USB - Bitcoin Mining Setup Guide

Recommended USB Bitcoin Miners for 2016? /r/BitcoinMining

Recommended USB Bitcoin Miners for 2016? /BitcoinMining submitted by BitcoinAllBot to BitcoinAll [link] [comments]

How to donate and spread Bitcoin in Venezuela - vemine.org

How to donate and spread Bitcoin in Venezuela - vemine.org submitted by isysd to Bitcoin [link] [comments]

/r/Monero - Newcomers Please Read. Everything You Need To Know.

What is Monero (XMR)?
Monero is a secure, private, untraceable (crypto-)currency. It is open-source and freely available to all. Don't believe us? Click here.
Monero is a tool that people can actually use. It makes receiving payments hassle-free, since merchants and individuals no longer need to fear the source of funds they are accepting. With transparent systems like Bitcoin, Ethereum, Verge, or Dash, these people need to hope (or spend substantial resources verifying) the sender did not use the funds illicitly. Furthermore, merchants do not want all their vendors known, and individually do not want everyone to know how much they are spending. If I spend more than I should at Newegg (store), that's my own business.
Monero is different because every transaction is always private. There is no way for pools and exchanges to opt out of sending private transactions. Thus, Monero's anonymity set far exceeds any other coin's anonymity set. Over 86,000 transactions in the past month of August, 2017 hid the sender and receiver, and about 99.95% of them also hid the amount (will increase to 100% of all new transactions in September)! There is no suspicion in using a private transaction, since all transactions are private. A single transaction does not stick out.*
This privacy is afforded with the best technology. I implore you to take a few minutes to learn about the four main technologies that Monero uses to provide privacy:
There are several other things that make Monero great! It has a smooth tail emission, dynamic blocks and fees, and an accessible Proof of Work (mining) algorithm.
*You can optionally choose a very large, unusual ringsize to make the transaction stick out. This is not recommended, and normal users who leave the ringsize at the default setting will not experience any issues. Also, it's possible for a user to manually add identifying information to the tx_extra field, which is something that a user must seriously go out of their way to do.
Now you know Monero (XMR) has the best technology. What else makes Monero (XMR) different than other cryptocurrencies?
P.S. Want a quick-start, simple your-grandma-could-do-it guide? Here's a great one!
Am I a bad person to consider using this?
No, Monero is freedom money. You can do whatever you want with it, whenever you want, where ever you want. We make it clear that you should own your wealth 100%. What you do with it, is none of our concern.
Where does the word Monero come from?
The word Monero comes from the language Esperanto. Monero means coin oand currency. The plural way of saying Monero in Esperanto and in our cryptocurrency is Moneroj.
How do I store Monero?
Monero Core
Monero Core GUI (If you don't know how to use it, click here for instructions and tutorial)
Monero Web-Wallet
Offline Wallet Generator
Is there a lightweight wallet for Monero?
Not yet, but you can use the official GUI with a remote node.
Are there any other ways to store Monero (XMR)?
Yes, there are many mobile wallets out there that allow you to store Monero (XMR). We do not recommend them, because they are not official releases of Monero. If you do decide to use other wallets, please make sure to do your research first before storing any Moneroj in the wallet. Anything used for Monero outside of official releases, will be used at your own risk. Some may be used for scamming purposes. If you still decide to take the risk; do not use them for large amounts. Also keep in mind that there is a high chance that Monero support will not be able to help you if you bump into any problems from applications outside of official releases. Why should you not use non-official wallets? Well would you buy a house and give your only key you have to the buildemanagement and wait for him/her to open the door to the house you supposedly own? No. Same goes with cryptocurrencies. You should always have possession of your private keys, and your Moneroj. Most non-official releases own your private keys, therefore you do not own the Moneroj.
How do I buy Monero (XMR) with fiat?
Kraken
Bitfinex
Monero For Cash
Local Monero
Other Options
Which exchanges support Monero (XMR)?
Poloniex
Bithumb
Kraken
Bitfinex
Bittrex
Bitsquare
ShapeShift
Livecoin
BTER
How do I setup a offline cold paper wallet?
Step-by-step guide for cold storage and offline transaction signing with optimal security
Guide For Securely Generating An Offline Cold Paper Wallet
USB Monero Cold Wallet Guide
Is there a Chinese translation so I can understand Monero? 是否有中文翻译,以便我能理解Monero?
Monero (XMR) Chinese Translation
Can I buy Monero (XMR) with CNY? 我可以用人民币买Monero吗?
BTER
*Can I buy Monero (XMR) with KRW?
Bithumb
Where can I find a good mining pool?
Monero Pools
What miner should I use?
CPU:
XMR-Stak (Windows-Linux)
CpuMiner by tpruvot (Windows, Linux)
CpuMiner By Wolf
xmr-stak (MacOS)
cpuminer(MacOS) By correcthorse
GPU:
XMR-stak (AMD)
Ccminer (nVidia) by KlausT, psychocrypt, and fireice-uk
Claymore's CryptoNote GPU Miner (AMD)
If you are a Windows user, click here.
Can I use a proxy for mining?
You can use XMR Proxy. If you want to monitor your rigs you can use Monero Mining Monitor.
How can I setup a local wallet while running node with little bandwidth?
You can use GUI, as a remote node as it uses very little bandwidth. Go to settings tab and change: "localhost:18089" to "node.moneroworld.com:18089". If you are still having problems, then just use our Monero Web-Wallet.
Can I run Monero through Tor or I2P?
Guide to use Monero with Tor correctly
Monero Safety Through Tor
Monero I2P
My vendor only accepts bitcoin but I only have Monero, and I know bitcoin is not private/anonymous. What should I do?
Use XMR.TO, but you should also educate them about bitcoins lack of privacy. Tell them to visit this post.
How long does it take to sync to the blockchain?
It can take from a few hours (using SSD drive) or even 24 hours, depending on hard drive and connection speed.
How do I generate a QR-code for a Monero address?
How to generate a QR code for a Monero address
Moneroqrcode.com for a personalized code
Guide to check balance
List of scams: (Always do a background check / research for anything outside of official releases.)
Did you know over 50 high profile artists accept Monero on their online stores? Check out Project Coral Reef
Are there any other sub-reddits that specialize in certain parts of Monero or just related to Monero?
Yes, there are a few. However, please keep in mind that this sub-reddit (/Monero) is the official Monero sub-reddit.
/xmrtrader - Trading, and investing related discussions & inquires.
/MoneroMining - Mining related discussions & inquires.
/MoneroCommunity for those who want to help grow the community.
/moonero for shitposts and memes.
/MoneroMarket for buying and selling wares for Monero.
/MoneroSupport for, you guessed it, Monero support.
Want to get involved? Click here for a list of sources.
How can I participate in the Monero community?
We welcome everyone to join us and help out. Check the "Community Info" section on our subreddit for our website, forum, stack exchange, github, twitter, and facebook. Anyway, we hope you stick around beyond the hype. Monero has a lot going for it, and we hope you agree! We really need your help, since this project is entirely driven by the community!
Nun vi spertis liberecon.
submitted by cryptonaire- to Monero [link] [comments]

Bitcoin, huh? WTF is going on? Should we scale you on-chain or off-chain? Will you stay decentralized, distributed, immutable?

0. Shit, this is long, TLWR please! Too long, won't read.
EDIT: TLDR TLWR for clarity.
1. Bitcoin, huh? Brief introduction.
There are 3 sections to this overview. The first section is a brief introduction to bitcoin. The second section looks at recent developments in the bitcoin world, through the analogy of email attachments, and the third section discusses what could be next, through the perspective of resilience and network security.
This is just a continuation of a long, long, possibly never-ending debate that started with the release of the bitcoin whitepaper in 2008 (see https://bitcoin.org/bitcoin.pdf). The recent mess during the past few years boils down to the controversy with the block size limit and how to appropriately scale bitcoin, the keyword appropriately. Scaling bitcoin is a controversial debate with valid arguments from all sides (see https://en.bitcoin.it/wiki/Block_size_limit_controversy).
I have researched, studied, and written this overview as objectively and as impartially as possible. By all means, this is still an opinion and everyone is advised to draw their own conclusions. My efforts are to make at least a few readers aware that ultimately there is only one team, and that team is the team bitcoin. Yes, currently though, there are factions within the team bitcoin. I hope that we can get beyond partisan fights and work together for the best bitcoin. I support all scaling proposals as long as they are the best for the given moment in time. Personally, I hate propaganda and love free speech as long as it is not derogatory and as long as it allows for constructive discussions.
The goal of this overview is to explain to a novice how bitcoin network works, what has been keeping many bitcoin enthusiasts concerned, and if we can keep the bitcoin network with three main properties described as decentralized, distributed, immutable. Immutable means censorship resistant. For the distinction between decentralized and distributed, refer to Figure 1: Centralized, decentralized and distributed network models by Paul Baran (1964), which is a RAND Institute study to create a robust and nonlinear military communication network (see https://www.rand.org/content/dam/rand/pubs/research_memoranda/2006/RM3420.pdf). Note that for the overall network resilience and security, distributed is more desirable than decentralized, and the goal is to get as far away from central models as possible. Of course, nothing is strictly decentralized or strictly distributed and all network elements are at different levels of this spectrum.
For those unaware how bitcoin works, I recommend the Bitcoin Wikipedia (see https://en.bitcoin.it/wiki/Main_Page). In short, the bitcoin network includes users which make bitcoin transactions and send them to the network memory pool called mempool, nodes which store the public and pseudonymous ledger called blockchain and which help with receiving pending transactions and updating processed transactions, thus securing the overall network, and miners which also secure the bitcoin network by mining. Mining is the process of confirming pending bitcoin transactions, clearing them from the mempool, and adding them to blocks which build up the consecutive chain of blocks on the blockchain. The blockchain is therefore a decentralized and distributed ledger built on top of bitcoin transactions, therefore impossible to exist without bitcoin. If someone claims to be working on their own blockchain without bitcoin, by the definition of the bitcoin network however, they are not talking about the actual blockchain. Instead, they intend to own a different kind of a private database made to look like the public and pseudonymous blockchain ledger.
There are roughly a couple of dozen mining pools, each possibly with hundreds or thousands of miners participating in them, to several thousand nodes (see https://blockchain.info/pools and https://coin.dance/nodes). Therefore, the bitcoin network has at worst decentralized miners and at best distributed nodes. The miner and node design makes the blockchain resilient and immune to reversible changes, making it censorship resistant, thus immutable. The bitcoin blockchain avoids the previous need for a third party to trust. This is a very elegant solution to peer-to-peer financial exchange via a network that is all: decentralized, distributed, immutable. Extra features (escrow, reversibility via time-locks, and other features desirable in specific instances) can be integrated within the network or added on top of this network, however, they have not been implemented yet.
Miners who participate receive mining reward consisting of newly mined bitcoins at a predetermined deflationary rate and also transaction fees from actual bitcoin transactions being processed. It is estimated that in 2022, miners will have mined more than 90% of all 21 million bitcoins ever to be mined (see https://en.bitcoin.it/wiki/Controlled_supply). As the mining reward from newly mined blocks diminishes to absolute zero in 2140, the network eventually needs the transaction fees to become the main component of the reward. This can happen either via high-volume-low-cost transaction fees or low-volume-high-cost transaction fees. Obviously, there is the need to address the question of fees when dealing with the dilemma how to scale bitcoin. Which type of fees would you prefer and under which circumstances?
2. WTF is going on? Recent developments.
There are multiple sides to the scaling debate but to simplify it, first consider the 2 main poles. In particular, to scale bitcoin on blockchain or to scale it off it, that is the question!
The first side likes the idea of bitcoin as it has been until now. It prefers on-chain scaling envisioned by the bitcoin creator or a group of creators who chose the pseudonym Satoshi Nakamoto. It is now called Bitcoin Cash and somewhat religiously follows Satoshi’s vision from the 2008 whitepaper and their later public forum discussions (see https://bitcointalk.org/index.php?topic=1347.msg15366#msg15366). Creators’ vision is good to follow but it should not be followed blindly and dogmatically when better advancements are possible, the keyword when. To alleviate concerning backlog of transactions and rising fees, Bitcoin Cash proponents implemented a simple one-line code update which increased the block size limit for blockhain blocks from 1MB block size limit to a new, larger 8MB limit. This was done through a fork on August 1, 2017, which created Bitcoin Cash, and which kept the bitcoin transaction history until then. Bitcoin Cash has observed significant increase in support, from 3% of all bitcoin miners at first to over 44% of all bitcoin miners after 3 weeks on August 22, 2017 (see http://fork.lol/pow/hashrate and http://fork.lol/pow/hashrateabs).
An appropriate scaling analogy is to recall email attachments early on. They too were limited to a few MB at first, then 10MB, 20MB, up until 25MB on Gmail. But even then, Gmail eventually started using Google Drive internally. Note that Google Drive is a third party to Gmail, although yes, it is managed by the same entity.
The second side argues that bitcoin cannot work with such a scaling approach of pre-meditated MB increases. Arguments against block size increases include miner and node centralization, and bandwidth limitations. These are discussed in more detail in the third section of this overview. As an example of an alternative scaling approach, proponents of off-chain scaling want to jump to the internally integrated third party right away, without any MB increase and, sadly, without any discussion. Some of these proponents called one particular implementation method SegWit, which stands for Segregated Witness, and they argue that SegWit is the only way that we can ever scale up add the extra features to the bitcoin network. This is not necessarily true because other scaling solutions are feasible, such as already functioning Bitcoin Cash, and SegWit’s proposed solution will not use internally integrated third party as shown next. Note that although not as elegant as SegWit is today, there are other possibilities to integrate some extra features without SegWit (see /Bitcoin/comments/5dt8tz/confused_is_segwit_needed_for_lightning_network).
Due to the scaling controversy and the current backlog of transactions and already high fees, a third side hastily proposed a compromise to a 2MB increase in addition to the proposed SegWit implementation. They called it SegWit2x, which stands for Segregated Witness with 2MB block size limit increase. But the on-chain scaling and Bitcoin Cash proponents did not accept it due to SegWit’s design redundancy and hub centralization which are discussed next and revisited in the third section of this overview. After a few years of deadlock, that is why the first side broke free and created the Bitcoin Cash fork.
The second side stuck with bitcoin as it was. In a way, they inherited the bitcoin network without any major change to public eye. This is crucial because major changes are about to happen and the original bitcoin vision, as we have known it, is truly reflected only in what some media refer to as a forked clone, Bitcoin Cash. Note that to avoid confusion, this second side is referred to as Bitcoin Core by some or Legacy Bitcoin by others, although mainstream media still refers to it simply as Bitcoin. The core of Bitcoin Core is quite hardcore though. They too rejected the proposed compromise for SegWit2x and there are clear indications that they will push to keep SegWit only, forcing the third side with SegWit2x proponents to create another fork in November 2017 or to join Bitcoin Cash. Note that to certain degree, already implemented and working Bitcoin Cash is technically superior to SegWit2x which is yet to be deployed (see /Bitcoin/comments/6v0gll/why_segwit2x_b2x_is_technically_inferior_to).
Interestingly enough, those who agreed to SegWit2x have been in overwhelming majority, nearly 87% of all bitcoin miners on July 31, 2017 prior to the fork, and a little over 90% of remaining Bitcoin Core miners to date after the fork (see https://coin.dance/blocks). Despite such staggering support, another Bitcoin Core fork is anticipated later in November (see https://cointelegraph.com/news/bitcoin-is-splitting-once-again-are-you-ready) and the "Outcome #2: Segwit2x reneges on 2x or does not prioritize on-chain scaling" seems to be on track from the perspective of Bitcoin Core SegWit, publicly seen as the original Bitcoin (see https://blog.bridge21.io/before-and-after-the-great-bitcoin-fork-17d2aad5d512). The sad part is that although in their overwhelming majority, the miners who support SegWit2x would be the ones creating another Bitcoin Core SegWit2x fork or parting ways from the original Bitcoin.
In a way, this is an ironic example how bitcoin’s built-in resiliency to veto changes causes majority to part away when a small minority has status quo and holds off fully-consented progress. Ultimately, this will give the minority Bitcoin Core SegWit proponents the original Bitcoin branding, perhaps to lure in large institutional investors and monetize on bitcoin’s success as we have it seen it during the past 9 years since its inception. Recall that bitcoin of today is already a decentralized, distributed, immutable network by its definition. The bitcoin network was designed to be an alternative to centralized and mutable institutions, so prevalent in modern capitalist societies.
Bitcoin Core SegWit group wants to change the existing bitcoin network to a network with dominant third parties which, unlike Google Drive to Gmail, are not internal. In particular, they intend to do so via the lightning network, which is a second layer solution (2L). This particular 2L as currently designed relies on an artificial block size limit cap which creates a bottleneck in order to provide high incentives for miners to participate. It monetizes on backlog of transaction and high fees, which are allocated to miners, not any group in particular. Cheaper and more instantaneous transactions are shifted to the lightning network which is operated by hubs also earning revenue. Note that some of these hubs may choose to monitor transactions and can possibly censor who is allowed to participate in this no longer strictly peer-to-peer network.
We lose the immutability and instead we have a peer-to-hub-to-peer network that is mutable and at best decentralized, and certainly not distributed (see https://medium.com/@jonaldfyookball/mathematical-proof-that-the-lightning-network-cannot-be-a-decentralized-bitcoin-scaling-solution-1b8147650800). For regular day-to-day and recurring transactions, it is not a considerable risk or inconvenience. And one could choose to use the main chain any time to bypass the lightning network and truly transact peer-to-peer. But since the main chain has an entry barrier in the form of artificially instilled high transaction fees, common people are not able to use bitcoin as we have known it until now. Peer-to-peer bitcoin becomes institution-to-institution bitcoin with peer-to-hub-to-peer 2L.
To reiterate and stress, note the following lightning network design flaw again. Yes, activating SegWit and allowing 2L such as lightning allows for lower transaction fees to coexist side by side with more costly on-chain transactions. For those using this particularly prescribed 2L, the fees remain low. But since these 2L are managed by hubs, we introduce another element to trust, which is contrary to what the bitcoin network was designed to do at the first place. Over time, by the nature of the lightning network in its current design, these third party hubs grow to be centralized, just like Visa, Mastercard, Amex, Discover, etc. There is nothing wrong with that in general because it works just fine. But recall that bitcoin set out to create a different kind of a network. Instead of decentralized, distributed, immutable network with miners and nodes, with the lightning network we end up with at best decentralized but mutable network with hubs.
Note that Bitcoin Core SegWit has a US-based organization backing it with millions of dollars (see https://en.wikipedia.org/wiki/Blockstream and https://steemit.com/bitcoin/@adambalm/the-truth-about-who-is-behind-blockstream-and-segwit-as-the-saying-goes-follow-the-money). Their proponents are quite political and some even imply $1000 fees on the main bitcoin blockchain (see https://cointelegraph.com/news/ari-paul-tuur-demeester-look-forward-to-up-to-1k-bitcoin-fees). Contrary to them, Bitcoin Cash proponents intend to keep small fees on a scale of a few cents, which in large volume in larger blockchain blocks provide sufficient incentive for miners to participate.
On the one hand, sticking to the original vision of peer-to-peer network scaled on-chain has merit and holds potential for future value. On the other hand, 2L have potential to carry leaps forward from current financial infrastructure. As mentioned earlier, 2L will allow for extra features to be integrated off-chain (e.g. escrow, reversibility via time-locks), including entirely new features such as smart contracts, decentralized applications, some of which have been pioneered and tested on another cryptocurrency network called Ethereum. But such features could be one day implemented directly on the main bitcoin blockchain without the lightning network as currently designed, or perhaps with a truly integrated 2L proposed in the third section of this overview.
What makes the whole discussion even more confusing is that there are some proposals for specific 2L that would in fact increase privacy and make bitcoin transactions less pseudonymous than those on the current bitcoin blockchain now. Keep in mind that 2L are not necessarily undesirable. If they add features and keep the main network characteristics (decentralized, distributed, immutable), they should be embraced with open arms. But the lightning network as currently designed gives up immutability and hub centralization moves the network characteristic towards a decentralized rather than a distributed network.
In a sense, back to the initial email attachment analogy, even Gmail stopped with attachment limit increases and started hosting large files on Google Drive internally, with an embedded link in a Gmail email to download anything larger than 25MB from Google Drive. Anticipating the same scaling decisions, the question then becomes not if but when and how such 2L should be implemented, keeping the overall network security and network characteristics in mind. If you have not gotten it yet, repeat, repeat, repeat: decentralized, distributed, immutable. Is it the right time now and is SegWit (one way, my way or highway) truly the best solution?
Those siding away from Bitcoin Core SegWit also dislike that corporate entities behind Blockstream, the one publicly known corporate entity directly supporting SegWit, have allegedly applied for SegWit patents which may further restrict who may and who may not participate in the creation of future hubs, or how these hubs are controlled (see the alleged patent revelations, https://falkvinge.net/2017/05/01/blockstream-patents-segwit-makes-pieces-fall-place, the subsequent Twitter rebuttal Blockstream CEO, http://bitcoinist.com/adam-back-no-patents-segwit, and the subsequent legal threats to SegWit2x proponents /btc/comments/6vadfi/blockstream_threatening_legal_action_against). Regardless if the patent claims are precise or not, the fact remains that there is a corporate entity dictating and vetoing bitcoin developments. Objectively speaking, Bitcoin Core SegWit developers paid by Blockstream is a corporate takeover of the bitcoin network as we have known it.
And on the topic of patents and permissionless technological innovations, what makes all of this even more complicated is that a mining improvement technology called ASICboost is allowed on Bitcoin Cash. The main entities who forked from Bitcoin Core to form Bitcoin Cash had taken advantage of patents to the ASICboost technology on the original bitcoin network prior to the fork (see https://bitcoinmagazine.com/articles/breaking-down-bitcoins-asicboost-scandal). This boost saved estimated 20% electricity for miners on 1MB blocks and created unfair economic advantage for this one particular party. SegWit is one way that this boost is being eliminated, through the code. Larger blocks are another way to reduce the boost advantage, via decreased rate of collisions which made this boost happen at the first place (see https://bitcoinmagazine.com/articles/breaking-down-bitcoins-asicboost-scandal-solutions and https://bitslog.wordpress.com/2017/04/10/the-relation-between-segwit-and-asicboost-covert-and-overt). Therefore, the initial Bitcoin Cash proponents argue that eliminating ASICboost through the code is no longer needed or necessary.
Of course, saving any amount electricity between 0% and 20% is good for all on our planet but in reality any energy saved in a mining operation is used by the same mining operation to increase their mining capacity. In reality, there are no savings, there is just capacity redistribution. The question then becomes if it is okay that only one party currently and already holds onto this advantage, which they covertly hid for relatively long time, and which they could be using covertly on Bitcoin Cash if they desired to do so, even though it would an advantage to a smaller degree. To be fair to them, they are mining manufacturers and operators, they researched and developed the advantage from own resources, so perhaps they do indeed have the right to reap ASICboost benefits while they can. But perhaps it should happen in publicly know way, not behind closed doors, and should be temporary, with agreed patent release date.
In conclusion, there is no good and no bad actor, each side is its own shade of grey. All parties have their own truth (and villainy) to certain degree.
Bitcoin Cash's vision is for bitcoin to be an electronic cash platform and daily payment processor whereas Bitcoin Core SegWit seems to be drawn more to the ideas of bitcoin as an investment vehicle and a larger settlement layer with the payment processor function managed via at best decentralized third party hubs. Both can coexist, or either one can eventually prove more useful and digest the other one by taking over all use-cases.
Additionally, the most popular communication channel on /bitcoin with roughly 300k subscribers censors any alternative non-Bitcoin-Core-SegWit opinions and bans people from posting their ideas to discussions (see https://medium.com/@johnblocke/a-brief-and-incomplete-history-of-censorship-in-r-bitcoin-c85a290fe43). This is because their moderators are also supported by Blockstream. Note that the author of this overview has not gotten banned from this particular subreddit (yet), but has experienced shadow-banning first hand. Shadow-banning is a form of censorship. In this particular case, their moderator robot managed by people moderators, collaboratively with the people moderators, do the following:
  • (1) look for "Bitcoin Cash" and other undesirable keywords,
  • (2) warn authors that “Bitcoin Cash” is not true bitcoin (which objectively speaking it is, and which is by no means “BCash” that Bitcoin Core SegWit proponents refer to, in a coordinated effort to further confuse public, especially since some of them have published plans to officially release another cryptocurrency called “BCash” in 2018, see https://medium.com/@freetrade68/announcing-bcash-8b938329eaeb),
  • (3) further warn authors that if they try to post such opinions again, they could banned permanently,
  • (4) tell authors to delete their already posted posts or comments,
  • (5) hide their post from publicly seen boards with all other posts, thus preventing it from being seeing by the other participants in this roughly 300k public forum,
  • (6) and in extreme cases actually “remove” their valid opinions if they slip by uncensored, gain traction, and are often times raise to popularity as comments to other uncensored posts (see /btc/comments/6v3ee8/on_a_reply_i_made_in_rbitcoin_that_had_over_350 and /btc/comments/6vbyv0/in_case_we_needed_more_evidence_500_upvotes).
This effectively silences objective opinions and creates a dangerous echo-chamber. Suppressing free speech and artificially blowing up transaction fees on Bitcoin Core SegWit is against bitcoin’s fundamental values. Therefore, instead of the original Reddit communication channel, many bitcoin enthusiasts migrated to /btc which has roughly 60k subscribers as of now, up from 20k subscribers a year ago in August 2016 (see http://redditmetrics.com/btc). Moderators there do not censor opinions and allow all polite and civil discussions about scaling, including all opinions on Bitcoin Cash, Bitcoin Core, etc.
Looking beyond their respective leaderships and communication channels, let us review a few network fundamentals and recent developments in Bitcoin Core and Bitcoin Cash networks. Consequently, for now, these present Bitcoin Cash with more favorable long-term prospects.
  • (1) The stress-test and/or attack on the Bitcoin Cash mempool earlier on August 16, 2017 showed that 8MB blocks do work as intended, without catastrophic complications that Bitcoin Core proponents anticipated and from which they attempted to discourage others (see https://jochen-hoenicke.de/queue/uahf/#2w for the Bitcoin Cash mempool and https://core.jochen-hoenicke.de/queue/#2w for the Bitcoin Core mempool). Note that when compared to the Bitcoin Core mempool on their respective 2 week views, one can observe how each network handles backlogs. On the most recent 2 week graphs, the Y-scale for Bitcoin Core is 110k vs. 90k on Bitcoin Cash. In other words, at the moment, Bitcoin Cash works better than Bitcoin Core even though there is clearly not as big demand for Bitcoin Cash as there is for Bitcoin Core. The lack of demand for Bitcoin Cash is partly because Bitcoin Cash is only 3 weeks old and not many merchants have started accepting it, and only a limited number of software applications to use Bitcoin Cash has been released so far. By all means, the Bitcoin Cash stress-test and/or attack from August 16, 2017 reveals that the supply will handle the increased demand, more affordably, and at a much quicker rate.
  • (2) Bitcoin Cash “BCH” mining has become temporarily more profitable than mining Bitcoin Core “BTC” (see http://fork.lol). Besides temporary loss of miners, this puts Bitcoin Core in danger of permanently fleeing miners. Subsequently, mempool backlog and transaction fees are anticipated to increase further.
  • (3) When compared to Bitcoin Cash transaction fees at roughly $0.02, transaction fees per kB are over 800 times as expensive on Bitcoin Core, currently at over $16 (see https://cashvscore.com).
  • (4) Tipping service that used to work on Bitcoin Core's /Bitcoin a few years back has been revived by a new tipping service piloted on the more neutral /btc with the integration of Bitcoin Cash (see /cashtipperbot).
3. Should we scale you on-chain or off-chain? Scaling bitcoin.
Let us start with the notion that we are impartial to both Bitcoin Core (small blocks, off-chain scaling only) and Bitcoin Cash (big blocks, on-chain scaling only) schools of thought. We will support any or all ideas, as long as they allow for bitcoin to grow organically and eventually succeed as a peer-to-peer network that remains decentralized, distributed, immutable. Should we have a preference in either of the proposed scaling solutions?
First, let us briefly address Bitcoin Core and small blocks again. From the second section of this overview, we understand that there are proposed off-chain scaling methods via second layer solutions (2L), most notably soon-to-be implemented lightning via SegWit on Bitcoin Core. Unfortunately, the lightning network diminishes distributed and immutable network properties by replacing bitcoin’s peer-to-peer network with a two-layer institution-to-institution network and peer-to-hub-to-peer 2L. Do we need this particular 2L right now? Is its complexity truly needed? Is it not at best somewhat cumbersome (if not very redundant)? In addition to ridiculously high on-chain transaction fees illustrated in the earlier section, the lightning network code is perhaps more robust than it needs to be now, with thousands of lines of code, thus possibly opening up to new vectors for bugs or attacks (see https://en.bitcoin.it/wiki/Lightning_Network and https://github.com/lightningnetwork/lnd). Additionally, this particular 2L as currently designed unnecessarily introduces third parties, hubs, that are expected to centralize. We already have a working code that has been tested and proven to handle 8MB blocks, as seen with Bitcoin Cash on August 16, 2017 (see https://www.cryptocoinsnews.com/first-8mb-bitcoin-cash-block-just-mined). At best, these third party hubs would be decentralized but they would not be distributed. And these hubs would be by no means integral to the original bitcoin network with users, nodes, and miners.
To paraphrase Ocam’s razor problem solving principle, the simplest solution with the most desirable features will prevail (see https://en.wikipedia.org/wiki/Occam%27s_razor). The simplest scalability solution today is Bitcoin Cash because it updates only one line of code, which instantly increases the block size limit. This also allows other companies building on Bitcoin Cash to reduce their codes when compared to Bitcoin Core SegWit’s longer code, some even claiming ten-fold reductions (see /btc/comments/6vdm7y/ryan_x_charles_reveals_bcc_plan). The bitcoin ecosystem not only includes the network but it also includes companies building services on top of it. When these companies can reduce their vectors for bugs or attacks, the entire ecosystem is healthier and more resilient to hacking disasters. Obviously, changes to the bitcoin network code are desirable to be as few and as elegant as possible.
But what are the long-term implications of doing the one-line update repeatedly? Eventually, blocks would have to reach over 500MB size if they were to process Visa-level capacity (see https://en.bitcoin.it/wiki/Scalability). With decreasing costs of IT infrastructure, bandwidth and storage could accommodate it, but the overhead costs would increase significantly, implying miner and/or full node centralization further discussed next. To decrease this particular centralization risk, which some consider undesirable and others consider irrelevant, built-in and integrated 2L could keep the block size at a reasonably small-yet-still-large limit.
At the first sight, these 2L would remedy the risk of centralization by creating their own centralization incentive. At the closer look and Ocam’s razor principle again, these 2L do not have to become revenue-seeking third party hubs as designed with the current lightning network. They can be integrated into the current bitcoin network with at worst decentralized miners and at best distributed nodes. Recall that miners will eventually need to supplement their diminishing mining reward from new blocks. Additionally, as of today, the nodes have no built-in economic incentive to run other than securing the network and keeping the network’s overall value at its current level. Therefore, if new 2L were to be developed, they should be designed in a similar way like the lightning network, with the difference that the transaction processing revenue would not go to third party hubs but to the already integrated miners and nodes.
In other words, why do we need extra hubs if we have miners and nodes already? Let us consider the good elements from the lightning network, forget the unnecessary hubs, and focus on integrating the hubs’ responsibilities to already existing miner and node protocols. Why would we add extra elements to the system that already functions with the minimum number of elements possible? Hence, 2L are not necessarily undesirable as long as they do not unnecessarily introduce third party hubs.
Lastly, let us discuss partial on-chain scaling with the overall goal of network security. The network security we seek is the immutability and resilience via distributed elements within otherwise decentralized and distributed network. It is not inconceivable to scale bitcoin with bigger blocks as needed, when needed, to a certain degree. The thought process is the following:
  • (1) Block size limit:
We need some upper limit to avoid bloating the network with spam transactions. Okay, that makes sense. Now, what should this limit be? If we agree to disagree with small block size limit stuck at 1MB, and if we are fine with flexible block size limit increases (inspired by mining difficulty readjustments but on a longer time scale) or big block propositions (to be increased incrementally), what is holding us off next?
  • (2) Miner centralization:
Bigger blocks mean that more data will be transferred on the bitcoin network. Consequently, more bandwidth and data storage will be required. This will create decentralized miners instead of distributed ones. Yes, that is true. And it has already happened, due to the economy of scale, in particular the efficiency of grouping multiple miners in centralized facilities, and the creation of mining pools collectively and virtually connecting groups of miners not physically present in the same facility. These facilities tend to have huge overhead costs and the data storage and bandwidth increase costs are negligible in this context. The individual miners participating in mining pools will quite likely notice somewhat higher operational costs but allowing for additional revenue from integrated 2L described earlier will give them economic incentive to remain actively participating. Note that mining was never supposed to be strictly distributed and it was always at worst decentralized, as defined in the first section of this overview. To assure at best a distributed network, we have nodes.
  • (3) Node centralization:
Bigger blocks mean that more data will be transferred on the bitcoin network. Consequently, more bandwidth and data storage will be required. This will create decentralized nodes instead of distributed ones. Again, recall that we have a spectrum of decentralized and distributed networks in mind, not their absolutes. The concern about the node centralization (and the subsequent shift from distributed to decentralized network property) is valid if we only follow on-chain scaling to inconsiderate MB values. If addressed with the proposed integrated 2L that provides previously unseen economic incentives to participate in the network, this concern is less serious.
Furthermore, other methods to reduce bandwidth and storage needs can be used. A popular proposal is block pruning, which keeps only the most recent 550 blocks, and eventually deletes any older blocks (see https://news.bitcoin.com/pros-and-cons-on-bitcoin-block-pruning). Block pruning addresses storage needs and makes sure that not all nodes participating in the bitcoin network have to store all transactions that have ever been recorded on the blockchain. Some nodes storing all transactions are still necessary and they are called full nodes. Block pruning does not eliminate full nodes but it does indeed provide an economic incentive for the reduction and centralization (i.e. saving on storage costs). If addressed with the proposed integrated 2L that provides previously unseen economic incentives to participate in the network, this concern is less serious.
In other words, properly designed 2L should provide economic incentives for all nodes (full and pruned) to remain active and distributed. As of now, only miners earn revenue for participating. The lightning network proposes extra revenue for hubs. Instead, miner revenue could increase by processing 2L transactions as well, and full nodes could have an economic incentive as well. To mine, relatively high startup costs is necessary in order to get the most up to date mining hardware and proper cooling equipment. These have to be maintained and periodically upgraded. To run a full node, one needs only stable bandwidth and a sufficiently large storage, which can be expanded as needed, when needed. To run a full node, one needs only stable bandwidth and relatively small storage, which does not need to be expanded.
Keeping the distributed characteristic in mind, it would be much more secure for the bitcoin network if one could earn bitcoin by simply running a node, full or pruned. This could be integrated with a simple code change requiring each node to own a bitcoin address to which miners would send a fraction of processed transaction fees. Of course, pruned nodes would collectively receive the least transaction fee revenue (e.g. 10%), full nodes would collectively receive relatively larger transaction fee revenue (e.g. 20%), whereas mining facilities or mining pools would individually receive the largest transaction fee revenue (e.g. 70%) in addition to the full mining reward from newly mined blocks (i.e. 100%). This would assure that all nodes would remain relatively distributed. Hence, block pruning is a feasible solution.
However, in order to start pruning, one would have to have the full blockchain to begin with. As currently designed, downloading blockchain for the first time also audits previous blocks for accuracy, this can take days depending on one’s bandwidth. This online method is the only way to distribute the bitcoin blockchain and the bitcoin network so far. When the size of blockchain becomes a concern, a simpler distribution idea should be implemented offline. Consider distributions of Linux-based operating systems on USBs. Similarly, the full bitcoin blockchain up to a certain point can be distributed via easy-to-mail USBs. Note that even if we were to get the blockchain in bulk on such a USB, some form of a block audit would have to happen nevertheless.
A new form of checkpoint hashes could be added to the bitcoin code. For instance, each 2016 blocks (whenever the difficulty readjusts), all IDs from previous 2015 blocks would be hashed and recorded. That way, with our particular offline blockchain distribution, the first time user would have to audit only the key 2016th blocks, designed to occur on average once in roughly 2 weeks. This would significantly reduce bandwidth concerns for the auditing process because only each 2016th block would have to be uploaded online to be audited.
Overall, we are able to scale the bitcoin network via initial on-chain scaling approaches supplemented with off-chain scaling approaches. This upgrades the current network to a pruned peer-to-peer network with integrated 2L managed by miners and nodes who assure that the bitcoin network stays decentralized, distributed, immutable.
  • Discussion at /btc/comments/6vj47c/bitcoin_huh_wtf_is_going_on_should_we_scale_you is greatly encouraged.
  • Note that the author u/bit-architect appreciates any Bitcoin Cash donations on Reddit directly or on bitcoin addresses 178ZTiot2QVVKjru2f9MpzyeYawP81vaXi bitcoincash:qp7uqpv2tsftrdmu6e8qglwr2r38u4twlq3f7a48uq (Bitcoin Cash) and 1GqcFi4Cs1LVAxLxD3XMbJZbmjxD8SYY8S (Bitcoin Core).
  • EDIT: Donation addresses above updated.
submitted by bit-architect to btc [link] [comments]

The Concept of Bitcoin

The Concept of Bitcoin
https://preview.redd.it/5r9soz2ltq421.jpg?width=268&format=pjpg&auto=webp&s=6a89685f735b53ec1573eefe08c8646970de8124
What is Bitcoin?
Bitcoin is an experimental system of transfer and verification of property based on a network of peer to peer without any central authority.
The initial application and the main innovation of the Bitcoin network is a system of digital currency decentralized unit of account is bitcoin.
Bitcoin works with software and a protocol that allows participants to issue bitcoins and manage transactions in a collective and automatic way. As a free Protocol (open source), it also allows interoperability of software and services that use it. As a currency bitcoin is both a medium of payment and a store of value.
Bitcoin is designed to self-regulate. The limited inflation of the Bitcoin system is distributed homogeneously by computing the network power, and will be limited to 21 million divisible units up to the eighth decimal place. The functioning of the Exchange is secured by a general organization that everyone can examine, because everything is public: the basic protocols, cryptographic algorithms, programs making them operational, the data of accounts and discussions of the developers.
The possession of bitcoins is materialized by a sequence of numbers and letters that make up a virtual key allowing the expenditure of bitcoins associated with him on the registry. A person may hold several key compiled in a 'Bitcoin Wallet ', 'Keychain' web, software or hardware which allows access to the network in order to make transactions. Key to check the balance in bitcoins and public keys to receive payments. It contains also (often encrypted way) the private key associated with the public key. These private keys must remain secret, because their owner can spend bitcoins associated with them on the register. All support (keyrings) agrees to maintain the sequence of symbols constituting your keychain: paper, USB, memory stick, etc. With appropriate software, you can manage your assets on your computer or your phone.
Bitcoin on an account, to either a holder of bitcoins in has given you, for example in Exchange for property, either go through an Exchange platform that converts conventional currencies in bitcoins, is earned by participating in the operations of collective control of the currency.
The sources of Bitcoin codes have been released under an open source license MIT which allows to use, copy, modify, merge, publish, distribute, sublicense, and/or sell copies of the software, subject to insert a copyright notice into all copies.
Bitcoin creator, Satoshi Nakamoto
What is the Mining of bitcoin?
Technical details :
During mining, your computer performs cryptographic hashes (two successive SHA256) on what is called a header block. For each new hash, mining software uses a different random number that called Nuncio. According to the content of the block and the nonce value typically used to express the current target. This number is called the difficulty of mining. The difficulty of mining is calculated by comparing how much it is difficult to generate a block compared to the first created block. This means that a difficulty of 70000 is 70000 times more effort that it took to Satoshi Nakamoto to generate the first block. Where mining was much slower and poorly optimized.
The difficulty changes each 2016 blocks. The network tries to assign the difficulty in such a way that global computing power takes exactly 14 days to generate 2016 blocks. That's why the difficulty increases along with the power of the network.
Material :
In the beginning, mining with a processor (CPU) was the only way to undermine bitcoins. (GPU) graphics cards have possibly replaced the CPU due to their nature, which allowed an increase between 50 x to 100 x in computing power by using less electricity by megahash compared to a CPU.
Although any modern GPU can be used to make the mining, the brand AMD GPU architecture has proved to be far superior to nVidia to undermine bitcoins and the ATI Radeon HD 5870 card was the most economical for a time.
For a more complete list of graphics cards and their performance, see Wiki Bitcoin: comparison of mining equipment
In the same way that transition CPU to GPU, the world of mining has evolved into the use of the Field Programmable Gate Arrays (FPGA) as a mining platform. Although FPGAs did not offer an increase of 50 x to 100 x speed of calculation as the transition from CPU to GPU, they offered a better energy efficiency.
A typical HD/s 600 graphics card consumes about 400w of power, while a typical FPGA device can offer a rate of hash of 826 MH/s to 80w of power consumption, a gain of 5 x more calculations for the same energy power. Since energy efficiency is a key factor in the profitability of mining, it was an important step for the GPU to FPGA migration for many people.
The world of the mining of bitcoin is now migrating to the Application Specific Integrated Circuit (ASIC). An ASIC is a chip designed specifically to accomplish a single task. Unlike FPGAs, an ASIC is unable to be reprogrammed for other tasks. An ASIC designed to undermine bitcoins cannot and will not do anything else than to undermine bitcoins.
The stiffness of an ASIC allows us to offer an increase of 100 x computing power while reducing power consumption compared to all other technologies. For example, a classic device to offer 60 GH/s (1 hashes equals 1000 Megahash. 1GH/s = 1000 Mh/s) while consuming 60w of electricity. Compared to the GPU, it is an increase in computing power of 100 x and a reduction of power consumption by a factor of 7.
Unlike the generations of technologies that have preceded the ASIC, ASIC is the "end of the line" when we talk about important technology change. The CPUs have been replaced by the GPUs, themselves replaced by FPGAs that were replaced by ASICs.
There is nothing that can replace the ASICs now or in the immediate future. There will be technological refinements in ASIC products, and improvements in energy efficiency, but nothing that may match increased from 50 x to 100 x the computing power or a 7 x reduction in power consumption compared with the previous technology.
Which means that the energy efficiency of an ASIC device is the only important factor of all product ASIC, since the estimated lifetime of an ASIC device is superior to the entire history of the mining of bitcoin. It is conceivable that a purchased ASIC device today is still in operation in two years if the unit still offers a profitable enough economic to keep power consumption. The profitability of mining is also determined by the value of bitcoin but in all cases, more a device has a good energy efficiency, it is profitable.
Software :
There are two ways to make mining: by yourself or as part of a team (a pool). If you are mining for yourself, you must install the Bitcoin software and configure it to JSON-RPC (see: run Bitcoin). The other option is to join a pool. There are multiple available pools. With a pool, the profit generated by any block generated by a member of the team is split between all members of the team. The advantage of joining a team is to increase the frequency and stability of earnings (this is called reduce the variance) but gains will be lower. In the end, you will earn the same amount with the two approaches. Undermine solo allows you to receive earnings huge but very infrequent, while miner with a pool can offer you small stable and steady gains.
Once you have your software configured or that you have joined a pool, the next step is to configure the mining software. The software the most populare for ASIC/FPGA/GPU currently is CGminer or a derivative designed specifically for FPGAS and ASICs, BFGMiner.
If you want a quick overview of mining without install any software, try Bitcoin Plus, a Bitcoin minor running in your browser with your CPU. It is not profitable to make serious mining, but it is a good demonstration of the principle of the mining team.
submitted by Josephbitcoin to u/Josephbitcoin [link] [comments]

Bitcoin, huh? WTF is going on? Should we scale you on-chain or off-chain? Will you stay decentralized, distributed, immutable?

0. Shit, this is long, TLWR please! Too long, won't read.
EDIT: TLDR TLWR for clarity.
1. Bitcoin, huh? Brief introduction.
There are 3 sections to this overview. The first section is a brief introduction to bitcoin. The second section looks at recent developments in the bitcoin world, through the analogy of email attachments, and the third section discusses what could be next, through the perspective of resilience and network security.
This is just a continuation of a long, long, possibly never-ending debate that started with the release of the bitcoin whitepaper in 2008 (see https://bitcoin.org/bitcoin.pdf). The recent mess during the past few years boils down to the controversy with the block size limit and how to appropriately scale bitcoin, the keyword appropriately. Scaling bitcoin is a controversial debate with valid arguments from all sides (see https://en.bitcoin.it/wiki/Block_size_limit_controversy).
I have researched, studied, and written this overview as objectively and as impartially as possible. By all means, this is still an opinion and everyone is advised to draw their own conclusions. My efforts are to make at least a few readers aware that ultimately there is only one team, and that team is the team bitcoin. Yes, currently though, there are factions within the team bitcoin. I hope that we can get beyond partisan fights and work together for the best bitcoin. I support all scaling proposals as long as they are the best for the given moment in time. Personally, I hate propaganda and love free speech as long as it is not derogatory and as long as it allows for constructive discussions.
The goal of this overview is to explain to a novice how bitcoin network works, what has been keeping many bitcoin enthusiasts concerned, and if we can keep the bitcoin network with three main properties described as decentralized, distributed, immutable. Immutable means censorship resistant. For the distinction between decentralized and distributed, refer to Figure 1: Centralized, decentralized and distributed network models by Paul Baran (1964), which is a RAND Institute study to create a robust and nonlinear military communication network (see https://www.rand.org/content/dam/rand/pubs/research_memoranda/2006/RM3420.pdf). Note that for the overall network resilience and security, distributed is more desirable than decentralized, and the goal is to get as far away from central models as possible. Of course, nothing is strictly decentralized or strictly distributed and all network elements are at different levels of this spectrum.
For those unaware how bitcoin works, I recommend the Bitcoin Wikipedia (see https://en.bitcoin.it/wiki/Main_Page). In short, the bitcoin network includes users which make bitcoin transactions and send them to the network memory pool called mempool, nodes which store the public and pseudonymous ledger called blockchain and which help with receiving pending transactions and updating processed transactions, thus securing the overall network, and miners which also secure the bitcoin network by mining. Mining is the process of confirming pending bitcoin transactions, clearing them from the mempool, and adding them to blocks which build up the consecutive chain of blocks on the blockchain. The blockchain is therefore a decentralized and distributed ledger built on top of bitcoin transactions, therefore impossible to exist without bitcoin. If someone claims to be working on their own blockchain without bitcoin, by the definition of the bitcoin network however, they are not talking about the actual blockchain. Instead, they intend to own a different kind of a private database made to look like the public and pseudonymous blockchain ledger.
There are roughly a couple of dozen mining pools, each possibly with hundreds or thousands of miners participating in them, to several thousand nodes (see https://blockchain.info/pools and https://coin.dance/nodes). Therefore, the bitcoin network has at worst decentralized miners and at best distributed nodes. The miner and node design makes the blockchain resilient and immune to reversible changes, making it censorship resistant, thus immutable. The bitcoin blockchain avoids the previous need for a third party to trust. This is a very elegant solution to peer-to-peer financial exchange via a network that is all: decentralized, distributed, immutable. Extra features (escrow, reversibility via time-locks, and other features desirable in specific instances) can be integrated within the network or added on top of this network, however, they have not been implemented yet.
Miners who participate receive mining reward consisting of newly mined bitcoins at a predetermined deflationary rate and also transaction fees from actual bitcoin transactions being processed. It is estimated that in 2022, miners will have mined more than 90% of all 21 million bitcoins ever to be mined (see https://en.bitcoin.it/wiki/Controlled_supply). As the mining reward from newly mined blocks diminishes to absolute zero in 2140, the network eventually needs the transaction fees to become the main component of the reward. This can happen either via high-volume-low-cost transaction fees or low-volume-high-cost transaction fees. Obviously, there is the need to address the question of fees when dealing with the dilemma how to scale bitcoin. Which type of fees would you prefer and under which circumstances?
2. WTF is going on? Recent developments.
There are multiple sides to the scaling debate but to simplify it, first consider the 2 main poles. In particular, to scale bitcoin on blockchain or to scale it off it, that is the question!
The first side likes the idea of bitcoin as it has been until now. It prefers on-chain scaling envisioned by the bitcoin creator or a group of creators who chose the pseudonym Satoshi Nakamoto. It is now called Bitcoin Cash and somewhat religiously follows Satoshi’s vision from the 2008 whitepaper and their later public forum discussions (see https://bitcointalk.org/index.php?topic=1347.msg15366#msg15366). Creators’ vision is good to follow but it should not be followed blindly and dogmatically when better advancements are possible, the keyword when. To alleviate concerning backlog of transactions and rising fees, Bitcoin Cash proponents implemented a simple one-line code update which increased the block size limit for blockhain blocks from 1MB block size limit to a new, larger 8MB limit. This was done through a fork on August 1, 2017, which created Bitcoin Cash, and which kept the bitcoin transaction history until then. Bitcoin Cash has observed significant increase in support, from 3% of all bitcoin miners at first to over 44% of all bitcoin miners after 3 weeks on August 22, 2017 (see http://fork.lol/pow/hashrate and http://fork.lol/pow/hashrateabs).
An appropriate scaling analogy is to recall email attachments early on. They too were limited to a few MB at first, then 10MB, 20MB, up until 25MB on Gmail. But even then, Gmail eventually started using Google Drive internally. Note that Google Drive is a third party to Gmail, although yes, it is managed by the same entity.
The second side argues that bitcoin cannot work with such a scaling approach of pre-meditated MB increases. Arguments against block size increases include miner and node centralization, and bandwidth limitations. These are discussed in more detail in the third section of this overview. As an example of an alternative scaling approach, proponents of off-chain scaling want to jump to the internally integrated third party right away, without any MB increase and, sadly, without any discussion. Some of these proponents called one particular implementation method SegWit, which stands for Segregated Witness, and they argue that SegWit is the only way that we can ever scale up add the extra features to the bitcoin network. This is not necessarily true because other scaling solutions are feasible, such as already functioning Bitcoin Cash, and SegWit’s proposed solution will not use internally integrated third party as shown next. Note that although not as elegant as SegWit is today, there are other possibilities to integrate some extra features without SegWit (see /Bitcoin/comments/5dt8tz/confused_is_segwit_needed_for_lightning_network).
Due to the scaling controversy and the current backlog of transactions and already high fees, a third side hastily proposed a compromise to a 2MB increase in addition to the proposed SegWit implementation. They called it SegWit2x, which stands for Segregated Witness with 2MB block size limit increase. But the on-chain scaling and Bitcoin Cash proponents did not accept it due to SegWit’s design redundancy and hub centralization which are discussed next and revisited in the third section of this overview. After a few years of deadlock, that is why the first side broke free and created the Bitcoin Cash fork.
The second side stuck with bitcoin as it was. In a way, they inherited the bitcoin network without any major change to public eye. This is crucial because major changes are about to happen and the original bitcoin vision, as we have known it, is truly reflected only in what some media refer to as a forked clone, Bitcoin Cash. Note that to avoid confusion, this second side is referred to as Bitcoin Core by some or Legacy Bitcoin by others, although mainstream media still refers to it simply as Bitcoin. The core of Bitcoin Core is quite hardcore though. They too rejected the proposed compromise for SegWit2x and there are clear indications that they will push to keep SegWit only, forcing the third side with SegWit2x proponents to create another fork in November 2017 or to join Bitcoin Cash. Note that to certain degree, already implemented and working Bitcoin Cash is technically superior to SegWit2x which is yet to be deployed (see /Bitcoin/comments/6v0gll/why_segwit2x_b2x_is_technically_inferior_to).
Interestingly enough, those who agreed to SegWit2x have been in overwhelming majority, nearly 87% of all bitcoin miners on July 31, 2017 prior to the fork, and a little over 90% of remaining Bitcoin Core miners to date after the fork (see https://coin.dance/blocks). Despite such staggering support, another Bitcoin Core fork is anticipated later in November (see https://cointelegraph.com/news/bitcoin-is-splitting-once-again-are-you-ready) and the "Outcome #2: Segwit2x reneges on 2x or does not prioritize on-chain scaling" seems to be on track from the perspective of Bitcoin Core SegWit, publicly seen as the original Bitcoin (see https://blog.bridge21.io/before-and-after-the-great-bitcoin-fork-17d2aad5d512). The sad part is that although in their overwhelming majority, the miners who support SegWit2x would be the ones creating another Bitcoin Core SegWit2x fork or parting ways from the original Bitcoin.
In a way, this is an ironic example how bitcoin’s built-in resiliency to veto changes causes majority to part away when a small minority has status quo and holds off fully-consented progress. Ultimately, this will give the minority Bitcoin Core SegWit proponents the original Bitcoin branding, perhaps to lure in large institutional investors and monetize on bitcoin’s success as we have it seen it during the past 9 years since its inception. Recall that bitcoin of today is already a decentralized, distributed, immutable network by its definition. The bitcoin network was designed to be an alternative to centralized and mutable institutions, so prevalent in modern capitalist societies.
Bitcoin Core SegWit group wants to change the existing bitcoin network to a network with dominant third parties which, unlike Google Drive to Gmail, are not internal. In particular, they intend to do so via the lightning network, which is a second layer solution (2L). This particular 2L as currently designed relies on an artificial block size limit cap which creates a bottleneck in order to provide high incentives for miners to participate. It monetizes on backlog of transaction and high fees, which are allocated to miners, not any group in particular. Cheaper and more instantaneous transactions are shifted to the lightning network which is operated by hubs also earning revenue. Note that some of these hubs may choose to monitor transactions and can possibly censor who is allowed to participate in this no longer strictly peer-to-peer network.
We lose the immutability and instead we have a peer-to-hub-to-peer network that is mutable and at best decentralized, and certainly not distributed (see https://medium.com/@jonaldfyookball/mathematical-proof-that-the-lightning-network-cannot-be-a-decentralized-bitcoin-scaling-solution-1b8147650800). For regular day-to-day and recurring transactions, it is not a considerable risk or inconvenience. And one could choose to use the main chain any time to bypass the lightning network and truly transact peer-to-peer. But since the main chain has an entry barrier in the form of artificially instilled high transaction fees, common people are not able to use bitcoin as we have known it until now. Peer-to-peer bitcoin becomes institution-to-institution bitcoin with peer-to-hub-to-peer 2L.
To reiterate and stress, note the following lightning network design flaw again. Yes, activating SegWit and allowing 2L such as lightning allows for lower transaction fees to coexist side by side with more costly on-chain transactions. For those using this particularly prescribed 2L, the fees remain low. But since these 2L are managed by hubs, we introduce another element to trust, which is contrary to what the bitcoin network was designed to do at the first place. Over time, by the nature of the lightning network in its current design, these third party hubs grow to be centralized, just like Visa, Mastercard, Amex, Discover, etc. There is nothing wrong with that in general because it works just fine. But recall that bitcoin set out to create a different kind of a network. Instead of decentralized, distributed, immutable network with miners and nodes, with the lightning network we end up with at best decentralized but mutable network with hubs.
Note that Bitcoin Core SegWit has a US-based organization backing it with millions of dollars (see https://en.wikipedia.org/wiki/Blockstream and https://steemit.com/bitcoin/@adambalm/the-truth-about-who-is-behind-blockstream-and-segwit-as-the-saying-goes-follow-the-money). Their proponents are quite political and some even imply $1000 fees on the main bitcoin blockchain (see https://cointelegraph.com/news/ari-paul-tuur-demeester-look-forward-to-up-to-1k-bitcoin-fees). Contrary to them, Bitcoin Cash proponents intend to keep small fees on a scale of a few cents, which in large volume in larger blockchain blocks provide sufficient incentive for miners to participate.
On the one hand, sticking to the original vision of peer-to-peer network scaled on-chain has merit and holds potential for future value. On the other hand, 2L have potential to carry leaps forward from current financial infrastructure. As mentioned earlier, 2L will allow for extra features to be integrated off-chain (e.g. escrow, reversibility via time-locks), including entirely new features such as smart contracts, decentralized applications, some of which have been pioneered and tested on another cryptocurrency network called Ethereum. But such features could be one day implemented directly on the main bitcoin blockchain without the lightning network as currently designed, or perhaps with a truly integrated 2L proposed in the third section of this overview.
What makes the whole discussion even more confusing is that there are some proposals for specific 2L that would in fact increase privacy and make bitcoin transactions less pseudonymous than those on the current bitcoin blockchain now. Keep in mind that 2L are not necessarily undesirable. If they add features and keep the main network characteristics (decentralized, distributed, immutable), they should be embraced with open arms. But the lightning network as currently designed gives up immutability and hub centralization moves the network characteristic towards a decentralized rather than a distributed network.
In a sense, back to the initial email attachment analogy, even Gmail stopped with attachment limit increases and started hosting large files on Google Drive internally, with an embedded link in a Gmail email to download anything larger than 25MB from Google Drive. Anticipating the same scaling decisions, the question then becomes not if but when and how such 2L should be implemented, keeping the overall network security and network characteristics in mind. If you have not gotten it yet, repeat, repeat, repeat: decentralized, distributed, immutable. Is it the right time now and is SegWit (one way, my way or highway) truly the best solution?
Those siding away from Bitcoin Core SegWit also dislike that corporate entities behind Blockstream, the one publicly known corporate entity directly supporting SegWit, have allegedly applied for SegWit patents which may further restrict who may and who may not participate in the creation of future hubs, or how these hubs are controlled (see the alleged patent revelations, https://falkvinge.net/2017/05/01/blockstream-patents-segwit-makes-pieces-fall-place, the subsequent Twitter rebuttal Blockstream CEO, http://bitcoinist.com/adam-back-no-patents-segwit, and the subsequent legal threats to SegWit2x proponents /btc/comments/6vadfi/blockstream_threatening_legal_action_against). Regardless if the patent claims are precise or not, the fact remains that there is a corporate entity dictating and vetoing bitcoin developments. Objectively speaking, Bitcoin Core SegWit developers paid by Blockstream is a corporate takeover of the bitcoin network as we have known it.
And on the topic of patents and permissionless technological innovations, what makes all of this even more complicated is that a mining improvement technology called ASICboost is allowed on Bitcoin Cash. The main entities who forked from Bitcoin Core to form Bitcoin Cash had taken advantage of patents to the ASICboost technology on the original bitcoin network prior to the fork (see https://bitcoinmagazine.com/articles/breaking-down-bitcoins-asicboost-scandal). This boost saved estimated 20% electricity for miners on 1MB blocks and created unfair economic advantage for this one particular party. SegWit is one way that this boost is being eliminated, through the code. Larger blocks are another way to reduce the boost advantage, via decreased rate of collisions which made this boost happen at the first place (see https://bitcoinmagazine.com/articles/breaking-down-bitcoins-asicboost-scandal-solutions and https://bitslog.wordpress.com/2017/04/10/the-relation-between-segwit-and-asicboost-covert-and-overt). Therefore, the initial Bitcoin Cash proponents argue that eliminating ASICboost through the code is no longer needed or necessary.
Of course, saving any amount electricity between 0% and 20% is good for all on our planet but in reality any energy saved in a mining operation is used by the same mining operation to increase their mining capacity. In reality, there are no savings, there is just capacity redistribution. The question then becomes if it is okay that only one party currently and already holds onto this advantage, which they covertly hid for relatively long time, and which they could be using covertly on Bitcoin Cash if they desired to do so, even though it would an advantage to a smaller degree. To be fair to them, they are mining manufacturers and operators, they researched and developed the advantage from own resources, so perhaps they do indeed have the right to reap ASICboost benefits while they can. But perhaps it should happen in publicly know way, not behind closed doors, and should be temporary, with agreed patent release date.
In conclusion, there is no good and no bad actor, each side is its own shade of grey. All parties have their own truth (and villainy) to certain degree.
Bitcoin Cash's vision is for bitcoin to be an electronic cash platform and daily payment processor whereas Bitcoin Core SegWit seems to be drawn more to the ideas of bitcoin as an investment vehicle and a larger settlement layer with the payment processor function managed via at best decentralized third party hubs. Both can coexist, or either one can eventually prove more useful and digest the other one by taking over all use-cases.
Additionally, the most popular communication channel on /bitcoin with roughly 300k subscribers censors any alternative non-Bitcoin-Core-SegWit opinions and bans people from posting their ideas to discussions (see https://medium.com/@johnblocke/a-brief-and-incomplete-history-of-censorship-in-r-bitcoin-c85a290fe43). This is because their moderators are also supported by Blockstream. Note that the author of this overview has not gotten banned from this particular subreddit (yet), but has experienced shadow-banning first hand. Shadow-banning is a form of censorship. In this particular case, their moderator robot managed by people moderators, collaboratively with the people moderators, do the following:
  • (1) look for "Bitcoin Cash" and other undesirable keywords,
  • (2) warn authors that “Bitcoin Cash” is not true bitcoin (which objectively speaking it is, and which is by no means “BCash” that Bitcoin Core SegWit proponents refer to, in a coordinated effort to further confuse public, especially since some of them have published plans to officially release another cryptocurrency called “BCash” in 2018, see https://medium.com/@freetrade68/announcing-bcash-8b938329eaeb),
  • (3) further warn authors that if they try to post such opinions again, they could banned permanently,
  • (4) tell authors to delete their already posted posts or comments,
  • (5) hide their post from publicly seen boards with all other posts, thus preventing it from being seeing by the other participants in this roughly 300k public forum,
  • (6) and in extreme cases actually “remove” their valid opinions if they slip by uncensored, gain traction, and are often times raise to popularity as comments to other uncensored posts (see /btc/comments/6v3ee8/on_a_reply_i_made_in_rbitcoin_that_had_over_350 and /btc/comments/6vbyv0/in_case_we_needed_more_evidence_500_upvotes).
This effectively silences objective opinions and creates a dangerous echo-chamber. Suppressing free speech and artificially blowing up transaction fees on Bitcoin Core SegWit is against bitcoin’s fundamental values. Therefore, instead of the original Reddit communication channel, many bitcoin enthusiasts migrated to /btc which has roughly 60k subscribers as of now, up from 20k subscribers a year ago in August 2016 (see http://redditmetrics.com/btc). Moderators there do not censor opinions and allow all polite and civil discussions about scaling, including all opinions on Bitcoin Cash, Bitcoin Core, etc.
Looking beyond their respective leaderships and communication channels, let us review a few network fundamentals and recent developments in Bitcoin Core and Bitcoin Cash networks. Consequently, for now, these present Bitcoin Cash with more favorable long-term prospects.
  • (1) The stress-test and/or attack on the Bitcoin Cash mempool earlier on August 16, 2017 showed that 8MB blocks do work as intended, without catastrophic complications that Bitcoin Core proponents anticipated and from which they attempted to discourage others (see https://jochen-hoenicke.de/queue/uahf/#2w for the Bitcoin Cash mempool and https://core.jochen-hoenicke.de/queue/#2w for the Bitcoin Core mempool). Note that when compared to the Bitcoin Core mempool on their respective 2 week views, one can observe how each network handles backlogs. On the most recent 2 week graphs, the Y-scale for Bitcoin Core is 110k vs. 90k on Bitcoin Cash. In other words, at the moment, Bitcoin Cash works better than Bitcoin Core even though there is clearly not as big demand for Bitcoin Cash as there is for Bitcoin Core. The lack of demand for Bitcoin Cash is partly because Bitcoin Cash is only 3 weeks old and not many merchants have started accepting it, and only a limited number of software applications to use Bitcoin Cash has been released so far. By all means, the Bitcoin Cash stress-test and/or attack from August 16, 2017 reveals that the supply will handle the increased demand, more affordably, and at a much quicker rate.
  • (2) Bitcoin Cash “BCH” mining has become temporarily more profitable than mining Bitcoin Core “BTC” (see http://fork.lol). Besides temporary loss of miners, this puts Bitcoin Core in danger of permanently fleeing miners. Subsequently, mempool backlog and transaction fees are anticipated to increase further.
  • (3) When compared to Bitcoin Cash transaction fees at roughly $0.02, transaction fees per kB are over 800 times as expensive on Bitcoin Core, currently at over $16 (see https://cashvscore.com).
  • (4) Tipping service that used to work on Bitcoin Core's /Bitcoin a few years back has been revived by a new tipping service piloted on the more neutral /btc with the integration of Bitcoin Cash (see /cashtipperbot).
3. Should we scale you on-chain or off-chain? Scaling bitcoin.
Let us start with the notion that we are impartial to both Bitcoin Core (small blocks, off-chain scaling only) and Bitcoin Cash (big blocks, on-chain scaling only) schools of thought. We will support any or all ideas, as long as they allow for bitcoin to grow organically and eventually succeed as a peer-to-peer network that remains decentralized, distributed, immutable. Should we have a preference in either of the proposed scaling solutions?
First, let us briefly address Bitcoin Core and small blocks again. From the second section of this overview, we understand that there are proposed off-chain scaling methods via second layer solutions (2L), most notably soon-to-be implemented lightning via SegWit on Bitcoin Core. Unfortunately, the lightning network diminishes distributed and immutable network properties by replacing bitcoin’s peer-to-peer network with a two-layer institution-to-institution network and peer-to-hub-to-peer 2L. Do we need this particular 2L right now? Is its complexity truly needed? Is it not at best somewhat cumbersome (if not very redundant)? In addition to ridiculously high on-chain transaction fees illustrated in the earlier section, the lightning network code is perhaps more robust than it needs to be now, with thousands of lines of code, thus possibly opening up to new vectors for bugs or attacks (see https://en.bitcoin.it/wiki/Lightning_Network and https://github.com/lightningnetwork/lnd). Additionally, this particular 2L as currently designed unnecessarily introduces third parties, hubs, that are expected to centralize. We already have a working code that has been tested and proven to handle 8MB blocks, as seen with Bitcoin Cash on August 16, 2017 (see https://www.cryptocoinsnews.com/first-8mb-bitcoin-cash-block-just-mined). At best, these third party hubs would be decentralized but they would not be distributed. And these hubs would be by no means integral to the original bitcoin network with users, nodes, and miners.
To paraphrase Ocam’s razor problem solving principle, the simplest solution with the most desirable features will prevail (see https://en.wikipedia.org/wiki/Occam%27s_razor). The simplest scalability solution today is Bitcoin Cash because it updates only one line of code, which instantly increases the block size limit. This also allows other companies building on Bitcoin Cash to reduce their codes when compared to Bitcoin Core SegWit’s longer code, some even claiming ten-fold reductions (see /btc/comments/6vdm7y/ryan_x_charles_reveals_bcc_plan). The bitcoin ecosystem not only includes the network but it also includes companies building services on top of it. When these companies can reduce their vectors for bugs or attacks, the entire ecosystem is healthier and more resilient to hacking disasters. Obviously, changes to the bitcoin network code are desirable to be as few and as elegant as possible.
But what are the long-term implications of doing the one-line update repeatedly? Eventually, blocks would have to reach over 500MB size if they were to process Visa-level capacity (see https://en.bitcoin.it/wiki/Scalability). With decreasing costs of IT infrastructure, bandwidth and storage could accommodate it, but the overhead costs would increase significantly, implying miner and/or full node centralization further discussed next. To decrease this particular centralization risk, which some consider undesirable and others consider irrelevant, built-in and integrated 2L could keep the block size at a reasonably small-yet-still-large limit.
At the first sight, these 2L would remedy the risk of centralization by creating their own centralization incentive. At the closer look and Ocam’s razor principle again, these 2L do not have to become revenue-seeking third party hubs as designed with the current lightning network. They can be integrated into the current bitcoin network with at worst decentralized miners and at best distributed nodes. Recall that miners will eventually need to supplement their diminishing mining reward from new blocks. Additionally, as of today, the nodes have no built-in economic incentive to run other than securing the network and keeping the network’s overall value at its current level. Therefore, if new 2L were to be developed, they should be designed in a similar way like the lightning network, with the difference that the transaction processing revenue would not go to third party hubs but to the already integrated miners and nodes.
In other words, why do we need extra hubs if we have miners and nodes already? Let us consider the good elements from the lightning network, forget the unnecessary hubs, and focus on integrating the hubs’ responsibilities to already existing miner and node protocols. Why would we add extra elements to the system that already functions with the minimum number of elements possible? Hence, 2L are not necessarily undesirable as long as they do not unnecessarily introduce third party hubs.
Lastly, let us discuss partial on-chain scaling with the overall goal of network security. The network security we seek is the immutability and resilience via distributed elements within otherwise decentralized and distributed network. It is not inconceivable to scale bitcoin with bigger blocks as needed, when needed, to a certain degree. The thought process is the following:
  • (1) Block size limit:
We need some upper limit to avoid bloating the network with spam transactions. Okay, that makes sense. Now, what should this limit be? If we agree to disagree with small block size limit stuck at 1MB, and if we are fine with flexible block size limit increases (inspired by mining difficulty readjustments but on a longer time scale) or big block propositions (to be increased incrementally), what is holding us off next?
  • (2) Miner centralization:
Bigger blocks mean that more data will be transferred on the bitcoin network. Consequently, more bandwidth and data storage will be required. This will create decentralized miners instead of distributed ones. Yes, that is true. And it has already happened, due to the economy of scale, in particular the efficiency of grouping multiple miners in centralized facilities, and the creation of mining pools collectively and virtually connecting groups of miners not physically present in the same facility. These facilities tend to have huge overhead costs and the data storage and bandwidth increase costs are negligible in this context. The individual miners participating in mining pools will quite likely notice somewhat higher operational costs but allowing for additional revenue from integrated 2L described earlier will give them economic incentive to remain actively participating. Note that mining was never supposed to be strictly distributed and it was always at worst decentralized, as defined in the first section of this overview. To assure at best a distributed network, we have nodes.
  • (3) Node centralization:
Bigger blocks mean that more data will be transferred on the bitcoin network. Consequently, more bandwidth and data storage will be required. This will create decentralized nodes instead of distributed ones. Again, recall that we have a spectrum of decentralized and distributed networks in mind, not their absolutes. The concern about the node centralization (and the subsequent shift from distributed to decentralized network property) is valid if we only follow on-chain scaling to inconsiderate MB values. If addressed with the proposed integrated 2L that provides previously unseen economic incentives to participate in the network, this concern is less serious.
Furthermore, other methods to reduce bandwidth and storage needs can be used. A popular proposal is block pruning, which keeps only the most recent 550 blocks, and eventually deletes any older blocks (see https://news.bitcoin.com/pros-and-cons-on-bitcoin-block-pruning). Block pruning addresses storage needs and makes sure that not all nodes participating in the bitcoin network have to store all transactions that have ever been recorded on the blockchain. Some nodes storing all transactions are still necessary and they are called full nodes. Block pruning does not eliminate full nodes but it does indeed provide an economic incentive for the reduction and centralization (i.e. saving on storage costs). If addressed with the proposed integrated 2L that provides previously unseen economic incentives to participate in the network, this concern is less serious.
In other words, properly designed 2L should provide economic incentives for all nodes (full and pruned) to remain active and distributed. As of now, only miners earn revenue for participating. The lightning network proposes extra revenue for hubs. Instead, miner revenue could increase by processing 2L transactions as well, and full nodes could have an economic incentive as well. To mine, relatively high startup costs is necessary in order to get the most up to date mining hardware and proper cooling equipment. These have to be maintained and periodically upgraded. To run a full node, one needs only stable bandwidth and a sufficiently large storage, which can be expanded as needed, when needed. To run a full node, one needs only stable bandwidth and relatively small storage, which does not need to be expanded.
Keeping the distributed characteristic in mind, it would be much more secure for the bitcoin network if one could earn bitcoin by simply running a node, full or pruned. This could be integrated with a simple code change requiring each node to own a bitcoin address to which miners would send a fraction of processed transaction fees. Of course, pruned nodes would collectively receive the least transaction fee revenue (e.g. 10%), full nodes would collectively receive relatively larger transaction fee revenue (e.g. 20%), whereas mining facilities or mining pools would individually receive the largest transaction fee revenue (e.g. 70%) in addition to the full mining reward from newly mined blocks (i.e. 100%). This would assure that all nodes would remain relatively distributed. Hence, block pruning is a feasible solution.
However, in order to start pruning, one would have to have the full blockchain to begin with. As currently designed, downloading blockchain for the first time also audits previous blocks for accuracy, this can take days depending on one’s bandwidth. This online method is the only way to distribute the bitcoin blockchain and the bitcoin network so far. When the size of blockchain becomes a concern, a simpler distribution idea should be implemented offline. Consider distributions of Linux-based operating systems on USBs. Similarly, the full bitcoin blockchain up to a certain point can be distributed via easy-to-mail USBs. Note that even if we were to get the blockchain in bulk on such a USB, some form of a block audit would have to happen nevertheless.
A new form of checkpoint hashes could be added to the bitcoin code. For instance, each 2016 blocks (whenever the difficulty readjusts), all IDs from previous 2015 blocks would be hashed and recorded. That way, with our particular offline blockchain distribution, the first time user would have to audit only the key 2016th blocks, designed to occur on average once in roughly 2 weeks. This would significantly reduce bandwidth concerns for the auditing process because only each 2016th block would have to be uploaded online to be audited.
Overall, we are able to scale the bitcoin network via initial on-chain scaling approaches supplemented with off-chain scaling approaches. This upgrades the current network to a pruned peer-to-peer network with integrated 2L managed by miners and nodes who assure that the bitcoin network stays decentralized, distributed, immutable.
submitted by bit-architect to Bitcoincash [link] [comments]

Bitcoin, huh? WTF is going on? Should we scale you on-chain or off-chain? Will you stay decentralized, distributed, immutable?

0. Shit, this is long, TLWR please! Too long, won't read.
EDIT: TLDR TLWR for clarity.
1. Bitcoin, huh? Brief introduction.
There are 3 sections to this overview. The first section is a brief introduction to bitcoin. The second section looks at recent developments in the bitcoin world, through the analogy of email attachments, and the third section discusses what could be next, through the perspective of resilience and network security.
This is just a continuation of a long, long, possibly never-ending debate that started with the release of the bitcoin whitepaper in 2008 (see https://bitcoin.org/bitcoin.pdf). The recent mess during the past few years boils down to the controversy with the block size limit and how to appropriately scale bitcoin, the keyword appropriately. Scaling bitcoin is a controversial debate with valid arguments from all sides (see https://en.bitcoin.it/wiki/Block_size_limit_controversy).
I have researched, studied, and written this overview as objectively and as impartially as possible. By all means, this is still an opinion and everyone is advised to draw their own conclusions. My efforts are to make at least a few readers aware that ultimately there is only one team, and that team is the team bitcoin. Yes, currently though, there are factions within the team bitcoin. I hope that we can get beyond partisan fights and work together for the best bitcoin. I support all scaling proposals as long as they are the best for the given moment in time. Personally, I hate propaganda and love free speech as long as it is not derogatory and as long as it allows for constructive discussions.
The goal of this overview is to explain to a novice how bitcoin network works, what has been keeping many bitcoin enthusiasts concerned, and if we can keep the bitcoin network with three main properties described as decentralized, distributed, immutable. Immutable means censorship resistant. For the distinction between decentralized and distributed, refer to Figure 1: Centralized, decentralized and distributed network models by Paul Baran (1964), which is a RAND Institute study to create a robust and nonlinear military communication network (see https://www.rand.org/content/dam/rand/pubs/research_memoranda/2006/RM3420.pdf). Note that for the overall network resilience and security, distributed is more desirable than decentralized, and the goal is to get as far away from central models as possible. Of course, nothing is strictly decentralized or strictly distributed and all network elements are at different levels of this spectrum.
For those unaware how bitcoin works, I recommend the Bitcoin Wikipedia (see https://en.bitcoin.it/wiki/Main_Page). In short, the bitcoin network includes users which make bitcoin transactions and send them to the network memory pool called mempool, nodes which store the public and pseudonymous ledger called blockchain and which help with receiving pending transactions and updating processed transactions, thus securing the overall network, and miners which also secure the bitcoin network by mining. Mining is the process of confirming pending bitcoin transactions, clearing them from the mempool, and adding them to blocks which build up the consecutive chain of blocks on the blockchain. The blockchain is therefore a decentralized and distributed ledger built on top of bitcoin transactions, therefore impossible to exist without bitcoin. If someone claims to be working on their own blockchain without bitcoin, by the definition of the bitcoin network however, they are not talking about the actual blockchain. Instead, they intend to own a different kind of a private database made to look like the public and pseudonymous blockchain ledger.
There are roughly a couple of dozen mining pools, each possibly with hundreds or thousands of miners participating in them, to several thousand nodes (see https://blockchain.info/pools and https://coin.dance/nodes). Therefore, the bitcoin network has at worst decentralized miners and at best distributed nodes. The miner and node design makes the blockchain resilient and immune to reversible changes, making it censorship resistant, thus immutable. The bitcoin blockchain avoids the previous need for a third party to trust. This is a very elegant solution to peer-to-peer financial exchange via a network that is all: decentralized, distributed, immutable. Extra features (escrow, reversibility via time-locks, and other features desirable in specific instances) can be integrated within the network or added on top of this network, however, they have not been implemented yet.
Miners who participate receive mining reward consisting of newly mined bitcoins at a predetermined deflationary rate and also transaction fees from actual bitcoin transactions being processed. It is estimated that in 2022, miners will have mined more than 90% of all 21 million bitcoins ever to be mined (see https://en.bitcoin.it/wiki/Controlled_supply). As the mining reward from newly mined blocks diminishes to absolute zero in 2140, the network eventually needs the transaction fees to become the main component of the reward. This can happen either via high-volume-low-cost transaction fees or low-volume-high-cost transaction fees. Obviously, there is the need to address the question of fees when dealing with the dilemma how to scale bitcoin. Which type of fees would you prefer and under which circumstances?
2. WTF is going on? Recent developments.
There are multiple sides to the scaling debate but to simplify it, first consider the 2 main poles. In particular, to scale bitcoin on blockchain or to scale it off it, that is the question!
The first side likes the idea of bitcoin as it has been until now. It prefers on-chain scaling envisioned by the bitcoin creator or a group of creators who chose the pseudonym Satoshi Nakamoto. It is now called Bitcoin Cash and somewhat religiously follows Satoshi’s vision from the 2008 whitepaper and their later public forum discussions (see https://bitcointalk.org/index.php?topic=1347.msg15366#msg15366). Creators’ vision is good to follow but it should not be followed blindly and dogmatically when better advancements are possible, the keyword when. To alleviate concerning backlog of transactions and rising fees, Bitcoin Cash proponents implemented a simple one-line code update which increased the block size limit for blockhain blocks from 1MB block size limit to a new, larger 8MB limit. This was done through a fork on August 1, 2017, which created Bitcoin Cash, and which kept the bitcoin transaction history until then. Bitcoin Cash has observed significant increase in support, from 3% of all bitcoin miners at first to over 44% of all bitcoin miners after 3 weeks on August 22, 2017 (see http://fork.lol/pow/hashrate and http://fork.lol/pow/hashrateabs).
An appropriate scaling analogy is to recall email attachments early on. They too were limited to a few MB at first, then 10MB, 20MB, up until 25MB on Gmail. But even then, Gmail eventually started using Google Drive internally. Note that Google Drive is a third party to Gmail, although yes, it is managed by the same entity.
The second side argues that bitcoin cannot work with such a scaling approach of pre-meditated MB increases. Arguments against block size increases include miner and node centralization, and bandwidth limitations. These are discussed in more detail in the third section of this overview. As an example of an alternative scaling approach, proponents of off-chain scaling want to jump to the internally integrated third party right away, without any MB increase and, sadly, without any discussion. Some of these proponents called one particular implementation method SegWit, which stands for Segregated Witness, and they argue that SegWit is the only way that we can ever scale up add the extra features to the bitcoin network. This is not necessarily true because other scaling solutions are feasible, such as already functioning Bitcoin Cash, and SegWit’s proposed solution will not use internally integrated third party as shown next. Note that although not as elegant as SegWit is today, there are other possibilities to integrate some extra features without SegWit (see /Bitcoin/comments/5dt8tz/confused_is_segwit_needed_for_lightning_network).
Due to the scaling controversy and the current backlog of transactions and already high fees, a third side hastily proposed a compromise to a 2MB increase in addition to the proposed SegWit implementation. They called it SegWit2x, which stands for Segregated Witness with 2MB block size limit increase. But the on-chain scaling and Bitcoin Cash proponents did not accept it due to SegWit’s design redundancy and hub centralization which are discussed next and revisited in the third section of this overview. After a few years of deadlock, that is why the first side broke free and created the Bitcoin Cash fork.
The second side stuck with bitcoin as it was. In a way, they inherited the bitcoin network without any major change to public eye. This is crucial because major changes are about to happen and the original bitcoin vision, as we have known it, is truly reflected only in what some media refer to as a forked clone, Bitcoin Cash. Note that to avoid confusion, this second side is referred to as Bitcoin Core by some or Legacy Bitcoin by others, although mainstream media still refers to it simply as Bitcoin. The core of Bitcoin Core is quite hardcore though. They too rejected the proposed compromise for SegWit2x and there are clear indications that they will push to keep SegWit only, forcing the third side with SegWit2x proponents to create another fork in November 2017 or to join Bitcoin Cash. Note that to certain degree, already implemented and working Bitcoin Cash is technically superior to SegWit2x which is yet to be deployed (see /Bitcoin/comments/6v0gll/why_segwit2x_b2x_is_technically_inferior_to).
Interestingly enough, those who agreed to SegWit2x have been in overwhelming majority, nearly 87% of all bitcoin miners on July 31, 2017 prior to the fork, and a little over 90% of remaining Bitcoin Core miners to date after the fork (see https://coin.dance/blocks). Despite such staggering support, another Bitcoin Core fork is anticipated later in November (see https://cointelegraph.com/news/bitcoin-is-splitting-once-again-are-you-ready) and the "Outcome #2: Segwit2x reneges on 2x or does not prioritize on-chain scaling" seems to be on track from the perspective of Bitcoin Core SegWit, publicly seen as the original Bitcoin (see https://blog.bridge21.io/before-and-after-the-great-bitcoin-fork-17d2aad5d512). The sad part is that although in their overwhelming majority, the miners who support SegWit2x would be the ones creating another Bitcoin Core SegWit2x fork or parting ways from the original Bitcoin.
In a way, this is an ironic example how bitcoin’s built-in resiliency to veto changes causes majority to part away when a small minority has status quo and holds off fully-consented progress. Ultimately, this will give the minority Bitcoin Core SegWit proponents the original Bitcoin branding, perhaps to lure in large institutional investors and monetize on bitcoin’s success as we have it seen it during the past 9 years since its inception. Recall that bitcoin of today is already a decentralized, distributed, immutable network by its definition. The bitcoin network was designed to be an alternative to centralized and mutable institutions, so prevalent in modern capitalist societies.
Bitcoin Core SegWit group wants to change the existing bitcoin network to a network with dominant third parties which, unlike Google Drive to Gmail, are not internal. In particular, they intend to do so via the lightning network, which is a second layer solution (2L). This particular 2L as currently designed relies on an artificial block size limit cap which creates a bottleneck in order to provide high incentives for miners to participate. It monetizes on backlog of transaction and high fees, which are allocated to miners, not any group in particular. Cheaper and more instantaneous transactions are shifted to the lightning network which is operated by hubs also earning revenue. Note that some of these hubs may choose to monitor transactions and can possibly censor who is allowed to participate in this no longer strictly peer-to-peer network.
We lose the immutability and instead we have a peer-to-hub-to-peer network that is mutable and at best decentralized, and certainly not distributed (see https://medium.com/@jonaldfyookball/mathematical-proof-that-the-lightning-network-cannot-be-a-decentralized-bitcoin-scaling-solution-1b8147650800). For regular day-to-day and recurring transactions, it is not a considerable risk or inconvenience. And one could choose to use the main chain any time to bypass the lightning network and truly transact peer-to-peer. But since the main chain has an entry barrier in the form of artificially instilled high transaction fees, common people are not able to use bitcoin as we have known it until now. Peer-to-peer bitcoin becomes institution-to-institution bitcoin with peer-to-hub-to-peer 2L.
To reiterate and stress, note the following lightning network design flaw again. Yes, activating SegWit and allowing 2L such as lightning allows for lower transaction fees to coexist side by side with more costly on-chain transactions. For those using this particularly prescribed 2L, the fees remain low. But since these 2L are managed by hubs, we introduce another element to trust, which is contrary to what the bitcoin network was designed to do at the first place. Over time, by the nature of the lightning network in its current design, these third party hubs grow to be centralized, just like Visa, Mastercard, Amex, Discover, etc. There is nothing wrong with that in general because it works just fine. But recall that bitcoin set out to create a different kind of a network. Instead of decentralized, distributed, immutable network with miners and nodes, with the lightning network we end up with at best decentralized but mutable network with hubs.
Note that Bitcoin Core SegWit has a US-based organization backing it with millions of dollars (see https://en.wikipedia.org/wiki/Blockstream and https://steemit.com/bitcoin/@adambalm/the-truth-about-who-is-behind-blockstream-and-segwit-as-the-saying-goes-follow-the-money). Their proponents are quite political and some even imply $1000 fees on the main bitcoin blockchain (see https://cointelegraph.com/news/ari-paul-tuur-demeester-look-forward-to-up-to-1k-bitcoin-fees). Contrary to them, Bitcoin Cash proponents intend to keep small fees on a scale of a few cents, which in large volume in larger blockchain blocks provide sufficient incentive for miners to participate.
On the one hand, sticking to the original vision of peer-to-peer network scaled on-chain has merit and holds potential for future value. On the other hand, 2L have potential to carry leaps forward from current financial infrastructure. As mentioned earlier, 2L will allow for extra features to be integrated off-chain (e.g. escrow, reversibility via time-locks), including entirely new features such as smart contracts, decentralized applications, some of which have been pioneered and tested on another cryptocurrency network called Ethereum. But such features could be one day implemented directly on the main bitcoin blockchain without the lightning network as currently designed, or perhaps with a truly integrated 2L proposed in the third section of this overview.
What makes the whole discussion even more confusing is that there are some proposals for specific 2L that would in fact increase privacy and make bitcoin transactions less pseudonymous than those on the current bitcoin blockchain now. Keep in mind that 2L are not necessarily undesirable. If they add features and keep the main network characteristics (decentralized, distributed, immutable), they should be embraced with open arms. But the lightning network as currently designed gives up immutability and hub centralization moves the network characteristic towards a decentralized rather than a distributed network.
In a sense, back to the initial email attachment analogy, even Gmail stopped with attachment limit increases and started hosting large files on Google Drive internally, with an embedded link in a Gmail email to download anything larger than 25MB from Google Drive. Anticipating the same scaling decisions, the question then becomes not if but when and how such 2L should be implemented, keeping the overall network security and network characteristics in mind. If you have not gotten it yet, repeat, repeat, repeat: decentralized, distributed, immutable. Is it the right time now and is SegWit (one way, my way or highway) truly the best solution?
Those siding away from Bitcoin Core SegWit also dislike that corporate entities behind Blockstream, the one publicly known corporate entity directly supporting SegWit, have allegedly applied for SegWit patents which may further restrict who may and who may not participate in the creation of future hubs, or how these hubs are controlled (see the alleged patent revelations, https://falkvinge.net/2017/05/01/blockstream-patents-segwit-makes-pieces-fall-place, the subsequent Twitter rebuttal Blockstream CEO, http://bitcoinist.com/adam-back-no-patents-segwit, and the subsequent legal threats to SegWit2x proponents /btc/comments/6vadfi/blockstream_threatening_legal_action_against). Regardless if the patent claims are precise or not, the fact remains that there is a corporate entity dictating and vetoing bitcoin developments. Objectively speaking, Bitcoin Core SegWit developers paid by Blockstream is a corporate takeover of the bitcoin network as we have known it.
And on the topic of patents and permissionless technological innovations, what makes all of this even more complicated is that a mining improvement technology called ASICboost is allowed on Bitcoin Cash. The main entities who forked from Bitcoin Core to form Bitcoin Cash had taken advantage of patents to the ASICboost technology on the original bitcoin network prior to the fork (see https://bitcoinmagazine.com/articles/breaking-down-bitcoins-asicboost-scandal). This boost saved estimated 20% electricity for miners on 1MB blocks and created unfair economic advantage for this one particular party. SegWit is one way that this boost is being eliminated, through the code. Larger blocks are another way to reduce the boost advantage, via decreased rate of collisions which made this boost happen at the first place (see https://bitcoinmagazine.com/articles/breaking-down-bitcoins-asicboost-scandal-solutions and https://bitslog.wordpress.com/2017/04/10/the-relation-between-segwit-and-asicboost-covert-and-overt). Therefore, the initial Bitcoin Cash proponents argue that eliminating ASICboost through the code is no longer needed or necessary.
Of course, saving any amount electricity between 0% and 20% is good for all on our planet but in reality any energy saved in a mining operation is used by the same mining operation to increase their mining capacity. In reality, there are no savings, there is just capacity redistribution. The question then becomes if it is okay that only one party currently and already holds onto this advantage, which they covertly hid for relatively long time, and which they could be using covertly on Bitcoin Cash if they desired to do so, even though it would an advantage to a smaller degree. To be fair to them, they are mining manufacturers and operators, they researched and developed the advantage from own resources, so perhaps they do indeed have the right to reap ASICboost benefits while they can. But perhaps it should happen in publicly know way, not behind closed doors, and should be temporary, with agreed patent release date.
In conclusion, there is no good and no bad actor, each side is its own shade of grey. All parties have their own truth (and villainy) to certain degree.
Bitcoin Cash's vision is for bitcoin to be an electronic cash platform and daily payment processor whereas Bitcoin Core SegWit seems to be drawn more to the ideas of bitcoin as an investment vehicle and a larger settlement layer with the payment processor function managed via at best decentralized third party hubs. Both can coexist, or either one can eventually prove more useful and digest the other one by taking over all use-cases.
Additionally, the most popular communication channel on /bitcoin with roughly 300k subscribers censors any alternative non-Bitcoin-Core-SegWit opinions and bans people from posting their ideas to discussions (see https://medium.com/@johnblocke/a-brief-and-incomplete-history-of-censorship-in-r-bitcoin-c85a290fe43). This is because their moderators are also supported by Blockstream. Note that the author of this overview has not gotten banned from this particular subreddit (yet), but has experienced shadow-banning first hand. Shadow-banning is a form of censorship. In this particular case, their moderator robot managed by people moderators, collaboratively with the people moderators, do the following:
  • (1) look for "Bitcoin Cash" and other undesirable keywords,
  • (2) warn authors that “Bitcoin Cash” is not true bitcoin (which objectively speaking it is, and which is by no means “BCash” that Bitcoin Core SegWit proponents refer to, in a coordinated effort to further confuse public, especially since some of them have published plans to officially release another cryptocurrency called “BCash” in 2018, see https://medium.com/@freetrade68/announcing-bcash-8b938329eaeb),
  • (3) further warn authors that if they try to post such opinions again, they could banned permanently,
  • (4) tell authors to delete their already posted posts or comments,
  • (5) hide their post from publicly seen boards with all other posts, thus preventing it from being seeing by the other participants in this roughly 300k public forum,
  • (6) and in extreme cases actually “remove” their valid opinions if they slip by uncensored, gain traction, and are often times raise to popularity as comments to other uncensored posts (see /btc/comments/6v3ee8/on_a_reply_i_made_in_rbitcoin_that_had_over_350 and /btc/comments/6vbyv0/in_case_we_needed_more_evidence_500_upvotes).
This effectively silences objective opinions and creates a dangerous echo-chamber. Suppressing free speech and artificially blowing up transaction fees on Bitcoin Core SegWit is against bitcoin’s fundamental values. Therefore, instead of the original Reddit communication channel, many bitcoin enthusiasts migrated to /btc which has roughly 60k subscribers as of now, up from 20k subscribers a year ago in August 2016 (see http://redditmetrics.com/btc). Moderators there do not censor opinions and allow all polite and civil discussions about scaling, including all opinions on Bitcoin Cash, Bitcoin Core, etc.
Looking beyond their respective leaderships and communication channels, let us review a few network fundamentals and recent developments in Bitcoin Core and Bitcoin Cash networks. Consequently, for now, these present Bitcoin Cash with more favorable long-term prospects.
  • (1) The stress-test and/or attack on the Bitcoin Cash mempool earlier on August 16, 2017 showed that 8MB blocks do work as intended, without catastrophic complications that Bitcoin Core proponents anticipated and from which they attempted to discourage others (see https://jochen-hoenicke.de/queue/uahf/#2w for the Bitcoin Cash mempool and https://core.jochen-hoenicke.de/queue/#2w for the Bitcoin Core mempool). Note that when compared to the Bitcoin Core mempool on their respective 2 week views, one can observe how each network handles backlogs. On the most recent 2 week graphs, the Y-scale for Bitcoin Core is 110k vs. 90k on Bitcoin Cash. In other words, at the moment, Bitcoin Cash works better than Bitcoin Core even though there is clearly not as big demand for Bitcoin Cash as there is for Bitcoin Core. The lack of demand for Bitcoin Cash is partly because Bitcoin Cash is only 3 weeks old and not many merchants have started accepting it, and only a limited number of software applications to use Bitcoin Cash has been released so far. By all means, the Bitcoin Cash stress-test and/or attack from August 16, 2017 reveals that the supply will handle the increased demand, more affordably, and at a much quicker rate.
  • (2) Bitcoin Cash “BCH” mining has become temporarily more profitable than mining Bitcoin Core “BTC” (see http://fork.lol). Besides temporary loss of miners, this puts Bitcoin Core in danger of permanently fleeing miners. Subsequently, mempool backlog and transaction fees are anticipated to increase further.
  • (3) When compared to Bitcoin Cash transaction fees at roughly $0.02, transaction fees per kB are over 800 times as expensive on Bitcoin Core, currently at over $16 (see https://cashvscore.com).
  • (4) Tipping service that used to work on Bitcoin Core's /Bitcoin a few years back has been revived by a new tipping service piloted on the more neutral /btc with the integration of Bitcoin Cash (see /cashtipperbot).
3. Should we scale you on-chain or off-chain? Scaling bitcoin.
Let us start with the notion that we are impartial to both Bitcoin Core (small blocks, off-chain scaling only) and Bitcoin Cash (big blocks, on-chain scaling only) schools of thought. We will support any or all ideas, as long as they allow for bitcoin to grow organically and eventually succeed as a peer-to-peer network that remains decentralized, distributed, immutable. Should we have a preference in either of the proposed scaling solutions?
First, let us briefly address Bitcoin Core and small blocks again. From the second section of this overview, we understand that there are proposed off-chain scaling methods via second layer solutions (2L), most notably soon-to-be implemented lightning via SegWit on Bitcoin Core. Unfortunately, the lightning network diminishes distributed and immutable network properties by replacing bitcoin’s peer-to-peer network with a two-layer institution-to-institution network and peer-to-hub-to-peer 2L. Do we need this particular 2L right now? Is its complexity truly needed? Is it not at best somewhat cumbersome (if not very redundant)? In addition to ridiculously high on-chain transaction fees illustrated in the earlier section, the lightning network code is perhaps more robust than it needs to be now, with thousands of lines of code, thus possibly opening up to new vectors for bugs or attacks (see https://en.bitcoin.it/wiki/Lightning_Network and https://github.com/lightningnetwork/lnd). Additionally, this particular 2L as currently designed unnecessarily introduces third parties, hubs, that are expected to centralize. We already have a working code that has been tested and proven to handle 8MB blocks, as seen with Bitcoin Cash on August 16, 2017 (see https://www.cryptocoinsnews.com/first-8mb-bitcoin-cash-block-just-mined). At best, these third party hubs would be decentralized but they would not be distributed. And these hubs would be by no means integral to the original bitcoin network with users, nodes, and miners.
To paraphrase Ocam’s razor problem solving principle, the simplest solution with the most desirable features will prevail (see https://en.wikipedia.org/wiki/Occam%27s_razor). The simplest scalability solution today is Bitcoin Cash because it updates only one line of code, which instantly increases the block size limit. This also allows other companies building on Bitcoin Cash to reduce their codes when compared to Bitcoin Core SegWit’s longer code, some even claiming ten-fold reductions (see /btc/comments/6vdm7y/ryan_x_charles_reveals_bcc_plan). The bitcoin ecosystem not only includes the network but it also includes companies building services on top of it. When these companies can reduce their vectors for bugs or attacks, the entire ecosystem is healthier and more resilient to hacking disasters. Obviously, changes to the bitcoin network code are desirable to be as few and as elegant as possible.
But what are the long-term implications of doing the one-line update repeatedly? Eventually, blocks would have to reach over 500MB size if they were to process Visa-level capacity (see https://en.bitcoin.it/wiki/Scalability). With decreasing costs of IT infrastructure, bandwidth and storage could accommodate it, but the overhead costs would increase significantly, implying miner and/or full node centralization further discussed next. To decrease this particular centralization risk, which some consider undesirable and others consider irrelevant, built-in and integrated 2L could keep the block size at a reasonably small-yet-still-large limit.
At the first sight, these 2L would remedy the risk of centralization by creating their own centralization incentive. At the closer look and Ocam’s razor principle again, these 2L do not have to become revenue-seeking third party hubs as designed with the current lightning network. They can be integrated into the current bitcoin network with at worst decentralized miners and at best distributed nodes. Recall that miners will eventually need to supplement their diminishing mining reward from new blocks. Additionally, as of today, the nodes have no built-in economic incentive to run other than securing the network and keeping the network’s overall value at its current level. Therefore, if new 2L were to be developed, they should be designed in a similar way like the lightning network, with the difference that the transaction processing revenue would not go to third party hubs but to the already integrated miners and nodes.
In other words, why do we need extra hubs if we have miners and nodes already? Let us consider the good elements from the lightning network, forget the unnecessary hubs, and focus on integrating the hubs’ responsibilities to already existing miner and node protocols. Why would we add extra elements to the system that already functions with the minimum number of elements possible? Hence, 2L are not necessarily undesirable as long as they do not unnecessarily introduce third party hubs.
Lastly, let us discuss partial on-chain scaling with the overall goal of network security. The network security we seek is the immutability and resilience via distributed elements within otherwise decentralized and distributed network. It is not inconceivable to scale bitcoin with bigger blocks as needed, when needed, to a certain degree. The thought process is the following:
  • (1) Block size limit:
We need some upper limit to avoid bloating the network with spam transactions. Okay, that makes sense. Now, what should this limit be? If we agree to disagree with small block size limit stuck at 1MB, and if we are fine with flexible block size limit increases (inspired by mining difficulty readjustments but on a longer time scale) or big block propositions (to be increased incrementally), what is holding us off next?
  • (2) Miner centralization:
Bigger blocks mean that more data will be transferred on the bitcoin network. Consequently, more bandwidth and data storage will be required. This will create decentralized miners instead of distributed ones. Yes, that is true. And it has already happened, due to the economy of scale, in particular the efficiency of grouping multiple miners in centralized facilities, and the creation of mining pools collectively and virtually connecting groups of miners not physically present in the same facility. These facilities tend to have huge overhead costs and the data storage and bandwidth increase costs are negligible in this context. The individual miners participating in mining pools will quite likely notice somewhat higher operational costs but allowing for additional revenue from integrated 2L described earlier will give them economic incentive to remain actively participating. Note that mining was never supposed to be strictly distributed and it was always at worst decentralized, as defined in the first section of this overview. To assure at best a distributed network, we have nodes.
  • (3) Node centralization:
Bigger blocks mean that more data will be transferred on the bitcoin network. Consequently, more bandwidth and data storage will be required. This will create decentralized nodes instead of distributed ones. Again, recall that we have a spectrum of decentralized and distributed networks in mind, not their absolutes. The concern about the node centralization (and the subsequent shift from distributed to decentralized network property) is valid if we only follow on-chain scaling to inconsiderate MB values. If addressed with the proposed integrated 2L that provides previously unseen economic incentives to participate in the network, this concern is less serious.
Furthermore, other methods to reduce bandwidth and storage needs can be used. A popular proposal is block pruning, which keeps only the most recent 550 blocks, and eventually deletes any older blocks (see https://news.bitcoin.com/pros-and-cons-on-bitcoin-block-pruning). Block pruning addresses storage needs and makes sure that not all nodes participating in the bitcoin network have to store all transactions that have ever been recorded on the blockchain. Some nodes storing all transactions are still necessary and they are called full nodes. Block pruning does not eliminate full nodes but it does indeed provide an economic incentive for the reduction and centralization (i.e. saving on storage costs). If addressed with the proposed integrated 2L that provides previously unseen economic incentives to participate in the network, this concern is less serious.
In other words, properly designed 2L should provide economic incentives for all nodes (full and pruned) to remain active and distributed. As of now, only miners earn revenue for participating. The lightning network proposes extra revenue for hubs. Instead, miner revenue could increase by processing 2L transactions as well, and full nodes could have an economic incentive as well. To mine, relatively high startup costs is necessary in order to get the most up to date mining hardware and proper cooling equipment. These have to be maintained and periodically upgraded. To run a full node, one needs only stable bandwidth and a sufficiently large storage, which can be expanded as needed, when needed. To run a full node, one needs only stable bandwidth and relatively small storage, which does not need to be expanded.
Keeping the distributed characteristic in mind, it would be much more secure for the bitcoin network if one could earn bitcoin by simply running a node, full or pruned. This could be integrated with a simple code change requiring each node to own a bitcoin address to which miners would send a fraction of processed transaction fees. Of course, pruned nodes would collectively receive the least transaction fee revenue (e.g. 10%), full nodes would collectively receive relatively larger transaction fee revenue (e.g. 20%), whereas mining facilities or mining pools would individually receive the largest transaction fee revenue (e.g. 70%) in addition to the full mining reward from newly mined blocks (i.e. 100%). This would assure that all nodes would remain relatively distributed. Hence, block pruning is a feasible solution.
However, in order to start pruning, one would have to have the full blockchain to begin with. As currently designed, downloading blockchain for the first time also audits previous blocks for accuracy, this can take days depending on one’s bandwidth. This online method is the only way to distribute the bitcoin blockchain and the bitcoin network so far. When the size of blockchain becomes a concern, a simpler distribution idea should be implemented offline. Consider distributions of Linux-based operating systems on USBs. Similarly, the full bitcoin blockchain up to a certain point can be distributed via easy-to-mail USBs. Note that even if we were to get the blockchain in bulk on such a USB, some form of a block audit would have to happen nevertheless.
A new form of checkpoint hashes could be added to the bitcoin code. For instance, each 2016 blocks (whenever the difficulty readjusts), all IDs from previous 2015 blocks would be hashed and recorded. That way, with our particular offline blockchain distribution, the first time user would have to audit only the key 2016th blocks, designed to occur on average once in roughly 2 weeks. This would significantly reduce bandwidth concerns for the auditing process because only each 2016th block would have to be uploaded online to be audited.
Overall, we are able to scale the bitcoin network via initial on-chain scaling approaches supplemented with off-chain scaling approaches. This upgrades the current network to a pruned peer-to-peer network with integrated 2L managed by miners and nodes who assure that the bitcoin network stays decentralized, distributed, immutable.
submitted by bit-architect to bitcoin_uncensored [link] [comments]

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