What Bitcoin is actually designed for vs Gavin & Theymos vision for scalability

[r0ach]

Everybody already knows this, but in case some random noob reads the post, Bitcoin is not designed to facilitate micro-transactions.  Yea, you can do it right now, but not in a mature network.  The design of Bitcoin is most coherently designed to be used as a checkbook and/or savings account in the modern world.  To get into micro-transactions, you would to fork the protocol to something like Bitcoin NG, which would have it's own pros and cons, or use a second tier network that integrates with Bitcoin, such as Lightning Network, but there will probably be others.

In terms of designing network variables for what we currently have, the maximum block size variable is either the least understood, or most propagandized with variable to create confusion and gridlock on purpose, cointelpro-style, take your pick.  People love to try and make the claim that huge block sizes will destroy the fee market and reduce mining incentives to nothing.  This is probably the biggest lie ever told in Bitcoin.  

It doesn't matter if the block size is infinite, miners are only passing on transactions with which they can keep themselves afloat with and profit.  The fee doesn't magically decrease to nothing just because the network theoretically can pass on far more transactions.  The only purpose of the maximum block size variable is to prevent monopoly formation by other miners not being able to keep up with infrastructure demands to pass on blocks.

If you accept as fact that Bitcoin is not designed for micro-transactions, and agree on the above, main, functional purpose of the max block size variable, it's much easier to determine ballpark figures for what this should be.  It is insanely clear that Bitcoin will likely have a large glass ceiling, just like gold does, unless on-chain transaction capability (as opposed to coinbase IOUs) is high enough to prevent fractional reserve while being used for it's intended purpose - a checking account for high dollar transactions.

In my quote below, you can see why gold has a glass ceiling, why Bitcoin has a glass ceiling, and how to fix the Bitcoin glass ceiling:

Gold is also money, yet it's inherent high friction in use and lack of granularity means that nobody actually uses it for anything.  It's just stuffed into bank vaults as a "reserve".  The market deemed gold was an invalid form of currency and needed something with less friction and higher granularity so gold IOUs were born, thus leading to fractional reserve.  This puts a glass ceiling on the value of gold no matter who is trying to manipulate it up or down.  Gold creates and spawns layers of trust based systems due to these inherent weakness discussed.  

For Bitcoin to pass whatever glass ceilings it has, it probably needs at least enough TPS to process all of the world's large, high value transactions such as houses, cars, yachts, etc.

At 7 TPS, you can do 604,800 transactions per day (probably closer to 500k in reality but whatever).  

There are 14,000 houses and 43,000 cars sold per day in the US.  1 meg blocks are probably too small, or dangerously close to maxing out if handling all of the world's house and car transactions.  We don't need to scale to gigantic blocks, but something like 8-10 meg blocks is probably what it needs to scale to for being a major player in the world, without a glass ceiling, where most things of several thousands of dollars in value are done on-chain.  This is an achievable goal without things like the Lightning network existing.

In the following post by DeathandTaxes, he's probably done the best at explaining why, even with the Lightning Network, block size would need to be increased over 1 MB still for the Lightning Network to function and not have most people on earth priced out of Bitcoin, thus hurting market cap:

Sidechains, payment channels, and cross-chain atomic transactions are decentralized system that can move some of the transaction volume off the primary chain.  In essence like centralized solutions they can act as a multiplier allowing a higher number of total transactions than the number of direct on-chain transactions.   It is important to realize they still rely on the primary chain having sufficient transaction capacity or they aren't trustless.  As an example a payment channel could allow hundreds or even thousands of off chain transactions but it requires periodic on-chain transactions to create, adjust, and takedown.  If the individual user loses direct access to the primary chain they also lose trust free solutions like payment channels.  If direct access becomes prohibitively expensive then only alternative which provides sufficient scale is using trusted third parties.

Summary and conclusion:

Bitcoin probably can't function without a glass ceiling that would have a considerable, negative impact on price while utilizing 1MB blocks, even with Lighting network.  The good news is, it probably can function without a glass ceiling somewhere around 10MB blocks, and isn't really even required to scale significantly larger than that for maximizing market cap with it's current intended design of checkbook/savings account.  It is my opinion that Satoshi made a huge error capping at 1MB, and he should have done so at a number closer to 10MB.  The Gavin, continuously increasing, BIP101 proposal doesn't make sense and the only thing that should happen is a 10MB change with a wait and see approach after that.

[hdbuck]

lmao: "a 10MB change with a wait and see approach after that."

so simple! why nobody think of that before?

you bitcoin dev ceo?

[r0ach]

lmao: "a 10MB change with a wait and see approach after that."

so simple! why nobody think of that before?

you bitcoin dev ceo?

In terms of maximizing diminishing returns without incurring large penalties, it's the only move that makes sense economically.  Most others are arguing philosophically and god knows what else.

[BillyBobZorton]

Bitcoin was designed to be p2p cash if you read the whitepaper that's what satoshi said, so it means decentralization is key so for starts big blocks is against this. The Gavin And Hearn vision goes against this fundamental so it has to be avoided.

[r0ach]

Bitcoin was designed to be p2p cash if you read the whitepaper that's what satoshi said, so it means decentralization is key so for starts big blocks is against this. The Gavin And Hearn vision goes against this fundamental so it has to be avoided.

Instead of regurgitating talking points involving the words "Gavin and Hearn", try to keep the discussion on what makes economic sense because "p2p cash" can't function without making economic sense.  My conclusion was that Bitcoin would have a large glass ceiling, just like gold, without a ballpark of around 10MB.  Nowhere in my post is there a pro-"Gavin and Hearn" endorsement of anything.  It says BIP101 doesn't make sense and the only thing that should happen right now is an attempt to remove the glass ceiling outlined in the original post then have a wait and see approach from there.

[hdbuck]

Bitcoin was designed to be p2p cash if you read the whitepaper that's what satoshi said, so it means decentralization is key so for starts big blocks is against this. The Gavin And Hearn vision goes against this fundamental so it has to be avoided.

Instead of regurgitating talking points involving the words "Gavin and Hearn", try to keep the discussion on what makes economic sense because "p2p cash" can't function without making economic sense.  My conclusion was that Bitcoin would have a large glass ceiling, just like gold, without a ballpark of around 10MB.  Nowhere in my post is there a pro-"Gavin and Hearn" endorsement of anything.  It says BIP101 doesn't make sense and the only thing that should happen right now is an attempt to remove the glass ceiling outlined in the original post, then have a wait and see approach from there.

There is no glass ceiling, just a ceiling implemented by satoshi himself to prevent SPAM whilst allowing a fee market to emerge.

Else it is indeed highly economically relevant that bitcoin stays decentralized and P2P as it's value directly thrives from the trustlessness of its network.

"Big blocks nao" is a joke, technically irrelevant and not so surprisingly supported by no one else than the hearndresen loonies.

Bruce Wagner : When was the last time you chatted to satoshi?
Gavin Andresen: Um… I haven't had email from satoshi in a couple months actually. The last email I sent him I actually told him I was going to talk at the CIA. So it's possible , that…. that may have um had something to with his deciding.

[PolarPoint]

It's not the users who are against lifting the blocksize limit, it's some of the devs and the miners. Someone has got to convince them, not us.

[suda123]

Bitcoin was designed to be p2p cash if you read the whitepaper that's what satoshi said, so it means decentralization is key so for starts big blocks is against this. The Gavin And Hearn vision goes against this fundamental so it has to be avoided.

We don't have much time as in retarded wars in shit, the choice now is technically lets go for a shitty future to a less shitty future, no downsides at all tbh.


Decentralized or not people are content with being peasants and stupid.

[ArticMine]

I do not accpet the premise the Bitcoin was not designed to pay for a cup of coffee since it is equivalent to saying that credit cards were not designed, back in 1949, to pay for a cup of coffee. https://en.wikipedia.org/wiki/Diners_Club_International

The argument that it is prohibitively expensive to maintain multiple copies of the ledger (keeping track of the cups of coffee) on computers and devices owned by private indivduals today is far less compelling that making the same argument back in 1949 for a single ledger (keeping track of the cups of coffee) held by a bank using the data processing technology of the time.

As for BIP101 moving the blocksize from 1 MB to 8 GB over 20 years, this is actually equivalent to moving from the punched card (80 bytes) in 1965 to a computer with 640 KB of RAM in 1985 and saying that the latter should be enough for anyone.

[Meuh6879]

Bitcoin is not designed to facilitate micro-transactions.

why ?

you can set the minrelayfee at 100 satoshis if you want ... 

[medUSA]

Bitcoin is not designed to facilitate micro-transactions.

why ?
you can set the minrelayfee at 100 satoshis if you want ... 

It's not that micro transactions shouldn't be allowed, it's not efficient to do on-chain micro transactions. It takes up the same space on the blockchain as large transactions and fee to transacted amount ratio is too high.

[hdbuck]

I do not accpet the premise the Bitcoin was not designed to pay for a cup of coffee since it is equivalent to saying that credit cards were not designed, back in 1949, to pay for a cup of coffee. https://en.wikipedia.org/wiki/Diners_Club_International

The argument that it is prohibitively expensive to maintain multiple copies of the ledger (keeping track of the cups of coffee) on computers and devices owned by private indivduals today is far less compelling that making the same argument back in 1949 for a single ledger (keeping track of the cups of coffee) held by a bank using the data processing technology of the time.

As for BIP101 moving the blocksize from 1 MB to 8 GB over 20 years, this is actually equivalent to moving from the punched card (80 bytes) in 1965 to a computer with 640 KB of RAM in 1985 and saying that the latter should be enough for anyone.

Heh, wtf are you talking about? Too much coffee?

[Bungeebones]

The OP makes some excellent points.

Why does it matter that Bitcoin can't do micro transactions when there are 1000's of alt coins that can? If the market demands high price Bitcoin the network backing it must be strong enough to handle it while micro -transactions can be done on less robust and secure alt-coin networks. The cost of providing security must be compensated for the system to remain viable. If Bitcoin errs on the side of "high price" transction when the market demands low price/micro ones then another coin will fill that void. I would think since Satoshi Nakamoto released Bitcoin as open source he must have expected, perhaps wanted, alt coins to follow along behind Bitcoin and to be ready to fill any voids or to pick up the flag if Bitcoin falls.

[ArticMine]

The OP makes some excellent points.

Why does it matter that Bitcoin can't do micro transactions when there are 1000's of alt coins that can? If the market demands high price Bitcoin the network backing it must be strong enough to handle it while micro -transactions can be done on less robust and secure alt-coin networks. The cost of providing security must be compensated for the system to remain viable. If Bitcoin errs on the side of "high price" transction when the market demands low price/micro ones then another coin will fill that void. I would think since Satoshi Nakamoto released Bitcoin as open source he must have expected, perhaps wanted, alt coins to follow along behind Bitcoin and to be ready to fill any voids or to pick up the flag if Bitcoin falls.

I do agree the void will be picked up by one or more alt-coins. Many alt-coins have blindly followed Bitcoin with fixed blocksize limits; however there are a handful that have adaptive blocksize limits, and an even smaller subset of the latter that also have a tail emission. The only long term solution to this issue I have seen requires both. 

As for how the market will value both Bitcoin and the one or more alt-coins that address this issue only time will tell.

[fr4nkthetank]

I dont understand this ideology.  its wrong.  what is a micro-transaction for you, can be a bigger transaction for someone else.  bitcoin wasnt built to be a ledger or whatever, are you a priest now, preaching the word of god ?  Bitcoin must be able to support micro-transactions.  and everything else you want.  its possible, its here.  Or else we might as well switch to dogecoin

[iCEBREAKER]

I do not accpet the premise the Bitcoin was not designed to pay for a cup of coffee since it is equivalent to saying that credit cards were not designed, back in 1949, to pay for a cup of coffee. https://en.wikipedia.org/wiki/Diners_Club_International

The argument that it is prohibitively expensive to maintain multiple copies of the ledger (keeping track of the cups of coffee) on computers and devices owned by private indivduals today is far less compelling that making the same argument back in 1949 for a single ledger (keeping track of the cups of coffee) held by a bank using the data processing technology of the time.

As for BIP101 moving the blocksize from 1 MB to 8 GB over 20 years, this is actually equivalent to moving from the punched card (80 bytes) in 1965 to a computer with 640 KB of RAM in 1985 and saying that the latter should be enough for anyone.

Diner's Club was created not for schmucks buying cups of coffee, but rather for rich (Masonic?) lawyers/financiers eating fancy meals in exclusive cosmopolitan restaurants ("33 West 33rd Street, 33 steps from the Empire State Building").

Diners Club International and its franchises service affluent and well-travelled individuals
https://en.wikipedia.org/wiki/Diners_Club_International

The first Diners Club credit cards were given out in 1950 to 200 people (most were friends and acquaintances of McNamara) and accepted by 14 restaurants in New York.
http://history1900s.about.com/od/1950s/a/firstcreditcard.htm

Even today, your neighborhood micro-roast provider may charge 50 cents extra to account for the friction of a small debit/credit payment.  So please stop with the bogus proxy allusion to Moore's Law Observation.

Satoshi said Bitcoin may be used for micropayments "eventually."

That eventuality comes after Bitcoin breaks the bankster monopoly and restores sanity+honesty to the financial/political realms.

Until then, it is an engineering requirement Bitcoin be above the law.

You'll get your coffee payments eventually (when it is safe for full nodes to be relegated to data centers), but Sorry, Not Tonight Dear.

[ArticMine]

I do not accpet the premise the Bitcoin was not designed to pay for a cup of coffee since it is equivalent to saying that credit cards were not designed, back in 1949, to pay for a cup of coffee. https://en.wikipedia.org/wiki/Diners_Club_International

The argument that it is prohibitively expensive to maintain multiple copies of the ledger (keeping track of the cups of coffee) on computers and devices owned by private indivduals today is far less compelling that making the same argument back in 1949 for a single ledger (keeping track of the cups of coffee) held by a bank using the data processing technology of the time.

As for BIP101 moving the blocksize from 1 MB to 8 GB over 20 years, this is actually equivalent to moving from the punched card (80 bytes) in 1965 to a computer with 640 KB of RAM in 1985 and saying that the latter should be enough for anyone.

Diner's Club was created not for schmucks buying cups of coffee, but rather for rich (Masonic?) lawyers/financiers eating fancy meals in exclusive cosmopolitan restaurants ("33 West 33rd Street, 33 steps from the Empire State Building").

Diners Club International and its franchises service affluent and well-travelled individuals
https://en.wikipedia.org/wiki/Diners_Club_International

The first Diners Club credit cards were given out in 1950 to 200 people (most were friends and acquaintances of McNamara) and accepted by 14 restaurants in New York.
http://history1900s.about.com/od/1950s/a/firstcreditcard.htm

Even today, your neighborhood micro-roast provider may charge 50 cents extra to account for the friction of a small debit/credit payment.  So please stop with the bogus proxy allusion to Moore's Law Observation.

Satoshi said Bitcoin may be used for micropayments "eventually."

That eventuality comes after Bitcoin breaks the bankster monopoly and restores sanity+honesty to the financial/political realms.

Until then, it is an engineering requirement Bitcoin be above the law.

You'll get your coffee payments eventually (when it is safe for full nodes to be relegated to data centers), but Sorry, Not Tonight Dear.

You are correct. Diner's Club was initially conceived as a way for very wealthy individuals to pay for high margin goods and services from high end merchants. The merchant is charged a high fee upwards of 5% in order to cover the cost of maintaining the ledger with the technology of the time. The merchant gladly pays the fee because the card company facilitated a sale with a very high profit margin. The same model was also used by American Express when they started in 1958.

Now Diner's Club had 0.2% of the credit card market, and 0% of the debit card market, while American Express had 8.2% of the credit card market, and 0% of the debit card market in 2013. http://www.nilsonreport.com/publication_special_feature_article.php. The winner in 2013 was VISA 48.5% of the credit card market, and 70.5% of the debit card market. What happened is that the Bank networks (VISA, MasterCard) starting in the late 1960's and 1970 with credit cards and in the 1990's and 2000's with debit cards saw the benefit of the plunging cost of keeping the ledger including even tracking the "schmucks buying cups of coffee" due first to the mainframe computer,  then the PC, Internet, mobile devices etc and adapted. At the same time Diner's Club and to a large extent American Express stuck with their business models that were based on the costs in the 1950s of keeping the ledger using punched cards and tabulating machines. This is the key lesson from the history of credit and later debit cards for crypto currency.  

Bitcoin is making the very same mistake in crypto currency that Diner's Club has made over the past 60 years with credit cards namely: Ignoring technological change. It is destined to a similar fate if it survives. Litecoin is also doing a similar thing following in the paths of American Express. There is another alt-coin that has a good chance of becoming the VISA of crypto currency because it has both adaptive blocksize limits and a tail emission. This will allow it to: Adapt to technological change.

My prediction is  crypto currency will be used for micro payments furthermore many copies of the blockchain will be stored on computers and devices (including mobile) under the control of individuals. These computers and devices will also have Terrabytes and Petabytes or more of storage (no need for data centres). The real question is which blockchain will be stored on these computers and devices. Unfortunately here my prediction is that it will not be Bitcoin unless some real drastic change does occur.

We can discuss which alt coin in the alt coin section.  

Edit: As for the banks I suspect they will still be around. There is no need for them to be put out of business for the above to happen, because technology will democratize the "keeping of the ledger" even way more than today. This is the lesson of history.  

[iCEBREAKER]

You are correct. Diner's Club was initially conceived as a way for very wealthy individuals to pay for high margin goods and services from high end merchants. The merchant is charged a high fee upwards of 5% in order to cover the cost of maintaining the ledger with the technology of the time. The merchant gladly pays the fee because the card company facilitated a sale with a very high profit margin. The same model was also used by American Express when they started in 1958.

Now Diner's Club had 0.2% of the credit card market, and 0% of the debit card market, while American Express had 8.2% of the credit card market, and 0% of the debit card market in 2013. http://www.nilsonreport.com/publication_special_feature_article.php. The winner in 2013 was VISA 48.5% of the credit card market, and 70.5% of the debit card market. What happened is that the Bank networks (VISA, MasterCard) starting in the late 1960's and 1970 with credit cards and in the 1990's and 2000's with debit cards saw the benefit of the plunging cost of keeping the ledger including even tracking the "schmucks buying cups of coffee" due first to the mainframe computer,  then the PC, Internet, mobile devices etc and adapted while Diner's Club and to a large extent American Express stuck with their business models that were based on the costs in the 1950s of keeping the ledger using punched cards and tabulating machines. This is the key lesson for crypto currency.  

Bitcoin is making the very same mistake in crypto currency that Diner's Club has made over the past 60 years with credit cards namely: Ignoring technological change. It is destined to a similar fate if it survives. Litecoin is also doing a similar thing following in the paths of American Express. There is another alt-coin that has a good chance of becoming the VISA of crypto currency because it has both adaptive blocksize limits and a tail emission. This will allow it to: Adapt to technological change.

My prediction is  crypto currency will be used for micro payments furthermore many copies of the blockchain will be stored on computers and devices (including mobile) under the control of individuals. These computers and devices will also have Terrabytes and Petabytes or more of storage (no need for data centres). The real question is which blockchain will be stored on these computers and devices. Unfortunately here my prediction is that it will not be Bitcoin unless some real drastic change does occur.

Going along with your anthropomorphism, I don't see Bitcoin "ignoring" technological change.

Quite the opposite, in fact.  I see Bitcoin as the cutting edge of technology, at the forefront of software's attempt to eat the world.

It's got the relay network for now, and IBLT on the horizon.

It's got RBF, so fee markets can mature in the (inevitable) context of tx backpressure.

It's got CLTV, so sidechains and payment channels may enable Visa-scale coffee purchases.

Confidential TX are coming too.

I don't agree with writing predictive/speculative Bitcoin obituaries, regardless of how excited I am about a certain 2nd gen coin (cough, XMR) and a particular 3rd gen smart-chain (cough, ETH).

Those consequent efforts benefited from the hindsight provided by their 2nd/3rd mover status, and they will continue to learn from Bitcoin's trailblazing efforts if we don't fuck it up.

They will benefit less than otherwise possible if we meddle with the Bitcoin experiment by prematurely altering control variables like 1MB max_blocksize, 10 minute blocktime_target, SHA2 PoW, and the 21e6 coin max_coins limit.

“Normal people ... believe that if it ain't broke, don't fix it. Engineers believe that if it ain't broke, it doesn't have enough features yet.” -Scott Adams

Let's also remember technological change doesn't happen in a vacuum and is subject to the Lindy effect, so Bitcoin's critical socioeconomic mass may be as important to the future as the QWERTY keyboard's was (Dvorak and Colemac notwithstanding).

So long as Bitcoin works just fine, there will be no popular appetite for changing its basic parameters simply for the sake of appeasing a noisy minority.

[ArticMine]

...

Going along with your anthropomorphism, I don't see Bitcoin "ignoring" technological change.

Quite the opposite, in fact.  I see Bitcoin as the cutting edge of technology, at the forefront of software's attempt to eat the world.

It's got the relay network for now, and IBLT on the horizon.

It's got RBF, so fee markets can mature in the (inevitable) context of tx backpressure.

It's got CLTV, so sidechains and payment channels may enable Visa-scale coffee purchases.

Confidential TX are coming too.

I don't agree with writing predictive/speculative Bitcoin obituaries, regardless of how excited I am about a certain 2nd gen coin (cough, XMR) and a particular 3rd gen smart-chain (cough, ETH).

Those consequent efforts benefited from the hindsight provided by their 2nd/3rd mover status, and they will continue to learn from Bitcoin's trailblazing efforts if we don't fuck it up.

They will benefit less than otherwise possible if we meddle with the Bitcoin experiment by prematurely altering control variables like 1MB max_blocksize, 10 minute blocktime_target, SHA2 PoW, and the 21e6 coin max_coins limit.

“Normal people ... believe that if it ain't broke, don't fix it. Engineers believe that if it ain't broke, it doesn't have enough features yet.” -Scott Adams

Let's also remember technological change doesn't happen in a vacuum and is subject to the Lindy effect, so Bitcoin's critical socioeconomic mass may be as important to the future as the QWERTY keyboard's was (Dvorak and Colemac notwithstanding).

So long as Bitcoin works just fine, there will be no popular appetite for changing its basic parameters simply for the sake of appeasing a noisy minority.

The problem is that Bitcoin does not work just fine. Both sides of the blocksize debate will agree to at least that.

Edit: All of the innovations above depend on being able to confirm transactions on the main chain.

[iCEBREAKER]

The problem is that Bitcoin does not work just fine. Both sides of the blocksize debate will agree to at least that.

Edit: All of the innovations above depend on being able to confirm transactions on the main chain.

If you want your tx to confirm, simply pay a competitive fee.  Or lowball and use RBF if you fail.  That's precisely how it's supposed to work.

The MPEX and #B-A types (among many others) don't agree there is a problem with Bitcoin, and I concur.

~Anyone can (in ~complete security) use Bitcoin to send ~any amount of money ~anywhere in the world, ~instantly and for ~free.

To me, that seems like a fucking miracle on the order of life, consciousness, wheels, fire, and Teflon.  Where's the issue?

In exactly what way does Bitcoin not work just fine?