Bitcoin Blocksize Problem Video

[edmundedgar]

Anonymous network bandwidth is especially fragile: look at how Japan's national police force has been talking about forcing ISPs to block Tor and proxies and even making using them illegal.

It doesn't particularly support or refute retep's main point but I don't want to miss a chance to correct this zombie fact, since the English-language press never bother correcting stories that turn out to be wrong:

It's almost definitely not true that the Japanese police have been talking about forcing ISPs to block Tor, or about making it illegal.

The police proposal seems to have been to (voluntarily) educate site operators so that they know how to block people from posting on forums and through email forms from the IPs of known Tor exit nodes. This may still turn out to be quite oppressive, depending on the tone of voice with which they said "voluntarily" and "educate", but it's an attack on websites, not on the network.

Unfortunately this got reported here rather vaguely (" The panel specifically recommends that communications be blocked when there is access from IP addresses publicly listed as those allocated to the third in a chain of computers that are used by Tor."), without saying who was blocking what communications or how.
http://mainichi.jp/english/english/newsselect/news/20130418p2a00m0na013000c.html

This then seems to have got picked up by non-Japanese media who filled in the missing details using the traditional, time-honoured journalistic technique of pulling things out of their arses and assumed it must mean they'd get ISPs to block Tor connections by some (mercifully non-existent) method.

[Peter Todd]

Anonymous network bandwidth is especially fragile: look at how Japan's national police force has been talking about forcing ISPs to block Tor and proxies and even making using them illegal.

It doesn't particularly support or refute retep's main point but I don't want to miss a chance to correct this zombie fact, since the English-language press never bother correcting stories that turn out to be wrong:

Good to hear! Corrected

This then seems to have got picked up by non-Japanese media who filled in the missing details using the traditional, time-honoured journalistic technique of pulling things out of their arses and assumed it must mean they'd get ISPs to block Tor connections by some (mercifully non-existent) method.

Don't think Tor is totally unblockable. The Chinese government has had a lot of success discouraging Tor and proxies in general, especially for the purpose of Bitcoin, by simply slowing down any encrypted traffic. Bitcoin is especially vulnerable to such techniques because miners need a lot of bandwidth to quickly get blocks when they are created, or their orphan rate will be too high to be profitable compared to miners who do have government support and have access to faster communications.

[edmundedgar]

The decision that it's safe to raise the 1MB limit won't be one made on technical grounds and it can't be made safely until we better understand how governments perceive Bitcoin.

The flaw in this plan - even if you grant all the assumptions along the way that get to miners operating anonymously being practical now, seriously useful against the easiest government attacks on the network and impractical with bigger blocks - is that the way governments perceive Bitcoin is not static.

The reason why even an oppressive government like China tolerates the internet at all, despite being unable to censor it properly, is because it provides big economic and social benefits to everybody, and not just dissidents. If it was a little niche tool used by dissidents and people who didn't trust the government they'd just shut the whole thing down.

The way you safeguard the ability to make censorship-resistant transactions is by growing Bitcoin as big as possible, as fast as possible. In the US context you want every company that owns a congressman or a senator calling them up instructing them to make sure nobody makes it hard to trade dollars for bitcoins, and every charity that mobilizes a large number of voters from the NRA to the Rotary Club terrified of losing their Bitcoin donation stream. And you need all those activities happening right on the blockchain, rather than through a bunch of PayPal-like intermediaries, because otherwise it becomes too easy to peel off the intermediaries from the underlying technology and make them use something less censorship-resistant.

Bitcoin is heading in the right direction to do all that, but if you cripple the network at 7 transactions per second and blow transaction fees up to $1 or $10 or $100 you stop all that progress and make it far, far easier to interfere with. (*)

(*) IMHO it's more likely that at that point most people just give up on Bitcoin and sod off to some alt-coin leaving the people expecting it to be their store of value holding a cryptographic collector's item, but let's assume for the sake of argument that they don't.

[edmundedgar]

Don't think Tor is totally unblockable. The Chinese government has had a lot of success discouraging Tor and proxies in general, especially for the purpose of Bitcoin, by simply slowing down any encrypted traffic.

Right, but you then mess with things that are of a lot of economic value. That wouldn't fly in Japan, and it probably won't work in China forever.

That ties into the point in my next post, which is that the way to stop hostile government action against Bitcoin is to take the world's payment systems hostage, so that nobody can shoot Bitcoin without risking hitting something they care about.

[Peter Todd]

The reason why even an oppressive government like China tolerates the internet at all, despite being unable to censor it properly, is because it provides big economic and social benefits to everybody, and not just dissidents. If it was a little niche tool used by dissidents and people who didn't trust the government they'd just shut the whole thing down.

China has effectively muzzled the internet, and they've been extremely smart about doing it. Saying dissident things is not illegal in China, however organizing in groups to do so is.

China muzzles the internet by allowing some dissidence, but making doing so inconvenient at every step, and clamping down on groups as they pop up. Sadly it's a very effective approach.

The way you safeguard the ability to make censorship-resistant transactions is by growing Bitcoin as big as possible, as fast as possible. In the US context you want every company that owns a congressman or a senator calling them up instructing them to make sure nobody makes it hard to trade dollars for bitcoins, and every charity that mobilizes a large number of voters from the NRA to the Rotary Club terrified of losing their Bitcoin donation stream. And you need all those activities happening right on the blockchain, rather than through a bunch of PayPal-like intermediaries, because otherwise it becomes too easy to peel off the intermediaries from the underlying technology and make them use something less censorship-resistant.

Intermediaries can be anonymous, and even better than that, there are ways to use cryptography and incentives that let you trust anonymous intermediaries, just like Bitcoin let you trust an anonymous group of miners.

Bitcoin is heading in the right direction to do all that, but if you cripple the network at 7 transactions per second and blow transaction fees up to $1 or $10 or $100 you stop all that progress and make it far, far easier to interfere with. (*)

(*) IMHO it's more likely that at that point most people just give up on Bitcoin and sod off to some alt-coin leaving the people expecting it to be their store of value holding a cryptographic collector's item, but let's assume for the sake of argument that they don't.

I wrote elsewhere how the smartest thing governments can do to stop Bitcoin is attack Bitcoin as a payment system by providing secure, zero-fee, no chargeback fraud alternatives. Even better is if these alternatives are mostly anonymous, or claim to be. I suspect the Canadian Mint is attempting to do exactly that with their MintChip project, although it's also quite possible it's just an attempt at ensuring the mint has a future in a cashless society.

What Bitcoin has to offer is deflation, decentralization and anonymity. If we screw up decentralization, Bitcoin will be no different from any other payment network.

[edmundedgar]

The reason why even an oppressive government like China tolerates the internet at all, despite being unable to censor it properly, is because it provides big economic and social benefits to everybody, and not just dissidents. If it was a little niche tool used by dissidents and people who didn't trust the government they'd just shut the whole thing down.

China has effectively muzzled the internet, and they've been extremely smart about doing it. Saying dissident things is not illegal in China, however organizing in groups to do so is.

China muzzles the internet by allowing some dissidence, but making doing so inconvenient at every step, and clamping down on groups as they pop up. Sadly it's a very effective approach.

A world where some communications get disrupted is completely different from a world where they are all stopped. The fact that people in authoritarian regimes are able to use the internet makes a huge difference to the level of freedom in those countries. Seriously, this is a huge win. It is not a trivial thing. And it happened because the internet is designed so that the same network that carries dissident content also carries economically important content, and pictures of people's cats.

The way you safeguard the ability to make censorship-resistant transactions is by growing Bitcoin as big as possible, as fast as possible. In the US context you want every company that owns a congressman or a senator calling them up instructing them to make sure nobody makes it hard to trade dollars for bitcoins, and every charity that mobilizes a large number of voters from the NRA to the Rotary Club terrified of losing their Bitcoin donation stream. And you need all those activities happening right on the blockchain, rather than through a bunch of PayPal-like intermediaries, because otherwise it becomes too easy to peel off the intermediaries from the underlying technology and make them use something less censorship-resistant.

Intermediaries can be anonymous, and even better than that, there are ways to use cryptography and incentives that let you trust anonymous intermediaries, just like Bitcoin let you trust an anonymous group of miners.

Build us a practical payment system that does actually does that and we can talk about crippling the one we have. Right now the places where we have to depend on intermediaries are causing the Bitcoin community all kinds of headaches.

Bitcoin is heading in the right direction to do all that, but if you cripple the network at 7 transactions per second and blow transaction fees up to $1 or $10 or $100 you stop all that progress and make it far, far easier to interfere with. (*)

(*) IMHO it's more likely that at that point most people just give up on Bitcoin and sod off to some alt-coin leaving the people expecting it to be their store of value holding a cryptographic collector's item, but let's assume for the sake of argument that they don't.

I wrote elsewhere how the smartest thing governments can do to stop Bitcoin is attack Bitcoin as a payment system by providing secure, zero-fee, no chargeback fraud alternatives. Even better is if these alternatives are mostly anonymous, or claim to be. I suspect the Canadian Mint is attempting to do exactly that with their MintChip project, although it's also quite possible it's just an attempt at ensuring the mint has a future in a cashless society.

What Bitcoin has to offer is deflation, decentralization and anonymity. If we screw up decentralization, Bitcoin will be no different from any other payment network.

Really, there's no comparison between what you can do with Bitcoin can and any system that you could get implemented in an actual country. MintChip seems to be going nowhere, and the people behind that don't dare suggest that it's for anything except small (<$10) transactions. There's a reason why this still hasn't been done.  Nobody wants to take responsibility for a new system without buyer protection. Nobody wants to take responsibility for a new system that lets you launder money or buy drugs. Or a new system where you can lose your private key and you can't get your money back.

If the governments of the world were run by some kind of incredibly cunning strategic mastermind then you might be onto something, but it's not. It's run by a bunch of politicians who respond to incentives, which is why back in the real world we're still stuck with sodding PayPal.

PS. If the governments of the world were run by the strategic masterminds you imagine, they'd have no trouble taking over the Bitcoin mining business by setting up their own mining business, running at a small loss and crowding everyone else out. Hell, with cheap access to capital and economies of scale they'd probably be able to run it at a profit.

[tvbcof]

...
The way you safeguard the ability to make censorship-resistant transactions is by growing Bitcoin as big as possible, as fast as possible. In the US context you want every company that owns a congressman or a senator calling them up instructing them to make sure nobody makes it hard to trade dollars for bitcoins, and every charity that mobilizes a large number of voters from the NRA to the Rotary Club terrified of losing their Bitcoin donation stream. And you need all those activities happening right on the blockchain, rather than through a bunch of PayPal-like intermediaries, because otherwise it becomes too easy to peel off the intermediaries from the underlying technology and make them use something less censorship-resistant.
...

Right idea, but note that crypto-currency regulation itself is pretty fungible.

The same effect can be had more quickly and safely by actively embracing off-chain transactions and alternate crypto-currencies.  In fact, a lot of organizations may be more quick to jump on the band-wagon if they had a crypto-currency of their own.

I worry that no crypto-currency will be able to be a truly competitive player while trying to fit the 'jack of all trades' roll.  That is to say,

 - A solution with faster confirmations may eat Bitcoin's lunch for much real-world activity.

 - Bitcoin has already effectively given up on 'micro-transactions'.

 - Bitcoin is developing complex transactions suitable for contracts, but at the expense of significant internal complexity, and with complexity comes risk.

 - As a 'digital gold', I personally and I think a lot of other people are not going to be satisfied if the blockchain and mining becomes ever more consolidated to large players who must rely on commercial infrastructure.

I see few disadvantages and a lot to win by letting go the 'one world currency' fantasy that a lot of people seem to have for Bitcoin.  It makes me think back to the old tale about "the fisherman's wife."

[benjamindees]

I see few disadvantages and a lot to win by letting go the 'one world currency' fantasy that a lot of people seem to have for Bitcoin.

This is a serious question.  I'm sure you'll answer it.  But I hope you really take a minute to think about it as well.

Since you've basically admitted, over and over again, that you have no interest at this point besides that of making the price of your Bitcoins go up in the short term (presumably so that you can cash out before the value implodes), why should anyone care about your opinion on this?

[benjamindees]

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

There isn't anyone reasonable in this discussion that thinks the limit is set in stone forever, however it will be years before it's safe to raise it, if ever.

Network bandwidth is something limited not by technology, but by what regulatory environment you live in. It has everything to do with what your local telecom monopolies and governments think the internet should be used for

The decision that it's safe to raise the 1MB limit won't be one made on technical grounds and it can't be made safely until we better understand how governments perceive Bitcoin.

By the time the limit can be raised safely many years will have passed, plenty of time for people to understand the nuances involved.

As for calling Bitcoin a democracy again I and the rest of my team decided it was quite reasonable to talk about it that way.

These are just some choice quotes, for the record.  I am actually kind of impressed at your ability to appeal to "democracy" while defending the oligopoly of miners and shadowy investors currently directing development of the de facto Bitcoin client.  Kudos for that, I guess.

But, I'm not really buying any of this.

I mean, you don't seem like an idiot.  So, I'm assuming you understand that, if Bitcoin is used as an actual currency, governments will respond poorly to it.  I also assume you understand that bandwidth is not really limited by telephone companies, and that users who demand more bandwidth will have it provided, one way or another.

Maybe I'm wrong, but are you really advocating hobbling Bitcoin so that we can all ask permission from governments and telephone companies whether we can actually continue to use it, just so that we can preserve some arbitrary standard of Bitcoin "democracy" that includes people with computers and broadband internet connections?

I don't really think you expect us to do that.  So, then, can you tell us what exactly you and your "team" are working on, and what "investors" are supporting you, that would justify you spending $10,000 to make a video about limiting the Bitcoin block size?

[tvbcof]

I see few disadvantages and a lot to win by letting go the 'one world currency' fantasy that a lot of people seem to have for Bitcoin.

This is a serious question.  I'm sure you'll answer it.  But I hope you really take a minute to think about it as well.

Since you've basically admitted, over and over again, that you have no interest at this point besides that of making the price of your Bitcoins go up in the short term (presumably so that you can cash out before the value implodes), why should anyone care about your opinion on this?

Fair question.  I've pondered it myself somewhat over th years.  In case anyone cares, here is probably a fairly accurate set of reasons for my duality on this topic.

I did not realize that it was going to be such a challenge to increase the block size.  So I went through a phase of giving up on Bitcoin for a while.  When it hit me that there was a chance to have something end up which I consider possibly workable it sort of put me back into the modestly hopeful camp.

I'm also human and would not mind making a buck on Bitcoin no matter where it eventually ends up.  Since I am confident that crypto-currency land will produce something which is a boon to humanity it is not completely the end of the world if it does not happen to be Bitcoin.  Getting rich has always been a factor in my opinions about things.  Sometimes more and sometimes less.

As I've said before, the whole ecosystem would be all around less messy and easier on 'the masses' if Bitcoin itself moved directly into the role of a top-dog reserve currency.  But I've little doubt that something will.  Or I should say, will complement gold on the virtual side of our world.

I do often play 'devils advocate' as a mechanism to explore and explain concepts.  Since I simultaneously hold several different view on this topic it is easy enough for me to do.

Lately I am becoming more excited about the potential for my 'paracoin' idea to solve the problem on a flexible schedule driven by events in Bitcoin-proper-land.  It would:

 - allow me and others who hold BTC a degree of protection,
 - give a flexible 'semi-live' environment to work on challenging problems
 - result in a blockchain free of 4+ years of cruft
 - may actually work!

I've toned it down on 'paracoin' a bit lately out of deference to those who are trying to influence Bitcoin itself evolve in a healthy direction.

[Peter Todd]

I don't really think you expect us to do that.  So, then, can you tell us what exactly you and your "team" are working on, and what "investors" are supporting you, that would justify you spending $10,000 to make a video about limiting the Bitcoin block size?

$7,000, the other $3,000 is going towards blow and hookers. (we're not filming that)

As for the team: http://www.youtube.com/watch?v=0Z09bNgSeMI <- I'm the handsome one.


Seriously, you think the tens of millions of Mt. Gox trade volume every day goes to buying socks?