And those who do are all at odds with eachother because Bitcoin can't do everything at once.
Bitcoin obviously has value right now as demonstrated by the fact that people can go out and exchange coins for things people regard as valuable, but current value is not a perfect indicator of future value and I'd argue that the current value is at least somewhat predicated on the belief that Bitcoin will eventually become a useful replacement for today's highly-liquid real-time transactional currencies.
I am probably naive, but can't a solution be found by simply increasing the block chain size and then creating software that makes the verification of transactions more distributed by making the process more fine grained in terms of CPU and memory resources? In other words, split current "nodes" into a more fine grained distributed virtual node that low end computers can run?
The verification of transactions in bitcoin is central to its protocol. Its the whole reason its novel and relevant. You would have to change the proof of work system from sha256 hashing to something else to make it anything but optimal for computation on specialized ASIC hardware. If you do that, now you have another cryptocurrency - litecoin, peercoin, etc.
And when you use a hashing algorithm meant to be hard for general computers (cpu or gpu) to do, and can manufacture hardware that does them much more efficiently, you end up where we are now where big miners and a handful of people represent most of bitcoins mining power.
Conundrum? Regardless, it's unsolvable, and I do empathize with the people who complain or offer their own (non)solutions.
> If they were just GPU cluster datacenters, despite their scale, they still would not compete with the distributed power of millions of home users desktops to as much a ludicrous degree as modern ASIC miners are in the Bitcoin space.
Do you suggest efficiencies of scale don't apply to GPU clusters in datacenters, or CPU clusters in datacenters?
As it pertains to mining centralization, do you suggest efficiences of scale only apply to sha256 ASICs?
The idea that this can be "solved" with clever code is utterly naive. The bottom line is investors in any cryptocurrency, regardless of its hashing algo, will buy up the majority of the hashing rate with high efficiency rigs in well-connected datacenters with low priced electricity. Tell me how to fix that with code. You can't do it - although I've certainly seen more than my fair share of altcoin investors try in vain to do just that.
The only time this is economically viable is when you both have a large enough economy and when your marginal hashrate gains over the swarm are significant enough to invest in.
My point is that if your algorithm is CPU / GPU favored, of course you can make specialized hardware, but as long as the performance gap isn't the multiple orders of magnitude modern bitcoin ASICs get over generic computers it takes significantly more money - and here is the key point - in relation to the value of the economy you are taking over to do so. Where it could cost 100 million to build a bitcoin miner datacenter that can immediately seize 30% of the hashing power on the network, your 100 million datacenter on an scrypt network can probably only seize 10-15% because there is much higher normalized mining participation by end users. It means it would cost you a lot more to get a 51% hashing oligopoly, and for the people making business decisions on if they want to spend a billion dollars doing so they will look at the market cap of the economy they are trying to usurp and realize its not a profitable venture.
My point is that there is also a degree of benefit in how consumer practical the mining algorithms are and thus how much less of a dramatic leap in performance custom ASICs would be. If you have algorithms that do not see the leagues of performance difference between custom hardware and general computers, your required investment for the same effective control are much higher, potentially to the point of fiscal unviability, but even if not that your margins would be slimmer and your opportunity cost would dissuade you more from doing it.
The mining superclusters of bitcoin only emerge because of how much potential revenue there is from doing so - fab a few thousand custom ASICs and you suddenly control a huge chunk of total mining power, because nobodies personal computers can even come close to competing. If you want working distributed mining everyone needs to already have viable mining hardware from the start, ie, the computer on their desk.
The limits on transaction size have been known since the beginning of Bitcoin. VISA level transaction rates require insanely high block sizes, much larger than those proposed so far. People have come up with many, many different solutions to this problem.
One thrown around a lot is the lightning network [1], but it's not really a "reserve currency" in this case - it's a way to prevent a bunch of intermediate transactions from entering the blockchain forever, but it's based around advanced Bitcoin scripting usage, so it's using Bitcoin for much more than just a backing value.
Keep in mind that Bitcoin currently has a $6 billion USD market cap. Breaking Bitcoin would reduce that to $0. Many people have strong motivations to be conservative with changes...
That blogpost is basically describing lightning. Lightning Network has explicitly described instant cross-chain swaps privately, and publicly for many months.
No. There are many other ways to scale bitcoin.
>Lightning Network is..based around advanced Bitcoin scripting usage
Rather quite the opposite. Lightning Network does not uses the bitcoin scripting.
Russian carders who make their living off of selling credit card numbers probably agree with you that the system is great.
In contrast, Bitcoin is permissionless. Just install the software and receive payments just like anyone else. That's what something born in the Internet age looks like.
Are you the owner of Ezfile/Filecloud by any chance? If you are, I'm actually quite curious to discuss payment processors with you. Last I checked, you're using Amazon gift cards and Bitcoin. Have you had any luck getting access to credit card processors? Also, what fee per transaction would you consider to acceptable from a CC processor for your category of website (with the ability to let users pay by subscription)?
Honestly, the proper competition vs Visa is ACH-based transactions like Dwolla.
There's also chargeback and consumer protection services, which currently there is little market for. You just rely on Visa. With Bitcoin, there is opportunity for a market of escrow and resolution services.
Right now, Visa works better, full stop. As Bitcoin improves, however, that could certainly change.
Some people, including Hearn (who is more vitriolic than the average) believe that #1 is false and #2 is a necessary risk.
If you are coming at this from reading Hearn's words, you are coming at this from an extreme perspective that would be balanced by reading Gregory Maxwell's words. I recommend http://www.truthcoin.info/blog/blocksize-conversation/ for a critical, outside and rational perspective.
Most of the people I know who have issues with XT have issues that go far beyond forking.
For example, some of the code included in XT includes blacklisting code. It also would break anonymity. I don't know if the camps is quite divided along the lines put forth in this article, but it's certainly true that XT wants to become/replace Visa.
Many people have been frustrated at the XT team, because whenever these concerns are aired they are ignored. Then, arguments like Hearn's are put forward, which imply that the only thing XT does is increase scalability, and opponents just have their heads in the sand.
It doesn't help that nearly every Bitcoin discussion forum has been seized by one side of the other, and moderated to all hell.
Some are the cypherpunks that want security at all costs. They see Bitcoin as a failure unless just about anyone can operate the network. They already see mining as a failure because it's too centralized, and are staunchly opposed to anything that might increase that centralization.
Ironically, I think increasing the block size would provide advantages to miners outside of the China firewall, which may have the effect of decentralizing mining a little. That's a very simple take on it, though, and only one of many factors.
Interestingly, many who hold this view argue that changes can only be made to the network through strict consensus, ultimately relying on very centralized development.
Others see Bitcoin as a currency that should be used at the consumer level, like cash. They want a network that grows and is predictable for investors. The possibility of expensive transactions is dangerous to business models and will stall adoption.
There are some focused on the technology, and what can be built on top of bitcoin. Recognizing the network effect (more users, more value), they see using Bitcoin as a settlement layer for the various implementations on top of that. Some of these require some changes to the Bitcoin protocol, and there's much controversy in what is permissible. Lightning Network, side chains, etc. could all operate at different frequencies of Bitcoin settlement transactions. Other services would like to store information on the blockchain, using a small transaction fee to pay for immutable information storage. This could be used for contracts of all sorts. Some would see this is spam on the network, and others a huge innovation and source of value.
Some will look to the early development for guidance. Satoshi wrote a lot about how the network might evolve, and it's quite clear that he thought network capacity would improve with technology. Basically, some use the argument that the 1MB limit was a stopgap, temporary limit that has passed its usefulness. The 'Bitcoin people signed up for' is one with a growing block size.
You can add to that concerns about many of the core developers working at Blockstream, so might have perverse incentives to cripple Bitcoin to generate demand for their products.
It's ... a little complex.
Is it really true that the people who are objecting to increasing the blockchain size see Bitcoin turning into a reserve "currency" to hold wealth instead of a liquid currency used to make real time transactions?
Is that really the debate? Because I didn't get that from Mike Hearn's essay at all...