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Author Topic: 3 Types of Consensus in Bitcoin  (Read 150 times)
butka
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August 29, 2018, 02:34:30 PM
Merited by dbshck (2), ETFbitcoin (2), Welsh (2), Heisenberg_Hunter (1)
 #1

Our education system (or at least in the country where I'm from) is such that students learn very little about the principles and foundation of money. For example, nobody is teaching about the history of money, how it is created, how it works, why it works etc.

Maybe the principles of money are known to economics students, but it is easy to check that the general population knows very little about the concept of money. Given how important money is in everyone's life, this lack of knowledge is really symptomatic. So much so that one has to ask oneself if this is done deliberately to keep the masses ignorant of one of the most important aspects in their lives.

In the following, I want to share a couple of interesting points about how crypto compares to fiat money and where is the important difference. It is about 3 types of consensus inherent to Bitcoin that I learned from the book:

Bitcoin and Cryptocurrency Technologies, Chapter 7. Community, Politics, and Regulation

As the authors state, there are basically

3 types of consensus that any cryptocurrency functioning as money has to have:

  • consensus about rules
  • consensus about history
  • consensus about value

1. The consensus about rules is basically a set of rules the majority agrees to follow.

Fiat money doesn't have this kind of consensus, because the government declares the rules by fiat. It may even change the rules along the way as it sees fit. Great example is the current hyperinflation disaster in Venezuela.

Cryptocurrencies do have this kind of consensus. In Bitcoin, we have a consensus about what makes a transaction valid, what makes a block valid, how new bitcoins are minted, what the total supply is, etc.

2. The consensus about history is actually about record keeping.

Like in the previous point, fiat money doesn't need this kind of consensus. It is enough to physically own money, or the banks can take care of your money and keep a record for you, so there is no need for this consensus.

Cryptocurrencies do need this kind of consensus. In Bitcoin, there has to be a consensus about the history of all valid transactions as well as about the current state of the public record.

3. The consensus about value is a mutual agreement about the value of money.

This consensus is the only consensus both fiat and crypto require in order to function properly. It is about people agreeing that the value of the money they are using will be there in the future.

This consensus equally applies to dollars, euros, and bitcoin. You have to believe that the money you hold will retain its value tomorrow. If many people believe in the same outcome, there is a consensus about value.

Interdependence of the 3 Types of Consensus

Bitcoin (and other cryptocurrencies) have to have all three types of consensus to work as they are supposed to. Moreover, these 3 types support one another. If everyone agrees about valid blocks and transactions, everyone agrees about the state of the public record. As a result, everyone agrees that the currency is not double spent and everyone agrees that the currency will be valuable in the future.

And the other way around: If everyone agrees that the currency will have value in the future, everyone will make sure the consensus rules are followed and the miners have incentive to obey the rules. Then, automatically there is a consensus about the state of the public record.

The ingenuity of Satoshi Nakamoto can be seen, among other things, in connecting these 3 consensus mechanisms and making them work so well in practice to support each other.
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ETFbitcoin
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August 29, 2018, 05:42:04 PM
 #2

Great article as usual Smiley

Since we're talking about consensus, we should know that consensus only can happen if more than 50% is being honest. Additionally, in Bitcoin we have consensus about Bitcoin improvement which Fiat Money don't have, unless on under huge public pressure.

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August 29, 2018, 06:23:22 PM
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Interesting this article because it well defines some characteristics about the consensus of crypto coins. There is now general agreement on the issue of the current aggressive currency volatility that causes investors many misgivings. Well, that's what I think.  Wink
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August 29, 2018, 06:40:37 PM
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The most important consensus is the consensus of a decentralized network, without which Bitcoin himself can not be seen. Roll Eyes
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August 29, 2018, 06:55:14 PM
Last edit: August 29, 2018, 07:09:01 PM by franky1
 #5

agree that consensus is a beutiful feature of bitcoin 2009-2013.
but since then consensus has been eroded.

now we have core and everyone has to treat core as the rule setter.. they have declared themselves as the "reference" client. the CORE of the network.

any network changes end up needing a moderated ACK from specific devs of the CORE team.
also as august 2017 proved. although segwit only had 35%. the devs decided not to just wait out and let consensus play. they went on a side mission to do a MANDATORY upgrade. thus consensus of rule changes died. with a so-op(social operation) of throwing opposers of the core roadmap off the network using things like
DCG.co's instigated NYA agrement of SW2x which was designed to fool people into accepting sgwit to then drop 2x
DCG.co's instigated USAF of threatening banning nodes and rjecting block unless segwit is accepted
DCG.co's instigated offer opposers an altcoin, just so they cant oppose cores roadmap
 
and all that is left is the consensus of following core and ensuring the data meets CORES roadmapped ruleset

yep i know i will get the core defenders attacking my post. but thats just the usual crap i expect when being honest that the 2009-2013 vision of bitcoin has changed

I DO NOT TRADE OR ACT AS ESCROW ON THIS FORUM EVER.
Please do your own research & respect what is written here as both opinion & information gleaned from experience. many people replying with insults but no on-topic content substance, automatically are 'facepalmed' and yawned at
butka
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August 30, 2018, 05:30:23 PM
 #6

Great article as usual Smiley
Thanks a lot, but all credits go to the authors of the quoted book for explaining this consensus thing so clearly.

Additionally, in Bitcoin we have consensus about Bitcoin improvement which Fiat Money don't have, unless on under huge public pressure.
Well said, this is another important difference.

agree that consensus is a beutiful feature of bitcoin 2009-2013.
but since then consensus has been eroded.
Thanks for pointing this out. I hear a lot about what happened with core and segwit, but I'm sorry to say that I wasn't a part of the bitcoin community back then. I still have to learn about these network changes in greater details to be able to say anything. In the meantime, all I can do is to stay open minded and try to hear both sides.
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August 31, 2018, 08:20:26 PM
 #7

This really is an interesting aspect. This shows that the coin has a smooth operation and at the same time proves that there are honest people associated with BTC, the majority of them per say. And at the same time, makes us believe that BTC is reliable.
TheBitcoinBadger10
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August 31, 2018, 08:56:31 PM
 #8

This seems really interesting and appealing fact. It gives us the fact that bitcoin has retained consensus for the smooth running of this coin. This is only possible when most of the people related with bitcoin are honest. This also proves that bitcoin is reliable.
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