This article shows that we are still in the very very early stage of adoption. When people eventually realize that money without free entry of production and a production cost will worth nothing, they will not question bitcoin's production costs
In principle, anything without a production cost will worth nothing, so should fiat money. But why fiat money still have some value is totally a historical phenomenon that is inherited from the gold standard, where each piece of fiat money was a presentation of corresponding amount of gold. Now fiat money is backed by nothing so it should worth nothing
Or you can say like this, if the fiat money that costs almost nothing to produce can worth so much, then bitcoin which costs magnitudes higher than fiat money to produce will worth at least magnitudes more
philosophically i disagree. its not the cost of production that makes it valuable...its the scarcity and utility. Gold didn't cost anything to mankind, it was already on the planet. Whether it got here by nuclear fusion or from a magic genie is irrelevant. Fiat currency is created out of thin air but people use it (has utility) and its (somewhat) scarce, therefore it has value. However, a cryptocurrency that costs energy is perceived as more fair. IF proof of stake currencies like NxT were widely used, perceived as fair in distribution, and as secure as Bitcoin, they would be as valuable. If it cost nothing to dig out gold, then it will worth nothing. Scarcity is only a means to increase the cost of production. But if the cost of production is zero then even it is very scarce it will not command any value, because the arbitraging will make sure the value will always equal to its cost: If it costs $0.1 to produce a POS coin while the market price is $100, everyone will mine coin and immediately sell, to pocket a 1000x profit, or to borrow lots of POS coins to sell, and mine them back to return the loan, to pocket a 1000x profit Another reason why cost-less fiat money would still have some value is because people are forced to use them to pay tax, so even if everyone uses bitcoin all the time and never touch USD, when the time comes that you need to pay the tax, you would still need to purchase USD, that gives it some value |
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Transaction fees will have a lot of room to rise before it really becomes a concern, and by that time I guess most of the large service providers would have already be running some sort of clearing solutions
LN is believed to be a good on-chain solution, but it will also take a lot of time to code and especially reach consensus to use it, which is the most difficult part, because LN will cause centralization of knowledge unless it is widely understood like bitcoin
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This article shows that we are still in the very very early stage of adoption. When people eventually realize that money without free entry of production and a production cost will worth nothing, they will not question bitcoin's production costs
In principle, anything without a production cost will worth nothing, so should fiat money. But why fiat money still have some value is totally a historical phenomenon that is inherited from the gold standard, where each piece of fiat money was a presentation of corresponding amount of gold. Now fiat money is backed by nothing so it should worth nothing
Or you can say like this, if the fiat money that costs almost nothing to produce can worth so much, then bitcoin which costs magnitudes higher than fiat money to produce will worth at least magnitudes more
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I found this analogy to be simple:
Your 1GB hard drive is almost full, you have 2 options:
1. Buy a 2GB hard drive to replace the old hard drive
2. Buy another 1GB hard drive, and a RAID controller and set up a Raid 0 array, so that the Raid software will move 40% of the data from your old hard drive to new drive , so it becomes not full again. Then you have total 2GB of space in your new array, which functionality wise equal to a 2GB hard drive
I think any normal people will just go for the first option, only geeks and technical interested guy will try the second approach, and eventually many of them will give up on the second setup because it is just too complex to implement and maintain, and a Raid 0 will have higher risk of failure, it does not worth the effort
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I'm sorry you disagree with the primary process by which the Bitcoin system evolves which has been used since the very beginning.
Perhaps you should take this to the altcoin subforum. No one is going to buy into the suicide pact Hearn and you seem to wish for-- and even if they did, they can't enforce it: soft forks can't be prevented.
I know that soft fork eliminate the risk of fork by forcing nodes to upgrade from old version, but this can also work against you when some one with a different political interest gathered enough hash power, just want to list the fact And I am not aware of this is the primary process since the very beginning, where can you point me to for a detailed documentation? |
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Yes, the July 4th fork is possible because more than 50% of the hash power was doing SPV mining thus they could fork an old chain with major hash power. But in my example, the new chain owns more than 51% or even higher amount of hash power, which makes this kind of fork impossible
How does it make it impossible? If your 51% of the miners are also SPV mining, they can just as likely fork the blockchain. Even if they are not, just one miner with the old rules getting a few blocks onto the blockchain can result in a fork. This is also another dangerous aspect of the soft fork, since some pools who have more than 30% of hash power might first support the new implementation, and after the soft fork is triggered, they changed idea and reverse to the old version thus make the old hash power larger than 55% again, thus the new implementation will stay in a new fork with minor hash power and possibly die
The same can happen with a hard fork. Indeed, the new chain might also have lots of SPV miners, but I think if they are aiming for a hostile take over with 51% hash power, they will be well prepared so that all their mining nodes are not doing SPV mining A hard fork does not have so many uncertain risky scenario that can go wrong. A hard fork is a well informed situation so that everyone knows what will happen and be prepared long before it happens |
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to: johnyj
a slight correction
soft fork attack, does not produce a different chain. it just manipulates the information within the chain to make older clients no longer understand much of what they are passing along. basically giving them cataracts and told everything is fine just pass it on, blindly.
the older clients would still pass on the information(thus being "compatible"), but without checking it. making old nodes no longer "full" and just "compatible"
imagine it like downgrading bitcoin-qt's* network responsibility down to being multibit's network responsibility, without the user choosing to be downgraded or ultimately informed that its a downgrade, using wishy washy words that everything will be fine..
*i used QT as just an example of a full node instead of core, purely to avoid confusion of blockstreams debated future implementations of the name core
Exactly, I'm against this hacky soft fork practice since this is pure scam, it is possible because bitcoin nodes are so stupid, they can not understand something that is not in their existing knowledge base, they can not sense the change in environment I recall this trick was originally brought out by Mastercoin, by encoding information into bitcoin transactions, they could use blockchain to securely transfer other information. This parasitic behavior caused some panic among devs, Peter Todd even joined them to see what was happening there. But it seems it costs too much to transport information using blockchain, so I did not hear from them any more. But the idea is widely spread and I think the side chain concept is also spawned from this thought Happened read this days ago https://www.cryptocoinsnews.com/davos-elites-talk-bitcoin/“We know that bitcoin itself is a complete failure and shows the number one law of programming and software: that anything that can be programmed can be hacked. So nothing is completely secure,” said Willem Buiter, Citi’s chief economist. This guy is smart, he really get some fundamental philosophy here. But he forget about that without hash power hackers don't have write permission to bitcoin blockchain. It seems the hash power is the only force to prevent bitcoin from being hacked. It is very important to make sure the mining nodes are not infected by this kind of virus, otherwise one day you wake up just find out that all your blocks are orphaned and you have to upgrade to a new version with the amount of total coin supply extended to 42 million  |
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and blockstreams rhetoric is... dont worry, you wont be affected.
but when pointing out that full nodes are made blind,, they reply ..if you want to be a full node. you have to upgrade to our agenda
Upgrading your node would be the answer. What's the problem with that? Keep it concise, please The question is upgrade to which version: SW? Classic? BU? XT? They all can be implemented use this soft fork trick, and it seems Classic currently have more than 51% hash power backing |
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Anyone can do that now. You can orphan blocks mined by other miners now, it makes no difference. Again, consensus. Same thing happens with hard forks.
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They will probably upgrade. As I said before, and I will say it again, consensus.
So really what is the difference in the forking between a hard fork and a soft fork? The Core nodes can proceed as they did because their chain is orphaned. Any blocks produced by the core nodes are ignored by the Classic nodes. The core nodes, if they are able to build extend their own chain, or at least build a block on top of a core block, results in their chain completely separating from the classic chain since they have a different block history. It splits, much like a hard fork.
It seems you still have not get the fundamental difference here, and it is indeed difficult, because you have to first understand the most technical intensive part, e.g. the old nodes do not know at all that there is a new chain forming It is dangerous to do a hard fork with only 51% hash power, because it will end up with 2 chains and you can not guarantee that your chain will win eventually. So you must seek major consensus before you fork. However, you don't need major consensus to do a soft fork, only 51% hash power. In fact the name is misleading, there will be no fork in a "soft fork". You can be rest assured that there will never be a competing chain, e.g. even the other 49% of mining hash power disagree with the new chain, they can not fork their own chain, because all their nodes regard new chain to be the longest valid chain, or to say, old nodes do not know it is already a new chain, they thought that they are still working on the old chain, the only difference they will notice is that suddenly all their mined blocks are orphaned one by one Not true, just look at the July 4th fork for an example of a fork that happens with soft forks. Blocks that are mined by the nodes with the old rules are invalid by the new rules. But if there are enough miners mining old blocks, then they could still be extending the old chain. In fact, if they were able to extend the old chain, you would end up with two different blockchains because the histories are different. Once an old block is inserted into the blockchain and miners extended on that, it would fork since the blockchain of new blocks is invalid since it has a different history. Likewise, the chain of old blocks is invalid to the other miners because they are old blocks. Yes, the July 4th fork is possible because more than 50% of the hash power was doing SPV mining thus they could fork an old chain with major hash power. But in my example, the new chain owns more than 51% or even higher amount of hash power, which makes this kind of fork impossible This is also another dangerous aspect of the soft fork, since some pools who have more than 30% of hash power might first support the new implementation, and after the soft fork is triggered, they changed idea and reverse to the old version thus make the old hash power larger than 55% again, thus the new implementation will stay in a new fork with minor hash power and possibly die |
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A soft fork is a deadly virus, everyone should be extremely careful, since it forcefully turn the old legitimate miners into zombie miners of the network. If soft fork practice gains traction, bitcoin will suffer from soft fork infection from time to time, and eventually die from it  After weeks of research, this is my conclusion, correct me if I'm wrong  A more technical explanation is here: Why soft fork is a very bad idea and should be avoided at all costs |
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Anyone can do that now. You can orphan blocks mined by other miners now, it makes no difference. Again, consensus. Same thing happens with hard forks.
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They will probably upgrade. As I said before, and I will say it again, consensus.
So really what is the difference in the forking between a hard fork and a soft fork? The Core nodes can proceed as they did because their chain is orphaned. Any blocks produced by the core nodes are ignored by the Classic nodes. The core nodes, if they are able to build extend their own chain, or at least build a block on top of a core block, results in their chain completely separating from the classic chain since they have a different block history. It splits, much like a hard fork.
It seems you still have not get the fundamental difference here, and it is indeed difficult, because you have to first understand the most technical intensive part, e.g. the old nodes do not know at all that there is a new chain forming It is dangerous to do a hard fork with only 51% hash power, because it will end up with 2 chains and you can not guarantee that your chain will win eventually. So you must seek major consensus before you fork. However, you don't need major consensus to do a soft fork, only 51% hash power. In fact the name is misleading, there will be no fork in a "soft fork". You can be rest assured that there will never be a competing chain, e.g. even the other 49% of mining hash power disagree with the new chain, they can not fork their own chain, because all their nodes regard new chain to be the longest valid chain, or to say, old nodes do not know it is already a new chain, they thought that they are still working on the old chain, the only difference they will notice is that suddenly all their mined blocks are orphaned one by one And how would you propose to fix this? It isn't a security vulnerability, it is an issue with forking that is not able to be resolved due to the nature of forking. It isn't really any worse than hard forks are, but with the backwards compatible nature of soft forks, not all nodes are required to upgrade, only mining nodes. Hard forks require that all nodes upgrade.
Of course the final result will be similar, but a hard fork with major consensus will create two chains, so that those disagree with major consensus could run their fork as a small alt-coin with much less hash power and value, and they will see later that chain is not practical both economically and security wise but they can still run that chain forever for hobby, or even as a test network With a soft fork, there is no such possibility, if you disagree, you can not fork your own chain, either you upgrade to new chain, or you node become the slave of the new chain, you don't have a choice Technically, using a soft fork can make sure that there will never be a fork, since all those mining nodes that disagree with new implementation will be captured and just mine useless blocks that will never be accepted into the blockchain. So I can understand it is a powerful hack to keep the highest level of integrity of the network. But everything has two sides, since it is such a devastating weapon that can overtake the network without major consensus, what if your political enemy get it and fire it up on you? |
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I was surprised by the latest announcement of Pieter that a SegWit implementation which changes pretty much everything in bitcoin can be implemented via a soft fork, where it does not require all the nodes to upgrade to be compatible
After a bit research, this is possible because you can always give old data new meaning in a new implementation, while the old nodes simply do not know how to parse that data
In principle, with this method, you can move all the transaction data out of the block, not only signature data, so that old nodes always see empty blocks
As a result, a new block will be accepted by the old nodes because they appear to be valid blocks, but in the new implementation, they are just a small subset of the new data structure, all the transaction data is in another related block
More importantly, after further analysis, it shows that although normal nodes can still run old client, all the mining nodes will have to upgrade, otherwise the blocks mined by them will simply be orphaned, because the new nodes do not accept old blocks, and new nodes have majority of hash power
As a result, such a soft fork is to force 100% of the mining nodes move to the new implementation so that there is no slightest chance of the old mining nodes forking into their own chain: Their fork will always be orphaned since they accept the longest chain
What this means in practical?
If one type of nodes, Classic for example, controls over 51% of hash power, they can implement whatever change they like by simply use this soft fork trick: Let all the old Core nodes accept their new format blocks while Classic nodes will reject Core blocks, so that Core blocks all get orphaned due to less hash power
The most deadly part is that Classic nodes do not need to ask for permission of Core nodes, they simply enforce it by orphaning blocks mined by those Core nodes. And Core nodes have no way to fork into another chain by rejecting Classic blocks, since they can not tell which block is Core block and which block is Classic block
As a result, a miner running core will simply lose money, he either trash his miners and quit the game, or bite the bullet and upgrade to Classic so that his hash power can still mine him some coins. I guess majority of the miners will upgrade. And they might start another round of similar soft fork to regain control when they accumulated more than 51% of hash power
This is very bad, since it totally removed the freedom of choice for those old mining nodes, you can call it a forceful take over of bitcoin network rules by 51% hash power. It totally break the major consensus rule and the spirit of bitcoin, so that with only 51% of hash power, you can implement whatever you want and force it upon rest of the miners and their hash power will be captured
Sure, Core nodes can change to another PoW fork, but since the value of the coin is always roughly the same as the mining cost due to arbitraging, that coin will not get more value than litecoin and will be forgotten quickly
Unfortunately, it is almost impossible to prevent such thing from happening by current design, so it is very important in mining community to widely spread this information so that miners are fully aware of the deadly effect of a soft fork, and reject such attempt as much as possible. At mean time, trying to find a solution to fix this security vulnerability
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ETH pump and dump Serious exchange should never provide exchange for anything except bitcoin, that is the mission of cryptocurrency exchanges, not fiat exchanges |
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TL/DR: A transaction fee market exists without a block size limit assuming miners act rationally.
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Miners being net econo-rational is probably an axiom for Bitcoin to work in the first place.
This is the biggest assumption of various schools of economics. However, economy is always political, economy policy is decided by the ruling class to manage the majority of poor people, so they are modeled towards average households that barely can live without the next pay check. For these people, econo-rational means short term profit seeking However, the definition of econo-rational is different for different people, depends on their income, their time frame, and their risk tolerance level. If you move those theory to bankers and large capitalists, you will clearly see their behavior do not follow these models. As we know, the miners and pool owners are bankers and capitalists in bitcoin ecosystem, so they won't seek short term profit like average household, their concerns are much larger and longer term |
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I understand what you are saying... I'm just trying to clarify that the price is not defined only by the cost of mining. The cost of mining sets a floor for the price, and demand can potentially pull the price to any level at all above that floor - and the price of mining will be pulled up at the same time, as it will be profitable (and ultimately necessary) for miners to spend more money to mine, no matter what the mining mechanism is (CPU, GPU, ASIC, whatever).
Usually the serious demand always first go to mining, since that is the lowest cost and will give them freshly mined coins. Only in case there is a sure anticipation of huge jump in difficulty due to new mining technology, they will go to exchange If you have so serious problem inside bitcoin that you even need to change PoW, the chance that the demand would still rise around the fork period is almost 0 |
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Mining cost is the baseline of coin value, if you change to GPU mining, coins value will drop to single digits thus abandoned by investors, better use litecoin in that case
I think you have it backwards. The cost of mining does not define the value of the coin. The amount of money people will be willing to pour into mining the coin is, however, determined by the value of the coin. Do you know arbitrage? This has been discussed for years in the economy forum, I thought it is already a basic knowledge, just search for it there Put it simply, if it cost $1 to mine one bitcoin and the market price is $400, everyone will mine and immediately sell, no one will buy; and those who want to hold coin will immediately sell their coins and mine it back at a much lower cost. That is $399 profit for every $1 spent, 399x return on investment. No matter how large the market demand is, the arbitraging will make sure the price keep dropping until it reaches the current mining cost So, unless the mining cost quickly rise up to $400 overnight, a new pow coin with neglectable initial mining cost will just crash to zero in a very short time You are assuming no real demand for bitcoin except speculation, which I expect will not be the case forever. If there is real demand, the demand will drive the price, and the cost of mining will rise to the value set by demand - not the other way around. If, on the other hand, demand remains purely speculative, then you would probably be correct that the price will fall to the floor established by the mining cost. Of course there is market demand, but if I need one bitcoin, and it takes $1 to mine but $400 to buy, should I mine or buy? Maybe I don't have the necessary tools to mine, but I'm quite sure there will be plenty of miners who are willing to sell to me at $10, which already bring them a 1000% profit immediately Maybe there are many people who are so stupid that they blindly buy at $400 a coin because they don't know the PoW has changed. But if there is only one guy knows this, he will immediately borrow as much coin as possible and at the same time buy as much hash power as possible, and dump the coin on exchange and mine them back, and in a few days everyone knows how to get rich quick |
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Mining cost is the baseline of coin value, if you change to GPU mining, coins value will drop to single digits thus abandoned by investors, better use litecoin in that case
Is that your case for "why bitcoin will appreciate forever", Jonny? In any case, your assertion doesn't withstand a basic reality test: if it were true, it's conceivable that mining costs would be way, way higher than at present. Seeing as it would provoke a 3rd (4th?) mining gold rush. That will be the case, the mining cost should always be close to bitcoin's market price, otherwise arbitraging will happen to make them equal Due to that the block reward are less and less, you might be able to maintain the same cost while have price double every 4 years, in case block space are always plenty thus the fee income is always a small part of the block reward |
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Mining cost is the baseline of coin value, if you change to GPU mining, coins value will drop to single digits thus abandoned by investors, better use litecoin in that case
I think you have it backwards. The cost of mining does not define the value of the coin. The amount of money people will be willing to pour into mining the coin is, however, determined by the value of the coin. Do you know arbitraging? This has been discussed for years in the economy forum, I thought it is already a basic knowledge, just search for it there Put it simply, if it cost $1 to mine one bitcoin and the market price is $400, everyone will mine and immediately sell, no one will buy; and those who want to hold coin will immediately sell their coins and mine it back at a much lower cost. That is $399 profit for every $1 spent, 399x return on investment. No matter how large the market demand is, the arbitraging will make sure the price keep dropping until it reaches the current mining cost So, unless the mining cost quickly rise up to $400 overnight, a new pow coin with neglectable initial mining cost will just crash to zero in a very short time |
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I think that one of the good things about Bitcoin is the possibility of transferring small amounts of money, which allows for microearnings. If that is going to be a problem due to transaction fees rising, I think that it will be a loss for Bitcoin.
Yes that unfortunately will consolidate, and I expect services like Faucetbox or Xapo to become a side-chain payment processor for that. There are always drawbacks and we have to be reasonable, we cant just spam the network with 100 satoshi payments, so that aspect will be taken out slowly. And let's be reasonable, for micropayments like that it's ok to leave it at a centralized service, it doesnt pose a lot of financial risk. Bigger transactions will be free to be sent over the blockchain itself for fee. That is how it shall be  Exactly, there are different user group, each give different weight for being able to do transaction on-chain. Treat every user the same way is very low efficiency, unless everyone have unlimited bandwidth and CPU power |
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Nobody should neither impose hard fork nor soft fork without consensus IMHO, not even on core.
Although I believe that with a soft fork, everything keeps working for everyone and with a hard fork there are users who can't see some transactions, and think they haven't gotten paid when they have.
But with soft forks, the protocol in 10 or 20 years is going to be a horrible and confusing mess.
TL;DR soft forks are grotesque. Hard forks are violent.
It's the opposite, the soft fork is much more violent than a hard fork, because it kills any mining nodes that do not comply with the new rule. A hard fork does not kill those nodes, just let those nodes become minority fork thus quickly lose support of users In fact, the soft fork concept is deadly dangerous because it grant miners who have 51% mining hash power not only the ability to double spend or cancel transactions, but essentially change every rules of bitcoin and force it upon rest of the nodes, thus kill bitcoin I will write a detailed analysis in a separate post |
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