Bitcoin is no longer decentralized

[becoin]

Self-correcting problem.

Evidence in the altcoins

Zangelbert is right.  centralization is not going to occur.

Centralization is not a prediction, it is a fact!

Every problem in society and economy is self-correcting. Sometimes it takes 5 minutes and sometimes it takes 100 years. Sometimes hardly anyone is noticing it and sometimes it is like a seismic shift. The point here is to avoid seismic shifts.

The future of ASIC production is to make the ASIC chip like a Swiss army knife capable of switching between different POW algos as the need arises. Field of competition will be how this switches are optimized between different pairs of POW algos. It may sound absurd but professional investing in ASIC production is the first worrying signs of centralization. Risk must be too big for a professional investor to make a bet for a single POW algo optimized ASIC chip. Only then we can say that the danger of centralization is not there anymore.

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[coolbeans94]

Bitcoin will be forced to become centralized or it will crash.
This is another reason why you should diversify. PPCoin is better because it shouldn't have "need" to become centralized. Transaction volume matters.

1.   http://www.youtube.com/watch?v=EIIkHfU2o8Y
2.   http://www.youtube.com/watch?v=ZEgj_whkg08

[Akka]

Bitcoin will be forced to become centralized or it will crash.
This is another reason why you should diversify. PPCoin is better because it shouldn't have "need" to become centralized. Transaction volume matters.

1.   http://www.youtube.com/watch?v=EIIkHfU2o8Y
2.   http://www.youtube.com/watch?v=ZEgj_whkg08

PPC actually has a stronger pressure to become centralized.

Don't get me wrong, I really like that he is trying something new and is looking for a alternative to mining. But Proof of Stake is not the answer.

With Bitcoin you always will get competition when you mining becomes to profitable. With PPC once you have you share of the Networks Proof of Stake it remains constant or even increases due to tx fees. The only way to get into POS and get a share of the Network is to get them from other PPC holders. Therefore big holders have high entry barriers that only allow competition to arise when they allow it. Therefore POS actually has a Trend towards centralization "build in".

But altcoins are Off Topic here.

[Mike Hearn]

I remember Stefan Thomas observing that it seems to be some fundamental law that making a decentralised solution is always a lot harder than a centralised one. Perhaps we should call it Thomas' Law or something :-)

These things will shake themselves out with time (over a number of years). Eventually the ASIC arms race will settle down and there won't be miners making enormous leaps over one another any more, but the competitive forces will still exist so miners will refocus on smaller optimisations, like eliminating fees paid to pool operators, finding cheap energy and so on.

I don't think a handful of mining pools could change the inflation rate. All the major exchanges and payment processors certainly run their own full nodes, so if miners did make a longer chain with altered inflation then the SPV clients would follow along, but web wallets and major economic entities would simply ignore it. People would quickly realise the coins they were mining couldn't be cashed out and would abandon those pools, even if you ignore the ideological devotion people have to the current inflation schedule.

Still, Gregory is right that we can't be complacent about such things. On the software side at least we've seen much less rapid development than on the mining hardware side, due to the lack of a good funding model for developing decentralised software. Many things we know can be implemented in a decentralised way end up being handled by centralised services, because the funding and programming models are all obvious and well tested. It takes bravery and a lot of skilled work to turn that around. We're trying to keep things at least balanced on the wallet side by pushing people towards SPV wallets (see the stickied thread for why it's not a choice between bitcoin-qt and web wallets), but wallets exist in a competitive market and again - centralised solutions always seem easier, even if in practice they create as many new problems as they solve.

[GoldSilverBitcoin]

You've all led me to this:

The Ledger Oligarchy: Bitcoin's NWO

http://www.reddit.com/r/Bitcoin/comments/1mmsm0/the_ledger_oligarchy_bitcoins_nwo/

[🏰 TradeFortress 🏰]

BC.i webwallet users out number all time downloads of the reference software by a significant multiple.  There are so many different ways that the Bitcoin economy and network has more single-point-of-failure risk than it did in the past now— and only a few ways that it appears to have less (more working client software, and viable exchanges are things I'd call out as having improved).

A better comparison would be the bitcoin network transaction volume when Blockchain.info's My Wallet was having downtime issues. Registering a wallet on a site is quite different from downloading software - most people probably have registered multiple blockchain.info wallets, for example for APIs, or maybe lost access, whereas with Bitcoin-Qt you don't need to download again.

[crumbs]

[...wal-o-text...]
we went thru this fear with gpu's and we are now going thru it with asic's.  the outcome will be the same.  self correction.

Take my word for it, cypherdoc, if AMD was making GPUs specifically for mining, you would be:
1.)  Pre-ordering them @ $1500 at least three months in advance.
2.)  Losing money mining them.
3.)  Shilling for AMD instead of HashFast.

Another bought & paid for opinion by cypherdoc^tm

[crumbs]

Self-correcting problem.

Evidence in the altcoins

Zangelbert is right.  centralization is not going to occur.

Centralization is not a prediction, it is a fact!

Every problem in society and economy is self-correcting. Sometimes it takes 5 minutes and sometimes it takes 100 years. Sometimes hardly anyone is noticing it and sometimes it is like a seismic shift. The point here is to avoid seismic shifts.
...

+1 and a half (If mankind nukes itself into extinction?  Well, that's self-correction too )

[niko]

Every problem in society and economy is self-correcting. Sometimes it takes 5 minutes and sometimes it takes 100 years.

By the same token, everything in society and economy is self-destructing. Sometimes it takes 5 minutes and sometimes it takes 100 years. Strangely, you don't consider this fact.

Gmaxwell makes persuasive arguments here. We can either ignore them while getting high on self-correcting-free-market mantra, or we can act proactively by making informed choices. Indeed, the former is easy to do, the latter is quite hard.

[becoin]

Every problem in society and economy is self-correcting. Sometimes it takes 5 minutes and sometimes it takes 100 years.

Gmaxwell makes persuasive arguments here.

I completely agree with gmaxwell here. One year ago when I warned on the forums he moderated that ASIC mining will cause centralization in mining and from there onto Bitcoin he was singing another tune. I'm glad to see now he is coming closer to my understanding.

[grau]

The P2P consensus remains the ruling force for the network even if it is only in effect between nodes serving dependent wallets.

Those using server dependent wallets exchange some risk for some added features. It is their decision, their tradeoff.

It is not a feasible goal for Bitcoin to extinct any operational and credit risk, not only because it is hard to do but because people are willing to take risk for the right price.

[BitVegas]

I just had an idea.

Although I do not know too much about mining, would it be possible for a pool to allow the person who successfully mined the block be able to choose the transactions that go in to it (excluding the new coinbase transaction somehow)? Instead of the pool owner? This way pool owners won't have so much control over the network.

Not sure if it's possible or not. The only hard part I can think of is a trustless way for the pool-owner to provide the receiving address for the new coinbase transaction while the block miner supplies all the other transactions. Give the block miner the end say and he can steal the new 25 BTC and give the pool owner the end say and there's no advantage to even doing this system at all.

[grau]

Not sure if it's possible or not.

It is not possible. The content of the block is sealed with the solution miner are searching for. That is the whole point of the exercise.
You can not find solution then change content.

[kjj]

Actually, it is possible.  There are pools that operate that way, including p2pool.

[cryptocoinmkt.com]

Bitcoin was a nice experiment of a decentralized currency,
but now it is becoming more and more like the traditional banking system,
less decentralized and more in the control of a few entities.

We see already that the blockchain is to huge for most users so they won't bother with using the bitcoin-client.
Instead most people will use bitcoin wallets in the cloud, and the real bitcoin clients will be run mostly by corporations, not by consumers.
The same goes with mining, it is not profitable anymore for you to mine coins at home, it must be done with ASIC and in a large scale to be profitable over time.

So the bitcoin infrastructure will become like fiat:
-The currency is issued by the banks ( bitcoins mined by a few mining corporations)
-The SWIFT backbone is run by the banks (bitcoin clients and mining run by a few corporations)

The only advantage of bitcoin is that everyone has the RIGHT to mine the currency or run the backbone (bitcoin client), but most users wont care about those rights.

In terms of a more "equalitarian" crypto-currency it turns out that LiteCoin is better than Bitcoin.  I realized right away when I learned that you have to have specialized expensive  ASIC hardware for SHA-256 mining.  This keeps the "Rich get Richer" scheme going.

At least the hardware (AMD, NVidia GPU) is within reach of most people that want to mine Litecoin.

[gmaxwell]

Indeed, it's trivially possible. You don't change them after the fact, you change them before you mine. P2Pool enables this, and any pool that supports GBT (e.g. Eligius) could in theory support this. (I believe eligius actually does, but I don't think any miner software exists that lets you make use of it).

Selecting transactions is really not at all sufficient, as it would still let someone controlling a pool reverse transactions.  What you really want to do is separate "pooling for payment" from "control of the Bitcoin consensus".  This is trivially accomplished, from a technical perspective:  Do a GBT request to a pool to get a coinbase transaction that they'll accept, then query a local bitcoin daemon for your idea of the network consensus... merge the two and submit shares to the pool.  The pool then pays you if your shares are paying a suitable (e.g. winnings go to the pool) coinbase. ... but this requires non-existing miner software and, of course, pools which support pooling only for the payment.

You would think that these supposedly civic minded pool operators would have getting themselves out of the creators-of-systemic-risk business as a high priority, but apparently not, since the market apparently doesn't demand it.  (Eligius has done the most in this regard for centralized pools ... and it's 2.5% of the hashrate.  P2Pool is a decentralized system and it's about 1% of the hashrate).

At least the hardware (AMD, NVidia GPU) is within reach of most people that want to mine Litecoin.

Litecoin was originally marketed as GPU proof, as you can see— that didn't pan out so well. Many people believe that people were secretly GPU mining it all along while others druged along with CPUs.  Likewise, there may be people with FPGA or ASIC miners on LTC today. There is nothing fundamental that ltc is doing which makes it hard to get a large advantage... maybe not quite as much of an advantage, but a 10x advantage in a thin margin business might as well be infinite.

[grau]

Actually, it is possible.  There are pools that operate that way, including p2pool.

Please teach me how do they measure contribution to pool if they do not work on the same task ?

[ronimacarroni]

Guys this is not a surprise at all.
Here's a prediction.
After a while only corporations are going to be able to afford mining.
And after a while a scrypt asic will come out and will evolve the same way bitcoins did.
And the as they become more centralized they will gain more value.
*shocker*
Like I said, the only way to make a truly decentralized coin is to make one that requires human input in the mining process.

[grau]

... merge the two and submit shares to the pool.  

what is a share here? Arbitary data with hash less then target?
How does the pool check if the share is for valid block ?

[gollum]

My prediction:
Bitcoin becomes almost as centralized and regulated as the rest of the financial sector.
It will actually benefit the average-joe user since the security will be better, and the value of bitcoin will be higher thanks to high hashrate and more regulation and acceptance by governments and banks.

The original bitcoin fans will give up bitcoin since it is no longer the utopian internet currency they started with.

We will give up bitcoin and start to develop & use an alt-coin that has these attributes:
-Harder to centralize (algorithms that discourage usage of ASIC)
-More anonymous (built-in mixing service)
-Smarter inflation model that encourages commerce and discourages hoarding
-Solution to the exponentially growing blockchain-monster