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I have been following the FinCEN guidance from 2013, subsequent guidance documents and events and other regulatory actions worldwide, as part of my due diligence as an investor in XBT (Bitcoin), XMR (Monero) and NMC (Namecoin). I am not a lawyer.
I have to disagree with some of the comments in the OP, when it comes to the FinCEN guidance.
Pool Operators.
There is nothing in the guidance that say they are an MSB. At what point in the process are they accepting virtual currency from anyone? What they are doing is purchasing hashing power in exchange for virtual currency and then using the purchased hashing power to generate virtual currency. Cloud hashing is an entirely different situation, that falls more in the area of selling securities SEC not FinCEN in the US.
Wallet Servers / Exchanges
There are two different situations here:
1) If they accept deposits of virtual currency which the operator of the wallet or exchange then has control over, for example Coinbase, Poloniex etc. then they are MSBs.
2)If they are only providing access to the blockchain and the wallet operator does not have access to the private keys for example Blockchain.info, MyMonero.com then the case that they are MSBs becomes very thin since once could argue that the money transmission is actually been done by the customer. A similar case can be made for Dash masternodes as far as the assembling Coinjoin transactions part of what they do is concerned. Nevertheless this could be considered a “grey area”.
Tipping servers / Micro payment services.
These can be technically MSBs. The issue here is whether the amounts are so small as to trigger any AML/KNC requirements.
There is here a much more fundamental issue here: Is the virtual currency a decentralised virtual currency under the regulations? The presence of a pre-mine can make whomever controls the coins in the pre-mine an administrator and consequently an MSB. The coin is then considered a centralised virtual currency. This is how Ripple Labs was deemed an MSB. A similar situation can be created when a portion of the mining rewards is diverted for example for development under the control of a group of people, as is currently the case with Dash. Then there is the case of ninja-mines and insta mines. Are they effectively a pre-mine making the developers “administrators” under the regulations and therefore an MSB? There are coins that fall into the decentralised category, for example Bitcoin, there are other coins that fall into the centralised category for example: Ripple. The really interesting case is those coins that have elements of both decentralised and centralised for example: Dash.
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and in the meantime:  This works to back up your Bitcoins  |
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It is a terrible law because it effectively forces the exchange or wallet provider to hold reserves in USD to cover an XBT liability effectively shorting XBT. If XBT spikes then the exchange will fail. Coinbase did the only reasonable thing. This kind of law this is why it is so important to raise the 1MB blocksize limit since it demonstrates very well how off chain transactions using a system such as Coinbase are not a replacement for on chain transactions.
Edit 1: I would be very interesting if an exchange or wallet provider that does business in Wyoming were to fail and a client who had losses were to sue the state of Wyoming on the grounds that by requiring the exchange or wallet provider to hold reserves in USD rather the the currency the exchange or wallet provider was liable for they caused the failure of the exchange or wallet provider.
Edit 2: Just imagine if Japan had done something like that to MTGox.
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Risto, don't you think chances of Poloniex being involved in margin trading themselves is 'marginal' considering the regulatory framework they've to comply to? If you get caught with that, you'd have to close shop. Speaking of regulatory framework, the BitLicense is out, and this part stuck out at me: "No Licensee shall engage in, facilitate, or knowingly allow the transfer or transmission of Virtual Currency when such action will obfuscate or conceal the identity of an individual customer or counterparty." In other words, if they are using a mix-in value greater than 0 for individuals in the State of New York, might it be a problem for them? I don't really see it. If they are sending coins to you, then where those coins came from (which is what mixing does) is not obscuring the identify of you as their customer. They will have a record of sending coins to you, along with your KYC information. Should be good enough. To me that sentence prohibits allowing things like straw buyers. I don't know how it would be interpreted in practice though, that's one of the problems with writing regulations for technologies that are in a fluid state of development and not even understood by the people writing the regulations. I do not see mixin values being the issue here. What the MSB is required to do here is 1) Tell the recipient from whom the funds are coming from 2) Keep a record of the transaction including the recipient and sender. Of course an exchange can simply say that a customer can only withdraw from or deposit to an address under the customer's control. The solution is simple withdraw to a wallet under one's own control, use one's own wallet to receive and send XMR and stop using exchanges as banks. |
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Bandwidth has followed Nielsen's law http://www.nngroup.com/articles/law-of-bandwidth/ of 50% growth per year. If one starts with 1 MB at the start of 2009 then the equivalent amount in mid 2016 is 21 MB. What is needed is not just an increase to 20 MB but also an ongoing increase at a rate that is a significant fraction of 50%. I understand that Gavin was talking around 20% annual compound rate of increase. |
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The idea that one can push an infinite number of transactions through the Monero network is utter nonsense. Monero uses adaptive limits that limit the blocksize dynamically. This is explained in section 6.2 of the Cryptonote Whitepaper https://cryptonote.org/whitepaper.pdf. This means that there is no fixed maximum number of TPS that cannot be exceeded regardless of the market conditions. This is the critical difference with not just Bitcoin, but with Litecoin, Dodgecoin, Dash and many other alt-coins. |
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Hi Guys,i have a question, if our main exchanger Pole be attacked by an Hacker, many coins would in a evil hand, so do you Guys think that would be the end of monero?
This sounds like Bitcoin in 2011 and the MTGox hack. Bitcoin is alive; however MTGox is dead. |
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I think the correct term for Monero is not "infinite TPS" but "virtually infinite TPS", it can scale to infinity but it doesnt mean you can make an infinite number or even a ridiculously big number of transactions right now all of a sudden.
technically it cant scale to infinity at all, because that would require more energy than there is in an infinite number of universes. Its very frustrating how the word "infinite" is thrown around without any understanding of what it means and the implications of such. A more correct term would be "unbounded", or "unlimited", which suggest exactly what it is, there are no limits imposed by the protocol. Yes this is correct. The limits should be imposed by the market given what is practical using the technology of the day and not baked into the protocol. That is why adaptive limits that are market driven is the way to go here. In this fashion as the cost of data processing falls the TPS can increase while maintaining the same level of decentralization. |
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I'm not suggesting it should be crippled, merely that it can only live within its technological means due to its architecture at that moment in time. The architecture imposes its own limits because of the lack of available resources to perform better, or conversely, the resources available (or lack of) impose the limits onto Bitcoin. This doesn't cripple anything, because over time as the resources available increase (or efficiency increases), Bitcoin is able to take advantage of them.
The same is for any currency, be it Bitcoin, Nxt, and others, they are limited in operation by the efficiency of the resources demanded by the implementation, at that moment in time.
There is no way to work around the resource limits available at any one moment in time in a vertical manner, which is the problem here with these "high TPS currencies", be it bandwidth, processing, storage...you can only be as efficient as the most efficient available resources will allow...past that, you have to start chopping things out and reduce the work load.
I'm sure that VISA didn't have 1 person verifying and doing all those punch card transactions, they had many, so it didn't matter that the resources available to do it were extremely inefficient. Block chains are like that scenario, no matter how many nodes you have everyone of them is verifying the same data as everyone else, which is exactly the same (in terms of performance) as having just one verifying all the data.
Actually in the 1940's and up to the 1970's the primary methods of transactions were cash and other bearer instruments so nobody had to verify any ledger since there was no ledger to verify. It was simply too expensive to have even one entity doing the verification. With the more widespread availability of mainframe computers in the 1970's data processing costs came down and it became viable to have centralized ledgers so the widespread use of credit cards and in the 1990's debit cards became possible. Now as data processing costs have further come down it is becoming viable to have decentralized ledgers such as Bitcoin, Monero etc. I really must emphasize that a historical perspective over the last 50 years and going back 200 years or more is critical to properly understand this issue. |
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Ok, that is technological advancement, and the resource requirements at any moment in time may be less than they were before. I have little doubt that in 50 years time, my iWatch V10 can process 100k TPS with ease, but that is not the issue I was raising and your response also sidesteps away from your original statement which I countered.
My point was that as of today, it is not possible to achieve 100k TPS on a block chain, without using tricks and hacks, yet maintain the true nature of what crypto-currency is meant to be. The resources required to do that vertically is too great, in 10-20-50 years time it may not be the case, but everyone wants this now, not in 50 years.
Yes but one cannot justify crippling Bitcoin to the current technology for ever. Furthermore many of us are looking at Bitcoin for its future rather than present value. Even over the life of Bitcoin we have a significant example. The cost of sending 1MB of data at the start of 2009 is the same as sending 21 MB of data in mid 2016. It is called Nielsen's Law http://www.nngroup.com/articles/law-of-bandwidth/To come to the VISA example should credit cards not have been launched in the 1940's because it was not possible to scale to the levels of the VISA network of today with the punch card and tabulating machine technology of the day? Edit: One the subject of the iWatch V10 it could easily process 100k TPS or more in 50 years, but only the 100k TPS that is approved by the censor board at Apple. This is because of the DRM in the device. |
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Please elaborate.
100 bytes of data will always be 100 bytes of data, regardless of what technological advancements are made in storing, transmitting it, or processing it. All you can hope for is that these methods of managing progress closer to the optimal over time.
The ultimate "fixed amount of resources" required to process that 100 bytes in any manner are governed by the laws of thermodynamics. So ultimately, there is a fixed amount of resource required to perform an action on that 100 bytes, and it stays in place forever, we just aren't anywhere near it.
The critical question is that amount of resources that are consumed rather than the amount of data that is processed. Take for example the first hard drive developed by IBM in 1956. http://www.extremetech.com/computing/90156-the-history-of-computer-storage-slideshow/6 The first hard disk drive shipped in 1956 with the IBM 305 RAMAC computer. The computer itself was vast — about 30 feet by 50 feet (9m x 15m) — and the storage device itself, the very first commercial hard disk drive, was a 1.5-meter cube. The drive had 50 24-inch platters and a total capacity of 5 million characters (5MB), or the equivalent of 64,000 punchcards. Just two read/write heads were used to access the entire array of platters. The platters only spun at 1200 RPM, too, which meant the average access time was very slow — around one second. Now compare this with a modern 1TB SSD drive. The latter can handle 200,000 times as much data while using a minuscule fraction of the resources. The math is actually very simple if the exponential rate of data growth is less than the exponential decline on the resources required to handle say 100 bytes of data, then the amount of resources is actually falling at an exponential rate. Edit 1: I was born in 1957 so I have experienced this relationship between data and resources for my entire life. Edit 2: The 5MB hard drive in 1956 was far less sustainable and far more centralizing than the 1TB SSD is today. |
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I know that 100,000 TPS sounds impossible, but so does an "automatic blockchain that pays for its own development with its profits"
100,000 TPS isn't impossible, its just impossible to do on a block chain in a true P2P decentralized manner without some form of centralization, or "magic trick". It seems to me BitShares may be doing both as per these 2 quotes in the link you provided. "...assuming that all the witness nodes have internet connections capable..." so it is indeed confined/centralized to a set of nodes and "...with an average transaction size of about 100 bytes." The latter concerns me, the absolute minimum core basic requirements of a secure verifiable transaction are a sender, a receiver, a value and a signature. Just the signature alone with a 256bit key is in the order of 70 bytes, sender pubkey is 32, receiver RIPEMD160 address is 20, and a value is 8 which is a total of 130 bytes with the bare minimum. If the key space is reduced to 160bit, then it will just fit in 100 bytes, but with a huge loss of security. I'm assuming that to achieve this 100,000 TPS something similar to this happens: Transactions are filtered through these "witness nodes" and I send 100 BTS to A. If within a certain time frame, A moves it to B, and B to C, etc etc that TX isn't recorded on the block chain until such a time that it lives at X for longer than a specified period of time. The 100 BTS movements between A -> B-> C....X are not recorded in full on the block chain (if at all), only the transaction A -> X Taking that approach could indeed give you very high TX throughput, but if that is the method used (or something similar) it's a total hack in my opinion and may well lead to issues later. Of course I'm speculating as I don't have the time to research this properly, so if you could provide some links/docs/something that details how this works rather than me hunting, I'd appreciate it. I stand by the fact that it is not possible to do, on a block chain, while recording all transactions to said chain, and allow any node to be a full node without special requirements. Anyway, I'm getting off topic. 180,000 TPS might sound great to some, but Monero destroys BitShares in this arena with the best TPS ceiling of "infinity," so there's that option too of course. In other words, the bitcoin community has infinitely more options than they are currently looking at, and I am just trying to show them that the state of crypto circa 2015 is "not your dad's crypto"
If Monero really has stated "infinity" as their TPS limit, then someone there really needs a reality check! Regardless of what is possible on a block chain or not, the laws of thermodynamics will step in and dispatch a tough and thorough spanking waaaaay before "infinity" is even close  IMO the only way to achieve anything near a sustainable VISA level transaction throughput, stay in keeping with real decentralization (no special node sub-sets that are selected or voted), not perform any "tricks" which may compromise security, AND have all transactions on a public ledger is to scale horizontally, and NOT vertically! Chain based ledgers can't scale vertically past a certain point, no matter how big your bag of tricks, nor your processing setup, horizontal is the only way and by that I mean a distributed and partitioned ledger of the ilk that we are doing over here. No one has even attempted to do this, because its assumed impossible or too difficult, and if it is so be it, at least it was attempted. However it's not impossible, we've ran it in many betas now and its is very close to being ready for use. Heh thanks but no thanks, I've ploughed my life and everything I have into eMunie and I'm not jumping ship, ever EDIT ---- So I did some more digging and came across this: "...the idea being that if transactions have their signatures validated as they propagate across the network, a witness can have any number of computers surrounding him that validates all of these signatures, and then he gets a list of transactions and puts them in a block, and he doesn’t have to check those signatures himself, because he has got all these other nodes surrounding him that are dividing up the task." Can someone clarify this? Witness nodes, which build the blocks DO NOT check transaction signatures themselves, but rely on 3rd parties (which may be dishonest) to inform them that the signature for said transactions validate? How does a witness node know if a 3rd party is providing false information regarding a transaction, claiming that it contains a valid signature when it may not? If this happens, how then does the network resolve it, someone, somewhere must be doing a full validation of those 100,000 TPS to ensure that all transactions really are legitimate. The critical error made in this post is the assumption that storing, processing or transmitting a given amount of data will take a fixed amount of resources for ever. The history of technology over that last 200 years has already proven this assumption to be completely wrong. |
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The key here is how is T set. If T is fixed then 2T becomes the hard limit and the problem remains. If T is set based on an some average of previously mined blocks then this may address the problem
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The key to decentralization in Bitcoin is to make sure that the enthusiast / hobbyist can run a full Bitcoin node using hardware and software that person controls.
Yes, which becomes less and less possible the bigger the blockchain becomes. So why jump straight to a 20-fold increase in potential blockchain size?
Bitcoin easily beat a credit card or debit card for transaction where 1) The parties are not in each other's presence (so cash is not an option) 2) Either the sender cannot get a credit / debit card or the reciver does not have a merchant account. This is a huge market that furthermore cannot be served by the likes of Coinbase. Those transactions have to be on the blockchain.
Nope, not in terms of speed. There's no faster payment method than swiping a credit card. Unless you decrease block lengths, bitcoin transactions will not catch up. I disagree the fastest in person payment method is cash. Chip and pin credit card transactions and debit card transactions are way slower. Tap credit card payment methods approach cash in speed but then the merchant accepts the "stolen credit card risk" which is worse than a 0 confirmation XBT transaction. Have you ever been to a restaurant with a group of say 20 people are paying the bill with debit? I have and it can easily take 20 min to an hour. Enough for up to six XBT confirmations on the blockchain. |
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Does it now make sense why Gavin picked 20 MB? He did the math, something the proponents of keeping the 1 MB blocksize limit have simply chosen not to do.
Can you do the math on how much bigger the already bloated blockchain will become? Its size is already impractical for a new user who just wants to use BTC to get around having to use PayPal, Western Union etc. You will be encouraging reliance on centralization if you increase the limit. Lets face it: bitcoin will never come close to being as fast or convenient as a credit or debit card. There are some niches where it will continue to be an improvement upon pre-existing payment methods, but making the blockchain potentially 20x larger in size is just dumb. Why not a 5-fold increase to 5mb first instead of going straight for the 20x increase? A 5-fold increase would have been appropriate in 2013. One of the reasons that people use SPV Bitcoin wallets is because many people use mobile devices that are so heavily infected with DRM that one cannot run a full Bitcoin client. IOS being the perfect example, since Apple uses DRM to censor Bitcoin until early 2014. The device may be perfectly capable and have the CPU, memory, storage bandwith etc to run Bitcoin but the DRM prevents it. This is a serious centralization problem but it has nothing to do blocksize limits. For example one cannot run a full Bitcoin client on Windows 8.1 RT regardless of the capabilities of the device or the blocksize because the DRM in the device censors it. The key to decentralization in Bitcoin is to make sure that the enthusiast / hobbyist can run a full Bitcoin node using hardware and software that person controls. Bitcoin easily beat a credit card or debit card for transaction where 1) The parties are not in each other's presence (so cash is not an option) 2) Either the sender cannot get a credit / debit card or the receiver does not have a merchant account. This is a huge market that furthermore cannot be served by the likes of Coinbase. Those transactions have to be on the blockchain. Edit: Storage is even less of an issue than bandwidth. My .bitcoin directory is 37GB. 20x this becomes 740 GB. One can now easily purchase 4TB and 8TB drives. In the horizon there are 10TB+ SSD drives etc. It is the same issue as with bandwidth. One simple cannot in perpetuity constrain Bitcoin to current technology. |
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I believe jgarzik the OP of the thread is now on the side of keeping the 1 MB limit. He was not happy when I dug up his thread back in 2013. |
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My proposal: Err on the side of decentralization.
That's not a proposal but a stance, we need more ideas. I think we should do the 8mb fork and use the time before that gets full to figure out and find a new solution to the problem. The problem with the centralization argument is that that the proponents of keeping the 1 MB blocksize limit are ignoring Nielsen's Law. http://www.nngroup.com/articles/law-of-bandwidth/ Here is that math: Internet bandwidth grows at an annualized rate of 50% a year. Now start with 1MBit/s in 2009 and figure out what the equivalent amount of bandwidth would be in mid 2016 when the proposed hard fork is supposed to take place. The answer is 20.9 MBit/s. So a 1MB blocksize limit at the start of 2009 is equivalent to 20.9 MB blocksize limit in mid 2016. Does it now make sense why Gavin picked 20 MB? He did the math, something the proponents of keeping the 1 MB blocksize limit have simply chosen not to do. |
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Bitcoin is nearly all-but-dead to the general public.
If you want to kill its chances of mainstream adoption entirely, then by all means, please proceed with the fork.
It was never really alive in the first place. Do you seriously believe that VISA could run its payment network using the punch card and tabulating machine technology of the 1930's and 1940's when credit cards first came out? Keeping the 1 MB blocksize limit is exactly the same: Assuming the current costs for bandwidth, CPU, memory, computer storage etc. will stay the same for ever. |
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It has been around for slightly over a year and trades on Poloniex. https://www.poloniex.com/ If one wants a POW coin that does not have the fixed blocksize issue then the Cryptonote https://cryptonote.org/whitepaper.pdf coins are the way to go and Monero is the strongest and most liquid. It goes without saying that it is imperative to do one's research first. Thanks, I don't visit the altcoin section much so I don't really know anything about it. I'm looking for something stable to transfer a percentage of my coins into until the current drama shakes out. I really just want something that holds its value well relative to btc. I'll check it out. You are very welcome. Ironically I found out about XMR in 2014 while researching the 1 MB blocksize limit. |
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It has been around for slightly over a year and trades on Poloniex. https://www.poloniex.com/ If one wants a POW coin that does not have the fixed blocksize issue then the Cryptonote https://cryptonote.org/whitepaper.pdf coins are the way to go and Monero is the strongest and most liquid. It goes without saying that it is imperative to do one's research first. Edit: There is a strong community and the start of an economy around Monero. There is even now a service https://xmr.to/ that allows for one to spend XMR on many sites that accept XBT. It also trades on https://shapeshift.io/ |
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