Bigger blocks take longer to propagate to the network and they also take longer to verify. The latter is especially problematic at larger block sizes because for certain transactions, signature hashing quadratically scales. If it takes several minutes to verify a block, that's a real problem. If invalid, it'll be orphaned. If miners are doing validationless mining to sidestep the issue, this can result in orphaned chains. This means less secure transactions for users, and more expensive mining for miners. This encourages smaller miners to shut down and larger miners to scale up to account for these inefficiencies.

Segwit partially solved the quadratic sig hashing issue, but transaction data in the base block is still a problem.


That's a fair assumption. Miners are paying far more per transaction than users are. Rationally, this is because they are investors who are speculating on the future value of bitcoins. It's bad to assume that miner speculation on fiat value will sustain the system forever, especially if the block rewards get smaller and smaller due to lack of fee revenue. At some point in the future, Bitcoin's value should become less speculative (as it becomes an established asset class) and mining incentives should accordingly be more in line with actual usage. Mining can't remain entirely dependent on speculation. That was never Bitcoin's design and it's just not sustainable.

If Bitcoin is a settlement layer, it will probably limit on-chain transactions to those who need to transfer higher value, or those who have a specific need for Bitcoin confirmation -- like a Lightning commitment transaction.

If people aren't willing to pay high fees, then mining revenue will drop and mining security will therefore drop. This may be fine, and we will hopefully see an equilibrium form where mining security reflects what users are actually willing to pay.

You know, I thought the same thing about Bitfinex when they lost 120,000 BTC in that 2016 hack. A year later, they were one of the biggest exchanges in the world.

Probably not a great example since Cryptopia was a much crappier exchange, but you get my point. Cryptocurrency traders are gluttons for punishment. They always come back for more.

2% discount on Bitcoin transactions -- not bad. I might try them out. However, I'm not a huge fan of physical cards because you need to provide them a mailing address and take delivery, and that's most of their inventory.


No issues accessing the site here. But for anyone thinking about using them from outside the US, I found this in their terms:

Not only that, but there's no announcement on Coinpulse.io itself and trading is still active. It seems like a really obvious attempt to disappear with customer deposits. Any responsible shutdown would allow for customers to withdraw for months after trading ended.

Right now, the cost per confirmed transaction (based on actual mining expenditure) is much higher than the fees users are paying. Miners are subsidizing that cost because their revenues are temporarily being subsidized by inflation. However next year, inflation will drop to 12.5% of the original reward and it quickly drops off after that. When should we expect fees to begin making up the difference? The design can't remain completely dependent on fiat speculation forever. At some point, users need to pay the actual cost of transactions if they expect miners to continue securing the chain. The sooner users get used to higher fees, the smoother the transition to a deflationary Bitcoin will be.

If we keep increasing block size, "more transactions" doesn't imply a requisite increase in fees. That all depends on how limited block space is. If we increase block size beyond demand because technology advancement allows it (Like Bitcoin Cash), fees will drop towards zero. We need full blocks and a constant transaction backlog, otherwise there is no fee pressure.

Now, what evidence do you have that "higher fees will kill Bitcoin?"

There's still a larger problem here that most people don't discuss. Even if hardware advancement allows us to significantly increase block sizes over time, that doesn't address whether doing so is compatible with Bitcoin's hard cap on supply.

Without inflation, the system needs fee revenue to continue incentivizing miners. The block size limit is the only means we have to enforce scarcity of block space, which guarantees fee revenue. Otherwise, Bitcoin's Byzantine fault tolerance may be threatened as block rewards decline in value. You can't have a network worth many billions or trillions of USD where miners have no incentive to secure the network.

The chain can be pruned. Whether full nodes are storing the entire blockchain isn't the major issue. Storage space is a bottleneck and can stop people from running full nodes, but bandwidth and latency are more pressing issues.


Exchanges and basically any service who credits accounts based on the blockchain need to run full nodes.

I'd say that the more people that run full nodes, the better. Without full nodes enforcing the consensus rules, miners and economically important nodes can collude to change the protocol. If the chain will be hard forked, SPV nodes have zero say about it. Only full nodes are relevant in hard fork attempts.


Larger blocks cause propagation delays. This increases orphaning rates, which disproportionately hurts smaller miners and will eventually force them off the network via unprofitability. Miners can sidestep these problems by centralizing -- pooling hashpower, colocation. Less mining entities, each with larger market share = bigger threat of transaction censorship, government targeting of miners, 51%/selfish mining attacks, political hard fork attacks, etc.

Larger blocks also cause increased bandwidth requirements. Data upload limitations are the primary bottleneck here. People who don't have access to unlimited internet data will become increasingly likely to shut down their nodes as it begins to interfere with streaming, gaming, file sharing, etc. The less full nodes there are, the easier the consensus is to attack.

I should hope so.

Just a joke, or maybe half-joking. After all, people have been known to do some unthinkable things when large sums of money are involved. That's why I never talk about my Bitcoin holdings to anyone except my wife. She's the only person who knows the details and can access the keys, and it took almost a decade together before reaching that level of trust...

That was true during the last longer-term bear market as well. It wasn't until 2017 that Bitcoin started regularly making headlines again. Before that, the media hype was pretty dead.

I remember seeing some chart from Bitpay that showed that consumer spending spiked a lot when price rose in 2017. Consumer spending might follow a similar pattern -- transaction volume might rise during bull markets and fall during bear markets.

Using timelocked transactions doesn't require trust. That's why it's a superior model vs. any sort of multi-sig arrangement. The only problem -- besides needing to periodically re-spend the outputs backing the timelocked transaction -- is ensuring your inheritor is competent enough to secure their wallet and take possession of the coins when the time comes. But I suppose that's a problem with any Bitcoin inheritance scenario. It's about as good as it gets.

Of course, using a dead man's switch creates incentive for your inheritor to kill you, but so does executing a will.

They may have been okay with the idea of mostly SPV users and vastly fewer full nodes. I think many big blockers believe that non-mining nodes aren't relevant to the consensus. I also think a lot of people legitimately don't understand Bitcoin's economic design and think infinite near-zero fees are actually viable.

It's possible they had a deliberate agenda to centralize the network, but I don't think we'll ever find out either way. If they did, at least we know they failed.

That's the way the sponsoring legislators are framing the discussion. They see this bill as a way to encourage US economic growth instead of letting crypto-friendly countries like Singapore, Malta and others dominate a burgeoning industry. I'm still not sure how likely it is to pass, though.

The New York Times guy? I never expected much from him. Digital Gold was on my list of books to read some years ago just because it seemed big at the time, but I never got around to it. Sounds like his opinions aren't worth my time...

At a certain point, that's true, but only if they expect immense new revenue. They'd need to develop a robust wallet and custody solution. That takes a lot of staff time and development money, ongoing maintenance costs, and also introduces custody risks. Saving 1% in processing costs has to be measured against what they'll lose in a potential compromise, and that's on top of development and maintenance costs.

There's plenty of incentive for a company like Coinbase to pour money into this stuff because they're raking in huge % commissions. The potential upside is much bigger. I really wonder what it would take to create that sort of incentive for Amazon. My feeling is that we're decades away, if ever.

It's not that simple. They'd need to worry about converting those coins into fiat. A processor like Bitpay charges 1%, so it's looking less lucrative already. If consumers demand it, I'm sure it'll eventually happen, but I see no real signs of demand from consumers.

Okay, "working with DHS on tracking users" sounded quite a bit more involved than that.

In any case, I was hoping for something a bit more reliable than Wright tweeting about himself. The guy seems like a narcissist. Many of things he lays claim to -- including being Satoshi -- are fabrications that only exist to massage his ego. I don't see why this would be any different. I assume 90% of what comes out of his mouth are lies.

This is the only reliable model. The others leave too much to chance.

I would use nLockTime. First, I would help my inheritor safely set up a wallet and send a test transaction to verify control of the wallet. Then I would make a transaction that pays him/her in 6 months and reveal it them. Before the 6 months is up, I would spend the coins to a new address I control and restart the process with a new timelocked transaction. When you die, it'll eventually act as a dead man's switch.

I prefer something like 6 months because I wouldn't want my heirs having to wait 10 years to access the money.

Here's a more complex approach I came across that some people might think of as more robust.

The Hearn connection is understandable -- probably more so related to his work at Google than his work on Bitcoin stuff. The Gavin Andresen / CIA conspiracies have been around for years; we know he talked to the CIA.

The Faketoshi thing came out of left field, though. Is there a real source for this? Any details on what he actually did for DHS?


Source?

I don't get it. What's the connection to an ETF? Blockchain analysis might improve their ability to identify manipulation -- I don't really know -- but it's not going to give them jurisdiction over offshore exchanges where manipulation is occurring.

Maybe they want to zero in on DEX trading, since security tokens are always issued on smart contract protocols, and all that activity is on-chain.


Probably some of the darknet market arrests. I imagine government agencies and blockchain data companies will continue honing their surveillance abilities over time.

DEX platforms definitely don't have the liquidity of centralized exchanges, but they're perfectly fine for smaller, casual traders. If you're trading less than 20-30 ETH worth of Ethereum assets, using a DEX is the way to go.


Sadly, it doesn't surprise me at all. There's something about cryptocurrency -- the speed with which irreversible payments can be made -- that makes it especially prone to these events.


QuadrigaCX stated they used multi-sig and cold storage. That's another problem with centralized exchanges. We take them at their word, but they often lie to our faces.


Doesn't that require keeping private keys online? Cold storage needs to be a central requirement.