Bitcoin Blocksize Problem Video

[Peter Todd]

I thought I'd let everyone know about a project of mine that I've been thinking of doing for awhile now, but is finally actually happening. While much has been written about the blocksize issue on these forums, very little of the discussion has been presented in a nice, accessible way, like the we-use-coins 'What is Bitcoin?' video. So I wrote up a preliminary script, tested it out on some friends of mine ranging from non-Bitcoin users to fairly serious investors and tweaked it until it worked. I then got in touch with stonecanoe (run by former classmates of mine) and we should have a roughly 2.5 minute animated video done in time for the conference. I'm pretty happy with the cut-down script and we're working on nailing down the storyboard in another day or so, followed by about two weeks of production if everything goes well. I'm also working on material for a website to go with it, and in the process learning how little I know about web design.

Why am I doing this? It's simple: right now Bitcoin is democratic. The blocksize simply won't change unless we all agree to change it. On the other hand, if you can't run a full validating node, you aren't participating in that democracy, so once the limit is lifted there is no going back. Beyond some niche troll-infested forums like reddit and this one the issue just isn't getting the mindshare it deserves. It's telling that the Silk Road forums, which have about as much volume that Bitcointalk, don't have a single mention of the issue, yet a centralized Bitcoin and the regulation that follows is a direct threat to the anonymity Silk Road users depend on.

Beyond that Bitcoin is far more important than just some internet payment system. Sure, calling it one is a nice safe thing to tell authorities, especially when you remind them that every transaction is public and easily traceable, but what is truly unique about Bitcoin is that it's the first currency with democratic decision making baked directly in the technology behind it. Everyone with a full validating node is a part of that democratic process.

I don't want to see that democracy sacrificed just so people can buy songs and make penny bets over the internet.

Neither do the concerned investors who have given me the first $3k worth of donations to cover the cost of the video. Right now I'm on the hook for the rest of the $7k cost, (after taxes) but if you want to help out my donation address is in my sig. Having said that the project is going ahead regardless; the long-term viability of Bitcoin is something I truly believe in.

[Peter Todd]

Also, I'd like to say thank you to TripleMining for being the first pool to put the /1MB/ string in their coinbase showing their support for the blocksize limit. I talked to the owner about the limit a few days ago about how it protects mining pools and miners by ensuring that the mining reward can go to the hashing power rather than overhead.

I'll also point out that there is a pull request from Gavin that will essentially ban microtransactions outputs less than 54.3uBTC in value; there is a consensus among the core developers that the Bitcoin blockchain can-not support microtransactions.

[Mike Hearn]

There's no such consensus, actually.

[Peter Todd]

There's no such consensus, actually.

Changed post to say 'core developers'

[Mike Hearn]

I'll let readers who are familiar with the work I've done decide whether your edit changes anything.

Regardless, I'm not sure what putting markers into coinbases is supposed to achieve. When the block size limit changes, miners who believe in 1mb sized blocks can just not create blocks that are larger. If most miners agree then transaction fees (and/or delays) will go up a lot and demand will be suppressed accordingly. If you're trying to build a voting framework, then it already exists.

[acoindr]

Peter, I appreciate your tenacity as causes need someone to champion them. However, I think you are overly concerned on this. You've been on this forum a while so you should know I take the grassroots, decentralized position. I even threatened to work as hard to undo the support I may have drummed up for Bitcoin as I did fostering it when I thought Bitcoin Foundation might gain uncontrolled centralized power.

I was glad I could back away from such a position. This was when I realized there could in fact be a check on future power because free markets work as good strict regulators. All that was needed was a viable market outlet valve for the market to express dissatisfaction with how things developed regarding Bitcoin Foundation and Bitcoin in general. Alternative coins had already shown up on the scene (by the wisdom of the market), though none had any real traction except Litecoin which was near $0.04.

I wrote a post explaining why I now felt Bitcoin Foundation proposed no threat to the idea of Bitcoin, as long as viable alternatives existed in the market, and that I would work to further establish alt-coins like Litecoin in the market for that reason.

At the time I believed there were many benefits to such a set up and the block size issue which developed later is a perfect example. While I actually share your concern for infinite block sizes I can rest easy knowing that even if a path taken by Satoshi's Bitcoin is ever unworkable there now exists viable alternatives (Litecoin is now at ~$4) which can do things differently yet still serve the crypto-community. Make sense?

[Peter Todd]

I'll let readers who are familiar with the work I've done decide whether your edit changes anything.

Don't get all butthurt about it - heck on IRC the other day I was saying if you could make an argument to add anyone to the core developer list on bitcoin.org it would be you.

I have to specify who exactly I'm saying has consensus somehow.

Regardless, I'm not sure what putting markers into coinbases is supposed to achieve. When the block size limit changes, miners who believe in 1mb sized blocks can just not create blocks that are larger. If most miners agree then transaction fees (and/or delays) will go up a lot and demand will be suppressed accordingly. If you're trying to build a voting framework, then it already exists.

I could bother replying to this, but my time would be better spent elsewhere on a website or similar resource with such replies to that and similar falsehoods in one place.

[Peter Todd]

At the time I believed there were many benefits to such a set up and the block size issue which developed later is a perfect example. While I actually share your concern for infinite block sizes I can rest easy knowing that even if a path taken by Satoshi's Bitcoin is ever unworkable there now exists viable alternatives (Litecoin is now at ~$4) which can do things differently yet still serve the crypto-community. Make sense?

Proof of work crypto-currencies have a startup problem: when they're small they are trivial to attack.

I suspect we have one shot at making a strong decentralized crypto-currency; future currencies will simply be killed at birth . Bitcoin and Litecoin are the only viable options right now, but the latter's scalability problems are four times worse, and it just doesn't have the level of support that Bitcoin does.

In any case the solution to the problem of making small payments viable for a decentralized crypto-currency, off-chain transaction systems, will create technologies that can be used with any crypto-currency. For that matter, part of making off-chain tx systems viable and secure will include security improvements that are applicable to on-chain transactions too.

[tvbcof]

I would greatly prefer to see Bitcoin be the solution which functions as a 'reserve currency' of sorts for the abundance of solutions which are likely to evolve going forward.  It is most critical to me that whatever system takes on this role can be as widely dispersed and diffuse as possible in terms of operational infrastructure.  That is a huge part of what gives a solution it's backing strength in my opinion, and to me this translated directly into a small block size.

If Bitcoin could just take on a 'reserve' role directly, the development phase of crypto-currency-land would be much simplified and it would be more likely that it will provide a robust and simple environment for the masses should more mainstream financial institutions crumble.

Seems like all hope may not yet be lost for Bitcoin to fill this role.  I've made a small contribution and will be interested to watch this effort proceed.

[grue]

THERE IS NO BLOCKSIZE PROBLEM.

the only reason free transactions are taking forever to confirm is because satoshi dice (and other on-the-chain gambling services) are spamming the blockchain with useless transactions.

[amincd]

^ If bitcoin ever becomes a major global currency, then there will be 10,000X as many transactions being created as SD is creating now. SD is providing stress-testing for the network, and showing that unless the block size limit is lifted, there will be a problem.

[Gavin Andresen]

My reaction:  stop spreading FUD.

"small mining pools will go out of business" -- give me a break! My back-of-the-envelope calculations say that anybody willing to spend a few hundred dollars a year on a dedicated server with a high-bandwidth connection can support a MUCH, MUCH larger block size.

The block size will be raised. Your video will just make a lot of people worried about nothing, in exactly the same way Luke-Jr's BIP17 proposal last year (and his hyperbolic rhetoric about BIP16) did nothing but cause a tempest in a teapot.

[johnblaze]

^ If bitcoin ever becomes a major global currency, then there will be 10,000X as many transactions being created as SD is creating now. SD is providing stress-testing for the network, and showing that unless the block size limit is lifted, there will be a problem.

interesting view

[acoindr]

Proof of work crypto-currencies have a startup problem: when they're small they are trivial to attack.

Please note that 51% attacks don't destroy cryptocurrencies, because they are simply agreements between a number of people. If a large enough number of people supported a certain cryptocurrency, even while starting up, it could gain traction even with external forces engineering hash power attacks until no longer effective. Granted, this isn't an ideal or smooth progression of a crypto coin starting up, but it is possible.

I suspect we have one shot at making a strong decentralized crypto-currency; future currencies will simply be killed at birth . Bitcoin and Litecoin are the only viable options right now,...

Don't forget about Novacoin, which has the most traction of an alt-coin next to Litecoin (now ~$3.90), which I believe is because it's a combination proof of work and proof of stake coin, which of course dramatically reduces the chance of successful 51% attack.

but the latter's scalability problems are four times worse, and it just doesn't have the level of support that Bitcoin does.

Why would you think Litecoin's scalability is four times worse? Aside from a few changes it's the exact same thing as Bitcoin. It actually has more scalability than Bitcoin right now because blocks occur 4 times faster, meaning the number of transactions waiting in between blocks don't build up as large. With Bitcoin the limit is 1MB worth of data every 10 minutes; with Litecoin it's 1MB worth  every 2.5 minutes. I think you have it backwards. However, I believe it's a good idea (though not crucial) to raise Litecoin's block size too, to say 10-15 MB, while allowing Bitcoin to be uncapped. That way we can see, and the market appreciate, which works best in practice.

As for level of support I think you're underestimating it. Remember Litcoin comes into circulation 4 times faster than Bitcoin. That means a $4 price point for Litecoin is the same valuation as Bitcoin not at $4, but at about $16. That's a lot of people holding litecoins and growing every day. Also remember support levels can change. When I wrote the post I linked above there were many skeptics in that thread, and what could I say? Litecoin was at $0.04 after all.

In any case the solution to the problem of making small payments viable for a decentralized crypto-currency, off-chain transaction systems, will create technologies that can be used with any crypto-currency.

I agree.

For that matter, part of making off-chain tx systems viable and secure will include security improvements that are applicable to on-chain transactions too.

I believe here you're talking about chaum banks, which I still haven't fully considered. However, while we share strong believe and support in off-chain tx solutions I believe many ways for that to develop exist.

[grue]

^ If bitcoin ever becomes a major global currency, then there will be 10,000X as many transactions being created as SD is creating now. SD is providing stress-testing for the network, and showing that unless the block size limit is lifted, there will be a problem.

it's not a stress test, it's a DDOS attack. stress tests are temporary and done with permission. satoshi dice transaction spam last forever on the network (uneconomical satoshi outputs). bitcoin was never meant to be a micro transaction currency, stop pulling numbers out of your ass.

[jdillon]

Peter: Interesting! I wish you had told me about this project earlier. You have my support:

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It is so important that you are taking this message to the people. Bitcoin is much bigger than this little forum.

Mike: Don't troll the forums with stuff you know isn't true. 1MB blocks still have to be processed by all miners regardless of what they think the blocksize should be.

Gavin: Your few hundred dollars a year means you will not be mining anonymously. That is unacceptable. I think you spend too much time thinking about the needs of the big businesses that pay your salary. It is telling how they businesses transacting Bitcoin out in the open as a payment system.

Why you put so much focus as Bitcoin the payment system puzzles me. It's a unscalable one where you have to wait long times to get your payment, you have to jump through hoops getting your money in and out, and every transaction is public. The claimed advantages of low transaction fees and zero fraud for the merchant are both things that non-bitcoin solutions can easily replicate. For instance MintChip gives you both. For Bitcoin to tie it's future to such applications is simply foolishness that will end sadly the moment non-anonymous systems pull the rug out of it by changing the way they treat their customers. You know that PayPal could change it's one-sided policies overnight with the new "PayPal No Refunds" service offering low-fees and no refunds.

On the other hand Bitcoin is a inflation proof and censorship proof store of value. The people in Cyprus, Russia and China, don't care about SatoshiDice, they care about their savings being secure from confiscation. Part of that security is anonymity of the kind that off-chain transaction systems can provide. But they can't provide that if Bitcoin is controlled.

Actually, to reply to another message of Mike Hearns, talking about how he expects regulatory efforts to focus on mining hardware that is EXACTLY the issue. Regulation WILL come to Bitcoin mining and the first step of that will be to regulate mining pools. Forcing pools to operate out of data centers with easily found high bandwidth connections will make those regulations possible.

Anyway I suspect there is a lot more Bitcoin activity going on that doesn't give a damn about Bitcoin as a payment system. Peter mentioned Silk Road which is brilliant I think. It is an off-chain transaction system already. As a serious Bitcoin investor I also care about the store of value, not stupid micropayments, and I know my partners feels the same way. We also know that Bitcoin's value has very little to do with being a payment system because any efficient payment system will hold Bitcoins for the minimum possible time which means payments don't actually drive much demand for Bitcoins. Investors on the other hand do.

[Peter Todd]

Peter: Interesting! I wish you had told me about this project earlier. You have my support:

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Hilarious. I love that you're donating with an off-chain tx system. But for the sake of transparency, I will say that was a 1BTC donation.

[WilderedB]

I know and understand nothing of the technical stuff you guys are talking about. I will say this though...

Complaining about the micro-transactions of some gambling site, or saying it's not what bitcoin was designed for, is meaningless unless you have an effective and practical plan to put a stop to such activities.

If there is no such plan proposed then you (we) need to presume such things will continue and work around them.

[tvbcof]

My reaction:  stop spreading FUD.

There are very real concepts being discussed here.  I find this a disapointing reaction from a person in your position.

"small mining pools will go out of business" -- give me a break! My back-of-the-envelope calculations say that anybody willing to spend a few hundred dollars a year on a dedicated server with a high-bandwidth connection can support a MUCH, MUCH larger block size.

Commercial broadband providers are monitoring and manipulating users traffic.  This is not some 'moon landing' consipricy theory.  It's happening now.

The importance of a monetary system is about 1000 times more important than keeping people from watching movies for free.  To think that the same legal structures, hardware infrastructure, marketing, and etc used for 'six strikes' will not be turned against decentralized crypto-currencies is wishful thinking.

To think that commercial infrastructure providers are going to be immune from similar pressures to attack their customers, even if you think that it is a good idea to force the Bitcoin infrastructure into this space, strikes me as utterly absurd.

If you are not actively thinking about these things, I have to say that you are simply not very well equiped to be planning the roadmap for a robust solution in light of various potential threats which are very probable.  I'm honestly not trying to be a dick; this is simply as close to a statement of fact as any of my ravings on this forum have been.

The BCF and you have my support in having a desire to integrate with state law at this time.  I don't see most laws and regulations as being without reasonable rational even if the implementation is cumbersome.  At this time.  The question is what if the laws change to 'no Bitcoin period'.  Is your answer going to the 'well, that is that.'?  This question is, in fact, not hyperbole.  A followup question is whether there would be any alternative which had been considered?

The block size will be raised. Your video will just make a lot of people worried about nothing, in exactly the same way Luke-Jr's BIP17 proposal last year (and his hyperbolic rhetoric about BIP16) did nothing but cause a tempest in a teapot.

The BIP17/16 thing was most memorable to me in that a single pool operator made the decision about timing if nothing else.  It was an excellent study in centralization.

I do labor under the assumption that 'The block size will be raised.'  just as I assume the worst about other threats to my interests or things that I care about.  It would be silly not to, and further, not to take pro-active steps to mitigate the damages.  I own 'bitcoin-legacy.org' and will gladly offer it to any person or group who demonstrates the right combination of technical and ethical proficiency to make use of it should that it be required.

[jdillon]

My reaction:  stop spreading FUD.

There are very real concepts being discussed here.  I find this a disapointing reaction from a person in your position.

Indeed. Gavin's original blog post on the subject a month or two ago is similarly embarrassing. But after all, Bitcoin is our currency, not his. If he wants to embarrass himself and the foundation let him.

If you are not actively thinking about these things, I have to say that you are simply not very well equiped to be planning the roadmap for a robust solution in light of various potential threats which are very probable.  I'm honestly not trying to be a dick; this is simply as close to a statement of fact as any of my ravings on this forum have been.

The BCF and you have my support in having a desire to integrate with state law at this time.  I don't see most laws and regulations as being without reasonable rational even if the implementation is cumbersome.  At this time.  The question is what if the laws change to 'no Bitcoin period'.  Is your answer going to the 'well, that is that.'?  This question is, in fact, not hyperbole.  A followup question is whether there would be any alternative which had been considered?

Absolutely. I do support the foundation and have donated funds to it and the development team but we can't just put our heads in the sand and hope for the best. In addition something people should realize in the wake of the StrongCoin debacle is how anonymity is a form of security. If what wallet software and who has what coins is not known, it is much harder to be attacked.

People often don't appreciate how your privacy is directly threatened by large transaction volumes. A SPV client, like your Android wallet, has to tell the nodes it communicates with about what Bitcoin addresses it is interested in so that only transactions relevant to it are forwarded. Now there is a mechanism where that knowledge is obscured, sort of like saying "Only tell me about addresses beginning with 1Ac4" but as transaction volumes go up the specificity of that filter has to increase so that your little Android phone is not flooded. The next step for any authoritarians is to setup a bunch of nodes to track who owns what coins.

blockchain.info already has that infrastructure.