Miner cartel, Bankster cartel, or an altcoin? Your choice?

[iamnotback]

Shelby; If you would need to assess the relative seniority of me and Mircea Popescu, which criteria would you use?

Hi Risto. Please excuse my atrocious ignorance, naivete, and cluelessness w.r.t. the underworld of darkhigh finance. This is a strange new terrain for me. I feel like a child who is struggling to take his first steps without stumbling onto my face.

In particular I would really like to understand what is different if anything about your perspective/approach compared to MP's economic philosophy and assessment of the value of humanity. MP seems to think those with the most wealth should be in control of the monetary system yet he hates democracy and mass marketing because he sees those as ways of enslaving the stupid masses in a farcical, house-of-cards, debt-based economic system. Perhaps it can't be any other way? My technological approach with my attempt to find an improvement to Satoshi's design, has been to try to find a design in which nobody is in control.

So I would judge your ability to enlighten me on these issues—either in public or private communication—as the critieria.

Note that your WoT (your relationships with other whales) is not my first chosen criteria, because leadership insight is IMO the most important criteria. A person's reputation and position within the inertia of the economy is relevant but not necessarily a predictor of future performance because of blackswans (we are in a highly transformative epoch, which is why I am here).

Without publicizing any specific event, your actions indicate you are wealthy.

He wrote about you:

Assuming your the real MP what are your thoughts on the wacky Finnish 'supernode' guy?

Pretty good job.

Mircea Popescu is the owner of MPEX which is pretty much the buttcoin stock exchange, he's famous for lasting longer than most bitcoin businesses without failing and hiring an ex-spammer to do PR on bitcointalk despite her having the same level of charm and interpersonal skills as Josh.

No, actually, most recently I'm famous for fixing the price of Bitcoin back in early April, muchly humiliating Max Keiser in the process, and for leading the MtGox collapse by about two months. The rumour du jour at the Google I/O sloppy seconds conference thing they're doing currently is that in fact Gox' demise was pre-arranged and then announced privately to a secret group during my private and at the time secret conference last month.

Before that I was famous for calling various other "news" and "shocking & surprising developments" a month or two in advance, the girls are keeping a list somewhere.

I work with poor people from a third world, Spanish speaking island called "Holyoke, Massachusetts". If they have Internet, it's through their phones, because they can't afford that and a modern pc, cable Internet, or a car, etc. How the hell are they supposed to download a 10 gigabyte block chain? I guess they could give out the block chain on DVD or Blu-Ray. Ok, to use this currency, first you need a copy of every transaction anybody has ever made...

I'm pretty sure nobody involved actually cares about these guys you work with, or poor people in general. This is a little like asking "but how are the thirld worlders from Holyoke Mass going to handle their own private jets". Well... they aren't.

1) Butts don't scale up at all.
2) Because of 1, decreasing mining rewards, greed and mining being ruled by an oligopoly transaction fees will skyrocket.
3) Butts are inconvenient.
4) Butts are insecure.

Why bitcoins will ultimately go down:
2) Exchanges are run by idiots. This is where the government already intervened.
3) Everyone who uses butts is either an idiot (largest proportion), scammer or otherwise criminal and oftentimes both at the same time. This is the case because non-dumbs and people with legal transactions can easily use other services.
4) This is a long shot, but I believe in the future all transactions will have names attached to them and cash will be phased out. It's just a matter of adoption and convenience now.

Apparently you're unaware who exactly you're talking to, which is chuckle worthy. Here's a thought : at the last count I was worth something north of 3/4 million Butts. Now what ?
(Yes, your numbered list consists of nonsense, most of it self-defeating, some of it self contradictory etc. But that's neither here nor there, what's a list these days, anyone's got one.)

In the last statement quoted above, MP is referring to the fact that what the USG.MIT mass media is painting onto Bitcoin is not what Bitcoin really is. Behind the curtain are whales who are changing the world from a debt-based industrial age to a more meritocratic knowledge age. Again I more than concur with MP's logic on this facet, and I even wrote my Rise of Knowledge, Demise of [Usury] Finance essay several years before the first instance of a similar elucidation I've found from him on his blog (of course he may have had those ideas much earlier, ditto for myself).

Perhaps I don't have the same valuation of humanity as he does. I don't entirely devalue the poor. Maybe he has similar logic to mine and just isn't communicating his ideas effectively to me. Essentially my major disagreement with MP seems to revolve around the mathematical fact which MP also derived, that is essentially Taleb's anti-fragility. It seems that MP punts to a hierarchical system of control, e.g. Satoshi's PoW ledger. But what if instead we had a way to encode the laws of physics into a monetary ledger such that nobody was in control, i.e. not a winner-take-all power vacuum of non-resilience? Wouldn't that be preferred?

What do you think about the developers frequently receiving threats by bitcoiners? Or the guild and certain developers trying to push for a centralised validation services?

Bitcointalk is a collection of mostly poor, mostly uneducated, mostly bizarre folk you wouldn't have on your lawn/daughter/whatever. The various shit they do is representative of Bitcoin in the sense Jeremiah Wright is representative of xtians or Cornel West is representative of academia. Specifically about threaths... I get threatened all the time on teh Interwebs. I've never managed to care (yes I'm aware "the FBI takes internet threats very seriously", but I've never managed to care about that, either).

People will always try to push for centralised something or the other as long as they figure they'll have more market share of the centralised thing than they do now. As various failures are pushed aside to rot into irrelevance they're certain to try and find some sympathetic ear to enforce protectionist measures for them too (que Winklewhoever doods ranting about "regulation"). That topic is best served here.

In short I don't think either are suprising or important.

[iamnotback]

Simply mix with dust from a new coinbase transaction.

You propose to spend the compound transaction on the whales' fork first, then after that has confirmed then respend the same inputs on the non-whales' fork without mixing in the coinbase inputs. The non-whales' fork can't replay the former because of the coinbase inputs mixed in the transaction. Or vice versa ordering if the coinbase from the non-whales' fork are in the compound transaction.

Your idea would not to scale well if employing the coinbase from the whales' fork, because how does the miner transfer those dust to others, because if dust were allowed in unconstrained blocks normally then Bitcoin mining would be spammed. So even with larger (but constrained) blocks it seems dust transactions will be done at huge losses on the whales' fork (when done is large volume).

It doesn't need to scale a lot.  In fact, this dumping has to be done on an exchange listing both coins, right ?
So this exchange should get some dust, even before being able to allow deposits and withdrawals in real coins from both coins.  Once such an exchange has "dust" (it can "explode" the dust in single Satoshis if it wants to), it can mix in dust in every withdrawal transaction on the whales' chain.  There aren't so many exchanges.  They only have to have some dust.

But the "trading" with IOU can start immediately of course: that's just a matter of virtual games on the exchange's web site.  But withdrawals will be impossible until the exchange has at least some dust from one chain or the other.  If the exchange is wise, it doesn't list the coins before obtaining the dust, because it could put itself in serious difficulties otherwise.

So you propose a few exchanges will split the tokens in bulk for the owners of the tokens. That works except it assumes we can trust the exchanges. What if one or a plurality of them conveniently lose all the tokens to a hacker.

As I wrote before, your idea doesn't scale well decentralized and thus it is more risky.

However, if we assume that 80% of the Bitcoins are held by whales (such as MP, Roger Ver, and @rpietila) who will make the decision^[1], then it seems they could adequately employ your method without relying on any exchange. So in that case, I wonder what the block size issue is really about?

Perhaps the whales view Bitcoin as a settlement system for those who matter, and think the peons can trade off chain and be settled with offsetting transaction on chain (e.g. the LN design). But I am wondering why they are so adamant about preventing Bitcoin from being uses for other things on chain.

Perhaps it is because Bitcoin whales want to minimize the level of top-down control that themselves have via their control over the protocol.

Perhaps they think by forcing the bulk of humanity activity to be organized off chain, then it affords others the opportunity to build other systems (even other blockchain instances) which then get periodically settled back to the master Bitcoin blockchain with a hashed summary transaction.

So maybe the 1MB blocksize limit is unselfish and a forward looking attempt to have more bottom-up anti-fragility baked in? Top-down control is vulnerable to blackswans so the whales need to be concerned about blackswans wiping them out, thus more bottom-up control is better:

Essentially my major disagreement with MP seems to revolve around the mathematical fact which MP also derived, that is essentially Taleb's anti-fragility. It seems that MP punts to a hierarchical system of control, e.g. Satoshi's PoW ledger. But what if instead we had a way to encode the laws of physics into a monetary ledger such that nobody was in control, i.e. not a winner-take-all power vacuum of non-resilience? Wouldn't that be preferred?

^[1] When I originally rejected your idea (actually it was my idea also but had rejected it), it was because I wasn't thinking of Bitcoin as entirely controlled by a couple dozen whales. But obviously it must be, due to the power-law distribution of wealth.

[dinofelis]

So you propose a few exchanges will split the tokens in bulk for the owners of the tokens. That works except it assumes we can trust the exchanges. What if one or a plurality of them conveniently lose all the tokens to a hacker.

But your (correct) theory is that coin owners will dump on the chain they don't like, to obtain more coins on the chain they like.  Now *where else but on an exchange* are they going to do that ?
This can't be a "friendly over the counter" encounter by 10 equal-minded big whales somewhere on an island in the Pacific, because those BUYING the coins you dump, are in the other camp.  

So you HAVE TO TRUST the exchanges in this affair.  The only way to "dump a chain into oblivion" by a whale, is to put to sale his stash on that chain *to the public*.  Otherwise, the public price wouldn't fall down.  The place where the value of a chain is made, given that there is almost no *economic value* to crypto, is on exchanges.  
The "oh my god, merchant X is only accepting BU coin or is only accepting Core Coin" doesn't play the slightest bit of a role, as this represents maybe $10,- in the bitcoin price (I even think less).
The "oh, my preferred dark market is now only doing Core Coin" won't matter much.  

The only thing that makes and kills coins in this greater-fool game that crypto is, are the casinos: the exchanges.

You only need 4 or 5 of them listing the two coins, and that will do.  And I can guarantee you that they will play the game: THEY will become rich because of this, because THEY take fees on the exchanging of Miner Coin against Core Coin.  

As I wrote before, your idea doesn't scale well decentralized and thus it is more risky.

But your "whales dumping" plan HAS to be executed on exchanges.  They don't have a choice.

However, if we assume that 80% of the Bitcoins are held by whales (such as MP, Roger Ver, and @rpietila) who will make the decision, then it seems they could adequately employ your method without relying on any exchange. So in that case, I wonder what the block size issue is really about?

They are going to dump their Miner coins on who ?  Who will buy them directly from them, and not on exchanges ?
Who are the big whales who will BUY these coins from them, if it is not on an exchange ?

But there's another problem.  How much are these whales trusting one another ?  Because you get a Prisoners dilemma between them, unless they are sitting together in the same room before their lap tops, holding guns to shoot down the cheater.

Because there's no more fun than to get your co-whales dump on the wrong chain, buy up their stash at ridiculous prices, and when they are "empty", start pumping the chain they just tried to dump to oblivion, on which they released all of their stash !   You can dump slightly on the "expensive chain", which the whales will buy, giving you a huge amount of cash, with which you buy the "cheap chain".  Especially if it is the "good old bitcoin" : people will see a huge dip, and when you start buying up, the price will go up again, investors will hesitate following the "pumped fork", you start dumping the "whale fork" after a while, your co-whales have to buy in like crazy and make you rich.

The "true bitcoin" name of the miner chain will in the end survive, the enemy whales have nothing any more to dump on it, you have bought their stash on that chain for a penny, and now you have:

1) all their "miner coins" which is the good old bitcoin chain
2) most of their stash when you dumped on the whales chain

"old bitcoin" will have survived the fork, the other whales are "rich in whale coin" and you are rich in bitcoin and cash.

The miners are back in business with a lot of PoW ; the other chain is a pumped alt coin.

Very very dangerous game for whales to dump their "true bitcoin".

What the block size issue is about ?  Very simple: miners want big fees, so small blocks and no second layer.  Exactly the bitcoin of today.  They don't want all these Core ideas.  They simply want bitcoin remaining the way it is (note that this is the true FUNCTION of proof of work: keep the network honest = keep it to the rules).
But how do they counter core which IMPLEMENTS AUTOMATIC protocol modifications ?  By going for a competitor.  Just ANY competitor that kills Core's de facto centralized software hegemony and (as they thought) their governance of modifications of the protocol.

This is why miners will never allow the BU fork to happen.  They will keep BU at 30-40%.  Sufficient to show that Core doesn't have consensus.  If ever Core implements a 50% soft fork, they will augment BU to 50-60% but that's dangerous, because some idiot might pull the trigger.  But now that core threatens to pull the trigger with change of PoW, the "altcoin guys" are on the Core side.

Nothing will happen.  Until after bitcoin has lost its first place.

[iamnotback]

There is in fact nothing exceptional to what is presented here as a kind of big conspiracy:

Who wrote that it is a conspiracy? The power-law distribution of wealth is well documented in published research.

Afair, roughly 50% of the wealth is held by the top 1%. And the remaining 50% follows the actions of the coordinated whales, because the remaining 50% can't self-organize (they're only organized in a manipulation by whales). When the whales fight, they need to fight over which of them can manipulate the other 50% of peons.

Apparently the reason the whale MP hates the dumb masses is because the USG.MIT is capable of manipulating the peons with the debt-based fiat system, which thus puts the stupid and incompetent in control because manipulating the masses is not a meritocracy. This is why MP is always foaming at the mouth about how much he hates social networking, marketing, Ethereum, etc..

if a hard fork of a coin is made, then of course all owners of the coins, having double coins, will decide in the market.  If there is a large preference by coin owners for one chain over the other, they will dump their holdings on one, to buy more of the other ; this will reflect in the relative market valuations of both market caps.

Whether this is done by "big whales", or by myriads of small owners doesn't really matter: it is the stake holders that split over the two coins according to their preferences.  Of course, if one of the chains is largely preferred by the majority stake, the other one will be "dumped into oblivion" but there's nothing wrong with that: it is stake preference.

Is such a system decentralized given that the power-law distribution of wealth means the control is highly concentrated?

Well if the Bitcoin whales fight each other, then there can be a split which doesn't immediately devolve to winner-take-all. For example, MP alleges that Ethereum is a project of the USG.MIT and even quoted @r0ach who says Ethereum is run by the R3 consortium. He also thinks similarly about Ripple.

So either Bitcoin is top-down controlled by a coordination of whales (e.g. MP's WoT) or it is a chaotic, ongoing, insoluble Godzilla vs. King Kong wars with us peons as fodder and collateral damage. This is why we peons prefer a winner-take-all outcome.

However, I think that all these people are missing the point: miners don't want to hard fork.  The current bitcoin protocol is a dream for them.  They simply don't want it changed.  The only ones pushing for forks are the Core guys with Segwit, and now with change of PoW.

Core (actually afaik only some members of Core) did not aggressively propose changing the PoW until BU threatened to HF. It is not a pre-emptive action but a defensive one.

Whether the miners were happy with 1MB blocks or not, they are apparently not happy about the SegWit softfork.

And I think I may understand the reason now. The miners don't want any economic activity to occur off chain, because they want a monopoly on the economic value of Bitcoin. This relates to what I wrote in my prior post in bold text:

Perhaps it is because Bitcoin whales want to minimize the level of top-down control that themselves have via their control over the protocol.

Perhaps they think by forcing the bulk of humanity activity to be organized off chain, then it affords others the opportunity to build other systems (even other blockchain instances) which then get periodically settled back to the master Bitcoin blockchain with a hashed summary transaction.

So maybe the 1MB blocksize limit is unselfish and a forward looking attempt to have more bottom-up anti-fragility baked in? Top-down control is vulnerable to blackswans so the whales need to be concerned about blackswans wiping them out, thus more bottom-up control is better:

Essentially my major disagreement with MP seems to revolve around the mathematical fact which MP also derived, that is essentially Taleb's anti-fragility. It seems that MP punts to a hierarchical system of control, e.g. Satoshi's PoW ledger. But what if instead we had a way to encode the laws of physics into a monetary ledger such that nobody was in control, i.e. not a winner-take-all power vacuum of non-resilience? Wouldn't that be preferred?

The BU are naive instrumentalized guys (or not so naive), that only need to exist to give counter weight to Core's desires to change bitcoin.  BU is not supposed to fork for real.  It only needs to bring sufficient dissent so that bitcoin can stay itself.

As such, the story becomes more involved: the only people *really wanting to fork away* are the Core side because they aren't pleased that bitcoin doesn't want to evolve according to their wishes ; that they have lost centralized control over bitcoin's protocol and cannot dictate the changes as they wish.   Those stopping them, and acting as the guardians of immutability, are the miners.  So the propaganda now wants to picture the miners as the people wanting change (with BU).  But they would be out of their minds to want change.  Bitcoin is a dream for them.

Well we'll see if BU actually attempts a hard fork.

Wouldn't miners prefer larger block sizes so that Bitcoin's economic value can grow and all on chain  

And you are the one who is making elaborate conspiracy theories. Occam's Razor says the miners want everything on chain and they want larger blocks.

The ultimate scare tactics is to threaten the miners that if they don't comply to the changes Core wants, they will render their investments useless by changing PoW.

Which works both ways. By having BU threaten to HF if SegWit gains more adoption, they threaten the miners not to adopt SegWit, because it is quite clear that if BU attempts a HF and the whales are united around small blocks, then the PoW hash will be changed and the miners will all be bankrupted.

Therefor, the threat works in both directions.

If the market (the whales) is with them, then yes, Core could bring out a fork with a new PoW, and the whales would kill the original bitcoin by dumping it to go to the forked Core version.

However, that will be a much, much more risky operation than at first sight, because you would need very strong collusion to do that:

Agreed would need 80% of the whales agreeing to go for the small blocks with PoW hash change.

all exchanges would need to list "bitcoin" as the FORK, and need to list the ORIGINAL bitcoin as the alt coin.

I don't think that is absolutely necessary, since the whales will decide which ticker symbol wins.

But if you have 80% of the whales colluding, then the exchanges don't want to get spanked and will comply.

Note that it worked with ethereum: the fork went with the name.  There WAS strong collusion between the whales, the Foundation, and the few exchanges listing ethereum to keep the name on the fork, and dump the original ethereum (renamed ETC) to oblivion.  Note that they ALSO had collusion of the miners.

Agreed it was the collusion of the economic majority, not the ticker name in particular.

But the power structure in bitcoin is different, and the *main propaganda for bitcoin*, the "longest chain, most protected by PoW" is going to be a very strong argument AGAINST such a PoW scheme, which cannot deliver a similar PoW security as the original bitcoin which will have ALL miners behind it (they have no choice !).

The price and marketcap of Bitcoin determines the level of mining security, not the PoW hash continuity.

One set of miners get replaced by another. The bankrupted miners get millions of ASIC pet rocks.

The surviving "old bitcoin" would have a more grassroots aspect than the new "big whales" coin with low PoW.  If ever the whales made a mistake, they would have their own coin amongst themselves to play with, and the "greater fools" would swarm to "cheap, true bitcoin": true bitcoin at $20, -, who wouldn't want to buy some !  With PoW like before, solid as a rock.  With the 1MB blocks largely sufficient to sustain the low traffic.  Bitcoin back in 2012, who wouldn't want to jump the train they missed the first time !

I call bluff.

Because only fools would enable a mining cartel that has every incentive to increase the number of tokens to 1 billion tokens, because neither the miners nor the fools own many tokens. The miners have sunk costs, ASICs, and debt.

So all those fools would debase each other into a tarpit as fools always do.

It is a huge inkblot to not remember that the whales have every incentive to protect the 21 million tokens limit, but the miners do not. That is why the whales are very likely to collude to prevent HFs by the miners. The miners must always remain slaves.

Segwit offers the fees relief every BU supporter is asking for.

It doesn't, stop lying, it was clearly explained by franky1 why it doesn't.
Core assumes attackers are going to spam LN instead of the main chain, are you telling me you actually believe in that?

Nonsense.

The whales want the fees to be too high on the main chain for you peons to use and they have their reason for that which you wouldn't understand, so they don't even bother to tell you.

But the fact is, you will not have any choice but to follow the decision of the whales.

So just keep crying in your milk, or perhaps consider another possible future option.

If you want to gain insight, read the following thread:

https://bitcointalk.org/index.php?topic=1837136.msg18339801#msg18339801

That alone tells me Core is either flat out lying or has absolutely no clue what they're doing.

The whales know what they are doing and why.

Like I said don't treat your users like they are idiots.

Idiots can't be treated as anything other than what they are. Again the above linked thread is available for those who want to learn.

[iamnotback]

So you propose a few exchanges will split the tokens in bulk for the owners of the tokens. That works except it assumes we can trust the exchanges. What if one or a plurality of them conveniently lose all the tokens to a hacker.

But your (correct) theory is that coin owners will dump on the chain they don't like, to obtain more coins on the chain they like.  Now *where else but on an exchange* are they going to do that ?
This can't be a "friendly over the counter" encounter by 10 equal-minded big whales somewhere on an island in the Pacific, because those BUYING the coins you dump, are in the other camp.  

So you HAVE TO TRUST the exchanges in this affair.

The splitting of the coins can be orthogonal to dumping and pumping on exchanges.

Only a small portion of the whales' tokens needs to on the exchange at any given time in order to paint the float.

Any way, I agreed that your proposal could be employed if the whales are not so numerous. So why are you still disagreeing?

Also I think MPEx (MP's exchange) is actually the place where most of the volume is done and the actual prices of Bitcoin are set (between players of sufficient size). But I might be mistaken about that. I haven't actually researched the data.

The only way to "dump a chain into oblivion" by a whale, is to put to sale his stash on that chain *to the public*.

Not all on the same day.

However, if we assume that 80% of the Bitcoins are held by whales (such as MP, Roger Ver, and @rpietila) who will make the decision, then it seems they could adequately employ your method without relying on any exchange. So in that case, I wonder what the block size issue is really about?

...

But there's another problem.  How much are these whales trusting one another ?  Because you get a Prisoners dilemma between them, unless they are sitting together in the same room before their lap tops, holding guns to shoot down the cheater.

No for the reason I explained that marketing has little or nothing to do with it:

Because only fools would enable a mining cartel that has every incentive to increase the number of tokens to 1 billion tokens, because neither the miners nor the fools own many tokens. The miners have sunk costs, ASICs, and debt.

So all those fools would debase each other into a tarpit as fools always do.

It is a huge inkblot to not remember that the whales have every incentive to protect the 21 million tokens limit, but the miners do not. That is why the whales are very likely to collude to prevent HFs by the miners. The miners must always remain slaves.

Because there's no more fun than to get your co-whales dump on the wrong chain, buy up their stash at ridiculous prices, and when they are "empty", start pumping the chain they just tried to dump to oblivion, on which they released all of their stash !   You can dump slightly on the "expensive chain", which the whales will buy, giving you a huge amount of cash, with which you buy the "cheap chain".  Especially if it is the "good old bitcoin" : people will see a huge dip, and when you start buying up, the price will go up again, investors will hesitate following the "pumped fork", you start dumping the "whale fork" after a while, your co-whales have to buy in like crazy and make you rich.

Surely they can attempt that but they have the prisoner's dilemma that the miners can then debase them to hell, because they already proved to each other that they are duplicitous.

So the fools die in their own tarpit as always.

The "true bitcoin" name of the miner chain will in the end survive

Only the fools believe marketing matters that much.

The economic paradigm is what ultimately decides.

What the block size issue is about ?  Very simple: miners want big fees, so small blocks and no second layer.

Incorrect/disagree. Miners want max(volume x fee per transactions) on chain.

Exactly the bitcoin of today.

Incorrect/disagree.

They don't want all these Core ideas.

Because Core doesn't want to maximize max(volume x fee per transactions) on chain, and because this is what the whales want.

And Core wants to enable off chain transactions.

And the miners always will be driven to increase the number minted tokens eventually if they have that control (but they can only have that control if the whales are duplicitous thus suicidal).

Nothing will happen.  Until after bitcoin has lost its first place.

Perhaps. We'll see how desperate the mining cartel becomes to stop SegWit while their revenue is being squeezed by the small blocks. Core has time on its side. If the miners raise fees too high, then they kill off Bitcoin destroying their sunk cost investment. If miners allow SegWit, they loose control over the fees charged off chain. If the miners attack with HF to get larger blocks, they end up with a million ASIC pet rocks.

Miner are stuck between a (n ASIC) rock and a hard place. Lol. BU are some technologically incompetent masochists who willfully enjoined the flogging.

Miners are slaves. Got it.

[dinofelis]

So either Bitcoin is top-down controlled by a coordination of whales (e.g. MP's WoT) or it is a chaotic, ongoing, insoluble Godzilla vs. King Kong wars with us peons as fodder and collateral damage. This is why we peons prefer a winner-take-all outcome.

This.  Well, "us", the idiots that are willing to pay for that joke, calling it "investment", while it is just a money pump.

Core (actually afaik only some members of Core) did not aggressively propose changing the PoW until BU threatened to HF. It is not a pre-emptive action but a defensive one.

But who is "BU" ?  Those few devs ?  The only ones that are *capable* of hard forking are the mining pools, when they DECIDE to make big blocks.  And they aren't.

And I think I may understand the reason now. The miners don't want any economic activity to occur off chain, because they want a monopoly on the economic value of Bitcoin. This relates to what I wrote in my prior post in bold text:

Yes, and that is their function, as PoW providers.

Perhaps they think by forcing the bulk of humanity activity to be organized off chain, then it affords others the opportunity to build other systems (even other blockchain instances) which then get periodically settled back to the master Bitcoin blockchain with a hashed summary transaction.[/b]

Mining pools have no megalomania world views, they are just in this business to make money.  Like exchanges.  They don't need world-domination.  They couldn't care less.  They want income.

The BU are naive instrumentalized guys (or not so naive), that only need to exist to give counter weight to Core's desires to change bitcoin.  BU is not supposed to fork for real.  It only needs to bring sufficient dissent so that bitcoin can stay itself.

As such, the story becomes more involved: the only people *really wanting to fork away* are the Core side because they aren't pleased that bitcoin doesn't want to evolve according to their wishes ; that they have lost centralized control over bitcoin's protocol and cannot dictate the changes as they wish.   Those stopping them, and acting as the guardians of immutability, are the miners.  So the propaganda now wants to picture the miners as the people wanting change (with BU).  But they would be out of their minds to want change.  Bitcoin is a dream for them.

Well we'll see if BU actually attempts a hard fork.

I'm 99% convinced (I always leave 1% of existential doubt) that there will NEVER BE a BU fork.

Wouldn't miners prefer larger block sizes so that Bitcoin's economic value can grow and all on chain  

And you are the one who is making elaborate conspiracy theories. Occam's Razor says the miners want everything on chain and they want larger blocks.

They need a HARD LIMIT on block size, in order to be able to squeeze the fee market.  Whether that limit is 1 MB, 10 MB or 50 GB doesn't matter (well it does, it only starts to be profitable when the market is squeezed, so 50 GB blocks is still too far off).

The reason is, as you pointed out yourself, that if there is no hard limit, the Tragedy of the Commons makes that each miner, individually, will be tempted to make larger blocks, having a somewhat larger gain at an instant, but will be doing so at the expense of releasing the pressure on the fee market, diminishing SEVERELY the fee income of all miners, himself included.  So *ideally* a miner would like to be able to make large blocks himself, but having his peers make small blocks.  That won't work of course.  So if there is no hard limit on the block size, to which to SQUEEZE the fee market, the temptation to increase block size will make that this market is never squeezed.

By sheer coincidence, there is, at the moment, a hard limit on block size: 1 MB.  That is a god-given present to miners.  This keeps them mutually in place, and allows them to escape the Tragedy of the Commons drama where they will kill one another's fee market.  So they absolutely want to keep this, because once this limit falls, ALL limits will fall in the same way.  There is only one wall.  If it crumbles, all of them are known to be able to crumble.

Now, you say that miners want maximum (fee x volume) x market price.

Yes.  But fees are a very INELASTIC market.   That is, from the moment that there is more transaction demand than can be delivered, fees SKYROCKET.  Because people NEED to transact.  Their coins are worthless if they cannot transact them.  Of course, if they think it is a temporary problem, they will wait.  But if there is a general scarcity of transactions, people will pay bigger and bigger fees to transact.  The small transactions that can be left alone, will not be done, and on bigger transactions, the fee is not a problem, so BIG transactions will pay BIG fees to get through.

As such, fee x volume, when the market is squeezed, will increase with smaller volume !  If there could only be 1 transaction per block, you would get only THAT SINGLE VERY IMPORTANT transaction of 50000 coins, with a fee of 20 BTC.  Of course, at that point, bitcoin would be dead. 

But by squeezing the market, you can probably PUMP UP the (fee x volume) AT LEAST AN ORDER OF MAGNITUDE maybe even two.  The market price will not readily increase an order of magnitude by not squeezing the market, and even if it FALLS an order of magnitude, you are still winning.

SWIFT has about 2-3 transactions per second.  Do you imagine the VOLUME of money they process ?  The 1 MB limit would be sufficient for SWIFT.  Can you imagine the FEES you can collect if ONLY swift-like transactions happen with bitcoin ?

Why would miners be bothered with peons paying for a book on Open Bazaar ?

Therefor, the threat works in both directions.

... and nothing will happen as a result --> immutability !

Agreed would need 80% of the whales agreeing to go for the small blocks with PoW hash change.

But they too, suffer from a Tragedy of the Commons problem.  The danger of dumping on a chain by a whale, to get the others buying his stash and then seeing this chain becoming the valuable one, is too big.    You wouldn't go in such an adventure and loose your fortune.

But if you have 80% of the whales colluding, then the exchanges don't want to get spanked and will comply.

Exchanges don't care about whales.   They don't care AT ALL about crypto tokens, only by idiots wanting to exchange them.  They couldn't care less about bitcoin, ethereum or whatever.  They live off people paying (cash) to exchange stuff.  Whatever stuff. So they cannot get "spanked" by a guy with a lot of crypto tokens.  The guy with a lot of crypto tokens needs them, not the other way around.  Contrary to miners who invested heavily in mining material.  Exchanges sell "exchange operations".  If they are careful, they are never exposed to price fluctuations of coins.

But the power structure in bitcoin is different, and the *main propaganda for bitcoin*, the "longest chain, most protected by PoW" is going to be a very strong argument AGAINST such a PoW scheme, which cannot deliver a similar PoW security as the original bitcoin which will have ALL miners behind it (they have no choice !).

The price and marketcap of Bitcoin determines the level of mining security, not the PoW hash continuity.

I know, as long as the mining production can follow, as long as there are enough asics around.  But if tomorrow, you switch to scrypt, for instance, there's not enough material available, and it will take months to install all this capacity.  In the mean time, those few miners with material (former Litecoin miners I suppose) will, at ridiculously low difficulties, make tons of benefit if this is the real bitcoin, and that chain will be very lowly secured in comparison with what it used to have as hash rate protection.

One set of miners get replaced by another. The bankrupted miners get millions of ASIC pet rocks.

Yes, but before the same amount of asics is produced for the new algorithm, difficulty is extremely low, and the cost of PoW will be ridiculously low as compared to the rewards.  The one or two producers of ASICS may very well hold back some production, to easily give a 10-fold hash rate to one of their friends, taking over entirely the system.

Imagine that the difficulty of the new chain is 100 times less than the PoW cost when the full capacity will be installed.  That is, the world now has to produce 100 times more asics than are available at the moment.  If you have a factory (one of the 2 or 3 that do this), and you've produced 20 times the current amount of running asics, you are in a perfect position to give someone a 95% hash rate majority at a given moment with the 20 times more asics you have produced and not yet exported.  

We're not talking about a 51% attack, but a 95% attack: the guy with the 20 times the number of currently used ASICS can dictate the chain and is still doing only 1/5 of the total PoW cost in equilibrium.

For instance, if it is scrypt: LTC has a market cap of about 200 million.  Bitcoin is rather 100 times more.  So my idea that at this moment, in the world, the total scrypt hash rate available is only 1/100 of what it would be if it came to equilibrium is not crazy.

Do you see the danger for the integrity of that scrypt bitcoin chain ?  After 5 attacks, people run back to the normal bitcoin chain.

Because only fools would enable a mining cartel that has every incentive to increase the number of tokens to 1 billion tokens, because neither the miners nor the fools own many tokens. The miners have sunk costs, ASICs, and debt.

Tail emission would be a good thing.  Miners could decide not to halve any more.  They would be right.

[iamnotback]

Perhaps it is because Bitcoin whales want to minimize the level of top-down control that themselves have via their control over the protocol.

Perhaps they think by forcing the bulk of humanity activity to be organized off chain, then it affords others the opportunity to build other systems (even other blockchain instances) which then get periodically settled back to the master Bitcoin blockchain with a hashed summary transaction.

So maybe the 1MB blocksize limit is unselfish and a forward looking attempt to have more bottom-up anti-fragility baked in? Top-down control is vulnerable to blackswans so the whales need to be concerned about blackswans wiping them out, thus more bottom-up control is better:

Essentially my major disagreement with MP seems to revolve around the mathematical fact which MP also derived, that is essentially Taleb's anti-fragility. It seems that MP punts to a hierarchical system of control, e.g. Satoshi's PoW ledger. But what if instead we had a way to encode the laws of physics into a monetary ledger such that nobody was in control, i.e. not a winner-take-all power vacuum of non-resilience? Wouldn't that be preferred?

Is making it easier to do fractional reserve banking another possible motivation for small blocks and forcing the masses to transact off chain?

LN users will need to delegate to banks acting on their behalf. At that point, regardless of the cryptographic assurances in the protocol, the banks can trade digits out-of-thin-air with each other.

[dinofelis]

Perhaps it is because Bitcoin whales want to minimize the level of top-down control that themselves have via their control over the protocol.

Perhaps they think by forcing the bulk of humanity activity to be organized off chain, then it affords others the opportunity to build other systems (even other blockchain instances) which then get periodically settled back to the master Bitcoin blockchain with a hashed summary transaction.

So maybe the 1MB blocksize limit is unselfish and a forward looking attempt to have more bottom-up anti-fragility baked in? Top-down control is vulnerable to blackswans so the whales need to be concerned about blackswans wiping them out, thus more bottom-up control is better:

Essentially my major disagreement with MP seems to revolve around the mathematical fact which MP also derived, that is essentially Taleb's anti-fragility. It seems that MP punts to a hierarchical system of control, e.g. Satoshi's PoW ledger. But what if instead we had a way to encode the laws of physics into a monetary ledger such that nobody was in control, i.e. not a winner-take-all power vacuum of non-resilience? Wouldn't that be preferred?

Is making it easier to do fractional reserve banking another possible motivation for small blocks and forcing the masses to transact off chain?

LN users will need to delegate to banks acting on their behalf. At that point, regardless of the cryptographic assurances in the protocol, the banks can trade digits out-of-thin-air with each other.

This.  Actually, maybe not even the "fractional reserve" thing.  There's nothing fundamentally wrong with that and, I will tell you, *unavoidable* in any financial system.  I think the main reason is to push people into banking again.  Banking is really lucrative.  Look at the only "banking" system there is in crypto: the exchanges.  This is the most lucrative part of the whole thing.

However, I don't think that can ever work: "bitcoin banking" has the worst of both worlds.  In that case, "fiat banking" is going to be preferred by almost all people.  If you are in any case subjugated to banks, just as well use fiat banks, which have some legal framing, and which have centuries of experience, not just "a banking guy on the internet".

[iamnotback]

Core (actually afaik only some members of Core) did not aggressively propose changing the PoW until BU threatened to HF. It is not a pre-emptive action but a defensive one.

But who is "BU" ?  Those few devs ?  The only ones that are *capable* of hard forking are the mining pools, when they DECIDE to make big blocks.  And they aren't.

The cartel had already spoken:

Apparently the cartel has the willingness and resolve.

And I think I may understand the reason now. The miners don't want any economic activity to occur off chain, because they want a monopoly on the economic value of Bitcoin. This relates to what I wrote in my prior post in bold text:

Yes, and that is their function, as PoW providers.

And so they need to scale up the blocksize and they need a HF to do that. Why are you causing me to repeat myself as quoted below:

Perhaps. We'll see how desperate the mining cartel becomes to stop SegWit while their revenue is being squeezed by the small blocks. Core has time on its side. If the miners raise fees too high, then they kill off Bitcoin destroying their sunk cost investment. If miners allow SegWit, they loose control over the fees charged off chain. If the miners attack with HF to get larger blocks, they end up with a million ASIC pet rocks.

Miner are stuck between a (n ASIC) rock and a hard place. Lol.

I really don't understand why you keep arguing on this point.

Perhaps it is because Bitcoin whales want to minimize the level of top-down control that themselves have via their control over the protocol.

Perhaps they think by forcing the bulk of humanity activity to be organized off chain, then it affords others the opportunity to build other systems (even other blockchain instances) which then get periodically settled back to the master Bitcoin blockchain with a hashed summary transaction.[/b]

Mining pools have no megalomania world views, they are just in this business to make money.  Like exchanges.  They don't need world-domination.  They couldn't care less.  They want income.

Mining pools have nothing to do with what you quoted. You are apparently confused. Please re-read my post.

The BU are naive instrumentalized guys (or not so naive), that only need to exist to give counter weight to Core's desires to change bitcoin.  BU is not supposed to fork for real.  It only needs to bring sufficient dissent so that bitcoin can stay itself.

As such, the story becomes more involved: the only people *really wanting to fork away* are the Core side because they aren't pleased that bitcoin doesn't want to evolve according to their wishes ; that they have lost centralized control over bitcoin's protocol and cannot dictate the changes as they wish.   Those stopping them, and acting as the guardians of immutability, are the miners.  So the propaganda now wants to picture the miners as the people wanting change (with BU).  But they would be out of their minds to want change.  Bitcoin is a dream for them.

Well we'll see if BU actually attempts a hard fork.

I'm 99% convinced (I always leave 1% of existential doubt) that there will NEVER BE a BU fork.

Although possible an indefinite standoff with 1MB blocks and no SegWit, I think it is not 99% chance. No BU fork if no indefinite standoff and if they realize they are defeated and accept SegWit which would not be the same as your implied indefinite standoff prediction (which might still happen especially if they are reading our analysis). Again I repeat...

And so they need to scale up the blocksize and they need a HF to do that. Why are you causing me to repeat myself:

Perhaps. We'll see how desperate the mining cartel becomes to stop SegWit while their revenue is being squeezed by the small blocks. Core has time on its side. If the miners raise fees too high, then they kill off Bitcoin destroying their sunk cost investment. If miners allow SegWit, they loose control over the fees charged off chain. If the miners attack with HF to get larger blocks, they end up with a million ASIC pet rocks.

Miner are stuck between a (n ASIC) rock and a hard place. Lol.

I really don't understand why you keep arguing on this point. The miners either have to eventually accept SegWit or HF. They can't let Bitcoin die. Perhaps there is a chance that there is an indefinite standoff at 1MB blocks with no SegWit but that would encourage investment in altcoins.

Wouldn't miners prefer larger block sizes so that Bitcoin's economic value can grow and all on chain  

And you are the one who is making elaborate conspiracy theories. Occam's Razor says the miners want everything on chain and they want larger blocks.

They need a HARD LIMIT on block size, in order to be able to squeeze the fee market.

Which is why they need HF so they can prove they have 51% of the hashrate and can dictate the blocksize after the HF.

Whether that limit is 1 MB, 10 MB or 50 GB doesn't matter (well it does, it only starts to be profitable when the market is squeezed, so 50 GB blocks is still too far off).

The mining cartel can set the optimum block size with their 51% control. Again I repeat myself:

What the block size issue is about ?  Very simple: miners want big fees, so small blocks and no second layer.

Incorrect/disagree. Miners want max(volume x fee per transactions) on chain.

Exactly the bitcoin of today.

Incorrect/disagree.

The reason is, as you pointed out yourself, that if there is no hard limit, the Tragedy of the Commons makes that each miner, individually, will be tempted to make larger blocks,

Incorrect because the mining cartel is colluding and 51% will decide the optimum blocksize and punish any defectors by orphaning their blocks.

By sheer coincidence, there is, at the moment, a hard limit on block size: 1 MB.  That is a god-given present to miners.

Incorrect. You haven't through this through as explained to you now.

The small transactions that can be left alone, will not be done, and on bigger transactions, the fee is not a problem, so BIG transactions will pay BIG fees to get through.

The mining cartel will change fees to a percentage of the transaction amount. They aren't stupid. They know they need to maximize volume, growth, and fees.

Why would miners be bothered with peons paying for a book on Open Bazaar ?

Because it costs them nothing and expands their market (through synergies and growth that small transactions foster).

Therefor, the threat works in both directions.

... and nothing will happen as a result --> immutability !

Maybe, except that if the miners don't try to fight, they lose any way, so they might as well try. Especially if they have the Chinese government behind them wanting to weaponize Bitcoin as a nationally controlled asset. USG.MIT apparently controls Ethereum. I'd love to see MP get REKT. Couldn't happen to a more congenial guy.  

Agreed would need 80% of the whales agreeing to go for the small blocks with PoW hash change.

But they too, suffer from a Tragedy of the Commons problem.  The danger of dumping on a chain by a whale, to get the others buying his stash and then seeing this chain becoming the valuable one, is too big.    You wouldn't go in such an adventure and loose your fortune.

Lol. You need to get out more. Do you know what a WoT is and how it works? Do you understand that in these circles, your word is your reputation and you break it once then you are persona na grata.

But if you have 80% of the whales colluding, then the exchanges don't want to get spanked and will comply.

Exchanges don't care about whales.

Whales can spend a lot of money on hackers and corrupting insiders.

The rules of the game are not so rigid. Think out-of-the-box.

But the power structure in bitcoin is different, and the *main propaganda for bitcoin*, the "longest chain, most protected by PoW" is going to be a very strong argument AGAINST such a PoW scheme, which cannot deliver a similar PoW security as the original bitcoin which will have ALL miners behind it (they have no choice !).

The price and marketcap of Bitcoin determines the level of mining security, not the PoW hash continuity.

I know, as long as the mining production can follow, as long as there are enough asics around.  But if tomorrow, you switch to scrypt, for instance, there's not enough material available, and it will take months to install all this capacity.  In the mean time, those few miners with material (former Litecoin miners I suppose) will, at ridiculously low difficulties, make tons of benefit if this is the real bitcoin, and that chain will be very lowly secured in comparison with what it used to have as hash rate protection.

Don't choose Scrypt then.

One set of miners get replaced by another. The bankrupted miners get millions of ASIC pet rocks.

Yes, but before the same amount of asics is produced for the new algorithm, difficulty is extremely low, and the cost of PoW will be ridiculously low as compared to the rewards.  The one or two producers of ASICS may very well hold back some production, to easily give a 10-fold hash rate to one of their friends, taking over entirely the system.

There is only a finite amount of competitive computing supply for rent on earth. You monopolize it. Bitcoin is paying enough for security to do that.

...you are in a perfect position to give someone a 95% hash rate majority at a given moment with the 20 times more asics you have produced and not yet exported.

With a $billion invested in Butts, you'd think a whale leader such as MP had prepared and spent $10m pocket change on having a plan B ASIC ready.

Also they can change the PoW hash again if they find that someone is outperforming which they can detect by the difficulty rising faster than the price and Moore's law.

I agree that the PoW hash change is the nuclear option. I think the mining cartel has to back down and accept SegWit. But maybe the mining cartel is emboldened by ignorance, defiance, or some entity backing them.

Because only fools would enable a mining cartel that has every incentive to increase the number of tokens to 1 billion tokens, because neither the miners nor the fools own many tokens. The miners have sunk costs, ASICs, and debt.

Tail emission would be a good thing.  Miners could decide not to halve any more.  They would be right.

What you would like has no bearing on the reality of the economics.

Even Monero's block scaling + tail reward is also flawed and will also devolve to a winner-take-all.

[iamnotback]

@dinofelis, I just realized another possible reason why the Chinaman miners have urgency to HF and why the whales want small blocks.

If the 1MB blocks become monopolized by whale transactions (because they can pay higher fees than anyone else), then the whales can become the miners and pay themselves the fees, especially as coinbase reward declines to 0. The miners who don't spend Bitcoins, will not receive any income and be bankrupted. Thus miners are fighting for their existence.

The point is that if the whales are paying all the block reward, then no one can earn any money from mining except the whales' approved miners. The whales will only send their transactions to the miners who give them kickbacks.

The whales in Bitcoin can dominate the economic rewards of the blocks and then make sure only their approved miners get those rewards. If the fees whales pay are 51% of the hashrate then whales can censor any block from the minority. The small blocks prevent the other miners from otherwise competing with the whale fees by accepting as many tiny transactions as can be put in a larger block. Smaller valued transactions usually can afford to pay a much higher percentage (of transaction value) transaction fee.

Also the whales have a converse problem. If they don't take control over mining (or at least prevent a cartel of mining), then the miners could gouge them for fees such as a 5% fee for all transactions (which consumers will pay but whales will not pay that!!!) and increase the money supply to more than 21 million tokens (thus debasing the whales more). But the miners must have a cartel to prevent small blocks, yet the whales need the small blocks to be sure they can take over mining when they need to.

Now it is crystal clear. They must fight. They have no choice but to fight.

And now I realize how horridly broken Satoshi's PoW design is.

And so this is possibly why the whales haven't been transparent about their motivation. It reflects very poorly on Satoshi's design.

So I think the whales have perhaps been planning for a PoW hash change at the opportune time. No need for them to have invested in SHA2 ASICS. Those will be deprecated soon. Interesting to note that MP had remarked in 2013 that both the USG and China were getting into ASIC mining. He seemed happy about that. Now I think I understand why.

What you probably don't know already is that a good chunk of the recent hashpower coming online is actually a taxpayer funded adventure. A good chunk of the recent hashpower is split roughly evenly between the Chinese and the US government. There might be a third player in there but I can't discern. I can't tell which of the two is actually ahead, it seems to oscillate on a three week period. But in either case, the race is on : the governments are mining, boys and girls.

We appear to be at a very volatile period for Bitcoin or perhaps the can will be kicked down the road.

@dinofelis, I want to thank you for stimulating this thought provoking discussion. I suspect the community feels the same appreciation.


Edit: @gmaxwell had pointed out in 2013 that large blocks without a tail reward are also insecure.

[dinofelis]

And so they need to scale up the blocksize and they need a HF to do that. Why are you causing me to repeat myself as quoted below:

Perhaps. We'll see how desperate the mining cartel becomes to stop SegWit while their revenue is being squeezed by the small blocks.

I fail to see how their revenue is squeezed by small blocks.  The smaller the block the higher the revenue.  Because demand for transaction is highly inelastic, much more so than 1/x.  It is essentially a wall.  Some people *absolutely need* their transaction to happen, and are willing to pay a high percentage of the transaction for it to happen.  The more desperate you can make people, the higher the fees they will pay.
Of course, in the long run, this hurts the system.  But nobody cares about the long run (apart from those sitting on a bagload of coins of course).  

If the miners raise fees too high, then they kill off Bitcoin destroying their sunk cost investment.

Nah.  What is the lifetime of hashing equipment ?  1 year ?  2 years ?  That's all you need to look for in the future.  On top of that, the deciders are not necessarily the owners of asics, but the POOLS.  The asic owners are their slaves to a certain extend.

I think if a miner has the choice between pumping a few million $$ in the next two years and have bitcoin broken afterwards, that's by far the option to take as compared to obtaining a few $10 000, with a healthy bitcoin system where in any case, he doesn't know if it is going to be profitable for him.  Miners are not investors in coins.  They are "extractors of money from greater fool players to whom they sell hash rate for their block chain", and their investment only lasts 2 years at most.

So I really, really don't see why miners wouldn't love even blocks of 100 KB, except that they can't, because of their mutual competition.

And so they need to scale up the blocksize and they need a HF to do that. Why are you causing me to repeat myself:

Again, I fail to see that. Collectively, miners have advantage over smaller and smaller blocks.  Ideally, one single transaction per block.  That single transaction is going to cost a fortune, much, much more than the current block reward.

Which is why they need HF so they can prove they have 51% of the hashrate and can dictate the blocksize after the HF.

No, because they are not sufficiently colluding and because the HF would leave the small chain existing as "true bitcoin", losing the only thing bitcoin has going for it: brand name.  

Who is paying for the mining ?  The greater fools, and the big whales, because they need bitcoin.  The first ones for their illusion, the second ones because it is their fortune.  The miners can't impose anything that is fundamentally different from "bitcoin as we know it" because then the first kind of people will run away, and the second ones will not be pleased at all.  But miners can pretend to KEEP bitcoin the way it is.  Nobody can stop them working on bitcoin as they are used to.  Even if this is not the very absolute optimal (I think it is for miners, in the coming 2 or 3 years), a HF would do much, much more damage to the image of "true bitcoin" than keeping it the way it is and squeezing the fee market.

Bitcoin won't appreciate orders of magnitude any more.  Hell, bitcoin hasn't won an order of magnitude since 4 years.  Apart from a serious overtaking, bitcoin won't depreciate orders of magnitude in the coming years either.   So you can, when thinking logarithmically, consider bitcoin's price essentially constant.  But fees can still win 2 orders of magnitude easily, and the squeeze is slowly setting in.  What better situation can you dream of, as a miner ?

Incorrect/disagree. Miners want max(volume x fee per transactions) on chain.

Yes, and because fees are highly inelastic, if you reduce the offer of fee by 2, fees increase by much, much more than a factor 2.  Probably by a factor of 10 or so.  Which means that the smaller the block is, the higher the value of the above expression, until you kill bitcoin.

The mining cartel will change fees to a percentage of the transaction amount. They aren't stupid. They know they need to maximize volume, growth, and fees.

That would be very reasonable in fact.  But they won't, because it kills one of the propaganda items of bitcoin.

Because it costs them nothing and expands their market (through synergies and growth that small transactions foster).

It is much better to have the few guys that need to transfer a few millions, pay a few thousands, than to have to bother with the guy wanting to transfer $10,- and risk that the guy tranferring a million, will not pay more than the guy transferring $10,-.

[dinofelis]

@dinofelis, I just realized another possible reason why the Chinaman miners have urgency to HF and why the whales want small blocks.

If the 1MB blocks become monopolized by whale transactions (because they can pay higher fees than anyone else), then the whales can become the miners and pay themselves the fees, especially as coinbase reward declines to 0. The miners who don't spend Bitcoins, will not receive any income and be bankrupted. Thus miners are fighting for their existence.

This is de facto PoW converted in PoS, but you still have to pay for electricity !
If the whales REALLY WANTED, they would fork to a proof of stake.  No more miners.  A proof of stake fork would be a good thing for bitcoin.  But again, I don't think it will happen.  In fact, if I had enough time, I would even code a version of bitcoin with PoS.  But I don't.

Now it is crystal clear. They must fight. They have no choice but to fight.

And now I realize how horridly broken Satoshi's PoW design is.

During this discussion, this also occured to me.  I knew that it was kind of problematic and silly as a system, except for burning seigniorage where it is brilliant.  But as a cryptographic security system, it is about the stupidest thing you can do, and the very fact of separating users/owners and "block chain builders" by specialisation of labor means that the system loses its self-control.

You get industrials producing block chain for users, and the only thing users do, is to pay the industrials, and undergo their ruling.

Again, PoW is great for coin creation.  But that's it.  It shouldn't be given any other value than the value to make a coin while burning a similar value.

[iamnotback]

except for burning seigniorage where it is brilliant

Again, PoW is great for coin creation.  But that's it.

Burning seigniorage (i.e. sending the capital to the electricity costs instead of to any entity involved with the token) doesn't prevent whales from taking a power-law distribution of the money supply. So I fail to see the advantage of having one set of whales or another set of whales.

If the people who take the seigniorage are evangelists and developers of the ecosystem, and if they are sufficient in number, then at least some of your whales are hopefully ardent supporters and not some venomous snakes that appear from the dark shadows of high finance.

OTOH, if the venomous snakes don't want to share the stage with whales who they think are undeserving, they make take their capital else where. So once again whales are back to competing for the other 50% of the wealth which isn't concentrated.

I think it is true though that if the money supply can be distributed competitively then more whales and talented will see it as a level playing field to compete in.

So I think any competitive distribution which doesn't give privilege to any group is acceptable. But even with PoW, it isn't truly competitive because so many people do not know how to mine. So in effect your distribution paradigm is filtering the type of people you want in your ecosystem.

So if you want only geeks, then do a PoW distribution. Maybe geeks are all that matters now and the rest of the world are fodder?

https://urbit.org/docs/about/objections/#-urbit-is-a-total-scamcoin-it-s-100-premined

Edit: I received this comment about the above:

It's the same pb with plato and athenian liberal democracy vs republic. The former always lead to collusion of interest and the second lead to ethics and putting wisedom and competency at the center of the game. The two are always in opposition.

Interesting analogy. Bitcoin is a republic where knowledge is power and the whale MP took control early on by establishing the MPEx stock and options exchange so that all the speculation in the system was feeding back to him and he was able to aggregate a million "Butts". He also become familiar with all the whales via that business. Heck maybe MPEx is Satoshi or knows who Satoshi is.

Bitcoin isn't a democracy because there is no need to fool the n00bs to buy their vote. The whales (aka economic majority) have the only vote in Satoshi's PoW.

What I try to do in my design is balance the power between the democracy and the republic, so that they keep each other in a stalemate. That doesn't prevent the power-law distribution, nor should it. It hopefully makes the system anti-fragile, thus (hopefully) superior to Satoshi's design. And then I make it (I think) implausible to buy the vote of the n00bs, because there is no voting. The result (hopefully) is the nobody controls it and it obeys its protocol in a Nash equilibrium. My design I think quite clever, but we'll have to see what peer review thinks (hopefully it doesn't stink).

[iamnotback]

And so they need to scale up the blocksize and they need a HF to do that. Why are you causing me to repeat myself as quoted below:

Perhaps. We'll see how desperate the mining cartel becomes to stop SegWit while their revenue is being squeezed by the small blocks.

I fail to see how their revenue is squeezed by small blocks.  The smaller the block the higher the revenue.  Because demand for transaction is highly inelastic, much more so than 1/x.

You are apparently only thinking about those who already must transact (because you think miners have no long-term focus). What about all those who sour on Bitcoin because they hear the fees suck and always increasing. It squelches the growth of Bitcoin.

If the miners raise fees too high, then they kill off Bitcoin destroying their sunk cost investment.

Nah.  What is the lifetime of hashing equipment ?  1 year ?  2 years ?  That's all you need to look for in the future.

Mining farms with long-term contracts with ASIC vendors and hydroelectric sites aren't only short-term focused. No one develops a serious business and all the overhead to start up with only a 1 - 2 year half life. You must be thinking of hobbyist mining.

Bitcoin won't appreciate orders of magnitude any more.  Hell, bitcoin hasn't won an order of magnitude since 4 years.

Because it can't scale. But if was scaled up, it potentially could. But maybe miners realize Bitcoin is just a delusion, in which case your reasoning is correct.

But the miners are fighting for survival, not just maximizing income.

The mining cartel will change fees to a percentage of the transaction amount. They aren't stupid. They know they need to maximize volume, growth, and fees.

That would be very reasonable in fact.  But they won't, because it kills one of the propaganda items of bitcoin.

See below...

Because it costs them nothing and expands their market (through synergies and growth that small transactions foster).

It is much better to have the few guys that need to transfer a few millions, pay a few thousands, than to have to bother with the guy wanting to transfer $10,- and risk that the guy tranferring a million, will not pay more than the guy transferring $10,-.

You are making another (perhaps correct) argument for why whales and miners are diametrically opposed.

Which is why they need HF so they can prove they have 51% of the hashrate and can dictate the blocksize after the HF.

No, because they are not sufficiently colluding and because the HF would leave the small chain existing as "true bitcoin", losing the only thing bitcoin has going for it: brand name.

Assuming that the whales' fork did not change the PoW, the miners' HF could 51% attack the whales' fork and prevent it from existing by censoring all transactions (orphaning all blocks with transactions).

This specific aspect of our discussion is getting redundant now.

We don't need to rehash every permutation and pretend we don't understand each other. That doesn't help the reader. I think we can stop now on this.

[iamnotback]

In a bizarre turn of events as I was browsing some browser tabs I had opened previously and hadn't yet read, appears that perhaps sperm whale MP supported a BU-like unlimited block size.

Yet his stance is that only the whales decide.

So apparently (at least in 2013) he wasn't aware of the game theory technical issue we wrote about today.

The whales are technologically incompetent also? I wouldn't be surprised if nobody knows what the fuck they are doing. Lol. I swear on TMSR's bib we could make a stupefying Monty Python outta 'dis thread, not to mention the Life of Bitcoin.

[miscreanity]

I also am wondering why the Chinaman mining cartel is so brave to challenge MP. 200 million yuan ($29 million) is peanuts for MP. Perhaps the Chinese government has committed to provide as much funds as is necessary. I would love to see MP defeated and bankrupted. Would be a good lesson for him about relative size of economies (China is a not an overleveraged, vacuous fiat house of cards yet like the West).

That's certainly possible.

What would forcibly deplete MP's holdings?

Is it possible that Satoshi's holdings are accessible? If so, could it be used to combat MP?

Does any of this change the need for a system that does not centralize yet provides improved functionality over Bitcoin and others?

[Wind_FURY]

I also am wondering why the Chinaman mining cartel is so brave to challenge MP. 200 million yuan ($29 million) is peanuts for MP. Perhaps the Chinese government has committed to provide as much funds as is necessary. I would love to see MP defeated and bankrupted. Would be a good lesson for him about relative size of economies (China is a not an overleveraged, vacuous fiat house of cards yet like the West).

That's certainly possible.

That is not possible. Why would the Chinese government support and provide funds to the Chinese mining cartel? They are then indirectly supporting a currency they so very much detest because of its uncensorable nature.

What would forcibly deplete MP's holdings?

Is it possible that Satoshi's holdings are accessible? If so, could it be used to combat MP?

The minute the news of a group gaining access to Satoshi's holdings come out, say bye bye Bitcoin. We cannot have a dumping war. We all lose in the process.

Does any of this change the need for a system that does not centralize yet provides improved functionality over Bitcoin and others?

If not this, there always be something in Bitcoin. It adds some spice into it.

[miscreanity]

Also I think MPEx (MP's exchange) is actually the place where most of the volume is done and the actual prices of Bitcoin are set (between players of sufficient size). But I might be mistaken about that. I haven't actually researched the data.

MPex volume may as well be non-existent and Bitcoin options trading is no longer available from what I see. However, I have not kept up with activity on IRC where they run bots, and anything done privately would obviously not be apparent.

[dinofelis]

You are apparently only thinking about those who already must transact (because you think miners have no long-term focus). What about all those who sour on Bitcoin because they hear the fees suck and always increasing. It squelches the growth of Bitcoin.

My idea is that sooner or later, bitcoin's growth has to stop.  A greater fool game always comes to an end, but of course, there is still a whole planet of greater fools to be taken.  However, bitcoin's on chain design doesn't allow for orders of magnitude upscaling in the near future.  It might very well 50 years from now, but nobody cares about "50 years from now" if you're serious - only greater fools think that.
If you go to off-scale, in other words banking (with eventually, unavoidably, fractional reserve banking) you:
1) lose all on-line fees
2) you will get effective coin IOU creation offline (fractional reserve banking) that will stop the individual coin price pump.

So even if the whole planet were using "bitcoin" as a reference, there would be so many IOU bitcoin that the VALUE of an individual on chain bitcoin wouldn't rise accordingly.  Like in the fiat system: 95% of bank dollars are not FED dollars but bank IOU.  This is NOT cheating, contrary to what naive monetary theories claim.  The issuing of IOU that are not entirely covered by originals, but are so by debt, is not cheating, and it the origin of fractional reserve banking.

So at a certain point, if there are secondary layers on top of bitcoin, fractional reserve banking WILL emerge, and what people are then using as a currency is denominated in bitcoin, but is not bitcoin, but rather partially covered IOU from institutions that use bitcoin on the lower layer to *settle their differences* --> reserve currency.

This would stop the growth of price of an individual bitcoin, as these IOU can be created at will by several institutions.  Their reserves in true bitcoin only need to be large enough to serve as a collateral for *individual IOU transactions*, not to back up all of them at once.

So *even* if a bitcoin denominated banking money would become world dominant, it would be identical to the current fiat system, apart from the "central banking settlements" between banks.

Bitcoin's value wouldn't increase orders of magnitude, because these banking layers would create as many "bank coins" as there are banks, all simply REFERENCED to bitcoin as a collateral for individual inter-bank transactions.

If bitcoin would have allowed ON-CHAIN world scaling, this would not be the case.  But bitcoin is reaching already right now in order of magnitude, its on chain capacity anyhow, and hence the price rise will be limited to at most an order of magnitude or so, at FULL ADOPTION (which is delusional).  So, for miners, there's not much to take more than there is to take today, and the "orders of magnitude" are much easier taken on fee increase, than on bitcoin's price increase, even if they hope for world adoption.

In other words, the only hope for bitcoin adoption is off-chain, and won't be a big boost for the bitcoin price, because it will be offset with fractional reserve banking.  Miners have nothing to win in that game directly.

However, on-chain bitcoin OWNERS are the guys they want to milk somewhat more.  In as much as these on-chain owners are exactly the banks issuing fractional reserve bitcoin-collateral IOU, they will HAVE TO settle on-chain between them.  But then, the current volume is already enough (SWIFT).  So if there is any hope to squeeze that fee market, blocks mustn't be larger than today.  Those to be milked, are the whales who need to transact.  And honestly, they won't mind too much: if you have to settle 10000 BTC with another bank twice a day, you don't mind paying 10 BTC for the transaction, do you ?

Bitcoin won't appreciate orders of magnitude any more.  Hell, bitcoin hasn't won an order of magnitude since 4 years.

Because it can't scale. But if was scaled up, it potentially could. But maybe miners realize Bitcoin is just a delusion, in which case your reasoning is correct.

I think that even if it scales off-line, as I outlined above, the individual coin will not appreciate proportionally because of fractional reserve banking.  Bitcoin is essentially an on-chain thing.  Fractional reserve banking is even made safer with bitcoin's chain limited, because there cannot be a bank run !  The chain can simply not follow all withdrawals !

Suppose you have 1 billion of bitcoin IOU users in the world, and there's a bank run.  Everyone wants to have its coins on chain during a week of panic !  They simply cannot be served.  At 10 million transactions per week at most with Segwit, it would take 2 years to process all these withdrawals on chain.   So fractional reserve banking is much more protected with a block chain than with things that can settle quickly and massively. 

Ironically, bitcoin is a dream for bankers !

[iamnotback]

Also I think MPEx (MP's exchange) is actually the place where most of the volume is done and the actual prices of Bitcoin are set (between players of sufficient size). But I might be mistaken about that. I haven't actually researched the data.

MPex volume may as well be non-existent and Bitcoin options trading is no longer available from what I see. However, I have not kept up with activity on IRC where they run bots, and anything done privately would obviously not be apparent.

Yeah I actually checked the MPEx site yesterday right before I passed out and there are only a few remaining tickers listed. He apparently sold 250,000 BTC after August 2016 when he shutdown the public aspect of MPEx:

http://trilema.com/2016/mpex-smpoe-closing-statement/