[Cryptography] Bitcoin is one of Cypherpunkdom's Greatest Achievements

[Matt Corallo]

Ray -

Its hard not to agree with you with a cursory glance at today's reality, but the fate of Bitcoin has not been sealed. 
Quite the opposite - it is still early, and by treating Bitcoin not as something which should be improved, but as 
something which should be taken out back and shot, you do a disservice to the entire cypherpunk movement.

Do not measure Bitcoin by the inspirational goals people assigned to it on its first release. Like others in your thread 
pointed out, if we measure the internet by the same metric, it, too, has failed. And maybe it has, but we cannot deny 
that it is used, daily, for many to communicate across the world instantly, even if more often than not via centralized 
platforms. Similarly, Bitcoin, today, allows many to transact across the world nearly instantly, even if more often than 
not via centralized platforms.

Like seemingly everything in this world, it is easier and more profitable for someone to build a centralized, 
controlling platform to extract rent and build a nice user interface than to build a decentralized, user-protecting 
product. The Internet only achieves user-protection when many people, from this list and elsewhere, constantly build 
user-protecting systems which fill niches and promote their use. So too, Bitcoin only protects users when many people, 
preferably more from this list, build user-protecting systems on top of it - various privacy-focused wallets have seen 
increased adoption over the past years, lightning was created to allow for lower-value transactions, and also slowly 
sees increasing adoption. But these systems, like Bitcoin itself, are early and strapped for resources. Instead of 
dismissing their existence as useless, we should celebrate them, contribute code to them, and come up with new ideas.

Cypherpunks Write Code.

Matt

On 12/28/20 8:07 PM, Ray Dillinger wrote:
 >
 > Okay, this may be just my depressive side talking, or it may be the
 > stress of the last year just boiling over.  But I'm inclined to think
 > it's not and it isn't.> > It is my opinion that Bitcoin is a failure.  Worse than that, it's a
 > disaster.
 >
 > The pseudonymity of coins being owned by the bearer of some
 > cryptographic key is a failure;  People have been eavesdropping and
 > aggressively analyzing the block chain from day 1.  And the block chain
 > will always be there, it will always be public, and it will always be
 > subject to further analysis.  And we are learning that analysis of that
 > record is sufficient to destroy any pretense of anonymity or
 > pseudonymity.

While its by no means true that privacy on blockchain systems sucks, be weary of believing all that you are told. Those 
doing the analysis exist to promote their analysis and provide regulatory cover for their customers - not to actually do 
thorough analysis. Anti-analysis techniques have always existed (albeit weakly) and continue to be developed and, more 
excitingly, used. More work needs to be done, but there is no question that many users of Bitcoin today use it in ways 
which the powers in their local jurisdiction do not approve of, and do so with limited issue. Is this not itself a 
massive win for the cypherpunk movement?

 > The scarcity of block chain space has led people to re-invent every
 > last feature of the banks they thought they were going to be escaping.
 > Including debt brokering (lightning network)
Minor technical gripe, there is no debt involved in lightning. Quite the opposite - every party provides cryptographic 
proof to their counterparties that they are fully collateralized.

 > and fractional-reserve
 > banking, starting with the case of Mt.Gox and continuing to ventures
 > today by "responsible" businesspeople who just don't get, or don't
 > care, or both, that the entire reason the system existed, as far as the
 > early adopters were concerned, was to get away from exactly that.  They
 > have made Bitcoin into a debt-based system like any other; as long as
 > the "exchange" holds your keys for you, there is no obligation for them
 > to maintain assets equal to the deposits.  You can't prove that they
 > are, or aren't, maintaining sufficient assets until after those assets
 > are spent and the evidence appears in the block chain.

Indeed, a lot of users of Bitcoin do not care about the goals you or I have for Bitcoin - they prefer to have a bank 
manage their Bitcoin. I'm dubious of your claimed causality, however. In my experience, the vast majority of such users 
could not care less about blockchain fees because they could not care less about transacting with Bitcoin in the first 
place. The concept of backing up a private key to ensure they do not lose funds is foreign, not to mention difficult 
even for those of us who understand it. Why should the existence of such users imply Bitcoin has somehow failed? While 
security lapses and accidental fractional reserve is an issue that occurs, purposeful fractional reserve is rare. It may 
be the case that it exists, but if the goal was to kill fractional-reserve banking through Bitcoin, then Bitcoin should 
be lauded as something which enables many to achieve that goal on a daily basis, and as a system which has an economy 
around it that largely avoids it in any case.

 > And it's useless for small transactions.  Had it been deployed to a
 > market the size of, say, a college campus it could bear the load and
 > the bidding for block space wouldn't exceed the value of most
 > transactions.  But had it been deployed to a market the size of a
 > college campus, the small pool of miners available would make mining
 > bursty and unstable, and the block chain therefore not well protected
 > from tampering.  Same could have happened to Bitcoin early on, which is
 > why Satoshi was mining like crazy and jumping on when needed to prop up
 > the block rate and back off again when the blocks were coming too fast.

Maybe. Maybe not. The story is not complete - many people *do* use Bitcoin for small transactions today, and it works. 
Systems like lightning are used broadly in some early-adopter communities for tiny transactions on a daily basis. It 
isn't broadly adopted, sure, but that doesn't mean it cannot be. Indeed, lack of resources and too many people writing 
mailing list tirades instead of code is one of the key reasons why. There are other ideas for better reaching the goals 
as well - chaumian ecash based on Bitcoin is possible even without trusted centralized intermediaries (eg TumbleBit), 
but the resources are not there (yet) to deploy it.

 > And that brings us to mining.  Bitcoin mining has encouraged corruption
 > (Because it's often done using electricity which is effectively stolen
 > from taxpayers with the help of government officials), wasted enormous
 > resources of energy, fostered botnets, centralized mining activity in a
 > country where centralization means it's effectively owned by exactly
 > the kind of government most people thought they *DIDN'T* want looking
 > up their butts and where the people who that government allows to "own"
 > this whole business work together as a cartel.
 >
 > There's a pretense of monitoring the network to guard against a 51%
 > attack, but to me it seems pretty clear that what they're guarding
 > against is merely the mistake of the cartel failing to give the latest
 > warehouse full of miners a distinct network identity.  The whole idea
 > of proof-of-work mining is broken the instant hardware comes out which
 > is specialized for mining and useless for general computation because
 > at that point the need to have compute power for other purposes is
 > absolutely irrelevant in having any effect on mining, and there ceases
 > to be any force that causes mining to be distributed around the world.
 > It becomes a "race to the bottom" to find where people can get the
 > cheapest electricity, and then mining anywhere else - anywhere the
 > government tries to make sure ordinary people actually get the benefit
 > from electricity bought for tax money, for example - becomes first
 > pointless, then a net loss.
 >
 > Mining is f***ng broken, and ASICs make it actively work against a
 > significant number of its design goals.

The story of mining, like so much of Bitcoin, is far from over. Electricity in China tends to be more expensive than in 
some of the western world. While China was able to build and deploy hardware faster than anywhere else and gain a 
significant advantage, the trend ever sense has been the opposite - miners seeking power where it may take longer to 
deploy, but ends up cheaper. Even more complicated, newer companies are seeking out interruptible power sources; 
otherwise-unused electricity in the west can be free and occasionally negative, at scale. More interestingly, the 
cheapest power is often available only on "small" (albeit industrial) scale, providing a long-term disincentive of 
scale, at least given a more stable Bitcoin.

I can't suggest that ASICs aren't a centralizing force, but you mention botnets as an issue - an issue that only exists 
in the absence of ASIC dominance. More generally, it doesn't appear to be the case that it is practical to build a 
system which doesn't trend towards dominance by large-scale farms with proof-of-work. Maybe proof-of-work is doomed, but 
given it has thus far without question managed to provide a system which allows many the world over to transact with 
each other without many of the issues Bitcoin set out to solve, should we be so quick to dismiss it?

 > So, Bitcoin was a good effort, it deployed some new ideas and
 > technology, and showed that at some scale the "block chain" idea
 > worked, but ultimately, although a successful proof of concept, failed
 > to deliver.  It doesn't scale, except by becoming the very thing it was
 > supposed to replace.> > The more scalable the network becomes, the more centralized it becomes,
 > until ultimately a "scalable" cryptocurrency would be doing things
 > exactly the same way as a credit card processor.
As I said in the intro, maybe this is the case. I cannot say I disagree here that the pressure in any system is to go 
the same way. We saw it with the internet, and we see it here, too. But hope is only lost when we give up. The Bitcoin 
community is filled to the brim with people who only care about the speculative gains they see not because they are the 
only people who could ever be attracted to Bitcoin, but because people on this list and others care more about how 
Bitcoin failed to achieve everything they dreamed than the dreams they had that it did achieve. There's still time to 
fix that.

Cypherpunks Write Code.