Why the Bitcoin rules can't change (reading time ~5min)

[markm]

There are people out there with whom things that go up in value faster than inflation, faster than a savings account, faster than pretty much anything short of a Ponzi, are not popular, it is true. It is a large part of why some communities on the web are very fond of claiming bitcoin is itself a ponzi. But long term I suspect what drove us down from $2 last time around was not people's lack of interest in small block size cryptocurrencies but, rather, the massive onslaught of major hacks and the lack of time tested value storing utility that left us short of past performance evidence with which to refute the "bitcoin is a ponzi" / "bitcoin is a scam" claims so many vocal detractors were making.

Blockchains are not ideal for retail sales payment processing, but for large transfers with small percentage fees they should be reasonably competitive.

Since we do not know which, if any, output of a transaction is change, nor even if a transaction with between someone and themself rather than someone and someone else, we really only have the price per bitcoin on exchanges and the number of bitcoins paid in transaction fees go by in measuring useful (as in paying for our infrastructure and operating -expenses) adoption.

We need to be adopted by money. Lots of money. People are less and less important in that regard the less and less money they bring in. The more money they bring in the more in fees and/or more in exchange rates, provided circulation involves fees. CIrculation that does not provide fees is mere churn, not useful in paying for the infrastructuire and operating-expenses of the network.

We should be looking to retain value, to store value, not to throw it away to freeloaders in the form of free transactions nor increase the cost of storing it by catering to decipayments nor even decapayments. We should aim at the centapayments and kilopayments markets not the centipayments and millipayments markets.

Lets store amounts of value that are actually worth going to the trouble and expense of storing them, while providing also the ability to transfer such amounts in and out of storage.

-MarkM-

[notig]

There are people out there with whom things that go up in value faster than inflation, faster than a savings account, faster than pretty much anything short of a Ponzi, are not popular, it is true. It is a large part of why some communities on the web are very fond of claiming bitcoin is itself a ponzi. But long term I suspect what drove us down from $2 last time around was not people's lack of interest in small block size cryptocurrencies but, rather, the massive onslaught of major hacks and the lack of time tested value storing utility that left us short of past performance evidence with which to refute the "bitcoin is a ponzi" / "bitcoin is a scam" claims so many vocal detractors were making.

Blockchains are not ideal for retail sales payment processing, but for large transfers with small percentage fees they should be reasonably competitive.

Since we do not know which, if any, output of a transaction is change, nor even if a transaction with between someone and themself rather than someone and someone else, we really only have the price per bitcoin on exchanges and the number of bitcoins paid in transaction fees go by in measuring useful (as in paying for our infrastructure and operating -expenses) adoption.

We need to be adopted by money. Lots of money. People are less and less important in that regard the less and less money they bring in. The more money they bring in the more in fees and/or more in exchange rates, provided circulation involves fees. CIrculation that does not provide fees is mere churn, not useful in paying for the infrastructuire and operating-expenses of the network.

We should be looking to retain value, to store value, not to throw it away to freeloaders in the form of free transactions nor increase the cost of storing it by catering to decipayments nor even decapayments. We should aim at the centapayments and kilopayments markets not the centipayments and millipayments markets.

Lets store amounts of value that are actually worth going to the trouble and expense of storing them, while providing also the ability to transfer such amounts in and out of storage.

-MarkM-

 

First, I have a really hard time reading and understanding your posts... I usually skip over them.
 
" Blockchains are not ideal for retail sales payment processing, but for large transfers with small percentage fees they should be reasonably competitive."

 So reddit, mega, wordpress are not what bitcoin is meant for? That's what you are saying because those are all retail transactions baby. If bitcoin isn't "meant for" small transactions it's only because there is a minority of people that want to keep an artificially low transaction limit. And I don't even think those people are miners (or bitcoin miners) . I think they just want bitcoin to fail for whatever reason. Maybe they own a bunch of litecoins .

[conv3rsion]

There are people out there with whom things that go up in value faster than inflation, faster than a savings account, faster than pretty much anything short of a Ponzi, are not popular, it is true. It is a large part of why some communities on the web are very fond of claiming bitcoin is itself a ponzi. But long term I suspect what drove us down from $2 last time around was not people's lack of interest in small block size cryptocurrencies but, rather, the massive onslaught of major hacks and the lack of time tested value storing utility that left us short of past performance evidence with which to refute the "bitcoin is a ponzi" / "bitcoin is a scam" claims so many vocal detractors were making.

Blockchains are not ideal for retail sales payment processing, but for large transfers with small percentage fees they should be reasonably competitive.

Since we do not know which, if any, output of a transaction is change, nor even if a transaction with between someone and themself rather than someone and someone else, we really only have the price per bitcoin on exchanges and the number of bitcoins paid in transaction fees go by in measuring useful (as in paying for our infrastructure and operating -expenses) adoption.

We need to be adopted by money. Lots of money. People are less and less important in that regard the less and less money they bring in. The more money they bring in the more in fees and/or more in exchange rates, provided circulation involves fees. CIrculation that does not provide fees is mere churn, not useful in paying for the infrastructuire and operating-expenses of the network.

We should be looking to retain value, to store value, not to throw it away to freeloaders in the form of free transactions nor increase the cost of storing it by catering to decipayments nor even decapayments. We should aim at the centapayments and kilopayments markets not the centipayments and millipayments markets.

Lets store amounts of value that are actually worth going to the trouble and expense of storing them, while providing also the ability to transfer such amounts in and out of storage.

-MarkM-

 

First, I have a really hard time reading and understanding your posts... I usually skip over them.
 
" Blockchains are not ideal for retail sales payment processing, but for large transfers with small percentage fees they should be reasonably competitive."

 So reddit, mega, wordpress are not what bitcoin is meant for? That's what you are saying because those are all retail transactions baby. If bitcoin isn't "meant for" small transactions it's only because there is a minority of people that want to keep an artificially low transaction limit. And I don't even think those people are miners (or bitcoin miners) . I think they just want bitcoin to fail for whatever reason. Maybe they own a bunch of litecoins .

Agreed.  Bitcoin is how it is used. Crippling it because you don't like how it's used means you want it to fail.

[tvbcof]

Uh by all means increase the blocksize, I'll move on and have a long hard laugh at you guys during the grind to the bottom.
It will be the dumbest ever thing Bitcoiners have ever done.

The recent chatter about it has given me extra incentive to explore cracking open some of my dusty deep storage wallets.

If we stay on the current price trend I'll probably want to dump around $12k worth of BTC in a month or so, and do it face-to-face, incrementally, in a bank, and in the NW part of the US.  I'm willing to take a certain amount of a hit in order to avoid supplying Mt. Gox with an identity theft kit.  Almost all my coins came through Tradehill.  Anyone who is potentially interested is welcome to PM me.

---

BTW, good post ~hazek.  I agree significantly with most of it.

[mobile4ever]

The client in it's current state is not a viable option for most people to run as a node in the not too far future. Both bandwidth and space issues will only intensify with further acceptance of Bitcoin. Thus either the client has to change with all that entails (such as developer decided rules changes) or more and more people will have to stop running a full node, when it's no longer viable for them.

How so? I have a laptop with 1TB space, and the block size limit means there's max 55GB that can be added in a year on avg, so how could I not run a full node for at least 5 more years when I'm sure I'm going to upgrade my laptop by then and have even more disk space available?

You're priviledged in your space and bandwith capacity. What about those not so lucky? Those on volume capped lines? What about Africa, where most people outside of major cities still connect via 56k dial-up if even?

I think mobile (smartphones) is going to take up internet in Africa. They can already pay their bills via SMS. Africa is a different animal than the rest of the world when it comes to internet. Eventually mobile will take over in every country.

[mpfrank]

I don't understand the argument some people are making that the block size limit is OK because the main chain will only be used for relatively rare high-value transactions while new blockchains will arise to serve the masses.  Why would Bitcoins on the main blockchain hold their value if new blockchains are popping up left and right?  A few die-hard curmudgeons who don't want to change the rules isn't enough to keep the market price propped up.

[hazek]

I don't understand the argument some people are making that the block size limit is OK because the main chain will only be used for relatively rare high-value transactions while new blockchains will arise to serve the masses.  Why would Bitcoins on the main blockchain hold their value if new blockchains are popping up left and right?  A few die-hard curmudgeons who don't want to change the rules isn't enough to keep the market price propped up.

You idiot.

You really didn't understand anything did you? Did you even read my OP? Did you understand what it was about? It's not about a rule change btw..


The problem isn't that we, as you call us "A few die-hard curmudgeons who don't want to change the rules", don't want to change any rules. The problem is that this particular rule change is likely going to have consequences that will change Bitcoin from what it is today to something else. Right now Bitcoin is a decentralized peer to peer payment system and a currency without a central authority. By removing the block size limit there is a very real chance it will change into a centralized payment system with a currency with a central authority, a system that you no longer have any control over like you do right now.

If you're fine with that, then I don't understand what you're doing here. Paypal meets your how many transactions you think Bitcoin is suppose to handle on a daily basis just fine. Just don't cry to them if you don't like their rules because if you let Bitcoin become impossible to be in your personal control that's exactly what will happen, other rules that you wont like.

And that, you idiot, is the point of my OP. To remind people that if you can't somehow validate what rules are being validated on the network, if you aren't an equal peer on this network, you don't matter and what you want doesn't matter.

[mpfrank]

...
The problem isn't that we, as you call us "A few die-hard curmudgeons who don't want to change the rules", don't want to change any rules. The problem is that this particular rule change is likely going to have consequences that will change Bitcoin from what it is today to something else. Right now Bitcoin is a decentralized peer to peer payment system and a currency without a central authority. By removing the block size limit there is a very real chance it will change into a centralized payment system with a currency with a central authority, a system that you no longer have any control over like you do right now.

If you're fine with that, then I don't understand what you're doing here. Paypal meets your how many transactions you think Bitcoin is suppose to handle on a daily basis just fine. Just don't cry to them if you don't like their rules because if you let Bitcoin become impossible to be in your personal control that's exactly what will happen, other rules that you wont like.

And that, you idiot, is the point of my OP. To remind people that if you can't somehow validate what rules are being validated on the network, if you aren't an equal peer on this network, you don't matter and what you want doesn't matter.

But, what is the point of having control of your node if it's following a set of rules that doesn't scale to global significance?  With the transaction-rate limit I don't see how Bitcoin can grow beyond a relatively small segment of the online transaction market  Eventually, something else will come along that scales better, and people (including you maybe) will abandon Bitcoin.

[conv3rsion]

I don't understand the argument some people are making that the block size limit is OK because the main chain will only be used for relatively rare high-value transactions while new blockchains will arise to serve the masses.  Why would Bitcoins on the main blockchain hold their value if new blockchains are popping up left and right?  A few die-hard curmudgeons who don't want to change the rules isn't enough to keep the market price propped up.

You idiot.

You really didn't understand anything did you? Did you even read my OP? Did you understand what it was about? It's not about a rule change btw..


The problem isn't that we, as you call us "A few die-hard curmudgeons who don't want to change the rules", don't want to change any rules. The problem is that this particular rule change is likely going to have consequences that will change Bitcoin from what it is today to something else. Right now Bitcoin is a decentralized peer to peer payment system and a currency without a central authority. By removing the block size limit there is a very real chance it will change into a centralized payment system with a currency with a central authority, a system that you no longer have any control over like you do right now.

If you're fine with that, then I don't understand what you're doing here. Paypal meets your how many transactions you think Bitcoin is suppose to handle on a daily basis just fine. Just don't cry to them if you don't like their rules because if you let Bitcoin become impossible to be in your personal control that's exactly what will happen, other rules that you wont like.

And that, you idiot, is the point of my OP. To remind people that if you can't somehow validate what rules are being validated on the network, if you aren't an equal peer on this network, you don't matter and what you want doesn't matter.

In the worst imaginable case, the ability to validate the currency becomes more expensive, not impossible. As long as it is not impossible, Bitcoin does not become a centralized payment system and you still have sovereign control over your money. Its still peer to peer, at worse its peer group to peer group. Of course this won't happen, because the devs are well aware of the dangers and are reasonable people who continue to put the technology and its users first. Reasonable people can come to compromises that provide for the greatest benefit for all parties.

To your other point, Paypal is a shitty comparison that does not meet people's needs because

A) My funds can be seized
B) I cannot send money to people in specific countries
C) It is not pseudo anonymous
D) The fees are too high to enable micro transactions
E) The fees are too high to provide adequate competition with other merchant processors
F) Paypal places artificial limits on withdrawals
G) Paypal can be much slower than Bitcoin despite being centralized
H) I have absolutely no say in any rule changes that Paypal makes

People saying that Bitcoin shouldn't aim to replace Paypal have no idea how badly Paypal sucks and how much better for humanity a solid Paypal competitor with Bitcoins advantages would be. Nor do they seem to understand or care about how much more important of a disruption that would represent than the "just slightly cheaper" wire replacement service that Bitcoin is designed to become with a hard block size limit of 7 transactions per second.  

I know you want and demand sovereign control over your money. I do not believe that is in any danger.

[mpfrank]

...
I know you want and demand sovereign control over your money. I do not believe that is in any danger.

"Soveriegn control of one's money" may be a desirable property, sure, but not if the value of that money eventually collapses because its protocol isn't scalable and so people abandon it.  

[conv3rsion]

"Soveriegn control of one's money" may be a desirable property, sure, but not if the value of that money eventually collapses because its protocol isn't scalable and so people abandon it. 

Right. And if it becomes expensive to issue a Bitcoin transaction, solely because through a non scaling limit the entire world can only perform 7 per second, the value of the technology which currently allows for almost free almost instantaneous money transfers to anyone will collapse. Bitcoin is becoming more valuable because of integration of industry, and that stops it in its tracks.

[johnyj]

In my estimation, those who are interested in bitcoin technology itself (blockchain/transaction/mining etc) are almost all here, it is impossible in today's internet world that after 4 years of introduction and many times of media coverage, there are still some people in the world who have the potential to become a true bitcoiner and he has never started his mining operation

So from this point forward, the technical user base will not expand that much, and the late adapters will unlikely to have a full node installed, web based services will become popular, and they will provide a service similar to bank today (they only provide saving and transaction service with a fee)

Once the majority of people are using web based services, many retail level transactions will just be cleared inside these system without go through the blockchain, and the end user don't even need to know public key/sha256 such kind of tech noise, what they only need to know is that total amount of bitcoin is fixed by protocol and supply is decreasing

Fractional reserve banking will be very unlikely to happen, since the bitcoin is deflative. Bitcoin borrower will take a very high risk, it is a common sense to borrow the inflative currency and buy the deflative currency

[Walter Rothbard]

Why would Bitcoins on the main blockchain hold their value if new blockchains are popping up left and right?

Have you compared the value of coin on the Satoshi blockchain with coin on the other blockchains?

[mpfrank]

Why would Bitcoins on the main blockchain hold their value if new blockchains are popping up left and right?

Have you compared the value of coin on the Satoshi blockchain with coin on the other blockchains?

I'm not myself claiming that alternative chains would be successful; I'm referring to some earlier posters' assertion on this thread that the demand for higher transaction rates would be met by new parallel blockchains popping up (once block space on the main chain becomes too scarce).  My claim is that, IF new chains were starting to become very widely used (as they would have to be to maintain a high transaction rate), there is no particular reason why coins on the main chain would continue to remain much more valuable than coins on the new chains in that scenario.  And if the overall supply of coins (on all widely-used chains) goes up, that is overall money-supply inflation, which would tend to depress the value of existing coins further.  IMHO, it would be very undesirable for the value of BTC to allow a lot of competing cryptocurrencies to pop up and be successful.  A good way to let that undesirable outcome happen would be to fail to upgrade Bitcoin to support some critical property that is (or soon will be) in high demand, such as scalability to high transaction rates.

[solex]

... A good way to let that undesirable outcome happen would be to fail to upgrade Bitcoin to support some critical property that is (or soon will be) in high demand, such as scalability to high transaction rates.

Yes. And I wonder how long it will take for one of the new alt-chains to replicate all the features of bitcoin except it also offers 20Mb blocks...?

[johnyj]

But, what is the point of having control of your node if it's following a set of rules that doesn't scale to global significance?  With the transaction-rate limit I don't see how Bitcoin can grow beyond a relatively small segment of the online transaction market  Eventually, something else will come along that scales better, and people (including you maybe) will abandon Bitcoin.

It's too early to talk about global significance, bitcoin is not going to heaven

Current hype will over when most of miners have migrated to ASIC devices, from then on there won't be fast expansion of hashing power and the price of bitcoin will not rise that fast as it doing now

And bitcoin have a long road to go before it reach widely acceptance, transaction capacity is such a small issue if you consider so many  legal and human factors. Even today, when I talk to my computer scientists friends in multinational company, most of them still doubt it is a scam, they have a good income and a good life, they might never care about this little thing

On the contrary, if it really gained mainstream acceptance and acknowledgement from government, there will be banks and institutions waiting in the line to solve this transaction problem with their existing mature and sophiscated clearing system, bitcoin will become a new digital gold standard. Do you really need to use a tiny bit of gold to buy milk?

If you are really that service minded, then you should consider remove the 21 million supply limit, and adjust the daily supply to keep the exchange rate fixed at $21,  then the merchants will feel safe to use bitcoin due to lower exchange rate risk

I had a strong impression that bitcoiners are so proud of the limited supply nature and I'm convinced this is really a different view in today's world, and I hope they are not walking towards a direction what everyone familiar: overproduction, plenty of supply and cheap

[markm]

Nice post, thanks.

It seems to me there is both a lot of underestimation of bitcoin's agility and way too much tendency to hurrah "the sharks are starting to notice us, hooray!" while worrying nervously "so we'd better throw away our shark tank else they might not find us appetising!"

-MarkM-

[hazek]

...
The problem isn't that we, as you call us "A few die-hard curmudgeons who don't want to change the rules", don't want to change any rules. The problem is that this particular rule change is likely going to have consequences that will change Bitcoin from what it is today to something else. Right now Bitcoin is a decentralized peer to peer payment system and a currency without a central authority. By removing the block size limit there is a very real chance it will change into a centralized payment system with a currency with a central authority, a system that you no longer have any control over like you do right now.

If you're fine with that, then I don't understand what you're doing here. Paypal meets your how many transactions you think Bitcoin is suppose to handle on a daily basis just fine. Just don't cry to them if you don't like their rules because if you let Bitcoin become impossible to be in your personal control that's exactly what will happen, other rules that you wont like.

And that, you idiot, is the point of my OP. To remind people that if you can't somehow validate what rules are being validated on the network, if you aren't an equal peer on this network, you don't matter and what you want doesn't matter.

But, what is the point of having control of your node if it's following a set of rules that doesn't scale to global significance?

There may not be a point in having such a Bitcoin, maybe this is actually a flaw that was overlooked, that this decentralized system isn't capable of scaling, maybe another solution must be fund where it scales but where peers, maybe without the full blockchain, can still be equal peers (if that's possible).

I don't know. All I know is that I want a decentralized Bitcoin that I was promissed when I found it and be an equal peer in the network. If that isn't possible then I have no use for Bitcoin.

[hazek]

I don't understand the argument some people are making that the block size limit is OK because the main chain will only be used for relatively rare high-value transactions while new blockchains will arise to serve the masses.  Why would Bitcoins on the main blockchain hold their value if new blockchains are popping up left and right?  A few die-hard curmudgeons who don't want to change the rules isn't enough to keep the market price propped up.

You idiot.

You really didn't understand anything did you? Did you even read my OP? Did you understand what it was about? It's not about a rule change btw..


The problem isn't that we, as you call us "A few die-hard curmudgeons who don't want to change the rules", don't want to change any rules. The problem is that this particular rule change is likely going to have consequences that will change Bitcoin from what it is today to something else. Right now Bitcoin is a decentralized peer to peer payment system and a currency without a central authority. By removing the block size limit there is a very real chance it will change into a centralized payment system with a currency with a central authority, a system that you no longer have any control over like you do right now.

If you're fine with that, then I don't understand what you're doing here. Paypal meets your how many transactions you think Bitcoin is suppose to handle on a daily basis just fine. Just don't cry to them if you don't like their rules because if you let Bitcoin become impossible to be in your personal control that's exactly what will happen, other rules that you wont like.

And that, you idiot, is the point of my OP. To remind people that if you can't somehow validate what rules are being validated on the network, if you aren't an equal peer on this network, you don't matter and what you want doesn't matter.

In the worst imaginable case, the ability to validate the currency becomes more expensive, not impossible. As long as it is not impossible, Bitcoin does not become a centralized payment system and you still have sovereign control over your money. Its still peer to peer, at worse its peer group to peer group. Of course this won't happen, because the devs are well aware of the dangers and are reasonable people who continue to put the technology and its users first. Reasonable people can come to compromises that provide for the greatest benefit for all parties.

To your other point, Paypal is a shitty comparison that does not meet people's needs because

A) My funds can be seized
B) I cannot send money to people in specific countries
C) It is not pseudo anonymous
D) The fees are too high to enable micro transactions
E) The fees are too high to provide adequate competition with other merchant processors
F) Paypal places artificial limits on withdrawals
G) Paypal can be much slower than Bitcoin despite being centralized
H) I have absolutely no say in any rule changes that Paypal makes

People saying that Bitcoin shouldn't aim to replace Paypal have no idea how badly Paypal sucks and how much better for humanity a solid Paypal competitor with Bitcoins advantages would be. Nor do they seem to understand or care about how much more important of a disruption that would represent than the "just slightly cheaper" wire replacement service that Bitcoin is designed to become with a hard block size limit of 7 transactions per second.  

I know you want and demand sovereign control over your money. I do not believe that is in any danger.

The second Bitcoin becomes centralized, all those things can arbitrarily change and I have almost no doubt they would change sooner rather than latter when the government comes knocking. You seem to forget that Bitcoin offers these rules only because there are no doors for the government to come knocking on, point guns at people's faces and demand them be changed, it's just peers in a network. Not so anymore in a centralized network.

[IIOII]

The second Bitcoin becomes centralized, all those things can arbitrarily change and I have almost no doubt they would change sooner rather than latter when the government comes knocking. You seem to forget that Bitcoin offers these rules only because there are no doors for the government to come knocking on, point guns at people's faces and demand them be changed, it's just peers in a network. Not so anymore in a centralized network.

I wholeheartedly agree with you, hazek.

In the worst imaginable case, the ability to validate the currency becomes more expensive, not impossible. As long as it is not impossible, Bitcoin does not become a centralized payment system and you still have sovereign control over your money. Its still peer to peer, at worse its peer group to peer group. Of course this won't happen, because the devs are well aware of the dangers and are reasonable people who continue to put the technology and its users first. Reasonable people can come to compromises that provide for the greatest benefit for all parties.

What makes you so sure that this is the case? Everyone can be corrupted. And given the personality pattern I've observed from part of the TBF members, I'd suppose they're even more prone to corruption than the average Joe. But I don't expect the majority to agree with that.

I feel at some not so distant point in future I'll be forced to evaluate alternatives to Bitcoin, because Bitcoin's features I've enthusiastically embraced in the beginning will have been changed beyond recognition.