Wall Observer BTC/USD - Bitcoin price movement tracking & discussion

[brg444]

Why is that better than forcing the fee directly, and ensuring that the capacity is well above the demand?  (I ca think of several reasons why it is much worse.)

It's not.  In fact, Nicolas Houy shows in this paper that a block size limit is economically equivalent to a minimum fee:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2400519

One criticism of the minimum-fee approach is that it would be possible (albeit awkward) for miners to refund fees out-of-band.

I think this paper was quite helpful, however, one thing it did not consider is the fact that miners may have their blocks orphaned, thereby forfeiting the block reward.  This orphaning risk serves as a production cost for our new economic commodity called block space.  In this paper (which I know you've seen), I build from Nicolas Houy's work to show that if orphaning is included, that a healthy fee market would exist without a block size limit.

I bought into Bitcoin because I thought I WAS buying block space by buying bitcoin.  If I have to include fees, and am limited in my ability to use the block chain for title transfer and recording, timestamps and microtransactions, then it is analogous to buying raw land only to discover I am not allowed to build on or develop the land and also have to pay property taxes.  Have I been duped? Are the haters right when they say this is a scam?  Scarcity means nothing if their is no utility value also. There are only 21 million bitcoins, but a potentially infinite number of cryptocoins.  What makes BTC better than the rest? Network effects did not save Myspace.

What makes Bitcoin better is the trust that investors have put into it. Trust is a very organic process which takes an enormous amount of time and cannot possibly be replicated so easily.

You will never be limited in your ability to use the blockchain but one day you might be lead to ask yourself: does this transaction necessarily require the full security and trustlessness of the Bitcoin blockchain or could I compromise some trust and use such a service which promises to be more efficient and will eventually settle on the blockchain anyway. Do you really care if some of your daily expenses are not all sanctified into the holy blockchain?

What you've bought is digital gold that is outside of the reach of any authority or censor. You can use this digital gold for a variety of use cases that all present different security and trust pre-requisites. What you need to consider is that the ultimate security and decentralization of the Bitcoin base layer comes at great cost which must be paid for. It's a trade-off like most every decisions you make in life.

[Peter R]

Did we ever consider what Satoshi insinuated by "cash"?
...
It makes sense considering his design of the system that Bitcoin can not ever reach the ubiquity of cash in transactions worldwide. This would necessitate such as scale as to effectively centralize Bitcoin and therefore defeats the original attempt to remove trust….

Perhaps not as ubiquitous as cash transactions worldwide, but it is crystal clear from the 3rd sentence in the Introduction of the Bitcoin white paper that Satoshi expected Bitcoin to be more useful for small casual online transactions than Visa, PayPal, etc:

Sure, does he necessarily imply that these should take place on the mainchain or did he not envision (and maybe couldn't at this stage) that Bitcoin would spawn an entire ecosystem that would serve all use cases he describes using Bitcoin as the settlement layer?

The entire paper is about transactions occurring on the Blockchain.  

...Maybe we ought to admit that there are intricacies about Bitcoin that Satoshi had no possible ways to know about when he laid the groundwork? I believe nullc was quick to point out a couple of these to you on reddit the other day. Consider for example the 21 million limit which was not specified (and actually not even enforced in the original code).

Satoshi does mention a limit to the number of coins:



Satoshi does NOT mention a block size limit AT ALL, regardless of what nullc says.  

[Peter R]

Why is that better than forcing the fee directly, and ensuring that the capacity is well above the demand?  (I ca think of several reasons why it is much worse.)

It's not.  In fact, Nicolas Houy shows in this paper that a block size limit is economically equivalent to a minimum fee:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2400519

One criticism of the minimum-fee approach is that it would be possible (albeit awkward) for miners to refund fees out-of-band.

I think this paper was quite helpful, however, one thing it did not consider is the fact that miners may have their blocks orphaned, thereby forfeiting the block reward.  This orphaning risk serves as a production cost for our new economic commodity called block space.  In this paper (which I know you've seen), I build from Nicolas Houy's work to show that if orphaning is included, that a healthy fee market would exist without a block size limit.

I bought into Bitcoin because I thought I WAS buying block space by buying bitcoin….

I think you've misunderstood.  By "block space" I mean bytes in the Blockchain to hold transaction entries.  I don't mean the number of coins.  You ARE buying a fixed % of the money supply when you buy bitcoins. 

[brg444]

The entire paper is about transactions occurring on the Blockchain.  

...Maybe we ought to admit that there are intricacies about Bitcoin that Satoshi had no possible ways to know about when he laid the groundwork? I believe nullc was quick to point out a couple of these to you on reddit the other day. Consider for example the 21 million limit which was not specified (and actually not even enforced in the original code).

Satoshi does mention a limit to the number of coins:



Satoshi does NOT mention a block size limit AT ALL, regardless of what nullc says.  

I see you've replied to the post I was going to quote but I'm gonna post it here regardless since it pretty much address in a succinct way all that is wrong with your recurring tendency to point to the white paper as some sort of holy scripture.

Bitcoin has evolved since the whitepaper was written.  It gives a good introduction to the overall concepts, but the whitepaper gets many of the details wrong

[Peter R]

Bitcoin has evolved since the whitepaper was written.  It gives a good introduction to the overall concepts, but the whitepaper gets many of the details wrong

Name one detail it got wrong (and I don't mean one detail that it omitted).

[brg444]

Bitcoin has evolved since the whitepaper was written.  It gives a good introduction to the overall concepts, but the whitepaper gets many of the details wrong

Name one detail it got wrong (and I don't mean one detail that it omitted).

Sure, easy: Satoshi makes no distinction between miners and nodes.

[Elwar]

Every thread seems to be a mixed topic thread recently

Yep, bitcointalk has become blocksizetalk.

[ChartBuddy]

Coin
Explanation

[Peter R]

Bitcoin has evolved since the whitepaper was written.  It gives a good introduction to the overall concepts, but the whitepaper gets many of the details wrong

Name one detail it got wrong (and I don't mean one detail that it omitted).

Sure, easy: Satoshi makes no distinction between miners and nodes.

How is this an error?  The network is composed of nodes.  Some nodes mine, some don't.  (I could also be pedantic and say all nodes mine but some have zero hash power.)  I don't see how this can be interpreted as an error.

[Fatman3001]

Who wants brg444-coins?

[brg444]

Bitcoin has evolved since the whitepaper was written.  It gives a good introduction to the overall concepts, but the whitepaper gets many of the details wrong

Name one detail it got wrong (and I don't mean one detail that it omitted).

Sure, easy: Satoshi makes no distinction between miners and nodes.

How is this an error?  The network is composed of nodes.  Some nodes mine, some don't.  (I could also be pedantic and say all nodes mine but some have zero hash power.)  I don't see how this is an error.

This is absolutely an error because it ignores significant game theoric scenarios such as the one we are experiencing now which is that not all miners validate themselves their transactions causing the SPV mining fiasco we've recently experienced.

This is a perfect example of Bitcoin evolving in a way Satoshi did not think of.

[brg444]

Who wants brg444 coins?

 

Did Fatman sell his account to Lambchop or something?

[Peter R]

Sure, easy: Satoshi makes no distinction between miners and nodes.

How is this an error?  The network is composed of nodes.  Some nodes mine, some don't.  (I could also be pedantic and say all nodes mine but some have zero hash power.)  I don't see how this is an error.

This is absolutely an error because it ignores significant game theoric scenarios such as the one we are experiencing now which is that not all miners validate themselves their transactions causing the SPV mining fiasco we've recently experienced.

Let's agree to disagree then.  I don't consider Satoshi's omission of a predication of SPV mining an "error in the white paper."

This is a perfect example of Bitcoin evolving in a way Satoshi did not think of.

I wasn't suggesting that Satoshi foresaw precisely how Bitcoin would evolve.  I was just questioning your/(Danny's) claim that the white paper got "many details wrong."  I'm not aware of a single detail the white paper "got wrong."

[DieJohnny]

We should absolutely avoid the danger of instilling into Bitcoin users some kind of belief that they have a right to free transactions. Nothing in life is free and the costs of security & decentralization cannot forever be externalized to nodes & miners.

In that sense it is perfectly reasonable to suggest we should strive to keep block size limit as close as possible to actual network demand. Flex cap proposals are interesting in this aspect.

Those transactions aren't free for the user even if the miners eat the cost. They STILL have to suffer exchange rate risk while using bitcoin. If they have to pay a fee higher than nominal WHILE BITCOIN IS STILL IN ALPHA, for the vast majority of people, that just isn't worth it. 

Miners have to subsidize transaction costs to bootstrap usage or this baby will die in its crib. That's why you're getting the goddamn block reward. I am the customer. I am the user who buys your fucking coins. What am I getting for my money if I have to take this monster risk and have to pay a fee anyway?  VISA gives me cash back for chrissakes. They are your competition. If you can't beat them, you won't earn their customers.

Don't you small block fuckers know how business works?

 

This post is full of misguided assumptions.

It should come as a rational observation considering the shortcomings you have pointed out that there exist absolutely no incentive to purchase bitcoins to make purchases. No amount of scaling is going to incentivize mainstream consumers to go through such hoops for a low-cost/free transactions as most of the time they don't pay for the transaction anyway, merchants eat them. You are correct that there is absolutely no way for Bitcoin to compete with VISA as a consumer payment processor and again, no amount of blocksize scale is going to change this.

The reasonable thing to ask then is do we really want Bitcoin to compete with Visa or is there another, possibly more valuable, use case for Bitcoin? What about digital gold? That sounds like an area where Bitcoin could thoroughly outcompete other players in its current state, with little to no change necessary. Why are we targeting to replace payment processors when we could somehow attract the incomparable value that resides in precious metal markets, offshore saving accounts and general safe havens? That sounds like a much more interesting moonshot if you ask me.

As is yours. Making the assumption that bitcoin was never intended to be a transaction system is probably the biggest assumption of them all.

Why would I want to use Bitcoin for transactions? 1) I don't have to go to the bank to get a cashiers check or a deal with questions to withdraw cash for my son's college car. 2) As a business owner I loathed paying fees to credit card companies, so I help other businesses as much as possible by using cash, I use bitcoin when they support it because I know the business will take in more money.  

Bitcoin has ALWAYS been a system for transactions, that has never changed, suggesting otherwise is ignoring history and inventing a new future for Bitcoin.

Frankly, I am not really caring where this blocksize debate lands, but being dishonest about Bitcoin and its history with transactions is absurd.

[Fatman3001]

Who wants brg444 coins?

 

Did Fatman sell his account to Lambchop or something?

I thought this pig-headed debate needed a chimer.

When people starts arguing about what satoshi knew or said or foretold, it's really just running on fumes anyway. Most of what he said is readily available on that interweb-thingy if anyone really cares.

"What would Jesus have done?"

Jesus ain't here. Satoshi bailed.

[billyjoeallen]

do we really want Bitcoin to compete with Visa or is there another, possibly more valuable, use case for Bitcoin? What about digital gold? That sounds like an area where Bitcoin could thoroughly outcompete other players in its current state, with little to no change necessary. Why are we targeting to replace payment processors when we could somehow attract the incomparable value that resides in precious metal markets, offshore saving accounts and general safe havens? That sounds like a much more interesting moonshot if you ask me.

Gold has utility value. Even so, it has become a financial backwater. A "barbarous relic".   At least gold can be used for jewelry, dental fillings, electrical connections, etc.  It's been a poor store of value this century.

Bitcoin doesn't even have those advantages. Without the blockchain, Bitcoin is just another crypto and those are in infinite supply. How can a cryptographic token be a store of value without any utility value?  No micropayments? No remittances? no irreversable consumer payments?

The thing about Swiss bank accounts was that they were bank accounts, only secret.  There are several cryptocoins that are better at anonymity: Monero, Dash, etc.

The thing about gold is that it is not in alpha or beta, but has a five thousand year history.  After Gox, Silk Road and all the other thefts and scams, you really think Bitcoin can be seen as a safe haven?  With no utility value?? Are you fucking insane? 

[DieJohnny]

Sure, easy: Satoshi makes no distinction between miners and nodes.

How is this an error?  The network is composed of nodes.  Some nodes mine, some don't.  (I could also be pedantic and say all nodes mine but some have zero hash power.)  I don't see how this is an error.

This is absolutely an error because it ignores significant game theoric scenarios such as the one we are experiencing now which is that not all miners validate themselves their transactions causing the SPV mining fiasco we've recently experienced.

Let's agree to disagree then.  I don't consider Satoshi's omission of a predication of SPV mining an "error in the white paper."

This is a perfect example of Bitcoin evolving in a way Satoshi did not think of.

I wasn't suggesting that Satoshi foresaw precisely how Bitcoin would evolve.  I was just questioning your/(Danny's) claim that the white paper got "many details wrong."  I'm not aware of a single detail the white paper "got wrong."

I agree that the fact Satoshi does not separate and account for node vs miner right now appears to be significant. Satoshi failing to account for the difference IS an error if not doing so jeopardize the whole model. So time will tell if he got this wrong.

[DieJohnny]

#1 smoking gun problem with Bitcoin, not enough distinct miners make up 75% of hashing power. It is making me want to no longer be a HODLER as I think about it.

[Fatman3001]

I agree that the fact Satoshi does not separate and account for node vs miner right now appears to be significant. Satoshi failing to account for the difference IS an error if not doing so jeopardize the whole model. So time will tell if he got this wrong.

It's not on Satoshi anymore. If it goes belly up it's our fault.

[Peter R]

Sure, easy: Satoshi makes no distinction between miners and nodes.

How is this an error?  The network is composed of nodes.  Some nodes mine, some don't.  (I could also be pedantic and say all nodes mine but some have zero hash power.)  I don't see how this is an error.

This is absolutely an error because it ignores significant game theoric scenarios such as the one we are experiencing now which is that not all miners validate themselves their transactions causing the SPV mining fiasco we've recently experienced.

Let's agree to disagree then.  I don't consider Satoshi's omission of a predication of SPV mining an "error in the white paper."

This is a perfect example of Bitcoin evolving in a way Satoshi did not think of.

I wasn't suggesting that Satoshi foresaw precisely how Bitcoin would evolve.  I was just questioning your/(Danny's) claim that the white paper got "many details wrong."  I'm not aware of a single detail the white paper "got wrong."

I agree that the fact Satoshi does not separate and account for node vs miner right now appears to be significant. Satoshi failing to account for the difference IS an error if not doing so jeopardize the whole model. So time will tell if he got this wrong.

Great point!  I'll agree to your definition: we don't know yet whether his omission to differentiate mining from non-mining nodes was an error.  If the difference between them harms the incentive structure enough that Bitcoin fails to provide (a) double-spend protection, and (b) censorship resistance, then and only then would I agree that it was an error in the design as described by the white paper.