Roger Ver lost the blocksize war back in 2017 and as such is not a reliable narrator as to the state of Bitcoin today.
It’s true that Satoshi described Bitcoin as a peer to peer *payment* technology, but in actuality his expectations were simply too low. It’s a peer to peer *world reserve asset* first and foremost, and the payment system will come later. Hal Finney recognized and wrote about this well over a decade ago.
Expanding the layer one blocksize doesn’t work for the number of transactions that a global payment system needs to support. Doesn’t matter if it’s Bitcoin, Bitcoin Cash, BSV or any of the alternative shitcoin networks. And it’s important that anyone can run a node on commodity hardware like PCs or Macs. That can’t be done with larger blocks and would cede the network to corporations — avoiding that is paramount to keeping it a people-controlled asset (and currency in future).
Lightning is real un-fakable Bitcoin. Channels must be opened with a valid layer 1 transaction. It’s early days for layer 2 solutions to allow the network to scale into a low-fee payments network, so let’s give them time (and there is plenty of time).
Aidan, on this idea that larger blocks would cede the network to corporations... Have you seen the BTC trading volume?
There are 66,000 BTC getting traded every 24 hours. Then there's the number of BTC transactions on Binance alone. They're happening at the microsecond level. This idea that larger blocks would cede the network to corporations totally ignores the fact that because the network is slow, this has already happened. Bitcoin is already being traded on networks entirely separate to blockchain.
Those trades happening on Binance are not happening on the network, they're happening on a private layer two, which opens up a very obvious asymmetry of knowledge to players like Binance. There are dozens of companies like Binance, and the banks will swallow them all up.
I wouldn’t call Binance a private layer two. They would be simply creating rows in a database as customers make trades, and later (hopefully, assuming they’re not another FTX) backfilling trades as needed on layer 1 to ensure a 1-to-1 backing.
That aside, to your point- layer 1 transaction speed is unrelated to the fact that corporations like Binance that custody bitcoin on behalf of others avoid layer 1 as much as possible. That will *always* be the case and it’s impossible to optimise block size to avoid that.
What’s important is that bitcoin continues to be people-controlled.
What larger blocks do is ultimately prevent you and me, if desired, participating in the propagation of what we deem as valid transactions by running our own node on commodity hardware. If we lose that ability, then companies will end up deciding what constitutes valid transactions. They will then be captured by governments, only KYC transactions from a whitelisted set of on-ramps or off-ramps will be accepted and we’ll be back where we started with the need for a grassroots ‘ Real no-KYC Bitcoin(tm)’ fork starting at square one. Let’s not go down that road.
You're describing - exactly - the situation of BTC as it is right now. There's no on or off ramps without KYC, BlackRock attendees are talking about building identity into the protocol, and even now the mining is already controlled by huge pools you cannot negotiate with.
The original vision for bitcoin acknowledged that nodes would become specialised. There's no reason for anyone (and no normal people do this) download the entire blockchain and run a node to verify.
I think you’re referred to MicroStrategy suggesting the network is used for decentralized identifiers, not Blackrock? That’s a slightly different topic, not related to corporate control in any way.
Mining Pools don’t control the network. Yes, there are some centralization concerns but it’s fairly trivial for anyone to change their mining rig to join another pool, so it’s pretty much a moot point.
There are on ramps without KYC, but if corporations control what transactions are propagated, we will be indeed in the position where only KYC on ramps exist.
I think you should get someone like Samson Mow on to speak to the other side here. Bitcoin Cash solves nothing.
Great post, really looking forward to the rest of the series.
People forget that every block in Bitcoin is an auction. This means that the smaller the space for transactions, the more expensive it has to be. I do think that there were some good arguments made by the "small block" team, but my position has been that the war over blocksize itself is what provided the opportunity for the community to be entirely subverted and the project ultimately sabotaged.
That said, I think it's important to avoid falling into the "true bitcoin has never been tried" trap.
For example, the arguments around scaling are irrelevant if people are using devices that don't have the resources to run the network, this is primarily a smartphone issue but applies broadly as well.
Haven't read his book, but I've heard the argument. I think there's a fairly straightforward response based around accepting the 'Trilemma' is real. Ie the inherent difficulty in maintaining high levels of security, scalability, and decentralization in a blockchain network.
Bitcoin opted to sacrifice scalability, hence the 'digital gold' label. Newer tech will solve the trilemma and that will become our 'silver'.
As long as we can still safely store our satoshi's out of the clutches of The System, the banks haven't bought off Bitcoin. The likes of Blackrock snapping up the supply for their ETFs is a concern for the decentralization aspect, but with all the other privacy focused projects in crypto, I'd say the genie is well and truly out of the bottle, and that's a good thing.
This is the first Digger essay that I don’t like. Until now I have seen COVID/vaccine focused essays. They are really good.
Phil H. Clings tenaciously to his funnel metaphor to explain the Bitcoin bottleneck. Understanding the technology that underpins Bitcoin is necessary as a precursor to understanding that a second layer was required and neither nuts nor nefarios. In short, Leslie Lamport’s theorems on distributed decisions and trust form a sort of collective “impossibility theorem” for any blockchain decision procedure that purports to carry the weight of a global cryptocurrency. Obviously I am not above metaphors when the going gets tough.
Bitcoin is too slow at decision making. The second layers that I have looked at have their problems, as well. I’m a bigger fan of Ethereum with decisions made by people with both skin in the game and a willingness to be penalized for bad behavior.
I quit looking at this stuff a few years ago. So I don’t know how the world has treated the proof of stake approach. In fact I was distracted by COVID and some really good work by Phil the Digger.
You know, all of us who naturally do things the legal, ethical way will eventually cross over the torn-down fence along with those who tore it down. Just because we will get tired of trying to do the right thing. And when the rebels tear everything apart and charge across, we’ll be right behind them. We won’t help destroy, oh, no, but we’ll follow them just to get where we need to go…
Do read the classic "Creature from Jekyll island" by economist G Edward Griffen. Exhaustively documented, mostly with declassified gov't docs and actual laws passed in favor of those who figured out how to loan money they DON'T HAVE.
By the time the Fed was created (on Rockefeller's Jekyll Island off the eastern seaboard), they'd perfected the scam, learned how to control all three branches of government, and had started huge wars as a way of raking in the bucks.
Free to download, just add "pdfy" to the title to find the page.. I PROMISE, you will be glad to have the info, which IMO everyone in the world needs to know, to find out who's behind all the wars, supposedly organic socio-political movements, etc.
The book focuses on the creation of the Fed, but that was the same basic design used, by the same players, around the world since at least the middle ages, and possibly much further back; though this author sticks with only what he can document, in order for it to not be dismissable as "conspiracy theory" (heaven forbid.)
Under most OECD tax laws, treating Crypto as a commodity, thus every transaction taxable for income tax, BTC is and was never going to be used as currency anyway. I hold it is as store of value digital gold only, no other reason.
As to the alts, as no future cashflows ever accrue to the coins - as dividends distributing the free cashflows of corporates do to shareholders - I won't touch them as they will always be valueless - there is no basis for valuation, just the bigger fool theory - and on proof of stake, limitless, thus pointless.
Here are my new and improved criteria for blockchain based currencies.
1) True peer to peer. Exchanges are only on/off ramps to the highway.
2) Low power. If it's not low power it won't scale.
3) Smart contracts. No human intervention required.
4) Offline transactions. Must be able to work with no network like cash.
5) Limit growth in coin to the growth in the economy to limit inflation.
6) Low bandwidth hidden inside an existing protocol like HTTPS/SSH to prevent detection.
7) Open source to prevent back doors being easily added.
I've been working with the Qortal Project for over 2 years. It is the closest I've seen. 4 & 6 are not there yet. It has a lot of issues but it is more than just a coin. It has a TOR type network (QDN), blockchain security for single sign on for the web, apps, chats, trade portal, etc. Go to qortal.org if you want to check it out.
If you know of any other projects that check most of the 7 boxes (first 3 are mandatory) let me know as I'd love to check them out.
The coin side of blockchain is all most people talk about but smart contract are giving supply chain management an order of magnitude improvement in productivity. One company where I live went from 40 to 6 people in the SCM department.
Thanks TRM, I'll take a look at Qortal. I'm not very knowledgeable on crypto, so I'll ask you. How do any of these currencies work if the authorities outlaw them? After all, we know they desire control over all transactions (and everyone). So what prevents them from shutting all these things down? Or at least making it a criminal offense to use such software?
If it goes through an exchange then it can be shut down. If it is on a true peer to peer network, like bitcoin originally planned, then it is orders of magnitude more difficult. I can see how attacks on peer to peer networks could be done but you'd have to coordinate 70+ countries. Not impossible but much harder than just shutting down an exchange.
They can make it a criminal offence but it already can masquerade as HTTPS traffic. Qortal is also incorporating Reticulum (https://reticulum.network/) as are some other projects.
As far as I can tell the primary attack vector for peer to peer networks would be bandwidth. They generate a lot of traffic and if the government forces ISPs to curtail bandwidth to users or price it out of range for P2P that would be very difficult to deal with as they are all very heavy bandwidth users.
Thanks for writing this article! “Hijacking Bitcoin” by Roger Ver and your brilliant friend Steve Patterson is a must read for anyone interested in blockchain technology and the history of Bitcoin. As an investor in enterprise software and payment companies built on the original Bitcoin protocol, it never ceases to amaze me at how little Silicon Valley understands distributed ledger technology and at the staggering amounts of capital misallocated towards chasing digital tulips. Love to compare notes sometime.
Roger Ver lost the blocksize war back in 2017 and as such is not a reliable narrator as to the state of Bitcoin today.
It’s true that Satoshi described Bitcoin as a peer to peer *payment* technology, but in actuality his expectations were simply too low. It’s a peer to peer *world reserve asset* first and foremost, and the payment system will come later. Hal Finney recognized and wrote about this well over a decade ago.
Expanding the layer one blocksize doesn’t work for the number of transactions that a global payment system needs to support. Doesn’t matter if it’s Bitcoin, Bitcoin Cash, BSV or any of the alternative shitcoin networks. And it’s important that anyone can run a node on commodity hardware like PCs or Macs. That can’t be done with larger blocks and would cede the network to corporations — avoiding that is paramount to keeping it a people-controlled asset (and currency in future).
Lightning is real un-fakable Bitcoin. Channels must be opened with a valid layer 1 transaction. It’s early days for layer 2 solutions to allow the network to scale into a low-fee payments network, so let’s give them time (and there is plenty of time).
Aidan, on this idea that larger blocks would cede the network to corporations... Have you seen the BTC trading volume?
There are 66,000 BTC getting traded every 24 hours. Then there's the number of BTC transactions on Binance alone. They're happening at the microsecond level. This idea that larger blocks would cede the network to corporations totally ignores the fact that because the network is slow, this has already happened. Bitcoin is already being traded on networks entirely separate to blockchain.
Those trades happening on Binance are not happening on the network, they're happening on a private layer two, which opens up a very obvious asymmetry of knowledge to players like Binance. There are dozens of companies like Binance, and the banks will swallow them all up.
I wouldn’t call Binance a private layer two. They would be simply creating rows in a database as customers make trades, and later (hopefully, assuming they’re not another FTX) backfilling trades as needed on layer 1 to ensure a 1-to-1 backing.
That aside, to your point- layer 1 transaction speed is unrelated to the fact that corporations like Binance that custody bitcoin on behalf of others avoid layer 1 as much as possible. That will *always* be the case and it’s impossible to optimise block size to avoid that.
What’s important is that bitcoin continues to be people-controlled.
What larger blocks do is ultimately prevent you and me, if desired, participating in the propagation of what we deem as valid transactions by running our own node on commodity hardware. If we lose that ability, then companies will end up deciding what constitutes valid transactions. They will then be captured by governments, only KYC transactions from a whitelisted set of on-ramps or off-ramps will be accepted and we’ll be back where we started with the need for a grassroots ‘ Real no-KYC Bitcoin(tm)’ fork starting at square one. Let’s not go down that road.
You're describing - exactly - the situation of BTC as it is right now. There's no on or off ramps without KYC, BlackRock attendees are talking about building identity into the protocol, and even now the mining is already controlled by huge pools you cannot negotiate with.
The original vision for bitcoin acknowledged that nodes would become specialised. There's no reason for anyone (and no normal people do this) download the entire blockchain and run a node to verify.
I think you’re referred to MicroStrategy suggesting the network is used for decentralized identifiers, not Blackrock? That’s a slightly different topic, not related to corporate control in any way.
Mining Pools don’t control the network. Yes, there are some centralization concerns but it’s fairly trivial for anyone to change their mining rig to join another pool, so it’s pretty much a moot point.
There are on ramps without KYC, but if corporations control what transactions are propagated, we will be indeed in the position where only KYC on ramps exist.
I think you should get someone like Samson Mow on to speak to the other side here. Bitcoin Cash solves nothing.
"Bitcoin Cash solves nothing" - While I disagree with some of your points you are 100% correct IMHO on this one.
Great post, really looking forward to the rest of the series.
People forget that every block in Bitcoin is an auction. This means that the smaller the space for transactions, the more expensive it has to be. I do think that there were some good arguments made by the "small block" team, but my position has been that the war over blocksize itself is what provided the opportunity for the community to be entirely subverted and the project ultimately sabotaged.
That said, I think it's important to avoid falling into the "true bitcoin has never been tried" trap.
For example, the arguments around scaling are irrelevant if people are using devices that don't have the resources to run the network, this is primarily a smartphone issue but applies broadly as well.
Haven't read his book, but I've heard the argument. I think there's a fairly straightforward response based around accepting the 'Trilemma' is real. Ie the inherent difficulty in maintaining high levels of security, scalability, and decentralization in a blockchain network.
Bitcoin opted to sacrifice scalability, hence the 'digital gold' label. Newer tech will solve the trilemma and that will become our 'silver'.
As long as we can still safely store our satoshi's out of the clutches of The System, the banks haven't bought off Bitcoin. The likes of Blackrock snapping up the supply for their ETFs is a concern for the decentralization aspect, but with all the other privacy focused projects in crypto, I'd say the genie is well and truly out of the bottle, and that's a good thing.
I’ll keep hod’ling my bitcoin as an incorruptible store of value. If I need to monetize it I can wait.
Who wrote it? This is still the best guess as to who the real Satoshi is. Paul Le Roux
https://www.investinblockchain.com/new-evidence-suggests-satoshi-nakamoto-is-paul-solotshi-the-creator-of-encryption-software-e4m-and-truecrypt/
or NSA???
Tatsuaki Okamoto. From the National Security Agency Office of Information Security Research and Technology Cryptology Division, 18 June 1996
Check the References section, #11 and 12. Eerily similar…
https://groups.csail.mit.edu/mac/classes/6.805/articles/money/nsamint/nsamint.htm
or the "Godfather of crypto" David Chaum?
https://chaum.com/
This is the first Digger essay that I don’t like. Until now I have seen COVID/vaccine focused essays. They are really good.
Phil H. Clings tenaciously to his funnel metaphor to explain the Bitcoin bottleneck. Understanding the technology that underpins Bitcoin is necessary as a precursor to understanding that a second layer was required and neither nuts nor nefarios. In short, Leslie Lamport’s theorems on distributed decisions and trust form a sort of collective “impossibility theorem” for any blockchain decision procedure that purports to carry the weight of a global cryptocurrency. Obviously I am not above metaphors when the going gets tough.
Bitcoin is too slow at decision making. The second layers that I have looked at have their problems, as well. I’m a bigger fan of Ethereum with decisions made by people with both skin in the game and a willingness to be penalized for bad behavior.
I quit looking at this stuff a few years ago. So I don’t know how the world has treated the proof of stake approach. In fact I was distracted by COVID and some really good work by Phil the Digger.
You know, all of us who naturally do things the legal, ethical way will eventually cross over the torn-down fence along with those who tore it down. Just because we will get tired of trying to do the right thing. And when the rebels tear everything apart and charge across, we’ll be right behind them. We won’t help destroy, oh, no, but we’ll follow them just to get where we need to go…
It’s a mistake to equate legal action with ethical action. They are often at odds.
When you refer to the traditional banking system, what and who is at the head of the banking system?
Do read the classic "Creature from Jekyll island" by economist G Edward Griffen. Exhaustively documented, mostly with declassified gov't docs and actual laws passed in favor of those who figured out how to loan money they DON'T HAVE.
By the time the Fed was created (on Rockefeller's Jekyll Island off the eastern seaboard), they'd perfected the scam, learned how to control all three branches of government, and had started huge wars as a way of raking in the bucks.
Free to download, just add "pdfy" to the title to find the page.. I PROMISE, you will be glad to have the info, which IMO everyone in the world needs to know, to find out who's behind all the wars, supposedly organic socio-political movements, etc.
The book focuses on the creation of the Fed, but that was the same basic design used, by the same players, around the world since at least the middle ages, and possibly much further back; though this author sticks with only what he can document, in order for it to not be dismissable as "conspiracy theory" (heaven forbid.)
Rothschild and Rockefeller would be my guess.
Under most OECD tax laws, treating Crypto as a commodity, thus every transaction taxable for income tax, BTC is and was never going to be used as currency anyway. I hold it is as store of value digital gold only, no other reason.
As to the alts, as no future cashflows ever accrue to the coins - as dividends distributing the free cashflows of corporates do to shareholders - I won't touch them as they will always be valueless - there is no basis for valuation, just the bigger fool theory - and on proof of stake, limitless, thus pointless.
Here are my new and improved criteria for blockchain based currencies.
1) True peer to peer. Exchanges are only on/off ramps to the highway.
2) Low power. If it's not low power it won't scale.
3) Smart contracts. No human intervention required.
4) Offline transactions. Must be able to work with no network like cash.
5) Limit growth in coin to the growth in the economy to limit inflation.
6) Low bandwidth hidden inside an existing protocol like HTTPS/SSH to prevent detection.
7) Open source to prevent back doors being easily added.
I've been working with the Qortal Project for over 2 years. It is the closest I've seen. 4 & 6 are not there yet. It has a lot of issues but it is more than just a coin. It has a TOR type network (QDN), blockchain security for single sign on for the web, apps, chats, trade portal, etc. Go to qortal.org if you want to check it out.
If you know of any other projects that check most of the 7 boxes (first 3 are mandatory) let me know as I'd love to check them out.
The coin side of blockchain is all most people talk about but smart contract are giving supply chain management an order of magnitude improvement in productivity. One company where I live went from 40 to 6 people in the SCM department.
Thanks TRM, I'll take a look at Qortal. I'm not very knowledgeable on crypto, so I'll ask you. How do any of these currencies work if the authorities outlaw them? After all, we know they desire control over all transactions (and everyone). So what prevents them from shutting all these things down? Or at least making it a criminal offense to use such software?
If it goes through an exchange then it can be shut down. If it is on a true peer to peer network, like bitcoin originally planned, then it is orders of magnitude more difficult. I can see how attacks on peer to peer networks could be done but you'd have to coordinate 70+ countries. Not impossible but much harder than just shutting down an exchange.
They can make it a criminal offence but it already can masquerade as HTTPS traffic. Qortal is also incorporating Reticulum (https://reticulum.network/) as are some other projects.
As far as I can tell the primary attack vector for peer to peer networks would be bandwidth. They generate a lot of traffic and if the government forces ISPs to curtail bandwidth to users or price it out of range for P2P that would be very difficult to deal with as they are all very heavy bandwidth users.
I've read quite a bit about all the blockchain stuff, and the more I read the more I'm inclined to Warren Buffett's view.
Thanks for writing this article! “Hijacking Bitcoin” by Roger Ver and your brilliant friend Steve Patterson is a must read for anyone interested in blockchain technology and the history of Bitcoin. As an investor in enterprise software and payment companies built on the original Bitcoin protocol, it never ceases to amaze me at how little Silicon Valley understands distributed ledger technology and at the staggering amounts of capital misallocated towards chasing digital tulips. Love to compare notes sometime.
You are a GREAT writer.
"piques my curiosity"
Thank you fellow grammar nazi LOL. You beat me to it.