Of course they can if they configure their wallet to connect directly to a miner pool node !   And do you think that a merchant or an exchange is going to stop its business for a day, while the competition accepts the new rules on the chain, and gets its node and wallet up and running again ?

Suppose that miners have announced that you should configure your node to 1.2 MB, because otherwise, you won't be able to see their chain.  Now, suppose that you need to send or receive 100 BTC for an important deal.  What are you going to do ?  Stop your node ?  Or accept their change ?  Suppose you are a merchant.  You simply want to be able to get bitcoins, and to send them for conversion.  You don't care about the technicalities, you simply want to use it.  What are you going to do ?  Connect to a stopped node, or connect to something that sees the current chain and accepts transactions ?

Suppose that you are an exchange.  Are you going to block withdrawals and deposits from customers, or are you going to update your node to suit the new chain ?  

As you say, the miners can wait to spend, they even have to wait to spend !  They just keep on mining the same chain, and you can chose to join them, and see your funds and be able to transact, or simply do nothing.  You upgrade, you are online again with bitcoin ; you don't upgrade, you are off the chain and off bitcoin.  What are you going to do ?

As a user, you are rather agnostic, and just want to use bitcoin.  As a full node owner, you can chose to have your node halted or to agree with the miner's protocol.  But by doing so, you are just going to get a user to ignore you, because the user wants a working chain to be able to transact on.


Of course it will be spendable.  Nobody else can in any case spend what so ever during all of this time.  All those not accepting the chain are "taken hostage" too.  So who's going to give in first ?  The mining pools, that eventually would like to sell their coins, or the nodes that serve the users, that cannot do anything on the network any more until they accept the new chain ? 

Remember that most users don't have full nodes.  There are millions of users, and only a few thousand of full nodes.  Users have wallets that connect to a reference node - this could just as well be a miner node.

These orphans have nothing to do with full nodes.  They have to do with the propagation delay of blocks amongst mining pools.
In other words, if, say, an orphaned block appears on average once or twice a week, say about every 400 blocks, it means that it takes on average 600 seconds / 400 blocks = 1.5 seconds for mined blocks to propagate to all miner pools
(rough estimation).

It means that within 1.5 seconds, a miner pool has received a valid block, has verified it, and starts mining a new block on top of it.  So one out of 400 times, a pool has found, by coincidence, a competing block, before realizing that a competitor was faster.

(BTW, this also indicates why miners are most probably directly connected: they could never have such a low orphaning rate if the 1MB blocks propagated through the P2P network: the delays between sending a block and having all other miners stop their work and start mining on top of yours would be too long, and would cause much more orphaning).

Well, the first thing one should realize is that in block chain land, *everything* is decided by an interaction between two classes of entities in the eco system:
- the "chain builders" on one hand
- the "users" on the other hand: the users are the people that are willing to OFFER VALUE FOR TOKENS.

In most cases, the chain builders get "rewards" for building the chain in the form of tokens on the chain they are building.  So in the end, the chain builders usually want to convert those tokens to value, by dumping them on the "users", who, for several reasons, desire to possess tokens on the chain at hand ; so to a certain extend, chain builders are sensitive to the willingness of users to pay for their chain.  On the other hand, users need the chain builders to be able to use the tokens they acquired, and to be able to sell them.

This is about the fundamental relationship between the entities in the crypto eco system.

So who's the boss ?  As we saw, both users and chain builders need one another: chain builders need users to buy their tokens ; users need chain builders to transact their tokens.  

As such:
a) users are the boss, because they are free not to buy chain builder's tokens
b) chain builders are the boss, because they can fix the rules by which users can access their possessions

So new buyers are the boss of the chain builders because they pay them, or not, and chain builders are the boss over stake holders because they give them access to their stake, or not.  But new buyers become stake holders.

As usual in such an eco-system, those that are more divided, are less powerful than those that are in agreement.

The most important point is however, this:
If chain builders are divided, then several chains can be built.   If chain builders are in agreement, then only one single chain is built.

If there is only one chain out there, and nobody else is building a chain, then the only option is to accept that chain as the ruling chain, or to leave the system (not buy any coins, and sell one's coins according to the requirements of the chain builders).  As such, chain builders in agreement have total technical control over all of the rules of the system, but they still need to seduce buyers.

So the only way to "attack" chain builders that are in agreement, apart from leaving the system, is:

a) to divide them or
b) to build other chains "oneself".

a) means: to give better terms to those going in your direction, than to what they are agreeing upon ; but most of the time, you would like them to have WORSE terms (lower fees, say) and less power.  So that's not going to work.

b) build another chain yourself remains.

This could be done in two ways:
a) change the PoW algorithm, making the miner's installations useless
b) change to a PoS style algorithm

In both cases, however, you are making a competing chain with the original one, and the question is: how will the users vote with their money ?  Users have equal amounts of coins on both chains, and will try to "dump" the chain of which they expect not to win, and will try to keep their coins on the chain that they expect to win in the market.  --> if you make a mistake, you lose all of your stake !

And this is where things get nasty.  How do you know that most users will prefer the new chain, and not stick to the old chain, or think that most users will stick to the old chain ?

After all, chances are that the old chain is considered "true bitcoin" (nothing changes !) and the new chain an alt coin.  It can even be that, if this is successful, did one open the flood gates, because what stops yet another entity from proposing YET ANOTHER "other chain" ?  Once you've successfully forked off, why not fork off N more times ?

It could work.  With ETH, it sort of worked.  The old chain, ETC, lived on, but an economic majority + devs went to the new chain (maybe also because the name was, remarkably, put on the new chain).  But ETH didn't have a "first mover brand name".

So, until one decides to divide the miners, or have the miners agree on a change, the option of making a totally new chain with another PoW or PoS, is going to be a most risky operation without any guarantee.

Well, if full-scale quantum computers are used in mining, they would simply "up" the difficulty, in the same way that the introduction of ASICS did.  You would have miners with quantum computers "competing" for blocks and all the rest left behind, like the CPU miners were left behind by ASIC miners.

Of course, the problem with PoW as a cryptographic security mechanism is that it is a quite ridiculous "security" in the sense that the work to be done by an attacker is comparable to the work done by the "good guys" ; and in the case of technological evolution, the work to be done by an attacker is MUCH LESS than the total work done by all the good guys (work done as in economic cost of work done).
For instance, with ASIC miners, it is very easy to overdo all the work that miners did the first few years of bitcoin, for much less cost than these miners did spend on it.
So if ever there is a quantum computer that can mine, miners should use it directly, and the "old part of the chain" will be easy to redo with the quantum computer at hand ; but competition between quantum computers will still make the "head" of the chain ; like ASICS now make the head of the chain, but the old tail is relatively easy to do over.

=> but it is exactly like that.

(because there is no OTHER tower)

All of the arguments that "nodes do matter" have the logical fallacy of taking the "intended way the network SHOULD work" as the "actually technically resulting technical operation".

This is the fallacy that is similar to:
- you've build a rocket to go to the moon with propellers, but propellers don't work in space !
- Of course propellers work in space !
- No, they don't.  They need air to function and in space, there is no air.
- But propellers obviously work in space, because we designed a rocket to go to the moon, and it has propellers !  Hence, propellers work in space, Q.E.D.

The argument here is that "because nodes SHOULD (that is: "we desire that", like we desire that our rocket flies to the moon) keep the miners in check, well, nodes ARE keeping the miners in check".

They don't.  I'll show you:


=> my desire


That block doesn't get set in stone because a majority of nodes copy it.  It will get set in stone if the following miner pools DECIDE TO MINE on top of it.  And they don't need the network to get their block ; they get it from the miner pool that mined it.  Directly.  Because they are in a hurry.  They don't WAIT for the P2P network to "approve it", because they would be wasting their time and hash rate in the mean time.


==> the only way a block becomes accepted, locked and immutable is because other miners mine their blocks on top of it.  Whether remote nodes download it or not, doesn't matter in this case.


==> what "orphaning effect" ?  Orphaning occurs when OTHER MINERS decide to mine upon ANOTHER block than the orphaned block.  If miners decided to mine upon block A, with blocks B, C, D and E, there simply isn't any other set of blocks around that a P2P node could "prefer".  Suppose that a majority of P2P nodes decides to "orphan" block B.  But the miners have been building blocks C, D and E on top of B.  What happens ?

Well, these nodes stop.  They stop at block A.  And they can't find any other block that pleases them.  B wasn't according to their taste.  But there's NO OTHER BLOCK around that is built upon A.  Nobody has ever made a block on top of A with a higher PoW than the chain B,C,D,E.  In fact, nobody ever made a block on top of A.

So what is the difference between our full node "not accepting" block B, and our full node just being switched off ?
What's the "orphan effect" of switching off your full node ?


No.  They are people that don't confuse "desires" with logical consequences.  If miners don't make another block than block B, you can chose between accepting block B, whatever miners did with it, or stop your node.  What else can you do, with your full node that doesn't like block B ?

Let us take a very simple example.  Let us assume that the miners, collectively, decide to make bigger blocks.  From block B onward, they make blocks of 1.2 MB.  All miners agree (to show you that it are the MINERS that decide).  They build a chain in which block B is 1.2 MB.  Nobody builds a chain with an alternative B block of only 1 MB.
99% of nodes refuse.  They don't accept a block of 1 MB.  But miners happily continue building blocks.  What now ?


But there is no "majority rule" of nodes.  The reason why Satoshi introduced vote per hashrate, was exactly to nullify every effect of "majority of nodes".  As miner pools are directly connected between themselves (for reasons of not wasting hash rate), they don't need the P2P network to get a block from another miner.

So all non-mining nodes can do, is copy the one and unique chain that miners make.  If they like it, they keep it ; if they don't like it, they stop.

Well, is the price of bitcoin stable or not, the last few years ?  If it were to be a currency, then it should be some reliable form of unit of account.  It clearly isn't, its price is immensely variable, so that was "the proof of the pudding", that velocity is not compensating anything.

Ok, your answer will be that the price of bitcoin is NOT made by the demand one has for bitcoin to "buy stuff", but rather mainly for speculative reasons - but that's my point exactly: speculative reasons, so expectation of (significant) rise !  (severe deflation)


Again, *my decision to spend* is essentially what determines velocity ; not "how fast the interaction is processed/confirmed/...." unless it is this which hinders my possibility of spending.  In other words, suppose I do a normal transaction on the bitcoin chain, and it takes 20 minutes to get confirmed, say.  Was the receiver WAITING for these 20 minutes in order to spend this coin again ?  And would he spend it faster if it was only taking 5 minutes ? 

I don't think so.

As such, this "time of confirmation" is NOT what is limiting velocity.

This used to be the case, but on several exchanges, you can buy directly several alt coins with fiat, and there are several exchange pairs that do not go over bitcoin (mostly between ETH and ether application tokens).  In other words - apart from the psychological impact of course - if bitcoin stopped working, this wouldn't impact several of the bigger alt coins.
For instance, on Kraken, you can buy/sell LTC, DASH, ETC, ETH, GNO, ICN, MLN, REP, XLM, XMR and ZEC directly with USD/EUR.

Yes, that's on the level of the daily bitcoin (speculative) volume.  (well, WAS because now this volume is 5 times higher)

In other words, that's not why people use bitcoin mainly, and it is not what drives its price.

Well, it isn't.  PoW is a very *insecure* and wasteful form of cryptographic security.  Cryptographic security is normally based upon the asymmetry between the adversary's effort needed to crack the system, and the effort needed by the good guy to set up the system.  Encrypting a disk with AES-256 costs you maybe half a cent, cracking it would not even be possible with trillions of dollars.

Now, the PoW security of bitcoin is ridiculously bad in that respect: you need to WASTE AS MUCH effort as "good guy" as the effort it would cost an attacker.  Instead of having an insane asymmetry between setting up and cracking, with PoW, both are the same !  This is extremely LOUSY security which is extremely wasteful.  So, no, it is not "the most secure design" AT ALL.  You can hardly do worse than PoW security.  It is also not censorship resistant, when mining gets centralized, and mining GETS centralized because of economies of scale, which are unavoidable with such a bad security scheme. 

Now, it is true that the wasteful PoW system as it is now, is "good enough", but there are clearly better schemes around, and proof of stake systems can provide for smarter cryptographic security without all that wasting.


Of course not.  Because PoW competition is relative.  It is a winner-takes-all scheme.  This is exactly what happened with the ASIC transition: technology improved a lot, and centralized the competition instead of decentralizing it.

But the worse of all is inherent to bitcoin's "lottery" design: the fact that mutualizing lottery risk is beneficial, makes that pools are a natural happening, in the same way that insurance is a natural phenomenon when random gains and losses occur.  So the fact that the PoW lottery is a winner-takes-all lottery makes that we have an unavoidable centralization of the mining towards pools, which group together the relatively most successful mining technology industries into an oligarchy of highly invested power structures.

This is not an "unfortunate temporary feat".  It is inherent in bitcoin's design: make a costly, technology and electricity intensive winner-takes-all lottery and you end up like this, in the same way that there are only a few centralized high-performance processor manufacturers (intel and amd, say), and only a few centralized high-performance memory manufacturers in the world, because there too, it is a high-investment winner-takes all environment where economies of scale matter.


I don't see how you can claim that.  There are a few years of difference in age between bitcoin and alt coins, and wind back bitcoin 3 or 4 years, and it was more "untested" than certain altcoins are today.  This difference of a few years will fade away as time passes by.  Between a 6 year old system and a 2 year old system, there's a big difference.  Between a 20 year old system and a 16 year old system, what's the advantage of the oldest one ?



Well, first of all, the fiat system didn't have a problem back then: the financial world had a problem with wild speculation on "empty" complex derivatives and over-investment in speculative assets that crashed down because of no content.  Seems that Satoshi designed himself a highly speculative asset too.  He based the economic model of his "currency" on some misguided theories about sound money, and this found some resonance in believers of these theories (I was part of them).  I neglected warnings of deflationary spirals. 


The "get rich quickers" are the NORMAL public of deflationary speculative assets.  You do not get "get rich quickers" in fiat, because fiat is slightly inflationary *especially to avoid that* ; but this feature was taken as a conspirational attack on people's assets by the designers of deflationary currencies - now we see why that was an error (at least, if the goal was to design a currency - if the goal was to design something akin to the "complex derivatives" that caused the crash in 2008, well, then it is succeeding very well).

If you need "true believers to come" for the system to work as pretended, then you know that the thing is not going to work as intended.  But it is working.  But as it was designed, not as it was pretended.  It is not a currency, it is a speculative asset, like these complex derivatives.

As I said elsewhere, this is difficult to maintain when smart money enters the scene, because the obvious gains (much higher than on normal financial markets) that would be there to grab are too easy.  There can simply not be an asset of which there is a steady price rise for years at rates that out-paces financial markets and of which this steady rise would be easily predictable.  No financial institution would miss that opportunity.

This is actually a well-sustained myth.  Do you think that your i-phone needs to spend $6 million a day on electricity to keep its data cryptographically safe ?  No, it uses smart cryptography.

The problem with PoW "cryptographic protection" is that it is about the silliest cryptographic security that one can think off.  Normally, cryptographic security resides in the HUGE amount of work and costs that an attacker needs to perform, as compared to the very light and simple calculation that the "good guy" has to do.  Signing a message cryptographically is easy ; faking a signature is very difficult.  Encrypting and decrypting a disk with a password/key is easy ; breaking it without the key is so difficult that it is essentially impossible.

But with PoW, the effort needed by the attacker is EQUAL to the effort provided by the good guy.   There is no asymmetry !  This is why this "security" is so wasteful and expensive: there is no asymmetry between the attacker and the good guy !  If you want the attacker to waste 6 million a day before being able to crack your system YOU have to waste also 6 million a day !

Compare this to encrypting your i-phone: it costs you maybe half a cent in electricity to encrypt it ; but even billions of $$ wouldn't be sufficient to crack it.

There is no fundamental difference between bitcoin and "alt coins".  All these are highly speculative assets, and in as much as the market becomes efficient, their evolution will be entirely unpredictable and not understandable.   Don't make a mistake, bitcoin is in the same boat.  From the moment that big smart money enters the scene, it is not bound to emotional attachment, and optimizes the greater-fool game.  In the same way as in the complex derivatives market, towards which the crypto scene is evolving, ideally nothing is predictable.  When you are sure it will go up, it will come down, and vice versa.  Because otherwise, there was an opportunity that smart money would have missed, which is against the hypothesis of it being smart.

This is nothing else but the "efficient market hypothesis": all there is to know is already in the price (except for inside knowledge).

I think the market is not there yet.  There is still too much asymmetry between, for instance, bitcoin, and all the rest, which makes things still somewhat previsible.  When you are sure that bitcoin will "go to the moon", for sure, it will crash.  When you are sure that altcoins will take over, for sure they will retract.  Until all of this becomes perfectly chaotic (except maybe for some insiders).

It is very simple: if smart money were 100% convinced that bitcoin is going to, say, $500 000 in a few years, then it wouldn't miss the opportunity in flowing massively in bitcoin.   To the claim that "no, they are misleading you with going to alt coins", the answer is: this is impossible because of the tragedy of the commons.  The smart money that would pump alt coins "to mislead you" would be losing out to the smart money that would go early into bitcoin.  There is no "single boss" in smart money.  So if smart money is convinced that bitcoin goes to $500 000 in a few years, its current price would already tend quickly to $500 000 because they would out-race one another to get in early and rip off one another.
This doesn't mean that bitcoin won't go to $500 000.-, but if smart money cannot know, you can't, either.

BTW, on the 5th of mai, bitcoin's market cap lost about $2 billion too.  That's not a problem for highly speculative gamblers' tokens.

There do not need to be "old fiats", because very long time frames are not what a currency is for.  A currency serves to fluidize economic interaction, and those interactions are never century-long ; even decade-long economic interactions are rather rare.  As such, a currency needs to be as speculation-free as can be, because it needs to be a unit of account.  It is true that very often, state issued money has been corrupted by political interference.  But currencies have rarely be highly speculative assets, simply because you cannot use them reliably for commercial interaction.


There could have been more or less automatic systems.  For instance, a slow, steady increase in difficulty would provide an upper boundary for its value, guaranteeing the one writing out a contract in BTC that he will not have to pay a fortune when he intended to pay a normal sum ; simply because if you have a given difficulty, people will never accept coins that would cost more than the economic cost of computing to make new ones.  

You are, however, perfectly right that "no-one joined bitcoin for that", because no-one joined bitcoin to have a currency.  Everybody joined it to play a greater-fool game and to "earn money with it".  This is why I say that bitcoin is designed to be a highly speculative asset, and not a currency.  As a speculative asset, it functions very well.  Its price is highly unstable.  If you can earn (a lot of) money with it and if that is the main drive to acquire it and to sell it, it is not a currency.

Indeed, bitcoin can very well stay what it is ; there will be a natural market limiting transactions to those that are worth it within the space that is allocated on its block chain.  The only thing that this is harming, is the fundamental belief system that needs to propagate the myth that bitcoin is going to be "the world's currency".  As long as people are somehow *believing* that, they can make silly projections of like "hell, if all fiat is going to be in bitcoin, and I'm holding 20 bitcoin, I'm holding a millionth's worth of the world's cash !".

So there needs to be sufficient technobabble that can make it *credible* that bitcoin is going to be the world's cash even though it won't ever.  There needs to be a technological projection that bitcoin COULD eventually handle the world's transactions, if that is needed to have sufficient belief in it to keep the *speculation* coming ; even if the true usage of bitcoin is speculation, and that this speculation needs only a few MB of transaction bloc size ; the technological adaptation to the real usage (shifting coins between speculator clearing houses: exchanges) would kill the myth that keeps the speculation going.   My stake is that that is what the LN is about.

As to the question on whether it makes sense for bitcoin to be a "sleazy big business reserve currency", I have to say I don't know.  This would be the case if bitcoin were the absolute monopolist in cryptoland, which it has been for 8 years, but which is seriously put in doubt with the recent fall in market share - although this has to be confirmed long term.  In speculation land, I don't see how one asset can be the obvious undisputed monopolist leader, because that would be in contradiction with the efficient market hypothesis.

Indeed, it took me some time to realize that, but the basic religion of bitcoin, which is deflation, is what is making it impossible for this thing to ever become a widely accepted currency.  The seigniorage of the early adopters is so tremendiously large that this is never socially acceptable, and moreover the deflationary spiral in which it is falling (on purpose), is turning this in a very highly speculative asset.  That said, without this, nobody would ever have heard of it because one wouldn't have the starry-eyed dream of getting rich quickly without it.  So probably Satoshi had no choice but to make a would-be currency that turns into a speculative asset and leaves its "universal currency" dream behind it, on the head of the useful idiots that got it running.

I think this is a cause of the alt coin rise.  To hedge against bitcoin monopoly risk, now that it has a very centralized power structure.

Interest is essentially the price of trust and liquidity (which is very similar !).

Why do I need a "loan" ?  What is a loan in fact ?  It is the exchange of a promise of mine against "money", which I will use to buy something ; say, a car.  Now why would the car salesman not accept my promise, but accept money ?  Because the car salesman has more trust in the money system than in me ; which indirectly means, that he has more trust in the issuer of the money (and in all people trusting this), than in me directly.  Note that the car salesman can perfectly accept my own promise, and doesn't need me to go getting a loan !  If I buy a car on credit directly with the car salesman, I have in fact short-circuited the lending circuit of money.  But in many cases, I need money and I can't buy it with my promise directly, because my promise is trusted less than money from a bank.

When I exchange a promise (to pay back) against money, I exchange a "low value trust" asset (my promise) against a "high value trust" asset (money).   The interest is the price I have to pay to the detainer of "trust" to use his trust.  His trusted issuing of money has more trust (and hence liquidity - no discussions to be had, everybody accepts it) than my issuing of promises ; so me exchanging my promise for his money is what I need to pay with interest.  

The free market sets this interest rate.  In as much as I think that in the end, his trust is over-rated, and the car salesman will accept my promise directly (direct credit with the car salesman !), I don't take his high-interest loan.  In as much as I really depend on his trusted money and nobody accepts my promises directly, I'm obliged to accept high interest.

In fact, the whole fiat system is based upon a layered system of trust like this, where money is issued on a higher layer (central bank, say) is issued against promises of higher quality down to promises issued by individuals against loans.

Why wouldn't he ?  You're being his proxy server, taking some load off his infrastructure, so of course he likes you to be his proxy server full node.

People are finally getting that, as Satoshi said already in 2008, "only people trying to make new coins need to run full nodes", and that full nodes that do not mine have almost no utility.  In fact, they have one, important, utility, and that is for its owner: 
1) the owner can verify for himself whether the miners have decided to change the protocol or not
2) the owner has extra privacy and security, because he doesn't need to rely on a third party full node to verify his transactions, and the transactions he sends out could come from just any light wallet connected to his node, so he has "plausible deniability" for his transaction.