagating at the same speed gets us what?  More orphan blocks (which in the long run doesn't hurt miners because just as many valid blocks per hour will be found after difficulty adjustments), no marginal cost to miners for including more transactions in blocks, but still limited to under 8 transactions per second. 

That's just not enough. 

The protocol needs a fundamental design change for bitcoin to continue to exist at this valuation.  The current valuation represents investor expectations that the current protocol cannot fulfill.

I believe in the idea of a cryptocurrency. 

But the more I think, the more I think it probably isn't bitcoin.

Bitcoin has and more or less isn't fixing its problems with scalability and speed.  If it fails to do so for another three months, it's going to die a horrible death.

There will be other cryptocurrencies with a more scalable design, after it does.

Oh.  From Gavin's post above, it leaves tx fees at 3.3 MilliBitcoins per Kilobyte.  For as long as the mining award is at 25BTC anyway.  Would people find that acceptable?

In the end I don't see any obvious way to handle this other than increasing TX fees enough to compensate for "orphan costs;"  where does that leave tx fees? 

It's turning out to that bitcoin miners don't get anywhere near the maximum block size. Altcoins with faster block times may suffer more or less than Bitcoin from this problem depending on a lot of things.

Bitcoin miners, even though allowed to produce million-byte blocks, limit themselves to a quarter of that, leaving transactions unconfirmed, because if blocks get bigger than that they propagate more slowly.  Slower propagation increases the risk that some later-discovered small block will reach more nodes first and therefore the larger block will be orphaned.

This "orphan cost" has been calculated per Kbyte, and it turns out to be less profitable for a miner to produce blocks larger than 250K.

The "orphan cost" is   (increased risk of orphaned blocks) * (mining award per block - (tx fee * non-free transactions in the block)).

If an altcoin has a shorter block time, that will increase the risk of orphaned blocks.  OTOH, if an altcoin has a shorter block time, it will have fewer transactions per block in the first place so a greater percentage of them will be "free" and a smaller percentage will be paid (assuming you have the same proportions of free and reserved-for-paid areas as Bitcoin).  If an alt has a different mining reward that also has its effect.

It's hard to account for all the things that altcoins change, but if an alt's blocks are structured like bitcoin's blocks, a faster block time may not mean a faster confirmation time, because producing blocks large enough to process all tx may turn out to be less profitable than producing blocks small enough to rapidly propagate across the network.

Is there any way to compensate miners for creating full blocks? 

I mean, if the issue is that smaller blocks are more profitable due to less broadcast latency, shouldn't larger blocks get a premium to compensate for the loss of profit? 

Right now it looks like the 25BTC per block is built in - but if a block bigger than 750Kbytes paid 26BTC and a block less than 500Kbytes paid 24BTC (or whatever ratios turned out to be needed) .... 

Awww, crap, if we did that we'd get Sybil attacks where miners had to spam the network with  a bunch of "padding" transactions to make every block bigger than 500/750 Kbytes.  You'd have to keep the premium perfectly balanced with the size cost (including halving it when block reward went down) to keep it from being worth anybody's time to game it.  Is there a balancing mechanism like there is for difficulty?  Based on the previous 2016 blocks, is there a statistical measure we can do to determine the size cost?  And if there is, can it be done without providing a motive and method to game that?

What's the expected statistical distribution of block size given the assumption that all possible tx are included?  Can we base a premium on deviation from that statistical distribution? 

And, hey, you can use the leftovers for scrabble tiles if you put the scrabble point values on them.

There are some serious scrabble freaks out there who would pay good money for an etched metal set.

That's roughly it.  Miners want to produce small blocks to minimize the time they take to propagate over the network.

Otherwise somebody who came up with a smaller block, later than theirs, can have it propagate and reach a majority of miners before their block does, which results in orphaning their block and sacrificing their block reward.

The "orphan cost" will cut itself in half when the mining rewards get cut in half -- but we can't wait that long because Bitcoin is currently in a mode of intermittent service failure and that undercuts the value of all coins.

We wouldn't be having this problem if blocks that don't have at least a quarter of the transactions currently in the mempool would, like tx without fees, not propagate across the network.

During the free banking era all the banks were issuing 'dollars' and, by law, trading them with the general public equally for specie.

Because in reality a bank on unsteady financial footing issued 'dollars' that were worth *LESS* than their denomination in specie, people who had silver or gold would sell to different banks at different rates due to the risk that the bank would collapse and their 'dollars' would be worthless.

The result was that if a bank's financial outlook appeared rocky, all of its 'bad' money (printed currency) would go to the people who sold them specie, and all of its 'good' money (the specie itself) would get sold to the general public at mandated rates, who could then take it to a different bank and get the same number of (more valuable) dollars.  The bad money in the bank drove out the good, and when they had no gold left, the bank collapsed.

If the currencies had been allowed to 'float' against each other, the bank with money that was worth less could have give an exchange rate of, say, 80 cents of someone else's dollars for one of its own, just as the miners did with their gold trade.  They (and people holding their bills) would still have financial problems, but the problems are now ordinary business problems rather than the effects of Gresham's law.

Yes. Exchanges trading different amounts of fiat for bitcoins (difference in price) are in this scenario valuing *fiat currency* differently, because it can buy more and less bitcoin in different places.  The arbitragers are the people enforcing Gresham's law by selling bitcoin at a higher price in Japan then 'driving out' the money they used to buy them with to (say) the US, where they buy more bitcoin than they sold. 

This is no different from a merchant who can buy an amphora of wine in Rome a couple thousand years ago for the new debased currency doing that, then taking the wine and selling it in Gaul where they value the debased currency according to its real silver value. He trades it for TWICE as much 'bad' money as he paid for it.

Repeat for as long as the idiots in Rome will take the debased coin at the same rate as real silver, and multiply by a thousand merchants. The net effect is the 'bad' money or debased currency all winds up in Rome while the 'good' money or pure silver all winds up in Gaul.

Now consider Bitcoins here to be the 'wine' from the above example and substitute "regulated and manipulated exchange rates" for "valuing the same money differently in different places" and the above is what's happening.

If you're gonna be elbows-deep in that code anyway, there's a major privacy upgrade you can do with block formats.

Is there any chance of just storing blocks as list of txid's, list of destroyed txouts, list of new txouts, without telling which txins/txouts go with which tx?

After all, if we're assuming that the clients have already *seen* the individual tx, they can check them anyway.  And look at the list of txid's to find out which ones they're missing, get those, and check them.

This doesn't make privacy absolute in any sense; it just makes it so that in order to trace tx and do data mining you have to be listening in realtime to get individual transactions instead of looking at the blockchain after the fact.  But that would still a big improvement.

Most of the new Internet infrastructure being built in countries around the world in response to the NSA is being built to prevent *DOMESTIC* traffic (ie, within that nation) from going over national borders (and usually to the USA which has the most Internet infrastructure deployed.)

In fact I heard the other day that England passed a law forbidding the routing of its domestic Internet traffic via international lines.  Of course if an Englishman wants to access a Peruvian site, the traffic is going to be routed internationally (and probably through the US where the NSA can sniff it).

Gresham's law happens when you have currencies of different value, but some idiot is accepting them both at the same value.  (or some idiot nation is demanding via law that *everybody* be such an idiot).

It naturally happens that the idiots then wind up with the currency that has the lesser value, whilst all of the higher-valued currency goes elsewhere, where non-idiots will give you more stuff for it.  So 'bad money drives out good' refers to a nation that demands that (say) a debased coin with half the silver content be considered 'the same' as an earlier coin that was substantially more silver.  If people can get more stuff for the silver money outside of that country than they can for the debased coin, then all of the silver money is 'driven out' of the country.

Just use metric prefixes.  It's not worth the trouble of explaining anything else to all newcomers.

Remember the weird 'wizarding money' in the H Potter books?  seventeen knuts to the sickle, 21 sickles to the Galleon?  You wanna explain something that's going to sound like *that* to newcomers, every time somebody joins up?

I think Rowling was poking fun at the old English pounds/shillings/pence debacle. Fortunately replaced by the decimal Euro at this point, which is much easier to deal with if you haven't been using the pounds/pence/shilling idiocy all your life.