[Cryptography] Bitcoin is a disaster.

[Deryk Makgill]

‐‐‐‐‐‐‐ Original Message ‐‐‐‐‐‐‐
On Thursday, December 31, 2020 2:17 PM, Ray Dillinger <bear at sonic.net> wrote:

> He did predict centralization into specialized businesses. He did not
> predict that a "centralization" entailed a race to find the single most
> corrupt available country in the world, where electricity could be
> cheap because it was stolen.  
>
> Emphasis on "single country." The disaster is not centralization
> itself; the disaster is that mining is centralized in one country.

Great point. There is a difference between a free market process the
works out a few regions of the world as being the ideal place to conduct
a particular kind of business, and centralisation due to subsidies (theft)
from a totalitarian state (that's putting it lightly). That's an
opportunity for state capture.

> Yes, the plan was to raise the size of the blocks.  And yes, I think it
> should have been done. The 1MB limit was considered temporary. We got
> the current limit just to prevent people from filling space with dumb
> stuff but thought, of course they'll make it bigger when people
> actually need the space for legit transactions. But now they can't
> make it bigger, because that was a classic case of nerds making a
> design mistake by failing to note that we were leaving a decision in
> the hands of people with perverse incentives.

Yes! If you try to play central-planner and predict the exact moment you need to
raise the blocksize, you'll f*ck it up and may lose your opportunity entirely.
And as you said, the troll army that ran disinformation campaigns and attacked
node implementations and companies trying to raise the blocksize with letters
to the SEC, DDoS, delistings and negative review brigades were highly
effective.

>Miners have a financial stake in the blocks
> continuing to be small, because bidding goes higher for a smaller
> amount of block space.

That's an interesting idea. I remember a lot of miners wanting to raise the
blocksize—ViaBTC, BTC.top, Bitcoin.com, AntPool, BTC.com... though talk is
cheap and in the end they certainly didn't get it done.

Regarding their financial incentives, is it not true that economies of scale
in transaction processing might net them more money than tiny blocks?
I've wondered instead whether it was the block reward that stopped them.
Hard to care about making money off millions of little transaction fees
when your primary revenue comes from a block subsidy that doesn't change
regardless of the block size.

Either way, it's clear there were parties that benefited from small blocks
in that they could build payment layers on top of Bitcoin that the peasants
have to use and pay for. They won. Good for governments too who want to regulate,
good for banks and legacy payment processors...

Thanks the thoughts. Your comments are educational as always.




‐‐‐‐‐‐‐ Original Message ‐‐‐‐‐‐‐
On Thursday, December 31, 2020 2:17 PM, Ray Dillinger <bear at sonic.net> wrote:

> On Tue, 2020-12-29 at 16:36 +0000, Deryk Makgill wrote:
>
> > On Monday, December 28, 2020 7:07 PM, Ray Dillinger bear at sonic.net
>
> > > Mining is f***ng broken, and ASICs make it actively work against a
> > > significant number of its design goals.
> >
> > Didn't Satoshi predict that Bitcoin mining would consolidate into
> > server farms? "It would be left more and more to specialists with
> > server farms of specialized hardware."
>
> He did predict centralization into specialized businesses. He did not
> predict that a "centralization" entailed a race to find the single most
> corrupt available country in the world, where electricity could be
> cheap because it was stolen.  
>
> Emphasis on "single country." The disaster is not centralization
> itself; the disaster is that mining is centralized in one country.
> Satoshi was expecting mining to be done by specialized businesses, but
> businesses located all over the planet, probably as a job that
> datacenters ran whenever their servers were otherwise idle, until a new
> customer with a new job came along. Because datacenters are all over
> the world, no single political regime would control the entire block
> chain.
>
> As matters stand, if President Xi tells (or pays) the miners to shut
> down, or cuts the flow of stolen power suddenly, or seizes all of the
> warehouses full of miners, the Bitcoin network will NEVER, EVER, in a
> million years, get a single additional block.
>
> Keep in mind, it's also a very inefficient theft. Even on stolen power
> they're running on small margins. They make their profit, a few people
> get their palms greased to claim they're a "qualifying subsidized
> business" which they don't employ nearly enough people or interact with
> nearly enough of the rest of China's economy to be, and the rest of the
> value goes up in literal smoke at a nearby powerplant.  
>
> If the Chinese government goes on another corruption purge, those guys
> getting their palms greased could be eliminated, and then somebody has
> to ask, with this power plant going full tilt, why are these local
> towns not getting the subsidized electricity it's supposed to provide?
> Why aren't these enterprise zones developing as, given these subsidies,
> they should? Oh look, they're subsidizing business that don't
> qualify." And throws the switch.  
>
> And at that point the miners have to either recruit a new generation of
> corrupt officials, or Bitcoin's network is gone forever.
>
> > You said on BitcoinTalk several years ago that the plan was always to
> > raise the blocksize. Is it still your opinion that it should have
> > been done? Or do you think that even Satoshi's original plans were
> > flawed too?
>
> Yes, the plan was to raise the size of the blocks.  And yes, I think it
> should have been done. The 1MB limit was considered temporary. We got
> the current limit just to prevent people from filling space with dumb
> stuff but thought, of course they'll make it bigger when people
> actually need the space for legit transactions. But now they can't
> make it bigger, because that was a classic case of nerds making a
> design mistake by failing to note that we were leaving a decision in
> the hands of people with perverse incentives.
>
> The reason that issue became the screaming sewer knife fight it became
> is because of toll trolls. Miners have a financial stake in the blocks
> continuing to be small, because bidding goes higher for a smaller
> amount of block space. So they hired a bunch of trolls to sabotage all
> discussion about raising the limit.
>
> All they have to do to kill a raised limit is refuse to mine on larger-
> size blocks. But that would mean abandoning all pretense of not being
> a cartel. The trolls and screaming you've seen are just symptoms of
> their need to keep the user base conflicted and uncertain. That way
> they don't have to alienate the community by being tremendously obvious
> in a highly visible 51% attack when they participate with each other in
> refusing a protocol with bigger blocks.
>
> The current 1MB limit was added to the code at the last minute, because
> Hal was concerned about the size of the block chain (and time/cost of
> downloading it to set up a new node) growing faster than the Internet
> communications bandwidth. Satoshi was confident that it wouldn't grow
> beyond the power of a $mumble-priced hard drive to contain as hard
> drives got bigger/cheaper, but that's a different thing. Hal saw a
> scalability problem w/r/t internet bandwidth because while drive space
> was on an exponential curve, internet bandwidth wasn't. And isn't.
>
> My input to the bandwidth discussion didn't go much beyond "well, of
> course the bandwidth would be a crippling issue at scale, but you don't
> need to worry about this for a small experiment .... wait, are you
> serious?"
>
> Bear