Self-correcting problem.
Evidence in the altcoins
Zangelbert is right. centralization is not going to occur.
as far as altcoins are concerned, i do not consider them a good example to compare to Bitcoin. they do not have the network effects to compete.
and in other security systems suggests its not.
please elaborate on what you mean. this is too vague.
One alternative, indeed, is to "correct", but correcting has great expense— one which is borne exclusively by the correctors but which confers benefits primarily to the general public, a failure to support decentralization is largely an externality. Additionally, the need for correction is not obvious to most users of the system until there is a massive failure— this kind of security is brittle—, I could argue that this thread is evidence that people are not completely unaware of these concerns, but here you deny them.
please provide some form of statistical evidence to support your claims. all i see is BTCGuild right now with 33% of the mining pool. big deal. i remember when DeepBit had in the 40's% and everyone was screaming the same FUD. then it was AsicMiner. then it was BTCGuild again. all these pools are only composed of individual miners who can defect the moment they detect abuses by their pool operator.
There are low/no cost changes participants in the system could make (move off of centralized mining pools to P2Pool, run full nodes for wallets if you can, SPV instead of webwallet where you can't, run additional full nodes for the network even where you don't run a wallet, refuse to provide funding to centralized mining datacenters) which few people appear to be taking.
well, i am. i run a solo mining operation and quite frankly, i find my efficiency to be much greater than running on the pools. i believe this is b/c i slavishly tend to my miners and fine tune them to my own specifications and performance measures. i have literally no down time in comparison to the pools which as you say are constantly being ddos or down for one reason or another. i constantly hear ppl complaining about their yields. well, they should solo mine. they'd be better off and we'd be more decentralized.
another thing you're failing to account for is human motivation for a cause. motivation to be a part of a new system that puts control of a form of money into the hands of the ppl. this is another reason i solo mine; b/c i know its the right thing to do for decentralization and i would do it at a loss if i had to.
The massive failures required to trigger correction would underscore that the core security premises of the system are not currently or automatically true, eroding confidence. Without confidence Bitcoin has no value. And everyone has another alternative: don't use Bitcoin.
i don't think you mine. if you did, you'd be amazed at cgminer. there are various modes built into the software that will allow instant shifting to backup pools just in case something goes wrong in the primary pool. and there are all sorts of options to switch if a pool slows down. there are too many to list or remember. bottom line is individual miners are vicious; they will switch pools at the first sign of trouble and won't tolerate any BS from the pool. operators better behave themselves or they will lose there participants quickly. they have no control over them.
while damage to the mining pool operators' reps is permanent.
Some of the most popular mining pools have been hacked over and over and over again, three and four times. Their reputation is fine. A large portion of hashers do not know or care.
you're very wrong here. as i said above, you wouldn't understand the mentality of a miner unless you're doing it or take pride in it. they/we are some of the most efficient and anal ppl i know. i don't tolerate pool operators b/c i know i can do it better myself.
Someone attacking the system would be interested in shutting it down completely and/or profiting off shorting it. They don't necessarily have to be those "trusted" parties, they may instead be someone who has hacked or coerced them. Your argument with respect to reputation could just as easily apply to the FED or Paypal, and yet they continue to stay in operation and continue to behave in ways which people find to be unethical or untrustworthy.
Bitcoin is supposed to be based on stronger stuff than that.
that's a ridiculous comparison. the only reason the Fed stays in business is thru the use of force. we can't supplant them. they force us thru the rule of law to use their fiat while they literally force $85B every month down our throats. except it's not our throats, it's the primary dealers who get to turn around and speculate on stocks, bonds, and commodities. they can screw up ad infinitum thru Greenspan, Bernanke, and now Yellen and no one can hold them accountable. whereas a pool operator is operating in a free market. if they try to cheat, collude, or inflate they will be punished by defection. even Eleuthria understood that he couldn't become more than the high 40% range of the network and refused to take any more participants. he also understood the concept of bringing along the entire community early on as demonstrated by his magnanimity in the hard fork last Spring. he, being around high 40% of the network at the time, knew that he could not afford to leave merchants in the 0.7 fork. he would lose by winning. by winning, i mean mining all those extra blocks while on the 0.8 fork that had been created. we all know what happened. he backed off, gave up 25 block rewards mined on 0.8 for a loss, and returned to 0.7 to rejoin the merchants. a brilliant example of game theory working out in the Bitcoin system where a big mining pool capitulated to save the system.
This also ignores that a sufficiently large reorg is unfixable without leaving some people robbed. You can end up with two chains with loads of mutually exclusive transactions and absolutely no way to determine who are the honest owners and who are the thieves: it's one persons word against another. The actual miners causing the reorg don't even need to be parties to all the theft, it can simply be opportunistic theft that happens during the consensus failure.
but rather by their agreement on the rules that constitute the Bitcoin protocol.
The majority of the users are not participating in the Bitcoin protocol, they use thin clients and hosted wallet services which do not enforce the rules. As usage grows it is a distinct possibility that operating a rule enforcing node will become very expensive— requiring multiple gigabits per second of bandwidth in the "scales to visa" examples given by some— so it's not at all clear that they even could respond to such a threat by changing their behavior due to economic constraints.
i'm not worried about that. data storage capabilities are growing exponentially. storing a blockchain today is nothing and will continue to be so for a very long time. i keep 5-6 full nodes operational just to support the network.
i've been listening to this argument about increasing centralization as a result of asic's for a long time now and it's just not happening. you may think it is but it's not. yes, it will be harder for the individual solo miner to make money but it's always been that way. it's just relative. asic mining equipment costs are plunging now. and they will continue to plunge. i am actively working in the asic mining space as we speak and i am aware of a number of players coming to market. to be quite honest, it's frightening for the companies and the big players as they all have to compete for market share. the only way to do that is to cut prices or offer extremely consumer friendly mining protection programs, etc. there are even "secret mines" being set up to compete with the pools and the hosting companies. this competition is only going to increase. why? b/c it is a truly free market and there is tons of money to be had. competition is flourishing.
you're forgetting that monopolies like the Fed or Paypal are extreme cases of centralization that can only exist in controlled markets organized to create unfair advantages. we don't have that in Bitcoin. hopefully never will.
we went thru this fear with gpu's and we are now going thru it with asic's. the outcome will be the same. self correction.