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Author Topic: Important Lighting Network reading- for everyone!  (Read 1217 times)
ChiBitCTy (OP)
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January 30, 2018, 09:41:49 PM
Merited by OgNasty (1), achow101 (1), LeGaulois (1), ABCbits (1), buwaytress (1), HCP (1), AGD (1), nullius (1), butka (1), Xynerise (1), godzillarekt007 (1)
 #1

I think it’s important that everyone who supports bitcoin be on the same page about how the Lightning Network works and why bitcoin’s future is still as bright as ever. This short read was written up by a buddy in a slack channel and I thought it was important to pass along. It’s easy reading for anyone! 10 minutes of your time and if you’re not fully educated on the Lighting Network basics..you will be!

https://medium.com/@melik_87377/lightning-network-enables-unicast-transactions-in-bitcoin-lightning-is-bitcoins-tcp-ip-stack-8ec1d42c14f5

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January 31, 2018, 12:48:36 AM
 #2

Thank you for that link!  Though many (including myself) have discussing the “network layers” analogy for a long time, this is very well worked up; and it’s the first I’ve seen the quite apt comparison to unicast vs. broadcast.

Admittedly overextending the analogy a bit, I think this will also excite the mental wheels of anybody with IP routing knowledge.  I haven’t been following LN development closely enough to know; but I’d be surprised if Lightning engineers hadn’t already been combing the vast repertoire of routing algorithms knowledge for useful things.

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January 31, 2018, 08:45:29 AM
 #3

That was excellent. As an ex-data communications engineer of a certain vintage (like I was doing it at the time Tim Berner-Lee was writing his proposal for the www) it certainly struck a new understanding for me. It's difficult for me to know whether everyone will get the same meaning from that as I did.
The main takeaway should really be that Bitcoin is still only just beginning. In the analogy with the internet, this is 1992 or 3.

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January 31, 2018, 11:18:31 AM
 #4

Thanks for the share, lightning will boost the Bitcoin Network a lot. I think we can´t forecast the impacts, they will be big.
Unconfirmed transactions in future ? zero , hopefully.

Merchant payments will be only transfered over lightning channels and after transaction finished resent to the Chain, after lightning channel closes.
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January 31, 2018, 07:07:23 PM
 #5

Very nice Ty! Good reading for the rest of us non technical mortals on this forum who try and understand all the magic that is happening around us Cheesy

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January 31, 2018, 07:37:53 PM
Merited by Welsh (1), TheQuin (1)
 #6

The main takeaway should really be that Bitcoin is still only just beginning. In the analogy with the internet, this is 1992 or 3.

This rings true.  I've been getting the sense more and more lately that Lightning means we aren't at all where I thought we were on the adoption curve:



In the earlier parts of last year, I generally felt that we were roughly nearing the end of 'early adopters' and rapidly approaching 'early majority'.  But Lightning is almost like someone pressed the reset button and we're just about back to 'innovators' again, because it's a huge change with such far-reaching implications.  It's like there's so much more to come now and we haven't even imagined all the possibilities yet.  Particularly if other cryptocurrencies get on board as well and we can start hopping from one chain to another via atomic-cross-chain-transfers.  That's when crypto becomes completely and truly... I'm pretty sure "unregulatable" isn't generally considered a real word yet.  Perhaps in time we'll make it one.  But yeah, that - unable to be regulated.  No centralised exchanges (unless fiat is involved) losing peoples' funds and no KYC losing peoples' financially sensitive data.  All in all, a better economy for everyone.

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February 01, 2018, 07:00:51 AM
 #7

I don't know if you people have seen this video, but maybe its good idea to check it now. The concerns of putting a middleman (hubs) in the p2p transactions can ruin the whole idea of anonymity and freedom and can be more beneficial for the banking system and give them control over the bitcoin in general.
I not sure how credible the source is and if what he says is truth, hope someone with more experience and knowledge can confirm/dismiss it.
https://www.youtube.com/watch?v=UYHFrf5ci_g

Please check it out and let me know what you think.

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February 01, 2018, 07:20:47 AM
 #8

In the earlier parts of last year, I generally felt that we were roughly nearing the end of 'early adopters' and rapidly approaching 'early majority'.  But Lightning is almost like someone pressed the reset button and we're just about back to 'innovators' again,......

Thanks for sharing that diagram, the numbers are fascinating.
I've seen some interesting articles recently which I can't find now that estimated that between 5 and 10 million people currently have a crypto wallet of some sort. If that true out of a world population of 7.6 Billion then we're still right at the beginning.

I did remember to bookmark this one.

https://www.coindesk.com/bitcoin-investing-10000-year-view/
Quote
Bitcoin users double every 12 months in our current phase of the adoption S-curve. This was calculated with my work tracking Google Trends data on the assumption that users search BTC/USD price.

If this trend continues, we are nine years away from half the world using bitcoin.



Please check it out and let me know what you think.

I think it's FUD. Using the analogy in the article linked to in the OP it's like arguing that the introduction of the internet reduced anonymity, was beneficial to the banking system, and gave them control over life in general.
It's probably a good subject for a thread of its own and many people more knowledgeable about LN will be happy to explain everything it gets wrong.

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February 01, 2018, 09:26:19 PM
 #9

I don't read articles often but I am sooo glad I read that one oh boy! I already knew a bunch about Lightning but I wasn't aware that we are in the stage of the internet pre-global revolution that is phenomenal to know and I can't wait for Lightning to come out so I can watch this puppy unfold Roll Eyes

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February 02, 2018, 02:15:10 AM
 #10

In the earlier parts of last year, I generally felt that we were roughly nearing the end of 'early adopters' and rapidly approaching 'early majority'.  But Lightning is almost like someone pressed the reset button and we're just about back to 'innovators' again,......

Thanks for sharing that diagram, the numbers are fascinating.
I've seen some interesting articles recently which I can't find now that estimated that between 5 and 10 million people currently have a crypto wallet of some sort. If that true out of a world population of 7.6 Billion then we're still right at the beginning.

I did remember to bookmark this one.

https://www.coindesk.com/bitcoin-investing-10000-year-view/
Quote
Bitcoin users double every 12 months in our current phase of the adoption S-curve. This was calculated with my work tracking Google Trends data on the assumption that users search BTC/USD price.

If this trend continues, we are nine years away from half the world using bitcoin.



Please check it out and let me know what you think.

I think it's FUD. Using the analogy in the article linked to in the OP it's like arguing that the introduction of the internet reduced anonymity, was beneficial to the banking system, and gave them control over life in general.
It's probably a good subject for a thread of its own and many people more knowledgeable about LN will be happy to explain everything it gets wrong.


This is exactly why I am a bit perturbed every time I hear "bitcoin bubble".  I do believe that BTC and Alts were oversold and a correction was due but as you point out there is just a small fraction of the world whom know what Bitcoin is all about and buy it.  Hell half the people on here are clueless about bitcoin, most saying they "invest in Bitcoin"

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.Duelbits.
..........UNLEASH..........
THE ULTIMATE
GAMING EXPERIENCE
DUELBITS
FANTASY
SPORTS
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February 02, 2018, 04:30:57 AM
Last edit: February 02, 2018, 04:53:43 AM by dinofelis
Merited by d5000 (1), Welsh (1), Xynerise (1)
 #11

I think it’s important that everyone who supports bitcoin be on the same page about how the Lightning Network works and why bitcoin’s future is still as bright as ever. This short read was written up by a buddy in a slack channel and I thought it was important to pass along. It’s easy reading for anyone! 10 minutes of your time and if you’re not fully educated on the Lighting Network basics..you will be!

https://medium.com/@melik_87377/lightning-network-enables-unicast-transactions-in-bitcoin-lightning-is-bitcoins-tcp-ip-stack-8ec1d42c14f5

Yes.  And no.  There is a huge difference between a payment system and a network system, and it is very important to understand this.  The comparison with the TCP/IP stack is tempting, and from a pure engineering viewpoint, it looks like it.  But this is a big misunderstanding of some very fundamental issues.

First of all, even though this sounds like blasphemy, one has to understand that bitcoin and bitcoin-like coins, are not a network, but a data set.  This was already clear in Satoshi's writings in November 2008.  All value in bitcoin, all meaning in bitcoin, resides in a data set.  The network is simply a tool to access and build the data set, but the network as such, has no value. You can do what you want on the network, if it doesn't influence the data set, it has no meaning in bitcoin.   That data set is the block chain.  In bitcoin, a transaction doesn't have meaning if it is not included in the block chain.

So this is already a fundamental difference with the TCP/IP stack.  There's no "underlying data set" in TCP/IP.

The next point to understand, is that bitcoin has a very specific rule to make sure there's only one agreed-upon data set: proof of work.  This system has evolved in such a way, that there are a very limited number of entities that actually (can) MAKE this data set.  There are many, many less entities that actually write in this data set, than there are users of the system.   There are at most something like 20 entities that write the data set (of which 3 or 4 write more than half of it, 10 write about 99% of it).  These few data set writing entities are in a competitive game that makes it necessary to have high-quality data links amongst them.

Users of the system (bitcoin users) need to consult very small pieces of the data set in order to know about their balance, and may need to ask one of these few "data set writing entities" to write something on their behalf into that data set: the first act is verifying one got paid, the second act is paying (sending a transaction).  Essentially, a user wants two things: know for sure he got paid and pay and see that he paid.  That's all there is to know for a user.

As such, the three NETWORK functions that are necessary in bitcoin, are:

1) users need to be able to send transactions to the "data set writing entities".  That's a communication from 1 to something like 20 entities.  The users can pay.

2) the 20 entities writing the data set should make that data set at disposal of the users.  That's classical one-to-many serving: the users can verify they got paid, or they paid.

3) the 20 entities writing the data set should of course also communicate between them in their competitive game which results in the data set expansion.

The first function is a very limited multicast.  This is something akin to sending an e-mail to 20 destinations.

The second function is like a very classical web server: put data at disposal for users

The third function is like a backbone high performance link.

Right now, there is a P2P grid of nodes that performs the first and the second function, which is far from optimal.  There's a P2P network that takes care of the communication between the user and the data set producers, transmitting transactions from the users to the data set producers, and caching/proxying the data set to serve it to users.   So network-wise, it is as if there were no ISP, but we all connected our PC to our neighbours, and we are accessing servers through our PCs.

It is the misunderstanding of this, not seeing that it is essentially client/multi-server structure, which is at the origin of the claims of unscalability.  This system scales perfectly, and it was already described by Satoshi in November 2008.

Proof of work splits the system in a small set of competing servers/data builders, and a large set of users.  The difference between this system, and a classical client-server system is essentially simply that the "server" is a "multi-server" of a relatively small number of entities.  Instead of 1, there's something like 20, but with 10 you cover already 99% and with 3, you cover 50%.

In such a system, you could, even though it is somewhat clumsy, forget about the bitcoin network.  You could have these 20 entities, still connected by a high-performance back bone, and having set up some FTP server of the data set (preferentially, something somewhat more sophisticated, that allows searching and only downloading parts: an SPV kind of server).  You could send your transactions by e-mail to some, or all of these entities.  That would work too.  People who want, could download the full block chain from some of these FTP servers.  Some would only download the header chain.  Some only one block.  Some only one transaction, a Merkle tree, and the full header.
Bitcoin would work just as well, and there's no need for a P2P network.

This is why the 'base layer' in bitcoin is not a network layer.

Comes now the LN network.  The LN network is also not comparable to a TCP/IP kind of routing protocol, for two reasons, both due to the "locking in of funds in a channel".   In a communications network, you can set up and break links at essentially no cost, and once a channel is set up, you can send as much data in one direction as you want.  You can open many links simultaneously.   With the LN network, however, "opening a socket" is a costly operation, and opening a socket limits your ability to open another one: funds locked into one socket, are not available any more for another one.  In as much as "setting up a TCP link" was essentially risk-free, "setting up an LN channel" stops you from setting up another one with the same funds.  If you see that your link is "dead", you will have to wait for a day or a week to be able to set up another one and it will cost you a fee.  Next, TCP connections can be used to send data in one direction, or in both.  With LN channels, you can exhaust all intermediate links.  There's only so much that can go in one direction.  In other words, the LN network is not comparable to the flexibility of TCP AT ALL.

For a payment system, this is actually quite problematic, because the essence of a payment system is that "money goes round in circles".  If there's one thing the LN cannot do, that is to make money go in circles.  The LN network can only make money "oscillate" back and forth.  But going around in circles exhausts all links along the circle.  However, where this is interesting, is in trading.  Trading is indeed "going back and forth".  So in as much as the LN network is quite a bad "money transporter", it can be a good "high frequency trading system".  An electrical engineer would say that the LN network is "AC coupled".  You cannot push a DC stream through it, but you can push oscillations through it.  In fact, the only way in which the LN network can "make money go round in circles" is if all users in the circle are connected to the same central hub.

So this analogy breaks down entirely.  Bitcoin is not a network but a data set, and bitcoin's functioning is not "broadcast", but client/multi-server in reality.  There is not really a scalability problem in a client/multiserver architecture, as we know. Moreover, this doesn't form a basis of a network.  And the LN network is way, way, way less flexible than the TCP layer.

The scaling problems in bitcoin find their origin in not understanding (or not wanting to understand) the real data flows in bitcoin and the real nature of the system.
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February 02, 2018, 05:52:53 AM
Last edit: February 02, 2018, 06:15:20 AM by TheQuin
Merited by d5000 (1), Xynerise (1)
 #12

So this analogy breaks down entirely.

All analogies break down if you try and push them further than they were intended. The point of an analogy is to use a similarity in something people are already familiar with to explain something new. Pointing out differences doesn't make an analogy invalid.

In this case the analogy is of blockchain being early Ethernet segments, a bus architecture with CSMA/CD being suitable for small LANs and then Lightning Network being the addition of routers and the TCP/IP stack at the next level of the OSI 7 layer model. In both cases they remove a restriction on bandwidth and allow you build an infinite network.

The analogy works in getting across the point it is intended to. LN is an additional layer on top of Blockchain.

Of course Bitcoin isn't directly comparable to a network, and of course, LN isn't directly comparable to a routing protocol. It's an analogy, not a comparison.


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February 02, 2018, 09:45:03 AM
 #13

So this analogy breaks down entirely.
All analogies break down if you try and push them further than they were intended. The point of an analogy is to use a similarity in something people are already familiar with to explain something new.

One can also think that this kind of image is simply rhetoric.  Association of "the product to sell" with other things that have a positive image is the basis of publicity.

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February 02, 2018, 09:48:33 AM
Merited by d5000 (1), Welsh (1), nullius (1)
 #14

... because the essence of a payment system is that "money goes round in circles". If there's one thing the LN cannot do, that is to make money go in circles.  The LN network can only make money "oscillate" back and forth.  But going around in circles exhausts all links along the circle.  However, where this is interesting, is in trading.  Trading is indeed "going back and forth".

This analogy to real money can be discussed as an interpretation, of what money is. Friedman, Nash, Schumpeter, Mises, or the gold standard...? The usual bills and coins (Pound, Dollar, Euros?), or the virtual money (FIAT), which only exists as figures, where you don't know if you can get it, if you really need it... you name it!

I don't see how money goes in circles, my view is it is a one-to-one connection. I open a 1:1 channel, when I pay with cash, I put a 10 Euro bill, and I get maybe some return. There is no circle at all involved. Same I can do with a Lightning Channel...
Circle might come into the game, when my 10 Euro bill, which is in the hands of some else now, continues his travel, cause this someone else pays again for something. So the re-usability of this bill is maybe the circle analogy. The exactly same thing can be done with Lightning. But this money has a major, major disadvantage: you open/close the transaction channel within several seconds/minutes, you cannot keep it open. Every time you pay something, you need to re-open a process like pulling out your wallet, find the right bills, and hand over the money. Lightning gives me the extreme flexibility of "lending money" to a trusted channel, from which a specific amount can be used over and over again. The assumption is, this makes it very cheap for especially smaller amount transactions.

The best thing with lightning is on top: in real live I cannot tell my grocery shop to keep some of my money, because I have to buy some bread around the corner, and they shall send it to the bakery. With Lightning I can do this. I'd call this hopping over service providers. Impossible in this money world (limiting the circle analogy).

With Lightning everyone can do this, and as such a network gets created. If the perfect game for lightning is, that 10.000 traders open channels with the exchanges, then I don't see how this can be called centralized. And another 10.000 with their cable service. And another 10.000 with Amazon (or what so ever). I don't have to use these existing channels, I can still open a channel with my spouse independently.

People here are discussing a lot centralization, predicting the future based on very limited assumptions. I am not seeing the centralization idea, as it is especially unclear, what centralization means. If there are 20 main hubs around the world, can this be called centralized? Or is centralized, when 1000 major hubs collect 10.000 users around them? Or is something centralized, when one company owns all these 20 worldwide hubs? Or is centralized, when you have to use a specific hub? There is a broad spectrum of personal understanding behind centralization, that people use to predict the future...  I always come to think, that a lot of personal fear is involved, and overall I am missing real tests from those people. It is easy nowadays to create several thousand or ten thousand nodes in lightning, and let them work. And then have real statistical values as an underlying basis for such statements. But I also see, that not everyone can create such a setup.

Summary: centralization of lightning cannot be predicted, nor proofed, due to:
 - incapability of large scale measurements
 - limited assumptions
 - limited personal understanding of the network
 - different scope of meaning (of centralization)
 - and a bit of personal apprehension

All this make predictions look like hobby research, throwing shells, maybe conspiracy theory, but not at all (bullet proof) research.
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February 02, 2018, 10:13:22 AM
Last edit: February 02, 2018, 10:26:46 AM by dinofelis
 #15

I don't see how money goes in circles, my view is it is a one-to-one connection.

Well, usually there's a money flow and an opposite goods/services flow, and these flows tend to be conservative, that is, flow in circles ("div B = 0" if you are mathematically inclined).  

Usually, money flows from my employer to me, from me to the bakery, from the bakery to his supplier, from the supplier to the farmer, from the farmer to the store, from the store to my employer, to make it simple.  I rarely pay my employer, my bakery rarely pays me, the supplier rarely pays the bakery, the farmer rarely pays the supplier and the store rarely pays the store.  Look at your bank account: you usually receive money from certain entities, and you usually spend money to other entities.  There's rarely a back-and-forth motion.  With all these entities, there's no point of opening channels.  They will quickly get exhausted.  It is more interesting for all of these entities to connect to a "single settlement node".

If we want to do this with a LN network, the only solution is to have a central node (a bank).  Otherwise, channels will always get exhausted, because they always need to flow in the same direction.  Yes, you can replace that central node by a "web of central nodes".  But my employer, me, the bakery, the supplier, the farmer and the store have no reason to have links between them, only to that "central web".  And inside that central web, if similar flows have to flow in systematic circuits, they all have also a reason not to connect along the periphery but only to a more central part.  And so on.

The ideal LN structure is hence a single central hub, with all others connected to it.  It is the only structure that can support indefinitely all possible "circles of money flow".  That's not even a criticism.
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February 02, 2018, 10:17:57 AM
 #16

One can also think that this kind of image is simply rhetoric.  Association of "the product to sell" with other things that have a positive image is the basis of publicity.

You could do, but then you would be completely missing the point.

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February 02, 2018, 11:25:26 AM
Merited by pebwindkraft (2)
 #17

If we want to do this with a LN network, the only solution is to have a central node (a bank).  Otherwise, channels will always get exhausted, because they always need to flow in the same direction.  Yes, you can replace that central node by a "web of central nodes".  But my employer, me, the bakery, the supplier, the farmer and the store have no reason to have links between them, only to that "central web".  And inside that central web, if similar flows have to flow in systematic circuits, they all have also a reason not to connect along the periphery but only to a more central part.

You provide no reasoning at all for why you, the bakery, the supplier and the farmer cannot simply pay each other with direct links. Well, except when you say that they need "flow in the same direction", which is precisely what having direct channels between one another achieves. This is a reason, but it disproves your point completely. There are actually people reading your posts sometimes, y'know!

Routing can be achieved by hubs, as you point out, but it can also be achieved other ways (which you suggest isn't desirable or possible). The protocol design doesn't care whether a node uses nodes with high numbers of channels (i.e. hubs), or uses a lot of multi-node hops, or opens a new channel. It only cares about minimising fees (which is in the user's interest).

Your description implies channels can never be closed, they can. Just one on-chain transaction can be used to close 1 channel and open a new channel at exactly the same time, and the new channel can be sent in the direction where no route existed before (i.e to where the money is needed). It's quite simple. And if it's cheaper, or more desirable for privacy reasons, than using a pre-existing route ("hub" or otherwise), that's exactly what users will do.



You're also repeating the use of the word "banks" to describe nodes with the highest number of channels (you've been doing this in other threads too). This is inaccurate. How many channels do I need to open to become a Lightning "bank"? There is no way of distinguishing between Lightning "banks" and regular nodes based on how many channels they have, everyone will be opening and closing channels as they please (including their "bank accounts" with nodes that have alot of channels, unlike when dealing with actual banks where one must ask permission to close one's account).

There is no entity in the Lightning network's model analogous to a bank, in any way, shape or form.

Vires in numeris
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February 02, 2018, 12:25:25 PM
Merited by pebwindkraft (1)
 #18

If we want to do this with a LN network, the only solution is to have a central node (a bank).  Otherwise, channels will always get exhausted, because they always need to flow in the same direction.  Yes, you can replace that central node by a "web of central nodes".  But my employer, me, the bakery, the supplier, the farmer and the store have no reason to have links between them, only to that "central web".  And inside that central web, if similar flows have to flow in systematic circuits, they all have also a reason not to connect along the periphery but only to a more central part.

You provide no reasoning at all for why you, the bakery, the supplier and the farmer cannot simply pay each other with direct links.

I realize that you are right, and I was wrong here.  There is indeed a solution I didn't realize.  If A, B, C, D and E are linked in a ring, of course, by the direct links, A can pay B only until the AB channel is exhausted.  But I forgot that A can also pay B by sending through the AE, the ED, the DC, and finally the CB channel.  I stand corrected. 
So, half of the time, A pays B though the direct channel AB, and when that reaches its limits, A pays B "the other way around". And then again in the direct sense.
Thank you.

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February 02, 2018, 02:49:02 PM
 #19


It is the misunderstanding of this, not seeing that it is essentially client/multi-server structure, which is at the origin of the claims of unscalability.  This system scales perfectly, and it was already described by Satoshi in November 2008.




It's a client-server structure only for SPV clients, while full nodes are peers of the network - even if they can't produce new blocks, they can verify all blocks and reject those that are invalid. This is a vital part of Bitcoin protocol - users can keep miners in check, making it impossible for them to cheat, except for 2 very expensive attacks (double spend and DOS). The big block model doesn't have this feature - for now fraud proofs don't even exist, so miners would be able to cheat as they please, but even if there were fraud proofs, miners and datacenter-nodes would still have so much power, that their relationship with users would be the same as that of banks - they would be able to get away with a lot of violations, because there's no mechanisms to stop them. We've already seen how easily big nodes (exchanges, services) and 90% of mining can act as one entity when they have tried to attack the network with their fork in the last year - this is a great example that we can't trust anyone, and instead we should verify everything.

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February 02, 2018, 03:12:46 PM
 #20

We've already seen how easily big nodes (exchanges, services) and 90% of mining can act as one entity when they have tried to attack the network with their fork in the last year - this is a great example that we can't trust anyone, and instead we should verify everything.

There's a common assumption that miners and big Bitcoin businesses want the same thing as the users, because it's supposedly irrational to want to cause any damage to Bitcoin.

This is very short sighted.

Miners and big Bitcoin businesses can:

  • Represent other industries that don't like Bitcoin competing against them. They would be strongly incentivised to use miners or businesses as a proxy to damage Bitcoin
  • Falsely believe that wresting more control over Bitcoin for themselves is beneficial
  • Falsely believe that any damaging actions are not damaging

Users can only control the Bitcoin they want to use by enforcing it's rules on the Bitcoin network. That means some users must be running fully validating nodes, even if some users (i.e. SPV users) are depending on those running full-nodes to look after their interests.

Satoshi's original model turned out to be wrong; fraud proofs for SPV nodes still do not exist, and so real world incentives have adjusted such that a middle-tier of users running full nodes is needed to keep the interests of the system's users in balance.

Vires in numeris
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