BIP 16 / 17 in layman's terms

[cunicula]

So the only way bitcoin can change is if 60% of the solved blocks in a set amount of time support something? Is that correct? If so I think that is very good. I think it should be extremely hard to change/attack bitcoin.

^ This. If this whole thing has proven one thing is that Bitcoin is a pain in the assembly to change in any way, and that's good. Stability is good.

Simple-minded thinking from the likes of Rassah. What a surprise.

In the world of electronic devices, stability can be an ominous sign. Companies that don't adapt well-liked products to changing conditions get steamrolled. Think Nokia and Blackberry. In financial services, stability has a better reputation. Bitcoin is at the intersection of the two.

Regardless of what you think about stability, it is clear that miners have way too much power for bitcoin to be governed well. In most respects, the opinion of miners is neither here nor there as far as bitcoin's future goes. They are not the same people as long-term bitcoin holders and bitcoin business operators. The latter groups have a clear long-term interest. The miners do not. But miners are afforded all this authority. It is like asking the electorate of Bolivia to choose the US president. One wouldn't expect the Bolivian electorate to be highly motivated to participate in the election, or if they do participate, to try and make an informed choice.

Finally, given that miners make decisions, it is best for them to be made by miners with substantial market power like Tycho. At least these guys will care somewhat about outcomes. Moreover, if some emergency happens it will be much easier to mobilize a small group of oligopolists to respond. Small miners won't care enough to even think about the issue, let alone download an update.

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[Rassah]

So the only way bitcoin can change is if 60% of the solved blocks in a set amount of time support something? Is that correct? If so I think that is very good. I think it should be extremely hard to change/attack bitcoin.

^ This. If this whole thing has proven one thing it's that Bitcoin is a pain in the ass to change in any way, and that's good. Stability is good.

Simple-minded thinking from the likes of Rassah. What a surprise.

*cough* um... 

In the world of electronic devices, stability can be an ominous sign. Companies that don't adapt well-liked products to changing conditions get steamrolled. Think Nokia and Blackberry. In financial services, stability has a better reputation. Bitcoin is at the intersection of the two.

Stability for new features = bad. Stability for underlying protocol = good. How much has SMTP, FTP, and even HTTP changed in the last 20 years? Sure the last one got a lot of new features, but overall, not much. We don't want actual money changing around too much, since stability = predictability.

Regardless of what you think about stability, it is clear that miners have way too much power for bitcoin to be governed well. In most respects, the opinion of miners is neither here nor there as far as bitcoin's future goes. They are not the same people as long-term bitcoin holders and bitcoin business operators. The latter groups have a clear long-term interest. The miners do not. But miners are afforded all this authority. It is like asking the electorate of Bolivia to choose the US president. One wouldn't expect the Bolivian electorate to be highly motivated to participate in the election, or if they do participate, to try and make an informed choice.

Actually a closer analogy is like having the US president veto ALL new laws passed by an almost evenly divided congress. Nothing will pass, and no new changes will be made unless people REALLY REALLY REALLY want it. In this case, miners really don't care about change. They have their equipment set up in a certain way, and changes only mean extra work.

Finally, given that miners make decisions, it is best for them to be made by miners with substantial market power like Tycho. At least these guys will care somewhat about outcomes.

Why? a 3% mining fee is a 3% mining fee regardless of the protocol changes. Why would Tycho or any other miners care?

Moreover, if some emergency happens it will be much easier to mobilize a small group of oligopolists to respond. Small miners won't care enough to even think about the issue, let alone download an update.

Hmm... that's true...

[cunicula]

If miners continue to give up their responsibility, yes I agree.

You are missing the point. Miners' self-interest is not intrinsically linked to bitcoin's long-term prospects. They are asked to make a decision affecting bitcoin's long-term prospects. They don't care. Surprised? You ask them to behave responsibly and they will.... wait for it... NOT FUCKING CARE!

Good luck exhorting them to take up their responsibility. While you're at it please exhort the speculators not to short sell. Also, consider the malware programmers. They could use some serious exhortation as well. Clearly the problem is that everyone needs to hear more wholesome exhortations about responsibility. Should put up some fucking loudspeakers outside to broadcast them like in communist countries. If you are really an exceptionally dirty bastard, encourage people to attend church to get it in the ear from those child rapists.

Disclaimer: I may seem to be reacting strongly. For an economist, "Claim that outcomes would be different if everyone just behaved more responsibly" = "noises associated with child-rape". Profoundly distasteful. Difficult to distinguish the two behaviors.

[Costia]

I think there can be a major problem if Deepbit agrees to work with another pool or gets 51%
It will be possible for them to set the transaction fees to 1-5BTC/kb and reject any block that was not created by them.
I think this is a lot worse than the 51% double spending problem Satoshi described
And the miners might not leave - they will be making extra money from those fees.
This is sort of the reason monopolies are illegal in most countries. when a large group agrees on a price - that group can get almost twice the profit - at the expense of the users.
Even if tycho won't do something like this, somebody needs to hack just ~2 servers to achieve this goal.
Bitcoin will become regulated...

Edit:
just to be clear. i dont think the pool managers are the problem. the miners are.

[istar]

Why? a 3% mining fee is a 3% mining fee regardless of the protocol changes. Why would Tycho or any other miners care?

Moreover, if some emergency happens it will be much easier to mobilize a small group of oligopolists to respond. Small miners won't care enough to even think about the issue, let alone download an update.

Hmm... that's true...

Because 3% of $5 is less than 3% of $20.

[cunicula]

just to be clear. i dont think the pool managers are the problem. the miners are.

Ridiculous. Idiotic. Insert additional expletives. This is like blaming the other people on the road when there is a traffic jam. Or like blaming other orange growers for selling oranges for too low a price during a good harvest year. Learn some fucking economics or STFU.

There is free entry and exit into mining. There is relatively low cost entry and exit into pool management. The decision-making patterns of miners and pool managers are determined by the protocol. It is nonsensical to blame miners, pool managers, etc.

The protocol is the only primitive of the system. Nothing else has a causal role. If there is any problem, it is a problem with how voting operates in the protocol.

[Costia]

just to be clear. i dont think the pool managers are the problem. the miners are.

Ridiculous. Idiotic. Insert additional expletives. This is like blaming the other people on the road when there is a traffic jam. Or like blaming other orange growers for selling oranges for too low a price during a good harvest year. Learn some fucking economics or STFU.

There is free entry and exit into mining. There is relatively low cost entry and exit into pool management. The decision-making patterns of miners and pool managers are determined by the protocol. It is nonsensical to blame miners, pool managers, etc.

The protocol is the only primitive of the system. Nothing else has a causal role. If there is any problem, it is a problem with how voting operates in the protocol.

I dont see how your response has anything to do with my post. read before you post.
if somebody is standing in the middle of the road and creating a traffic jam - it is their fault, but i dont understand the analogy.
so who do you want to blame for Bitcoin centralization? the economics? the bitcoin protocol?
Or do you thing that centralization of bitcoin is not a problem?

[cunicula]

I dont see how your response has anything to do with my post. read before you post.
if somebody is standing in the middle of the road and creating a traffic jam - it is their fault, but i dont understand the analogy.
so who do you want to blame for Bitcoin centralization? the economics? the bitcoin protocol?
Or do you thing that centralization of bitcoin is not a problem?

Wow. You just don't know anything about economics. It's okay. Just flush the shit out of your brain and I'll drop some knowledge in it instead.

Whatever the outcome is. Only the protocol is to blame.

If someone sits in the road blocking traffic, it is because there is no system in place to sanction people who sit in the road blocking traffic.

The protocol is the system.

The miners are just regular guys. You could purge all the miners and bring in new people. The new people would adopt the same pattern of behavior because they would face the same incentives. The incentives are structured by the protocol.

[Costia]

I dont see how your response has anything to do with my post. read before you post.
if somebody is standing in the middle of the road and creating a traffic jam - it is their fault, but i dont understand the analogy.
so who do you want to blame for Bitcoin centralization? the economics? the bitcoin protocol?
Or do you thing that centralization of bitcoin is not a problem?

Wow. You just don't know anything about economics. It's okay. Just flush the shit out of your brain and I'll drop some knowledge in it instead.

Whatever the outcome is. Only the protocol is to blame.

If someone sits in the road blocking traffic, it is because there is no system in place to sanction people who sit in the road blocking traffic.

The protocol is the system.

The miners are just regular guys. You could purge all the miners and bring in new people. The new people would adopt the same pattern of behavior because they would face the same incentives. The incentives are structured by the protocol.

are you serious?
To blame the protocol is like blaming a gun for murder.
The protocol is a tool.the miners and traders are the ones making the decisions and steering Bitcoin to what it is today and will be in the future.
this has nothing to do with economics. People should be responsible for the conequences of their actions and not blame the tool they used to do that.

edit:
not only that, the miners have control over the protocol. if the miners decide not to support a part of it (like what is happening now) it wont be in the protocol.

[cunicula]

are you serious?
To blame the protocol is like blaming a gun for murder.
The protocol is a tool.the miners and traders are the ones making the decisions and steering Bitcoin to what it is today and will be in the future.
this has nothing to do with economics. People should be responsible for the conequences of their actions and not blame the tool they used to do that.

Aside: It is so much more difficult to educate people when you can't threaten to fail them for failing to conform to your world vision.

[Costia]

Aside: It is so much more difficult to educate people when you can't threaten to fail them for failing to conform to your world vision.

so educate =  conform to your world vision ?
"anyone who is n't agreeing with me is stupid and wrong"
nice

[cunicula]

Aside: It is so much more difficult to educate people when you can't threaten to fail them for failing to conform to your world vision.

so educate =  conform to your world vision ?
"anyone who is n't agreeing with me is stupid and wrong"
nice

So true. (As suggested by picture and motto.)

[Costia]

Aside: It is so much more difficult to educate people when you can't threaten to fail them for failing to conform to your world vision.

so educate =  conform to your world vision ?
"anyone who is n't agreeing with me is stupid and wrong"
nice

So true.

i dont know if to laugh or cry

[cunicula]

edit:
not only that, the miners have control over the protocol. if the miners decide not to support a part of it (like what is happening now) it wont be in the protocol.

Yes, but now we come to an interesting issue in theories of innovation.

Changing the protocol is difficult (synonym costly). Therefore, the initial choice of protocol can have a long term impact on the evolution of the system. Start from a bad protocol and you can end up stuck with a bad technology for a prolonged period.

This is not true with miners or pool operators. Bad miners and bad pool operators face competition via low-cost entry and exit.

Entry and exit for a protocol is possible, but it is a big, time-consuming, and costly endeavor. Changes to the protocol are the control instrument here.

Most Importantly, the fact that miners control the protocol is a central feature of the protocol [central flaw would be more apt].
This can and should be changed.

[Costia]

That's the whole point of monopoly - no competition. any new comer can join the monopoly. if he wants a short term profit he won't join, but in the long term it will be beneficial for him to join - less risk, almost guaranteed profit. thats why new miners join deepbit by default

How can you take the power away from miners in a protocol that relies on computing power for its security? To make such a change you will have to reinvent the core principles of bitcoin.

edit: i do agree the the power miners have over bitcoin it too big, but i dont see a way to "fix" this

[Technomage]

I think this topic has derailed a bit thanks to cunicula, his arrogant and in my opinion ignorant approach isn't helping much. Comparing traffic jams with Bitcoin mining is a very bad analogy, traffic jams are clearly a symptom of a badly designed traffic system, with Bitcoin mining it's different. It costs people very little in either money or convenience to fix the problem of excess centralization. With car traffic the situation is very different.

I find it funny that cunicula is claiming here that people don't understand economics when I think he's been learning from a clueless mentor. It has been proven over and over again that people are not "rational" when it comes to their decision making, it's more complex than that. Feelings and more important than that, values, matter a lot when people make economic decisions. These factors can be affected by raising awareness, or educating people.

However with mining we can assume that a good number of miners are mining only because of the profit, they do not really have an ideological feeling about Bitcoin or something like that. Even those people should care about this if they are economically rational, their business is at stake here. Not only is centralization bad for the security of the network, now it has been proven that the whole development of Bitcoin is at stake here and that could significantly affect the competitiveness of the whole technology. All this affects price which affects miners.

I believe that this issue is one of the factors that have caused a recent price dip. In fact it will have a significant effect for the whole future of Bitcoin depending on how the whole issue is solved and how it affects future decision making. My personal opinion is that everything went wrong the minute this whole thing went public like this. The developers should be able to make a decision on this and then present it to the public as the solution, which undoubtedly people will accept. I know that they were unable to do this but bringing it to the laymen so to speak is most likely only going to bring the ball back to the developers.

The good thing about this is that the devs have had some feedback from technical people who are not part of the core dev team, so that's probably helpful. Clueless non-coders speculating on the whole thing is not helping at all, it's clearly just adding doubt to the whole development of Bitcoin. I'm not calling names again but I think some devs need to start compromising amongst themselves if they really know what's best for Bitcoin.

[Technomage]

Some people were concerned about the growing size of Deepbit, and began working on new types of pools. A few ideas were tossed around and finally forrestv created P2Pool. It was experimental for quite some time, and only recently has been a stable offering. It gives the advantages of pool mining, without the disadvantages. The protocol has changed. Time will tell if this has an effect on the hash pie. People still love regular payouts and stability, but they also will realize that they can have larger payouts and stability and keep their vote to boot.

TL;DR: There is no "the protocol", it's a constantly evolving thing, and the patterns will change because the incentives have changed. The hash pie we see today is a result of the benefits of the traditional pool. Well, now we have a new kind of pool that can compete directly with the traditional pool and offers additional benefits (returns previous benefits rather). Time will tell if it can gain enough momentum to overtake the comfort and regularity people have found in the traditional pools.

+1

It's absolutely erroneous to think that it's not an incentive for miners to improve the way we mine. It's not only about direct profit, if people want to see mining and the network itself as a healthy business environment in the long term, it must be developed and it can be developed by anyone. This has been proven first with people starting pools of their own that have succeeded as smaller pools. Now mining has evolved again with p2pool. I'm confident that p2pool in the way it is now is not the end game either, we will go forward.

[cunicula]

I think this topic has derailed a bit thanks to cunicula, his arrogant and in my opinion very ignorant approach isn't helping much. Comparing traffic jams with Bitcoin mining is a very bad analogy, traffic jams are clearly a symptom of a badly designed traffic system, with Bitcoin mining it's different. It costs people very little in either money or convenience to fix the problem of excess centralization. With car traffic the situation is very different.

I find it very funny that cunicula is claiming here that people don't understand economics when I think he's been learning from a clueless mentor. It has been proven over and over again that people are not "rational" when it comes to their decision making, it's more complex than that. Feelings and more important than that, values, matter a lot when people make economic decisions. These factors can be affected by raising awareness, or educating people.

However with mining we can assume that a good number of miners are mining only because of the profit, they do not really have an ideological feeling about Bitcoin or something like that. Even those people should care about this if they are economically rational, their business is at stake here. Not only is centralization bad for the security of the network, now it has been proven that the whole development of Bitcoin is at stake here and that could significantly affect the competitiveness of the whole technology. All this affects price which affects miners.

I believe that this issue is one of the factors that have caused a recent price dip. In fact it will have a significant effect for the whole future of Bitcoin depending on how the whole issue is solved and how it affects future decision making. My personal opinion is that everything went wrong the minute this whole thing went public like this. The developers should be able to make a decision on this and then present it to the public as the solution, which undoubtedly people will accept. I know that they were unable to do this but bringing it to the laymen so to speak is most likely only going to bring the ball back to the developers.

The good thing about this is that the devs have had some feedback from technical people who are not part of the core dev team, so that's probably helpful. Clueless non-coders speculating on the whole thing is not helping at all, it's clearly just adding doubt to the whole development of Bitcoin. I'm not calling names again but I think some devs need to start compromising amongst themselves if they really know what's best for Bitcoin.

Your computer science training has equipped you to analyze decision-making behavior. Certainly wouldn't want any input from a fucking expert who specializes in studying rational decision-making. Those idiots with their mathematical models of rational decision-making and statistical skills don't really count as technical people. Business never try and make rational decisions anyway so what is the point. Incentives don't matter. It's open-source, duh?

What a fucking idiot you are.

[Technomage]

Your computer science training has equipped you to analyze decision-making behavior. Certainly wouldn't want any input from a fucking expert who specializes in studying rational decision-making. Those idiots with their mathematical models of rational decision-making and statistical skills don't really count as technical people. Business never try and make rational decisions anyway so what is the point. Incentives don't matter. It's open-source, duh?

I don't value people like you very much, you're lacking something I tend to value a lot which is communication skills. As far as the issue is concerned, you're again clueless. Incentives are everything but the problem is that if you only take into account monetary incentives, you're basically stepping off a cliff. This might apply to a large corporation that bases everything on numbers, but for a regular consumer the incentives can be very complex. In fact they are too complex to be able to model accurately with any current science or technology. You can get accurate results in very specific scenarios where a limited set of incentives have a major role, but that's it.

Bitcoin mining is something that can be called very complex, there is no average miner mindset. You have miners who use Bitcoin for more than mining, miners who don't. People who have ideological feelings for Bitcoin, people who don't. Small miners, medium sized operations and mining businesses. People who hoard their bitcoins and people who sell them all. And everything in between.

All of these people should care about these issues because it affects the long term profitability of Bitcoin mining. Not all of them care because many are only concerned about the direct profits, but through raising awareness and educating people it's clear that people change their behaviour. The pool pie has already changed quite a bit because of the concerns over 51% attacks but it's still too centralized, this recent issue highlights that.

One of the biggest issues in the world today is short term thinking. Companies care about their quarterly profits while the thinking of miners seems to be even more short-sighted. If they thought about the bigger picture a little more they would understand many things, first and foremost that variance in mining goes way down over time, you don't need to mine in a 1000gh/s+ pool to get very low variance. Second, they would understand that what happens in the Bitcoin world affects price which affects their mining profits so they should care a little more about what's happening.

I've actually studied incentives quite a bit but not from an economics standpoint. To read more on how incentives really work, based on real science, I can recommend this book. For everyone. http://www.amazon.com/Drive-Surprising-Truth-About-Motivates/dp/1594484805/ref=sr_1_1?ie=UTF8&qid=1327661332&sr=8-1

That book is not exactly about consumer or business incentive, more like employee incentive. But it proves nonetheless how flawed the thinking regarding incentives really is, especially in economics and business.

[hoo]

In layman's terms:

They want to happily charge you more fees.