See how important this point is !

Note that most users don't use full nodes.  There are more than 5000 or so bitcoin users in the world.


Look at the edit at the end of my previous post:
https://bitcointalk.org/index.php?topic=1915733.msg19025925#msg19025925

in order to see what's the genuine utility of full nodes.

I must have been misunderstood.  I didn't say "peg to the USD".  I did say "regulate to an amount of value" (and I took the amount of value that $1 represents today).   A given amount of hash work represents an amount of economic value.  If one can have a decent estimation of how much economic value an amount of hash work will represent in the future (say, Moore's law and somewhat extra), we can program in advance the amount of hash work that can make a coin at a given moment in time.  If we can fix that more or less to what corresponds to $1 today (say, one fifth of a Big Mac), then people will automatically generate coins if they are worth more than the economic cost of hashing them.  There's no "pegging mechanism" to the dollar ; there's a pegging mechanism to economic cost of hashing.  This curve can be even slightly deflationary (that is to say, the expected hash cost will increase over time, the difficulty will outpace technological evolution).  It doesn't matter much.  There's a value regulation mechanism.


The FED tries to regulate the VALUE of the USD to follow a more or less established inflation curve.

If suddenly, someone dumps 500 billion dollars on the market, the FED will sell assets and buy up dollars to avoid a serious crash of the dollar value.  
You cannot crash the dollar market by dumping it.  You cannot corner the dollar market by buying up all dollars: the FED will print you out of business.

Probably, the European central bank is even more an "automatic regulator of value" than the FED is, because the FED also has political goals, while the ECB doesn't, really.


Sure.  I also use bitcoin occasionally.  But I mean, "the general public".   The gains you have by using it don't outweigh the volatility risk.  Apart from special applications, and apart from some geekiness, honestly, doing a wire order to an exchange, buying coins, withdrawing them, paying on the internet, is more hassle and cost than using my credit card for everything which is "open and legal".  And with my credit card, I have some legal protection if I'm scammed.

Putting aside a reserve of bitcoin for future buying (which I did, because of said hassle) and see that it takes a factor of 5 gains, induces me to keep them aside even if that wasn't the purpose.   But it could just as well go down.  So this "money" cannot be stored as neutral value keeper.  If you store it, you speculate (heavily).  Most people speculate on "up", of course, but they speculate.  They end up speculating even if that was not the idea.

1) audit, yes, I do not deny this.  You can find out for yourself whether the bitcoin block chain is doing what you thought it was supposed to be doing (that is to say, whether it corresponds to the protocol programmed in the node software).    Now you can learn whether that is a yes or a no.  But that's about it.  
It is like checking a signature.  You can see whether it is right or not.  But that's about it.  You can't DO anything about this.  You can write an article about it here on the forum, or you can write this on coindesk or something.  "hey, guys, the unique block chain is not checking on my node !".   Duh.  
You may use that knowledge to sell your coins (using *another* node that will allow you to send transactions, and does accept the block chain's protocol!) because you may think that bitcoin is screwed now.  But that's about it.  Yes, it will INFORM you.  No, it won't do anything about it.

2) how's that ?  We know their IP addresses.  Why would an attacker bother to attack Joe's node in his basement, when he knows the node IP of BitFury, say ?  But I will agree with you that a P2P architecture has some network advantages if direct internet connections are problematic.  However, you don't need the BITCOIN P2P network for that.  You can use just ANY P2P network, like Tor, to do the network communication between the customer (the wallet user) and the provider (the miner pool backbone).  You can argue: yes, but what if THEIR backbone fails ?  Well, in as much as the bitcoin P2P network finds a way around, just ANY internet connection will find a way around.

3) actually, that would rather be the direct connection between user wallets (customers) and the miner pools (providers).  Note that these miner pools may just as well have a DISTRIBUTED network of proxies (distributed, but centralized under their control) in the same way that google and facebook have distributed but centralized proxy servers all over the world.  What full nodes do, is to provide miners with a free proxy service.  

The point is that non mining full nodes don't contribute to the DECENTRALIZATION (not to the distributedness) of the network.  Decentralisation is about power and politics ; distributed is about network architecture.  full nodes don't have the slightest bit of political POWER.


This is funny, because I'm the only one never to use something else but logical arguments, and try to reason from a given to a result, without thinking about politics, autority, "others say so", etc... but just sheer reasoning.  I'm totally a scientist.  I'm actually the one thinking I came in some sort of church or something, where established dogma may not be questioned.  One of these is "full nodes are important to the decentralization of the network".

Now, given the fact that this in my honest opinion totally flawed statement is so often used to take decisions, I would think it is important to establish its veracity or its falsehood.  You would think that if Pythagoras' theorem is used all over the place, that *there's a solid logical proof* of it.  But no.  If presented with a proof of the opposite, there's no watertight demonstration of the veracity of the theorem in sight.  Only "you're wrong" or "you're a shill" or "you're religious" or whatever.  No mathematician ever would say, to someone that says "I think Pythagoras' theorem is wrong", "you're religious".  He would just give the demonstration of the theorem.  That should convince.  I think I have enough arguments to show that full nodes don't contribute anything to political decentralized power.  Show me the proof of the opposite.

For that, I discussed elsewhere the following Gedanken experiments, which will abstractly show one or the other: full nodes impose their view on miners, or the other way around.

Starting condition: today.  Miners and nodes agree on the same, current, protocol.  I consider two (abstract) cases to come to the conflicting situation, where miners and full nodes are in disagreement: A: the miners change something ; B: the full nodes change something.

A) suppose that the 20 miner pools (>99% of hash power) decide amongst themselves, to start mining blocks of 1.2 MB.  They publicly announce this, and there's also a version of bitcoin node software that can do this.   No non mining node agrees.  They all stop.  The miners continue making the block chain with 1.2 MB blocks.  What happens ?   Do users connect their wallets to the miner nodes, and continue using bitcoin, or does bitcoin come to a grinding halt, no exchanges, no transactions, nothing, all the time these miners keep making the new chain (and no old protocol chain is available) ?

B) suppose that the 20 miner pools keep on working on the bitcoin chain as today, but ALL non mining full nodes want to impose blocks of 0.5 MB as from tomorrow.  For one or other reason, all full nodes agreed upon that.  So they all implement the new software, that doesn't agree any more with the block chain the miners are making.   Do users connect their wallets to the miner nodes, and continue using bitcoin, or does bitcoin come to a grinding halt, no exchanges, no transactions, nothing, all the time these miners keep making the old chain (and no new protocol chain is available) ?

From these two exercises, what can we conclude about the political power of full nodes over miners concerning bitcoin's protocol ?

Nope, they remain exponential.  The only thing pooling does is smoothing out the GAINS as compared to solo mining for each of its customers (and a bit of economy of scale which is probably lost on the fact that the customers have some overhead to prove their work: trustlessness comes at a price).

If you have a small amount of hash rate that would, on average, let you win a block per month, some times you might only win a block after 3 months and no gains in between ; some times you might win 3 blocks in one month.  This uncertainty of income is smoothed out by pooling together, where the pool will pay you regularly about one block per month minus his fees and margins etc... and the pooling together also removes the hassle to have to constitute blocks yourself, check, have a good network node, etc... (and at the same time, take away your decision power on that).

@franky1.  One more trial.

Take an old piece of block chain, say, around block number 200 000 or so, but consider the actual, today's, difficulty, take a given miner setup, with a given hash rate, say, 1/6 of the total hash rate for that difficulty, and compare two different experiments:

A) take the transactions of block 200 000, make your own block of it, and hash on it.  Regularly, you will find a solution, but you continue trying to find new solutions on that very same block.  Do this for a day.   ==> at what average rate do you think you will find solutions for this same block ?

B) do the same as in A, but switch blocks every 30 seconds, that is, work 30 seconds on a block made of the transactions of block 200 000 ; then work 30 seconds on the block made of the transactions of block 201 000 ; then work 30 seconds on the transactions of block 200 002 etc...  Do this also for a day.
==> at what average rate do you think this time, you will find solutions for some of the blocks during the time you hash on them ?

How do the rates in A and in B compare ?

Of course not.  In Europe, many currencies were replaced by the Euro, and the Euro didn't "rise" against these currencies to replace them.   The Euro got more and more participants, and replaced bigger and bigger markets, as new countries adopted the Euro, but the Euro didn't "rise" against these other currencies.  

Imagine that an imaginary bitcoin was emitted at against, say, $1 in the beginning, and that it had an emission scheme to keep it around $1.  (my proposal is to have proof of work that is about $1 worth, and can do as much proof of work as you want and emit as many coins as you want with that: if you are willing to burn about a million $ worth in proof of work, you own now a million coins ; if you want to burn a billion $ worth of PoW, you now own a billion coins).  Suppose that people like it, and start using it more and more.  Slowly, it starts to replace payments about everywhere.  The extra demand for the currency, to be able to use it (Fisher's formula) would make it rise in value, but that makes it more interesting to mine it, and it costs about the value of $1 to mine it, so people will mine a lot of it until it lowers again to near $1 value.  If it is less than $1 in value, nobody will spend PoW on it to make more of them, and none get emitted.  But if more people use them, more and more coins are in circulation.  The monetary mass, the market cap rise, and they replace soon most payments.  But nobody can get rich with it.  It is a currency.  Its value is stable (the value of about $1 of proof of work).  You can write a contract in it.  You know its value will remain stable (at least, will not deflate like crazy and become a rare collector's item).

No, Big Macs are priced in many currencies, and this is used to find relative over or under-evaluations of currencies.

https://en.wikipedia.org/wiki/Big_Mac_Index

Big Macs expressed in, say, Yen, and calculated in Euro by their conversion rate, can be compared to Big Macs bought directly in Euros.

There are of course differences, which can also be partially accounted for by different *valuations* of the specific item of a Big Mac in different societies, but it gives a rather rough index of "true value of exchange".  They indicate differences on the 10-20% level or so.

Bitcoin went up from 10 000 BTC for one pizza, to about 200 pizza for 1 BTC in 7 years or so.   That's not a unit of account.  In Big Mac terms, that's 6 orders of magnitude.

It is a known economic experience that collectibles are never good units of account: it takes active steering (which can be automatic, as I said before) to keep the value of a currency more or less stable.

In fact, you can measure it in another way: if you can get genuinely rich with it by just hoarding it, it isn't a currency.  It is a speculative asset.

No, I mean in Big Mac of course.  How many Big Macs could you buy with 1 BTC in November last year ?  And how many big macs can you buy now with 1 BTC ?

How many Big Macs could you buy with $1000, in November ?  And right now ?

Franky1 is still locked in thinking that a mining pool that had 1/6 of the hash rate, and hence 1/6 of the blocks when he was in consensus with the others, is going to make 6 times faster blocks if he forks of on a hard fork, pleasing the full nodes and leaving his peers behind with their 5/6 of the hash rate.

Of course, he will make all the blocks on his own new forked chain ; but he will make them 6 times slower too, so concerning "winning rewards", he's not going to make any more profit if his chain gets adopted in the end, than when he was remaining on the consensus chain.  Franky1 thinks he will make 6 times more rewards because now "all the blocks are his", but he doesn't understand that our miner will make 6 times less blocks in the same time.  

(back to square one....)

Caveat: at least, if our forking miner is not MODIFYING the difficulty or reward of the chain, but that's not very probable that the full nodes would be running code that has this changed...

I know you still think that.  See above. 

But it is still just as wrong as before

Do you understand the importance hence of a serious logical and rational (not rhetorical) argument of why these non-mining nodes are essential ?

You are going to make a decision upon restricting the use of a system, maybe based upon an argument (we need lots of non mining nodes for "decentralization") that doesn't hold water, and of which one cannot give, visibly, a strongly argumented proof ?

Bitcoin will never go mainstream as payment system, that's obvious (*), so one shouldn't aim for something that will never happen.  Bitcoin is a speculative asset, it is not a currency.  Of course, it is a speculative asset that can be transmitted, and hence, can be used somewhat as a payment in those cases where normal payments don't work well (such as dark markets, bribing, murder on command, financing prohibited political activity, doing business away from taxes, and many other applications where fiat can only go with difficulty).  But it is not a stable currency that can be used as a general payment system so that's not necessary.

It only needs to carry the load of these niche payment applications, and of course, its main application, which is speculative trading.  Now, 1 MB is maybe a bit low for that, but I would be surprised if bitcoin needs orders of magnitude more for speculation transactions.  After all, they essentially serve to go to exchanges, and back to wallets.


Could you argue with text please ?  I'm sure you can give a logically constructed argument on which we can reason, instead of some or other video.  I can't reason with videos.  I watched the beginning of it, and it sounded like some rhetoric about the analogy with the internet, but rhetoric doesn't cut it.

I think my argument is quite watertight concerning the non-power of full nodes, and I've never seen a LOGICALLY ARGUMENTED rebuttal to it, that doesn't confuse full nodes with users, or doesn't confuse it with the power game of a hard fork.

(*) it is obvious because bitcoin is not a good unit of account, there's no mechanism in it that adapts the emission of bitcoin with its value with the aim to stabilize it, and bitcoiners are even proud of that.  Something that is not a good unit of account (volatile value) cannot be generally used as a currency in a payment system.

Of course you can, it is called proof of stake (for instance).  Some call it "check points" (which is signature of the dev).  Proof of stake has a known problem which is "nothing at stake", but ONLY because one combines proof of stake also with block rewards.  Proof of stake as a non-rewarded consensus mechanism doesn't suffer from that.  

Bitcoin could not really start with *rewarded* PoS, because then Satoshi was the only one who could "stake" in the beginning, so he would be the only one receiving new coins, and the only people obtaining bitcoin would be people getting them directly from Satoshi, which would look too much like Satoshi printing an infinite amount of money that he would then sell.
However, Satoshi could have had the idea of using PoW for coin CREATION, but keeping the consensus mechanism with PoS, non-rewarded.  At that time, it probably seemed a good idea to reward people doing the consensus signature thing ; but it turned bitcoin in a "mining industry" where the users are now "external customers".  If the consensus mechanism had been based upon staking signatures (with no reward) then "miners" would only be people making new coins, but would have had nothing to say about the protocol, the block size, or whatever, which would have remained in the hands of the bitcoin owners (the stakers).
It seemed a good idea to do everything in one go, but it turns out it probably wasn't.

A lot !  Namely how much other speculators will speculate more than you do !  That's how you can make money out of that !

One should distinguish between inflation/deflation (= the change in real world value of a token) on one hand, and debasement (= creating monetary tokens) on the other hand.

In general, a good currency has only very mild inflation or deflation, and what's more important, this mild inflation or deflation is *predictable*.  This makes that the currency is a good representation of value as a function of time, and hence a good "unit of account".   Whether the deflation or inflation is 2% or 3% ... doesn't really matter.  If you KNOW that on average, a currency has an inflation rate of 2%, say, you KNOW that 10 years from now, a given sum represents 20% less value than that same sum today, so you can take this into account in every long term agreement.  If you know that the currency is mildly deflationary, you know that a given sum will represent about 20% more than today, so that too, you can take it into account.
As such, mild inflation or deflation, for a currency, doesn't matter much, as long as it is predictable.

But in order for a currency to keep its inflation or deflation rate close to the "programmed" one, the currency OFFER needs to adapt as a function of its value.  If the currency is too expensive (that is, if the deflation is too severe), more currency needs to be put on the market.  If the currency becomes too cheap, (that is, inflation is too severe), currency needs to be taken out of the market.

A currency with a given production rate, worse, a currency with a decreasing production rate, and an increasing adoption, will be explosively deflationary.  That's exactly what we saw with bitcoin.  Everyone is cheering that bitcoin went up from $0.1 to $1700 or so in about 6 years, but that is a catastrophic deflation.  

Imagine that 6 years ago, you signed a contract with me that I would clean your room for 100 BTC (say, $10) per day, with an indemnity of breach of contract of 5000 BTC (say, $500) if you decide to stop the contract without me failing to clean your room.  Then I'm rich now, and you will be working the rest of your life to pay off the contract !
You cannot do business in such a "currency".  

If that currency would become in general usage, then the economy would fall in a deflationary spiral: as hoarding currency instead of spending it would lead to higher wealth, and as the increase in value of the hoarded currency would outpace any reasonable true economic return on investment (look at bitcoin: what real world economic investments allow a factor of 10000 ROI in 7 years !), nobody would spend, nobody would invest, and everyone would hoard more and more currency, having less and less currency running around, increasing even more the value of the few coins that are available and not hoarded yet, inspiring people to hoard even more.

Sure, it is another option.  That said, when government wants to take assets from people, they will always find a way, especially when the assets become "publicly accepted" (and hence also "declared"). 

But there's a difference between "freedom money" (of which I'm fond), and "sound money doctrine" (finite set of assets).   Nothing stops freedom money from having an issuing mechanism that more or less regulates its value to a constant, and hence can become a much better unit of account than an inelastic amount of assets which will always turn into speculative items, because of their volatility (and especially, if "growing", by their greater-fool potential).

In as much as bitcoin was a great idea to have a decentralized monetary token, its economic policy is very naive and bound to failure (as an ideal monetary asset), especially because it has no elasticity.


But gold never was a great money, and gold is special, because of its historical ground.  Rare stuff just becomes speculative, and when it is speculative, it has not stable value, and when it has no stable value, it is not a good unit of account, and when it is not a good unit of account, it is not a fluid currency.

Also, gold "always existed" in a certain way, and the only thing that new gold sources did, was a "gold rush" which was always an economic disaster, from the demise of the native American civilisations to the disasters elsewhere ; but gold never faced the problem of extremely severe seigniorage, making huge fortunes of a few. 


My take on it is that bitcoin will stay, of course.  But I think bitcoin has so many flaws, is based upon so many misconceptions, that it will never be what it was said it was going to be ; and bitcoin has been withholding serious crypto competition until recently, by its de facto monopoly of the market. 

That said, my idea is that most of crypto, as of this day, is heavily speculative, and that this will only get worse, not better, because almost no token has self-regulating systems, and if they are, nobody is interested in it.  Bitcoin has killed the dream of free money by being a get-amazingly-rich-quickly scheme like rarely has been seen before, and by having many imitators of that same scheme.  DASH, for instance, even amplified the deflationary spiral with its master node scheme. 

It is very easy to make a speculation-capped crypto asset, that will never fall into a deflationary spiral, but nobody would use it, because, exactly, the get-rich-quickly dream would not be included, and all the deflationary bullshit of bitcoin's monetary theory would be baffled: the simple thing to do would be to have PoW without automatic adaptation, but with a slowly rising curve.  As such, a coin would never be worth more than the economic cost of the PoW of its creation, and the monetary mass would adapt to its market value to keep it essentially constant (the rising curve would compensate for the improving technology) ; exactly like central banks do.  But nobody actually wants "internet money" - except dark markets.  People want "digital gold on steroids" to become rich quickly in a greater fool game.  My idea is that this is what kills crypto's soul, and that we're just seeing the crypto version of a huge "complex derivatives" market on which people speculate.

Humans are social animals, which means they are designed to abuse, or be abused, to dominate, or to be dominated, to rule, or be ruled.  The abused, dominated and ruled want others to be abused, dominated and ruled too, apart from their abusers, dominators, and rulers.  That's the essence of social behaviour: if you're beaten up, you want others to be beaten up too.

Social behaviour is perpetuated, because it is in the advantage of the deciders for it to be perpetuated (the progenitors, the rule makers, and the economically privileged), and they keep the speculative dream alive of the dominated, to be one day the dominant (which almost never happens, but it is the belief that counts).  As such, the dominated, too, want this to be perpetuated, waiting for the moment (in vain) when they will be the dominators.

In other words, social behaviour is locked in by a consensus mechanism that became immutable.  You can always try to fork off, you will get a 51% attack on your nose.

So all this is in perfect agreement with human nature.

This is in fact extremely ironic.  The banking crisis of 2007-2008 was NOT caused by any failure of the fiat currency system.  It was caused by reckless speculation of financial institutions on "virtual assets" which were the toxic complex derivatives, of which the backing in real economic terms was totally unfathomable by their complexity and hence became unbacked assets, and which essentially crashed, exposing these financial institutions with worthless paper.  This SPECULATION is what was at the cause of the crisis, not any quirks in the issuing of fiat money, as can be seen by the relative price stability of most fiat currency in that period.

Now, as a reaction to that, bitcoin's creator invented an asset, bitcoin, that has a severe deflationary spiral built into it, and hence is entirely designed to be a heavily speculative asset (as is observed in reality), exactly of the same kind as the kind of hollow derivatives speculation that caused the crisis.

So, bitcoin pretended to fix a problem that wasn't one (namely the pretended problem with the fiat payment system), while inventing an asset that was of the same speculative type as the stuff that DID cause the problem.

That said, bitcoin did pave the way for a "freedom currency", that would allow people to win back their economic freedom, from law, state and tax.  So the fact that a freedom currency could exist, is an interesting aspect of bitcoin.  However, in my opinion, it contains too many fatal design flaws to become such a large scale currency (if even there's a demand for it) ; but for a smaller community of people, it can have this usage on occasions even though its overall design makes it into a speculative asset.

In bitcoin, and in several other crypto, one has confused several different functions, to bring them together in one single thing, and I think it is quite obvious now, with hindsight, that this was a bad idea.

The different functions that PoW has been assigned to, are these:

1) burning seigniorage for new coins.  The ability to print "money out of thin air and get its value" (seigniorage) has always seen as a bad trait of any monetary system ; in fact, it is the sole justification of "sound money doctrine", namely that NOBODY should be able to print money because of seigniorage.  The Austrian school considered gold, that came from "long ago" as an acceptable sound money, because nobody could "print" gold - and mining gold was about as costly as what it was worth.  If you make a new currency, of course you have to "print" it, and bitcoin's way of killing the seigniorage was exactly, mining with PoW: you got bitcoin's value, but you had wasted about the value you obtained in hardware and electricity.

==> this is a sensible use of PoW

2) allowing new users to compete for coins without being in the "old boys network".   PoW allows just anyone to create coins, without permission or acceptance or whatever.

==> this is a sensible use of PoW

3) consensus formation.  This is already somewhat more doubtful.  NORMALLY, all transactions that are transmitted over the network, should simply be part of the consensus, apart from double spends, in which case, one has to decide "arbitrarily" which of the two double spends, if any, should be part of the consensus.  One should also include, in the consensus, who had the right to win coins through PoW.

==> this has nothing to do with PoW a priori.  In case there's a doubt, a random, but agreed-upon decision should simply be taken.

In fact, consensus formation is almost trivial apart from double spends close in time so that they arrive in different orders at different parts of the network, which is the "hard part" to solve, but which could in fact be solved easily: if ever there is a double spend in a relatively close interval of time, the spending address is blacklisted, and the coins are lost for ever, which would be a serious disincentive to double spend.  Without double spends, the consensus formation is trivial: it is the full list of all transactions, and the order doesn't matter.

4) cryptographic securing of the consensus formation.  In as much as the consensus is "the biggest set of transactions", there's in fact not much securing to do.  It is the possibility of *excluding* transactions that needs cryptographic securing, so that nobody *excludes* old transactions.  In as much as it would be "the biggest list", no cryptographic securing is in fact needed, but if the list has special requirements, it needs to be secured once the list is accepted generally.

In fact, it is the severe consensus mechanism, to put everything in a block chain, that needs cryptographic securing, and here, PoW is really bad.  Just any digital signature scheme would be better because cryptographically more secure. The whole of bitcoin's drama comes from the fact that the PoW, which was meaningful for coin creation, was also used as a very severe consensus decision mechanism, and as a cryptographic securing of this very severs consensus decision, leading to the mining industry and the uselessness of network nodes.

Even if someone was having 51% of the hashing power, that wouldn't mean that bitcoin was not functioning - only, we would now have a "CEO of bitcoin".  That said, the relationship is somewhat more complicated, because that 51% power is mostly outsourced to hardware owners.  There hardware owners cannot decide directly, (they only sell their hash rate), but they are part of the "block chain producing industry" and wouldn't want to see the system destroyed in which they are hardware-invested.   So even if a single pool had more than 51% of the hash rate, I don't think it would mean that bitcoin was compromised.  The day that that pool owner "goes beserk", the hardware owners might decide to jump to another pool if the jumping of the pool owner is not seen in their lucrative advantage.

There's no reason for a big pool owner to go beserk ; however, all miners (hardware owners and pool owners) will want to find the most lucrative way of running bitcoin for them, that's for sure.   My idea is that the current protocol is actually very lucrative to them.