A ban is not what is threatening bitcoin.  Its clunkiness is.  Its ridiculous block sizes, electricity consumption and fees are.  Bitcoin represented > 80% of crypto in the beginning of 2017, and had always been at that level or higher.  Look at it now: less than 35% of the market (if we include the 20%-25% of dead coins), because of the silly block size limitation.

The real question is: what will happen to crypto when bitcoin loses its nr 1 position for good, like it lost its monopoly in 2017 because of clunkiness.

There are two answers if this happens:

1) bitcoin will slowly sink away like any old tech, taken over by better, and alt coins will prevail.
2) given that "eternal bitcoin" only lasted for 9 years or so, this pulls the floor under any other eternal crypto belief system, and crypto inflation kills the very idea of crypto scarcity.

So bitcoin losing no 1 position could be the liberating boom for crypto, or it could be the realisation that all this is just hot air, as just any dude can launch a new coin and dilute the crypto market with its inflation.

Of course, one can say that bitcoin will never lose its no 1 position.  Now let us think about that.  Real chain transactions seem to be limited forever to 1 MB blocks (optimized with segwit but very limited nevertheless).  Yes, the LN can be a banking layer on top of bitcoin, where the banks (the LN nodes) hold full bitcoin reserve.  Now, let us suppose that crypto increases still 10 or 20-fold in market cap in the coming years.  If bitcoin needs to stay no 1, it will most probably need to increase also 10-fold in market cap.  That means that mining costs and electricity consumption need to increase also 10-fold.  Is that still reasonable ?  Is bitcoin all by itself, going to consume as much electricity as Germany ?  If bitcoin reaches these values 12 years from now, there's less of a problem, because of the diminishing block reward.  But in the coming years, power consumption needs to remain proportional with block reward value.

This is why bitcoin cannot remain no 1 if crypto market cap is still going to rise a lot, and if bitcoin remains a PoW coin, which it most certainly will remain, if it cannot even change its block size.  And if it changes to PoS (which PoS), this will almost for sure be a contested hard fork, because all those people who invested in mining equipment will want to keep the PoW coin alive.

But if bitcoin goes down the drain, the whole belief system in crypto might go down the drain too.  Because what eternal belief can still be held up ?

About all coins below bitcoin on coinmarketcap are better in terms of security and efficiency.  Don't forget that bitcoin's security comes at the expense of the entire electricity bill of a small European country, and that its security is only induced by its high price.  That's how PoW coins are secured: by inflation.  Yes, bitcoin's block chain has a high level of security, but it needs to secure a high value, and needs to spend the amount of electricity of a small European country for that.  Any PoS coin can reach higher levels of cryptographic security with just a digital signature which spends only a few Joules.


Bitcoin doesn't have a scaling solution.  It doesn't have a mechanism to adapt block size to demand. The only solution proposed, namely LN, is a banking layer, which won't even be secure, because of the limited block chain space to settle, which means that no matter what, in 100 blocks, there are only so many settlements that can be placed.  Any settlement that will not be ranged within those 100 blocks can be screwed.  100 blocks, that's what ?  500 000 transactions ?  So any lightning hub that has more than 500 000 open channels, can screw its customers, because they cannot settle within the "punishment time" even if all room on the chain is used for that.

The point I was trying to make was that in crypto, coins have value because they are scarce.  The original bitcoin dream was that there would be 21 million coins, and that's it.  And most probably, there will never be more than 21 million bitcoins.  But there will be many, many, many more crypto coins, so the market of crypto can be infinitely diluted.  As to what is a valuable coin, almost ANY alt coin out there is technically a more valuable coin than bitcoin.  Bitcoin's only real use case is the transmission of tokens, on a limited block size, one every 10 minutes, that consumes more electricity than a small European country, with a clunky piece of software, and with your transactions visible to any Joe out there in the world for ever.  That's something that about any alt coin does better than bitcoin.  Most of the "currency" alt coins improved upon the problems of bitcoin.  It is amazing that one of the best improvements, namely stopping the waste of electricity, was experimented by Peercoin, which is now "out of sight".  DASH and monero, and later zcash, and many others, attacked the problem of privacy and the potential problem of non-fungibility that goes with it (although the non-fungibility problem hasn't manifested itself in bitcoin, only in ethereum).
Then there are the "useful" tokens, that buy you a ticket for a service nobody has been waiting for: all the ICO app tokens.  All these tokens can act like a currency coin (can be transmitted) but on top of that, they do something on an application that is, most of the time, pretty useless, but sound as if they are going to change the world, from blogging (steam and co) to prediction markets (augur and co).

Yes, at the moment, it still takes some dev. effort to make a plausible coin, even though just copying bitcoin's code, and changing some parameters is something a reasonable dev can do in one week's time (like Doge coin).  The essence is simply to have a token that can be transmitted.  Making a block chain with a token that can be transmitted isn't that hard.  You can take the open source code of many stuff out there, change a detail, and then hype it as the next revolution (that last part is probably the most delicate one).   You can do that an unlimited number of times, which makes the supply of crypto unlimited.  You can also fork existing chains an unlimited number of times.

So even if there's scarcity on a *given chain branch*, there's no scarcity in the crypto market.  You simply need to make believe people that only a very limited number of chain branches is "real", or the whole market will be infinitely diluted.  But there's nothing that distinguishes the "real" branches from others, apart from some brand name.  All essential functionality (and the only real functionality is transactions) is present on all coins, on all branches of all forks of coins.

It still takes some dev effort, like it took some knowledge of HTML in the 90-ies to set up a web page.  But I don't see why there won't be soon "tools to make a coin", or even better, tools to make a fork (say, of bitcoin), so that you don't even need to be a dev.  Say, the "dreamweaver of crypto".

When  we look at 2017, I think the most important happening is that bitcoin lost its monopoly.  Exactly 1 year ago, bitcoin's market share was 85%, and apart from some glitches, had never been below 80%.  Then it crashed down to 40% or so, to have a dead cat's bounce back to 65% and now we're at an all time low < 40%.  Remember, on top of this, that about 20-25% of bitcoin's coins are dead, so the real market cap is 20/25% less than that, so bitcoin's real market share is less than 30%.   This never happened before.

Nevertheless, bitcoin is still market leader.  It has been close with ethereum on June 15th, when bitcoin was only 30% higher than ethereum (if you discount the dead coins, they were really close !).  But Ethereum's market share also fell.

What is interesting to see is that "other coins" is now the second most important market share.  Bitcoin is not really losing from "number 2" all by itself (be it ETH, XRP, ...).

In all this, however, people talk about the amazing run by bitcoin.  Yes, bitcoin went up about x15 in 2017.  And alt coins went up x 150 !  The market cap of alt coins was somewhat more than 2 billion one year ago, now it is more than 300 billion.  However, even though within the alt coin market there are a few heavy weights, there's not one clearly dominating like bitcoin did.  The first place has been bitcoin since its inception, but the second place has not been so evident.  And the third place even less.

What does this mean ?  It means that the market becomes less and less evidently predictable.  7 years ago, if you wanted to invest in crypto, you bought bitcoin, period.  Now, it is not clear and it will become more and more opaque. 

My take is that bitcoin's dominance is gone for good.  This is not a glitch that will recover, and we won't see bitcoin at 80% market share any more ever.  Bitcoin is still a very big name, and it is not clear if bitcoin will lose its 1st position in 2018 or not.  But all the rest becomes much more opaque.  Nobody will be able to say who will be number 2 in 5 years from now (I wouldn't even bet on bitcoin being number 1).  The market will become efficient, and gains will not be easy any more.  What seems to be a grower today, can be a loser tomorrow.  Like in the normal stock market.

The question will be of course, what will happen psychologically to alt coins, at bitcoin's loss of position 1, if it happens.  Because then, it will be clear for everyone that crypto doesn't last for ever, which is the belief that kept it going until now.  If the original coin is not number 1 any more, and there are thousands of other coins, and just any Joe can start a coin, what's the value of such a thing in the long term ?

I agree with that.  The only thing the LN will achieve, is a banking layer.  Yes, it will be a good idea to have a LN channel to your preferred exchange, which will become your bank.  And yes, exchanges will be part of the LN and you will be able to transact amongst customers of different exchanges.  And yes, they will impose KYC/AML, you'll have to provide ID and everything and they will demand fees and costs and know everything about your transactions: exchanges will become your bank.  
It DOES have the advantage over normal banking that they cannot confiscate your money, and that they can't go broke and take your money, that's (almost (*) ) true.  But all the rest of banking will be the same: they can stop transactions, they know your transactions, you'll have to pay costs and fees and so on.

(*) almost: because if a big exchange goes broke, there are too many LN customers linked to that exchange to be able to settle on chain within the allowed time frame, so there will be the equivalent of a banking run, but for block chain room, and fees will probably rise over the value of your holdings.  After that time frame, the exchange can still run with your money.  In other words, the only cases where the LN would protect you when a normal banking crisis wouldn't, it doesn't work with small  blocks.

Remember the silliness of small blocks: so that Joe can run his full node in his basement with a small hard disk.  Well, if Joe does 3 transactions, he has to pay as much in fees as would have cost him a 2TB disk.  And if it continues like it is going, soon, Joe can even buy a new PC and his wide band connection for the price of 3 transaction fees.

Well, it is quite the opposite.  I can't use bitcoin any more on Openbazaar.  I'm not going to pay a fee of $30 for something that's worth $15 and not even be sure that the transaction will be processed.  When I want to buy some coins, I take fiat to an exchange, and I'm not going to get out bitcoin, but rather something like litecoin or ethereum to my wallet, to put this on a crypto-only exchange where the coin is available.  With bitcoin, I would need 2 transactions, costing me $60 or so.   Bitcoin is simply unusable, unless for very big amounts of several $1000 so that the fee doesn't matter much.   The ONLY thing you can do with bitcoin, is keep it.  You can't seriously use it any more.  Almost all other big altcoins are better at that: faster, more reliable (no big mem pool) and cheaper.

The fact that the simple Segwitx2 was "too hard to implement" (LMAO: simply changing a parameter) killed it for me.  Clearly, bitcoin is going all for banking (LN) or nothing.  No mere mortal shall transact on chain, only whales will.  That's a great idea if you're the monopolist.  That's a much worse idea if you're losing market share and the competitors are better.

Bitcoin has died many times, but it was the crypto monopolist.  As crypto wasn't going to die right away, bitcoin revived.  Bitcoin lost its monopoly this year.  It went down from an >80% market dominance (that's a monopolist) down to the 40-60% market share.  In reality, bitcoin's true market share is lower, because about 20-25% of the bitcoins counted in the market cap are non-existing (keys lost, can never participate in a trade any more, hence don't influence price).  So in reality, at this moment, bitcoin's market share in market cap is of the order of 30% or lower.  It is still the market leader, but not the market monopolist any more.
This number is, moreover, entirely credible when one looks at bitcoin's market share in *volume*.  Bitcoin has, at the moment of writing, about $16 billion volume while the crypto market has $41 billion volume.  That's a big third too.

Bitcoin is about the most clunky coin out there, with crazy fees and forever limited blocks, but it has one hell of a brand name.  In fact, that brand name is all it has, but bitcoin's value being a recursive belief system where the name is all it is, that's a hell of an advantage.  I wonder how bad bitcoin will have to become technically before the brand name cannot make you forget it clunkiness.  Bitcoin's energy consumption is now that of a small European country.  If you're a newcomer to bitcoin, where you are going to be your own bank, you'll have to pay a month worth of unlimited internet access to make one single transaction (for instance, between two of your own addresses), and if you're not generous, you will wait until tomorrow to know if the transaction took place or not.  Welcome to the smooth world of advanced finance.  Do the same with, I don't know, monero, litecoin, ethereum.... and for a much smaller amount of money, you have done your thing 5 minutes later.  You wonder how this dinosaur is still the market leader.  And then you realize: all this is just a name game, and bitcoin is one hell of a name.  There's nothing "real" in this.  You're not really going to pay your coffee with bitcoin, like the propaganda books sold it 5 years ago.  You're most probably not even going to use an expensive bitcoin wallet.  You're just going to buy some on an exchange, and hopefully sell them again for a benefit (which will be paid for by another guy doing the same but with less luck).

It will cost you ~20% of your fiat amount to pay the transaction fee to get your coins (independent of exchange fee).  In as much as bitcoin's price rises, if the fees rise proportionally, you will also have to pay 20% again whenever you want to use them.  If the fees rise more than proportionally (that is, if the amount of satoshis per byte increases for the average fee), you might even hold an amount of coins that drops below the transaction fee (that is to say, unmovable coin dust).  At which point you are the proud owner of some unmovable dust on the bitcoin block chain.
In other words, if the fees remain proportional, you will be able to get your full $25,- out of bitcoin again by the time that bitcoin has doubled its value.  If the fees rise more than proportionally, you might lose them forever.

Bitcoin has moved out of the "pay-for-your-coffee" era (before you could buy coffee with it in most places).  Bitcoin is now "gold" for larger investors.  Look at other coins if you want to do stuff with small amounts of money.  Consider for instance Litecoin (or any other "big" altcoin that isn't a clear ICO scam).

https://bitinfocharts.com/comparison/transactionfees-btc-ltc.html#log

For $0.1 you do a litecoin transaction, while you're around $5-$6 for a bitcoin transaction.

That is because when you short a bitcoin NOW, you are actually shorting a bitcoin AND a BCC after 1 august.  Because the bitcoin you are shorting now has split in two.  If, of course, your exchange is somewhat dummy, you may get away with just giving then back a "bitcoin-after" and put the other half in your pocket, yes.

You see, that's the other side of looking at:

"if I have pre-1-august bitcoins on an exchange, will they give me my post-1-august bitcoins AND my BCC coins after 1 august ?"

If you've shorted a pre-1-august bitcoin, that became a short of a post-1-august bitcoin and a short of a bcc coin.  Unless you can do what some exchanges tried to do with the ethereum split: keep the other half of the spit coin in their pockets (coinbase tried that for instance).  Yes, you could try to keep the other half of the split coin you shorted, in your pocket, true.  If they aren't smart enough at the exchange (because they want to keep their customers' BCC for instance and don't see how they could tell you you've shorted BCC if they pretend it doesn't exist) you may get away with that.

But the rule is: a pre-1-august bitcoin = a post-1-august bitcoin AND a BCC.

In any financial operation that bridges 1 august.

You can understand this if you take, for sake of argument, the extreme vision that it is bitcoin that falls spectacularly in price, and that its market cap is essentially overtaken by BCC (I don't think it will, although it should: BCC doesn't have the original bitcoin name, and all bitcoin has, is a name, nothing else: it is that name that differentiates this old clunky crypto currency from all "alt coins" that work much better, but don't have the brand name).

Suppose that bitcoin drops to $100,- and that BCC is now at $2500,-.  Redo your story.  The exchange will claim that what you shorted was a combination of post-1-august bitcoin AND BCC.  And they would be right.  They could even say that they drop original bitcoin from their listings, and that for them, essentially, what was bitcoin before, is BCC now.  Then your "proof" proves that bitcoin's value after the split cannot be more than 0.5% or so.

When I come to BCT, I have the impression to be at a church, where there is a religion that counts over reason, and where group think is more important than logical arguments.  This is a pity, because fragile anarchist concepts (like science was in Galileo's time) need people with strong, logical, independent thinking skills, and not a religious herd that likes to crucify those that do not believe in their declared Truths, because falsehoods, no matter how much you believe in them, turn out, well, to be false.

There are some very good ideas in bitcoin.  But there are some very bad ones to it too.  The idea itself of a "freedom money" made me like it.  But by looking at how it behaved, and by thinking about why it behaved that way, I realized over time that it also contains extremely BAD ideas and concepts - even if these ideas are admired by a lot of bitcoiners.  I now think that bitcoin spoiled a unique opportunity to invent a true freedom money, and is in fact, by its design mistakes, making it HARDER rather than EASIER to invent a true freedom money.  In other words, I think bitcoin, by its design flaws, has killed essentially the hope of making a freedom money it pretended to become.  Some with conspiracy thoughts think that was done on purpose - I think it is sheer "stupidity" although that's too harsh of a judgement: Satoshi WAS a bright guy, but he did screw up.

However, what has been done recently to bitcoin, is even worse, and leads it even more to the path of a freedom killer than it was.

The lightning style transaction system is PERFECTLY fitted for turning exchanges in global clearing houses.   They turn them from a somewhat undesired side effect of crypto (the economies of scale in trading fiat for crypto have killed the individuals market like localbitcoins), into the central hubs of transactions.  It completes the institutionalisation of what was a badly designed decentralized token transaction system. 

Miners are the producers of block chain, which is sold to users, which need it to put their transactions on.  The product is made by miners, and the customers are the users.  Users need to buy tokens from miners and need to pay fees to get their transactions registered on the block chain made by miners.  That's what's bitcoin is about: the selling of block chain from miners who make it, to users who buy it.

Essentially, there are about 20 companies that sell this product: the 20 important mining pools.  They subcontract the hashing work to "miner hardware owners", which get paid for that, and they deliver the consensus block chain to the users, who can read it to prove their transactions in it.

You could say that the mining pools are like Toyota ; the miner hardware owners are like the subcontractors that Toyota uses to make the brakes, the wind shield, the fuses, .... and the users are the customers that buy Toyota cars.

With that difference that the mining pools are not a single company, but a consortium of mining pools that come to oligarchic agreement of consensus, and produce a single block chain.

Bitcoin is not a payment system.  It is a speculative gamble token, that people buy to sell to a greater fool mostly.
Apart from some geeks, and apart from dark markets where it becomes dangerous, nobody uses bitcoin seriously as a payment system on any large scale.  It is too unreliable, risky, and the volatility is making it impossible to write serious contracts in.
For casual value transfers that cannot see the daylight, and for the moment still for things where you want privacy, it is a clumsy payment option, yes.  But where bitcoin has been used mostly, and constantly, during the last 8 years, is in pure speculation in greater fool games, also known as trading.

Bitcoin is a trader asset.  Not a payment system.  But if you really want to, and you really have a good reason, with some effort you can also pay with it.

Indeed, bitcoin is looking more and more like a human organisation, with power struggles, kings, fights, and layered hierarchical structures.  The Vitalik trick of power by complexity has also been pushed nicely (and ALL reasons given to push segwit are false arguments, from scaling, to cheap off chain transactions, to the importance of non mining nodes.... - there's only one good argument, that is that segwit eliminates one bug from the bitcoin protocol, which is transaction malleability; but there are so many other bugs in bitcoin that all this hassle for this single bug is ridiculous).

Moreover, bitcoin has been *designed* to centralize, with remunerated proof of work as the decision takers.  Even though it was said (and maybe initially believed) that this was going to work against power concentration, it does the opposite, as we've seen: a few people took the decision to change bitcoin, by flipping bits on their pools.

Bitcoin will never become a normal payment system, until it is so radically changed that Satoshi wouldn't recognize it as bitcoin.

Its economic model is that of a highly speculative gambling token, not as an ideal money.  It is perfect to speculate with, but it cannot stabilize, because of its huge initial seigniorage which has created immensely rich whales that can do anything with the market, and because of its hard issue limit.  That's a disaster as a monetary system ; Satoshi was simply a naive dude who didn't even understand the motivations of sound money doctrine, and applied it in a case where it couldn't work (namely with a NEWLY ISSUED money).

Its proof of wasted economic value also makes it entirely centralized, expensive and wasteful, and highly vulnerable to state control.


Yes.  You are right.  This is because bitcoin was invented based upon a ridiculous conspiration theory, that "bankers are evil".  Not understanding that monetary things have evolved over time and adapted to human society, and that a naive system like bitcoin misses a lot of what those systems have built into them.  Bitcoin is an brilliant technical implementation of a very naive idea concerning the complexities of payment systems.  And as such, it will live, but not as what it was meant to be, but rather as a gambling token.  Which is what it has been for the last 8 years or so, and will remain.  Which will not mean that it will not be adopted a lot: people will gamble a lot with it.  Some will win, and an equal amount (somewhat more in fact) will lose, and it will waste a lot of value on proof of wasted value.

That said, I liked bitcoin exactly because of its anarchist idea, but it has lost this charm.  My idea was indeed, a subversive payment system that could entirely pervert and subvert all state operation, by bribing politicians, having a fluid murder market on which it would be possible to raise armies in a totally invisible and anonymous way, by financing invisibly the development of new weapons (like biological weapons) all over the earth without anyone noticing in a distributed way and so on.  THIS is why I loved bitcoin in the beginning, because I saw it as a way to ultimately overthrow all forms of publicly organized society.  But bitcoin will not do that.  And within an organized society, it doesn't mean anything else but a gambling token.


That was my inception from the start: that a dark market would grow so big, that it would overtake and outperform the normal economy, like happened during WWII in Europe.  When most economic activity is actually undercover.  This is the thing I saw for bitcoin.  But it is not anonymous enough.  This is why my interest got later ported to things like monero and other anonymous coins, because only those could have a chance of doing so. 

Outside of anarchy, bitcoin has only a future in gambling.

UASF was NOT a full node thing, it was ALSO a miner thing.  It is simply a misleading name for MINERS making a fork.  Whatever you do with your non-mining full node wouldn't have contributed zilch to "U" ASF, because you needed MINERS to make a new chain.  
UASF is as much "user" as the Deutsche Democratische Republik was democratic.  It is not because it's in the name, that it is true.

However, all this propaganda is needed to keep people away from the real problem of bitcoin and to keep them believe that bitcoin is decentralized (it isn't) and will provide "cheap and fluid transactions for the masses" (it can't).  I explained elsewhere why.

The ONLY "user activated HARD fork" that is possible in bitcoin, and only operated by full nodes, is a switch to proof of stake.  As long as bitcoin is proof of work consensus, as the name says, the decisions - all the decisions - are taking by those providing proof of work.  (all decisions except of course market price).

I fail to see where your "proof" is.  Everything that recently happened, were miner pool decisions.  The few miner pools decided to flip bits on the blocks THEY assembled.  In total, maybe 20 people have taken the recent decisions, and at no single point, any non-mining full node intervened in that process.  Everything has been decided by hash rate. 

I think that if the recent events show anything, it is exactly that which is already obvious from the principles of bitcoin's working: decisions are taken on the basis of proof of work ; not on any form of node count (which is so easily Sybilled that Satoshi invented proof of work as a decision scheme).


And how exactly did that raspberry flip the bits ?

This discussion took already partly place in -ck's self-moderated thread concerning the Barry Silbert segwit2x thread, where -ck considered this off topic.

Here are the last few posts related to this:

https://bitcointalk.org/index.php?topic=1928093.msg20316377#msg20316377

and

https://bitcointalk.org/index.php?topic=1928093.msg20317250#msg20317250

Now, of course this isn't discussing *directly* the Barry Silbert agreement, but it does discuss the underlying aspects.  After all, what is "special" in the segwit2x, is the 2x, the fact that one proposes to break out of this 1 MB limit, and hence all the arguments for and against touching the block limit.

Segwit, all by itself, is:
a) an improvement on some technicalities modifying the way transactions are done in bitcoin
b) also a "trick" to keep some essential cryptographic data within a 1 MB block, while extra data of the transactions is now made available outside of that 1 MB block, but in such a way that old clients wouldn't recognize it, and hence, wouldn't complain about "too big blocks".

As "more transactions for the same network and computing infrastructure resource usage", Segwit is very similar to a modest block size increase: the TRUE burden on computing and network resources increases somewhat, and it can also allow somewhat more transactions - exactly as a block size increase would do.  The only thing that has been done, is to split the transaction data in two chunks, one that goes into an old block less than 1 MB, and the rest that goes "next to it".  If you don't want to understand the transactions in detail, you can keep only the old blocks and then you remain within the 1 MB limit.  But that's a cheap trick, nothing more.  In as much as a block size increase can be repeated, and repeated, the "segwit trick" is a single shot trick, and you cannot "segwit, and segwit more, and segwit even more" until we have 500 times more transactions in the same 1 MB block than now.

So, as a transaction-increasing "solution", this is a very small and single-shot improvement that is much more complicated, and much less flexible, than simply changing one single parameter in the bitcoin core client: the maximum block size.

However, segwit's technical modification makes it much simpler to ADD LAYERS to bitcoin, from side chains to the lightning network.

The argument goes that these extra layers will make the "scaling problem" go away.  The "scaling problem" is that the *technical burden* of resource usage for individual users contributing to the decentralization of the bitcoin system becomes too large when too many transactions are to be voted over, and that individual users will "stop running full nodes" and hence let bitcoin's consensus "centralize" in the hands of a few power users.  Indeed, if bitcoin's model were that all users were to contribute to the consensus, then bitcoin's resource usage would grow as N^2 where N is the number of users (at an average amount of transactions per user), and bitcoin's burden per user would grow with N.  At a certain N, so the story goes, users will stop contributing to the consensus, leaving the decision to bigger boys.  

==> this is the main argument for leaving the block limit in place, and be "careful" in touching it.

This argument is entirely false, for the following reasons:

1) the consensus decisions are not taken by full nodes, but by miners.   This is done on purpose in bitcoin, to avoid the easy sybil attack on "number of nodes".  Proof of wasted economic value (proof of work) is what secures bitcoin.  The amount of wasted economic value needed to secure bitcoin is many, many of magnitude larger than the technical burden to run full nodes ; hence, whenever you can contribute somewhat to the bitcoin consensus, the main part of your cost is not running a node, but wasting work.  And if you don't waste work and prove it, you have nothing to say in bitcoin's consensus, and hence, you don't contribute to the decentralization.

2) "poor Joe with his node in his basement", as a bitcoin user, has to pay for the wasted value on proof of work, like all bitcoin users.  So if he cannot afford his node, maybe he cannot afford using bitcoin all together, because he's paying, like anyone, for the proof of wasted value.

3) Bitcoin uses "remunerated hash cash" in order to stimulate decentralization.  That's something that doesn't work.  Hash cash prevented people from "pretending they are many", because when they pretended to be many, their COST (the value they needed to waste) was proportional to the number of people they pretended to be.  So at a certain point, hash cash made it too expensive to pretend to be 10 000 voters.   But of course, you totally kill that idea if you REMUNERATE people proportionally for pretending to be many voters.  In fact, whether "pretending to be many" becomes lucrative or not, depends on whether you can out-compete others in your "cost per unit of pretended voter".  And here, we get economies of scale, making this MORE LUCRATIVE for those that do MANY SYBIL attacks.    This is now even so accepted, that 5 or 6 entities can vote as if they are half the number of bitcoin users (the 5 or 6 biggest pools).  So bitcoin's remunerated hash cash leads in any case to an oligarchy of voters pretending to be most of the users: the miner pools we have seen.  That's because "remunerated hash cash" is a failed idea against sybilling.  Bitcoin has in its heart, a mechanism that "makes bigger boys emerge" in any case in the decision process.
 
But there IS a good reason to keep the number of transactions scarce !

Indeed, in the long run, all this proof of wasted value will need to be paid by the fees of people wanting to do bitcoin transactions.  As this amount of wasted value needs to be HUGE (because that is what bitcoin's protection is about: it has HUGE wasted economic value proved, and if you want to attack it, you need to prove MORE wasted economic value), the fees need to be important.  And people will only pay important fees if transactions, the cheapest possible transactions, are nevertheless scarce, so that they are expensive.

One way is keeping the blocks small.  That obviously will render transactions scarce.  But one shouldn't, then, put a second layer on top of bitcoin.  Because if one does, these transactions may become cheaper, and they will crash the market of "on chain transactions".  So off-chain transactions must ALSO be scarce and expensive, or bitcoin breaks down !

It doesn't matter whether your transactions are on chain or off chain: they must be expensive !  Because it is this price that pays for bitcoin's security, its continuous waste of economic value.  And, as I said, this price is MUCH MUCH larger than any technological cost of resource usage of block chains.  So at no point, the resource cost (of "big chains and big blocks") comes into play in this thing.

That is, by the time that blocks would become so big that they generate a significant *technical* cost (disk space and so on) as compared to the cost of proof of wasted value that needs to be paid, bitcoin would have become insecure because not enough PoW in any case.  The waste on PoW will always be orders of magnitude larger than any waste on technical resources, or bitcoin is dead.

So, yes, one has to be very careful, not with the SIZE of the block chain, but with the SCARCITY OF TRANSACTIONS.  All of them, off chain and on-chain.  Bitcoin can only keep working if transactions remain scarce and expensive.

For the moment, and still in the coming decade, bitcoin's wasted economic value is still mainly paid for with inflationary tax, so we haven't seen the difficulty yet.

Organizing the scarce transactions in several layers is hence rather useless, because even though one would win something on the side of technical costs, this doesn't contribute anything to decentralization (bitcoin is designed to centralize due to economies of scale in remunerated hash cash), and it doesn't have any significant effect on the true cost of bitcoin, which is mainly due to proof of wasted value, much larger than the technical costs.

However, organizing transactions in several layers DOES have an effect: one gets hierarchies of power, and layers of delegated trust.  In other words, exactly how the modern financial system is layered, with different layers of trust and of power.  Decentralization is already gone, cheap transactions are not possible because they need to pay for proof of wasted value as a security, and now, permissionlessness will be the next thing that fades away from bitcoin, where we get complicated layers of power where Joe needs to ask permission to layer N to participate before he can transact.  His node in his basement was going to be the least of his worries !

TL;DR

bitcoin needs scarce and expensive transactions in the long run to keep financing his "remunerated hash cash" security.  It doesn't matter in how many layers these scarce transactions are distributed: they all need to be scarce so that people pay enough fees.
The techical costs of bitcoin (disk space, network access....) are minuscule as compared to the cost of using it (because of the need of having to pay for proof of wasted value).

==> this is in fact a fundamental thinking error.  The fact of splitting up the system in 2 layers that can accomplish transactions changes a priori ZILCH to the market pressure, which is fundamentally the "demand for transaction" and the "artificial or resource-limited scarcity" in front of it.

Greg is absolutely right that bitcoin's economical model is *fundamentally* flawed if its intend is to become a decentralized and fluid payment system (but maybe it is not flawed to become something else, like a speculative vehicle for financial institutions, or a reserve currency for sleazy business or the like).  I outlined this obvious flaw already several times, and most probably Greg with all his math knowledge, saw that easily too.  The very fact that bitcoin's security and consensus decision power depends on Proof of Work (which is in fact a proxy of "proof of wasted economic value") means that the bitcoin system, if it becomes valuable, has to waste a lot of value.   So, essentially, as a whole, bitcoin is a "zero sum game with a big value leak" at first sight: there's net value flowing out of bitcoin's into wasted heat.   That's not necessarily negative: in as much as bitcoin's system also *produces* economical value (for instance, by fluidizing economical interaction that wouldn't have taken place without it), the value creation of bitcoin can overcome its wasting.  For the moment, this is maybe only the case in dark markets where bitcoin did open economical opportunities that weren't possible in the classical fiat system, but right at this moment, my guess is that bitcoin is net wasting a lot of value.

This has to come from somewhere.   There are two sources of "taxes" that finance the wasting of resources:
- inflationary pressure
- fees

Up to now, and most probably in the coming decade, the main financing of the wasting in bitcoin has come from inflationary pressure: coin creation.   That's a pretty obvious and stable system.  But one of the cornerstones in the bitcoin belief system is that at a certain point, inflationary pressure should stop.  This is a fundamental problem in the system but it is so deeply grounded in bitcoin's belief system that it cannot be altered.

So the problem is: once there's no inflationary tax any more, who's going to pay for the waste ?

Answer: the transactions.

==> and this is where Greg's 2 layer model doesn't make any sense: the waste tax is going to be paid by all transactions.  Those on layer 1 and those on layer 2.  And in order for this tax to be sufficiently high, these transactions have to be sufficiently scarce.  If those on layer 2 are too cheap, then everybody will run to layer 2, and layer 1 will be left without "market pressure" and hence without fees.

It doesn't matter what mechanism you use to build layer 2 on top of layer 1.  In the end, transactions, whether they are on layer 2 or on layer 1, have to become scarce enough that people will be willing to pay fees to get them. 

If layer 2 has a natural dependency on layer 1, layer 2 will just be a "block chain magnifier" of some sort.  If layer 2 is unlimited and can live on a very small layer 1, then you get EXACTLY THE SAME effect as unlimited blocks.

There's no difference whether the transaction happens on layer 1 or layer 2: in the end, you need a transaction to be scarce enough so that people pay fees for it, that end up being wasted with proof of work.

Imagine that the LN works out such, that you can do 100 transactions on average on LN for one transaction on the block chain.   Well, in that case, economically, that LN system is equivalent to a block chain with 100 MB blocks and no second layer.  The fees will be the same, the total mining income (to be wasted on PoW) will be the same.  There's no difference.

Most probably, Greg realized this.  1 layer or 2 layers, it doesn't matter.  The problems are the same.  In the end, transactions need to pay for the waste in proof of work, which is the ultimate security of the bitcoin system (and THAT is the other fundamental flaw in bitcoin).  And you need scarcity of these transactions to establish a fee market, whether that market is essentially on layer 1 or layer 2 doesn't matter.  If transactions are too fluid and cheap, the system will crumble in any case.  So you CANNOT allow cheap and fluid transactions, even if they are only cheap and fluid on layer 2.  Because they would crash the market on layer 1, unless you make that technically not so, which means the scarcity on layer 1 folds over to layer 2, and we're back to square one.

So what could Greg still say after realizing that the fundamental problem in bitcoin he discovered (correctly), was in fact not solved at all with a 2 tier network ?   Well, he could mumble something that doesn't matter in all this: the very small RESOURCE waste of the block chain.  Yes, next to the HUGE on purpose waste on proof of waste, there's a small but real resource waste on hard disks networks and so on.  This is why he leveraged this importance of Joe's node in his basement.  While Joe cannot afford $2000,- for his useless node in his basement, bitcoin is wasting a billion dollars or so on proof of waste by a centralized cartel of miners (also due to a fundamental flaw in bitcoin: remunerated proof of waste with economies of scale), but it is Joe's waste that is going to be the culprit, and the need for a second layer.  That's how he can save his face.

This whole circus is in fact the result of a failed solution to a fundamental problem of bitcoin, and the fact that the proponent most probably realized that his solution wasn't a solution to that problem, and hence needed another argument.

No, it doesn't.
Decentralization is about decision power.  The only decision power in bitcoin is by proof of work.  Nodes have nothing to decide.  They can copy the block chain that mining pools make for them and find consensus on, or they can stop copying.  In the first case, they have to adopt whatever the protocol is that the mining pools found consensus on ; in the second case, they are not different than a switched-off node.

Joe's node in his basement has ZILCH to do with decentralization of the decisions in bitcoin.