The fork

[hazek]

or by doing a completely made up activity that has no purpose outside the oligopoly. (mining)

Don't forget: (mining or by maintain a full node, even if not mining)

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[Zangelbert Bingledack]

An oligopoly is a situation where there are very high barriers to entry.

With Bitcoin, anyone can participate. The only thing resembling a monopoly situation is the core dev team, but that resemblance is only superficial: it's a natural monopoly for the moment, but the barrier to entry is not prohibitive since other, possibly even more capable software engineers could form their own team or even their own Bitcoin fork and it's possible that the majority would eventually support their fork.

This is the free-est market in the history of the world, because there is no coercion in it at all. It is entirely voluntary.

So we are faced with the seemingly paradoxical situation wherein we have a completely free market yet there is a natural monopoly development team. This means that, in the short term, the dev team has a lot of power and can seemingly maintain a uniform set of rules by "fiat."

But I think it's a myth that this ability to quasi-legislate is what underpins the uniformity and solidity of the Bitcoin protocol. The existence of this debate shows that many will not automatically follow the core devs (even if they were unanimous). Rather, the source of the uniformity is the belief each node has in the core protocol rules, with the hard BTC limit being the most staunchly supported. Adherence to the original protocol in all aspects seems to be supported as well, but to a lesser extent, and may be amenable to persuasion.

In other words, Bitcoin as a system has always been underpinned by the beliefs and wills of its participants, including the belief that the original protocol should not be changed lightly. The only way to make changes, then, is by convincing people to go along with them, and although the dev team may be in the best position to do that, there is no monopoly on persuasion.

[Peter Todd]

An oligopoly is a situation where there are very high barriers to entry.

Exactly. For mining itself, 1MiB blocks ensure that the barriers to entry are very low, and thus an oligopoly of miners won't form.

Increasing the block size, and especially allowing miners themselves to determine by how much, increases the barriers to entry, allowing for an oligopoly to form.

Bitcoin itself may be an oligopoly, but we really, really do not want Bitcoin mining to become an oligopoly.

[Zangelbert Bingledack]

While I understand what you're getting at and it may be a concern if we are to have a single fork, in terms of economics you're talking about virtual oligopolies, not actual ones, because the "barriers to entry" you mention are not barriers to entry into the cryptocurrency market proper, but barriers to entry into mining in a certain implementation of Bitcoin. That is, there is still no barrier to creating a Bitcoin fork that has low/high barrier to entry for mining.

My point is that as long as there is no actual oligopoly - no actual barrier to entry into the market itself - natural order should sort everything out.

"Let a thousand forks bloom!"

...keeping in mind that forks will only arise when and if there is an insurmountable lack of unanimity in the system, which should only happen if there is a huge fundamental rift in terms of vision or application, such as it in fact turning out to be infeasible to have a single Bitcoin that is optimized as both as payment system and a store of value. This can only happen once or perhaps twice, I would think, and if it needs to happen I think it should. Take the bitter medicine if it's really needed; hopefully it isn't.

[Zangelbert Bingledack]

Increasing the block size, and especially allowing miners themselves to determine by how much, increases the barriers to entry...

Why wouldn't miners reject interactions with miners who set the block size too high, for instance?

[markm]

Increasing the block size, and especially allowing miners themselves to determine by how much, increases the barriers to entry...

Why wouldn't miners reject interactions with miners who set the block size too high, for instance?

Isn't part of this whole cool story the tale of the brave defenders of the original one true bitcoin who will do just that?

-MarkM-

[Peter Todd]

Increasing the block size, and especially allowing miners themselves to determine by how much, increases the barriers to entry...

Why wouldn't miners reject interactions with miners who set the block size too high, for instance?

Read my post on the subject.

[Peter Todd]

Isn't part of this whole cool story the tale of the brave defenders of the original one true bitcoin who will do just that?

The cool story isn't when the miners bravely reject the large blocks, it's when the users of Bitcoin bravely reject large blocks, by doing nothing more than not installing any version of Bitcoin that removes the current 1MiB block limit.

Bravery by doing nothing; kinda anti-climatic really.

[Gavin Andresen]

Why wouldn't miners reject interactions with miners who set the block size too high, for instance?

Yes, I believe they would. So far, most miners and pools are VERY conservative; I think the idea that they will create huge blocks that have a significant risk of being rejected, just so they MIGHT get an advantage over marginal miners that can't process them fast enough, is loony.

But I might be wrong.

So I'd like to wait a little while, think deeply some more, and see how miners and merchants and users react with the system we've got as transaction volume increases.

[markm]

Yes, I believe they would. So far, most miners and pools are VERY conservative; I think the idea that they will create huge blocks that have a significant risk of being rejected, just so they MIGHT get an advantage over marginal miners that can't process them fast enough, is loony.

Loonies aren't legal tender where you're from, eh?

-MarkM-

[Peter Todd]

Why wouldn't miners reject interactions with miners who set the block size too high, for instance?

Yes, I believe they would. So far, most miners and pools are VERY conservative; I think the idea that they will create huge blocks that have a significant risk of being rejected, just so they MIGHT get an advantage over marginal miners that can't process them fast enough, is loony.

Rejections are is not a significant risk for miners. That's the whole point of my original post on the issue. If your blocks are built upon by the majority of hashing power, you come out ahead in the long run. Your orphan rate does increase proportionally, but if, say, 5% of the hashing power never sees your blocks, the increase in varience is low, yet you get the very real benefit of 5% less competition. In the long run there is no "might" - it's simple statistics, and I haven't seen anyone offer a rebuttal based on analysis rather than hand-waving.

But I might be wrong.

So I'd like to wait a little while, think deeply some more, and see how miners and merchants and users react with the system we've got as transaction volume increases.

I agree with you there. But if large blocks turn out to not be an option, for whatever reason, we need alternatives, and creating those alternatives take time. We've probably got two or three years before the limit becomes a big issue, maybe less, and as you know raising the limit will take at least a few months for the consensus to be achieved among all users. Right now what I'm hearing from you and Mike Hearn is a defacto "yeah, we'll just keep upping the blocks size, I just don't know yet by how much or if it'll be one-time thing or a floating limit". This attitude leads to people not working on alternatives and if alternatives don't exist by the time the limits are reached, like it or not, raising the limit will be the only option regardless of the downsides.

You already know about the fidelity-bonded banking stuff I'm working on, but it really bothers me that I don't seem to have much competition. Frankly I'd be happy to see someone else come up with an even better idea that I haven't thought of, or just come up with a better implementation of bonded banks than me. That outcome is much more likely to happen if you make it clear that if off-chain value transfer systems are developed not raising the limit is an option.

[markm]

Doesn't Ripple basically make every normal user a fidelity-bonded bank, with the "gateways" as the fidelity-bond vaults?

I say this because it seems to me one can regard a "gateway" to be functionally equivalent to, or at least quite akin to, placing a fidelity bond sum of value somewhere. Any of the IOUs backed by that "bond" can be made good at the fidelity corp aka "gateway" instead of by the "bank" (the person who actually transfered to you such a "fidelitous" IOU instead of one of their person IOUs).

Or is the key distinction in your "fidelity bond" concept a kind of "fractional fidelity" system wherein the amount of IOU "insured" by the bond can exceed the amount of the bond itself?

-MarkM-

[tvbcof]

I use Bitcoin because it is built upon certain principles and built in such a way that those principles can't be "legislated" away with a rule change. If this isn't the case I have no use for Bitcoin.

A hard fork has to happen before year 2036 in order to bump the timestamp from a 32 to a 64 bit integer.  Will you be ditching Bitcoin for that reason?  What's the difference between calling the 32-bit timestamp requiring a hard fork to change a fundamental principle and any other hard fork change?  If your answer is "a change tweaking the economic side of things" does that mean the Bitcoin contract only includes economic reasons and not technical?  Who defines what change is economic vs technical?  Why do you think this contract exists when nobody's bothered to spell it out?

It appears to me that what we have here is a situation where some people have dreams of being the next JP Morgan by forging Bitcoin into a solution whereby only a few can run it.  Namely themselves in their dream world I suspect.  The pesky block size limit is interfering.  The sad thing is that Bitcoin is already large enough that these folks would likely fall to the 'big fish, little fish' phenomenon...although they still might make some money off it.

A lot of people who were initially drawn to the Bitcoin solution will innately reject the centralization which would occur with unlimited growth.  Hopefully the core developers who most people put a some of faith in will as well.  Confident assurtions that Stratum is 'the future of Bitcoin' aside, a lot of us are going to think it sucks just on principle if nothing else.  Not to mention disgust at ham-handed OPs on the bitcointalk.org forum trying to put words in Gavin's mouth.


Edit: --- I should have read the corresponding tech thread first.  On that thread I strongly agree with the OP of this thread's stance, and disagree with the Gavin's and Mike's posture on the topic.  I believe that both Gavin and Mike underestimate the risk of Bitcoin needing to deal with an actively hostile block of governments and corporations in the days and years ahead.

Edit 2:  Oops, it is ~retep who I think argues eloquently and to my way of thinking on this point.  Not necessarily the OP.

[Zangelbert Bingledack]

Why wouldn't miners reject interactions with miners who set the block size too high, for instance?

Yes, I believe they would. So far, most miners and pools are VERY conservative; I think the idea that they will create huge blocks that have a significant risk of being rejected, just so they MIGHT get an advantage over marginal miners that can't process them fast enough, is loony.

Rejections are is not a significant risk for miners. That's the whole point of my original post on the issue. If your blocks are built upon by the majority of hashing power, you come out ahead in the long run. Your orphan rate does increase proportionally, but if, say, 5% of the hashing power never sees your blocks, the increase in varience is low, yet you get the very real benefit of 5% less competition. In the long run there is no "might" - it's simple statistics, and I haven't seen anyone offer a rebuttal based on analysis rather than hand-waving.

I just don't see why widespread norms wouldn't emerge to have the blocksize be within a certain reasonable range at any given time (the norms would change dynamically/organically as the mining community sees fit), with the result that rogue miners would be more or less completely isolated.

Tragedies of the commons only happen if there is a forcible ban on anyone taking ownership or control of any part of the commons. Since each node is in control of itself, at least, I don't see how this situation can be subject to a tragedy of the commons. It seems that if any behavior was know to be harmful it would become taboo and miners would understand that to protect their long-term investment they had better reject rogue behavior.

Isn't the debate then a matter of how many people would reject? My sense based in economic reasoning suggests that norms like this could cover much more than 5%.

[markm]

The well heeled elite's "norm" is likely to be out of reach of some people somewhere, but being the entitled, the elite, with their natural disdain of anyone who cannot afford enough sufficiently weighty law firms or enough sufficiently advanced ASICs or enough well enough armed troops or whatever to defend themselves are natural prey, the commons belongs to whoever has the troops to seize it, and if having your and your peers', your similarly elite, similarly entitled buddies' troops actually come to blows cuts into profits well maybe it is better to simply co-operate in having them keep lesser beings out instead of raising your corporate health plan costs by wasting your troops on each others' troops.

Gosh when I think of it this way I start to think the middle east is a commons of oil, and remember hearing of various send in the marines type of stories... Get those ragheads out of the commons because the commons contains something we have the brute force / violence capability to seize regardless of what the ragheads want or do not want...

Heck the ragheads are maybe not even rapiing the planet's resources at max possible speed, a real outfit needs to get in there and get all that oil out and burn it quick to maximise profits because profit now is better than profit later...

-MarkM-

[tvbcof]

Tragedies of the commons only happen if there is a forcible ban on anyone taking ownership or control of any part of the commons.

WTF?!?

For one, if someone takes ownership or control of the commons, they are not the commons any more.

For two, it is very much the case that the 'tragedy' occurs absent a mechanism to prevent it.  'forcible ban' or otherwise.  You seem utterly backward on the whole 'tragedy of the commons' principle.  To me.

For three, a lot of us, and especially myself, are pretty leery about individuals 'taking ownership or control' over the certain aspects of Bitcoin's function.  Indeed, the difficulty of doing this is a major 'selling point' of the Bitcoin solution.  In part because of the ill effects of such control in other solutions.

[Zangelbert Bingledack]

For one, if someone takes ownership or control of the commons, they are not the commons any more.

Indeed, having a "commons" is the problem in the first place: no commons, no tragedy of the commons.

Bitcoin has no commons. Every node is owned by someone and they control it, therefore no commons, therefore no tragedy.

For two, it is very much the case that the 'tragedy' occurs absent a mechanism to prevent it.  'forcible ban' or otherwise.  You seem utterly backward on the whole 'tragedy of the commons' principle.  To me.

That's good, because most economic reasoning seems exactly backwards from common sense.

If land is not owned by anybody, although legal formalism may call it public property, it is utilized without any regard to the disadvantages resulting. Those who are in a position to appropriate to themselves the returns — lumber and game of the forests, fish of the water areas, and mineral deposits of the subsoil — do not bother about the later effects of their mode of exploitation. For them the erosion of the soil, the depletion of the exhaustible resources and other impairments of the future utilization are external costs not entering into their calculation of input and output. They cut down the trees without any regard for fresh shoots or reforestation. In hunting and fishing they do not shrink from methods preventing the repopulation of the hunting and fishing grounds.

This can only happen when there is a commons ("public property"), which can only happen when there is a ban on ownership. There is no ban on ownership of Bitcoin nodes; each node operator owns his or her node and has control over it. No commons for there to be a tragedy in.

For three, a lot of us, and especially myself, are pretty leery about individuals 'taking ownership or control' over the certain aspects of Bitcoin's function.  Indeed, the difficulty of doing this is a major 'selling point' of the Bitcoin solution.  In part because of the ill effects of such control in other solutions.

Only the nodes are owned, not "Bitcoin" (the system).

[tvbcof]

For one, if someone takes ownership or control of the commons, they are not the commons any more.

Indeed, having a "commons" is the problem in the first place: no commons, no tragedy of the commons.

Bitcoin has no commons. Every node is owned by someone and they control it, therefore no commons, therefore no tragedy.

I say you are missing the forest for the trees.  The entire Bitcoin economy and ecosystem forms a very viable and very real 'commons'.

For two, it is very much the case that the 'tragedy' occurs absent a mechanism to prevent it.  'forcible ban' or otherwise.  You seem utterly backward on the whole 'tragedy of the commons' principle.  To me.

That's good, because most economic reasoning seems exactly backwards from common sense.

If land is not owned by anybody, although legal formalism may call it public property, it is utilized without any regard to the disadvantages resulting. Those who are in a position to appropriate to themselves the returns — lumber and game of the forests, fish of the water areas, and mineral deposits of the subsoil — do not bother about the later effects of their mode of exploitation. For them the erosion of the soil, the depletion of the exhaustible resources and other impairments of the future utilization are external costs not entering into their calculation of input and output. They cut down the trees without any regard for fresh shoots or reforestation. In hunting and fishing they do not shrink from methods preventing the repopulation of the hunting and fishing grounds.

This can only happen when there is a commons ("public property"), which can only happen when there is a ban on ownership. There is no ban on ownership of Bitcoin nodes; each node operator owns his or her node and has control over it. No commons for there to be a tragedy in.

In Libertarian fantasy-land it sounds good, but in the real world there are countless examples of unmitigated disasters when the commons are divied up (or simply taken by those with the means to do so) and extracted out of existence.

One of the first which comes to mind is the salmon fishing in Bristol Bay which I participated in for many years.  You won't find a bigger set of right wingers and libertarians than commercial fishermen, but every one of the recognized the value of treating the resource in a sustainable and managed way.  Especially those who had been around in the bad old days.

For three, a lot of us, and especially myself, are pretty leery about individuals 'taking ownership or control' over the certain aspects of Bitcoin's function.  Indeed, the difficulty of doing this is a major 'selling point' of the Bitcoin solution.  In part because of the ill effects of such control in other solutions.

Only the nodes are owned, not "Bitcoin" (the system).

When only .0001 percent of the community has the realistic ability to operate a node (much less a mining setup) the system will be for all intents and purpose operated at the pleasure of a very small group of very probably like-minded people.

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty or justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary."  - Adam Smith

I the open source world of Bitcoin, the protocol is the law.  And the users are those who enforce the law.  To the extent that it is practical at least.

[Zangelbert Bingledack]

Bristol Bay is a perfect example of a forcible ban on ownership, exactly opposite to the situation with Bitcoin: there are laws preventing anyone from owning or homesteading any part of the fishing waters. This is what causes the tragedy of the commons and artificially removes the incentive of each user to maintain the resource. Commons (in the economic sense) are always created by government fiat.

This is why Bitcoin has no commons. Each node is self-owned. Each can do whatever it wants. There is never anything forced on anyone, unlike in a commons. The organism will adapt in accord with its interests.