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Bitcoin's Nightmare Scenario Has Come To Pass
HughPickens.com writes: Ben Popper writes at The Verge that bitcoin's nightmare scenario has come to pass as the bitcoin network reached its capacity, causing transactions around the world to be massively delayed, and in some cases to fail completely. The average time to confirm a transaction has ballooned from 10 minutes to 43 minutes. Users are left confused and shops that once accepted Bitcoin are dropping out. For those who want the Bitcoin system to continue to grow and thrive, this is troubling. Merchants can't rely on digital transactions that can take minutes or hours to validate. A number of prominent voices in the Bitcoin community have been warning over the past year that the system needed to make fundamental changes to its core software code to avoid being overwhelmed by the continued growth of Bitcoin transactions. A schism has developed between the team in charge of the original codebase for Bitcoin, known as Core, and a rival faction pushing its own version of that open source code with a block size increase added in, known as Classic. "Many in the US Bitcoin community had hoped that hitting this crisis point — a network maxed out, transactions faltering — would result in closure, with miners quickly moving to adopt whichever chain proved more valuable to their economic interests," says Popper. "But so far the debate is dragging on without one side claiming a clear victory, leaving tens of thousands of consumer transactions stranded in limbo."
I don't need any of your fiat currency .
I wouldn't use cars as currency either !
I don't know if there's more backstory, but perhaps users have been slow to adopt because "Classic" sounds like what you'd call an older and (in the usual context) more limited option?
If I'm developing a new technology with potentially millions of $USD riding on its availability and adoption, I'm not going to call it "Classic." "NextGen," or "Enhanced," or even "CC" for Corrected Chain? This sounds less like the free market and more like terrible marketing.
I don't need any of your fiat currency .
Gold is great until you need more of it, which you always do, because economies grow (all being well) and extra money is needed to support that. The other problem would be getting too much of it too quickly (ie building a mine) and ending up with a glut inflation. Fiat currencies are the only way to have a quantity of money that matches the size of the economy. I know we all want to believe that there's some quantity of precious metal somewhere that backs our cash, it's comforting, but real economies don't work well like that.
Conversely, fiat currencies don't necessarily represent the actual amount of wealth in the economy - hence the economic crash. A currency you can literally just make up out of confidence (or false confidence) isn't representative of real wealth.
You're right in that gold doesn't scale as a currency backing - because the amount of effort required to get it is not a fair representation of economic output any more (it used to be - you needed men and basic equipment so it was a reasonable proxy representation of how much economic surplus you had).
Cryptocoin could be regarded as a currency backing that actually scales with economic output - because there are no physical limits beyond manufacturing the ASICs and generating the energy (until you hit physical limits for those...).
With that much internal bickering sabotaging the whole project, it MUST be OSS.
SJW's don't eliminate discrimination. They just expropriate it for themselves.
Its doubtful - the main issue here is the core BitCoin team who are blocking changes.
This is a fantastic post on the topic, from an authoritative source: The resolution of the Bitcoin experiment.
Sure but the gold standard did not prevent economic crashes, eg in the 30s, and coming off the standard at that time helped. And there's a need to change the amount in circulation up and down to match what's going on in the economy.
As an aside, I rather think that using the vast quantities of energy to keep mining is a bad use of resources. At a time we're trying to be more efficient, creating a system that deliberately inefficient seems is dumb.
This is a neither interesting nor insightful post. It's glib, ignorant and stupid.
People are happily exchanging bitcoins for goods and services and back again. In fact they're so happy with it that they exceed the capacity of the network.
If you sell some stuff for bitcoins, then buy some other stuff for bitcoins, then it is just inane to claim that you have been scammed.
SJW n. One who posts facts.
This only works for old coins. Modern coins are so adulterated that the currency would have to crash very hard indeed for you to cover smeltering costs with the value of the nickel/copper/silver in them. Tin is very, very cheap.
Seven puppies were harmed during the making of this post.
Who exactly do you think would be running the gold mine?
Do you really think that somehow, getting rid of fiat currency will also somehow invalidate the old rule of "it takes money to make money?"
You do not have a moral or legal right to do absolutely anything you want.
Gold is crap as money. Good money needs to be a medium of exchange, store of value, and unit of account. It fails at all three of these. No one accepts gold as payment - we've moved on to other technologies. No one uses gold as a unit of account - considering its value can literally double (or fall in half) in the space of 1 calendar year, it'd make business wildly unpredictable. (Just imagine... that mortgage you got denominated in gold? One year later you owe twice the value of the house.) The only thing it sort of works for is being a store of value - it's deficient there, due to its volatility, but the volatility is different than other asset classes' volatility, so works as a hedge against a crisis. It's more insurance than it is money.
The World Wide Web is dying. Soon, we shall have only the Internet.
That's one of the biggest items, along with other black market payments. Legal purchases, donations, etc, appear to make up only a tiny fraction. Paying $200 to get your files back is your only option if you didn't keep backups, and they make it really easy and streamlined these days. There was even an article a while back about how they actually have customer service departments that are very helpful.
It's sort of like how bittorrent has plenty of legitimate uses we can point to, but at the end of the day 90% of it is pirating.
Pay higher fees if you are in a hurry.
The demand for most goods tends towards infinity as the cost drops. Bitcoin transactions have been fantastically cheap, which everyone sensible knew couldn't possibly last.
So, do we make bigger blocks, or increase fees? Miners should get more fees from either option. Users would prefer bigger blocks, since it keeps their costs artificially low.
But the real problem is the relay node shortage. Running a node is no longer trivial, and there is no mechanism to recover costs. The blockchain is around 80 GB now (including the index), and growing by ~100 MB per day. Larger blocks will only make that worse, and will almost certainly knock yet more nodes offline.
Someone made a distro that ran bitcoin entirely out of tmpfs. I once had a bunch of super-fast nodes using it. When the blockchain finally exceeded my ability to add more RAM to those boxes, the average time for a new node on the network to sync up increased by a factor of 3 or so.
That's just my personal example. Hundreds of other nodes have dropped off for their own reasons.
See that "Preview" button?
Currently we mine 1-1.5% of the existing supply of gold annually.
That means that unless your economy grows less than that, or mining rates go up significantly, you are basically having deflation: Your gold becomes worth more over time.
Deflation is generally seen as a really bad thing, as it makes people prefer saving over spending. Money being saved is not part of the available supply, causing more deflation, causing more people to save their money, etc.
The people hardest hurt are those that can't save any money, as they need to spend all they earn on things like food.
Deflation is really good for people who have a lot of money, as they can save most of it, becoming richer over time, without doing anything.
If they let other people borrow the gold at an interest, their pile of gold also grows, on top of it getting more valuable.
The end result becomes a situation where those few people who have enough gold that they spend less than they earn by lending, will end up with all the gold very quickly.
This has happened many times in the past, when gold was the main type of currency. It usually ended by some King using their power to steal the money from whatever bankers had the big gold piles. (Kings always have wars to spend money on, so they usually spend more than they can earn and then some).
RogerWilco the Adventurous Janitor
Like most things in life, currency policy is one of tradeoffs. You can have wild swings in value and deflation associated with hoarding, or you can have steady but stable inflation. The main downside to steady inflation is that hoarding cash becomes a money-losing endeavor. Of course, that's rather the point... Solution: buy something else instead of hoarding money. If you are comfortable with gold, hoard gold. If you like equities, get those. Or mix it up a little.
Another advantage of steady inflation is that salaries go down over time. Usually this is all but impossible, even though the laws of economics demand it for an efficient economy. The disadvantage is that, well, your real salary goes down over time. But in theory a rising tide lifts all boats. In practice there are winners and there are losers. This was the case during the gold standard as well.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
US coins do not contain tin.
"I'm not sure I like the fugnutish tone you used in your post!" -RogL (608926)-
At least paper money can be used as an actual fan.
Paper money only has value because enough people think it does. People will be willing to give you things of tangible value (goods and services) in exchange for paper money and tin coin because they have confidence they can turn around and trade it for more goods and services from someone else at a later date.
Gold only has value because enough people think it does. Most people, however, will NOT be willing to accept gold in exchange for goods and services. In all but a handful of special cases you'll have to first convert that gold to an agreed upon currency first, possibly via some process that certifies the quantity and purity of the gold first.
Both paper money and gold are fiat currencies in this way: They have little or no intrinsic value, but instead serve as proxy of value. It's traded based on a level of trust that the per-unit-value will remain relatively stable (or increase) in the time it takes to turn around and trade it to someone else.
All of this is true for Cryptocurrencies as well. It has value because people want it, not because it's intrinsically valuable. If nobody wants it or is willing to accept it in trade, then it's worthless. You can't even burn it for warmth like paper money or make decorations and tableware out of it like you can with gold... it is absolutely devoid of intrinsic value.
=Smidge=
That's expected to happen if you have a currency not tied to a precious metal (not saying it's a good idea, merely an observation) as you can create money without respect to the amount of any other resource. In these systems excess money is usually created (either by design in order to encourage inflation or due to reckless government action) which means that as time goes by its value naturally decreases with respect to the material of which the physical currency is made. A U.S. penny costs the government more than it's face value to mint because it has lost sufficient purchasing power that the metal it is composed of and the labor expended to min the coin has more value than the coin itself. Over a long enough period of time (about 150 years assuming annual inflation remains at around 3% on average), it will be useless to have anything less than whole dollars.
Also, this ignores the fact that in a real crisis, a gold coin isn't worth any more than a quarter for most people. You'd probably be more able to get someone to take it, but you can't eat it. Also, really old coins are worth far more than the gold or other metal it is made from simply because it is old and heavily supply constrained. Melting it down would destroy most of its value to other people who are interested in old coins. Even some of the older coins from the U.S. are worth more as collectibles than either their face value or the metal they contain. For example, a US half penny (we used to have one before the government decided it was useless to keep making because it had lost its value) can fetch thousands of dollars depending on year and condition.
I don't recall ever having a check accepted where I didn't have to show ID. Furthermore, unless it was forgery, the check itself identifies who wrote it, and who is responsble for the debt. None of that is true with bitcoin. In fact, that seems to be the main selling point of bitcoin.
Credit cards take a while to clear too - - chargebacks can be up to 6 months later. There's absolutely no guarantee that you will actually have the money until that six month period is past. Bitcoin actually improves the situation tremendously. The odds of a bitcoin double-spend are significantly lower than the odds of a credit card chargeback. Especially within wallet systems - say Mycelium to Mycelium - nobody in the peer-to-peer economy is worried at all about getting their money. It's something the established bankers make up to create fear.
My God, it's Full of Source!
OUTSIDE_IP=$(dig +short my.ip @outsideip.net)
People are happily exchanging bitcoins for goods and services and back again. In fact they're so happy with it that they exceed the capacity of the network.
Well they aren't going to be exchanging them for much longer, because the exchange mechanism is broken (sort of) by design.
If you sell some stuff for bitcoins, then buy some other stuff for bitcoins, then it is just inane to claim that you have been scammed.
It wasn't intended as a scam by the creator, but it became one because of the developers that took over, that didn't view bitcoins as a currency, but rather as a store of value. They don't care that it takes hours or days to close a transaction, because they are not really on board with the idea that bitcoins can be used like money. They only see it as an investment.
Mike Hearn lays out the issues much better than I can, in his open resignation letter. Everyone knew it was coming but the people in charge refused to do anything about it despite the warnings. I really think it's because they don't care about the use of bitcoin in commerce. They view it as nothing but mattress money or a digital investment. Only time will tell how much people lose as there will be less and less people interested in bitcoin at all.
"Somebody has to do something. It's just incredibly pathetic it has to be us."
--- Jerry Garcia
For most of my lifetime, if a U.S. retailer accepted checks, one of two things happened: You wrote your check and went on your way with your goods, and either the check cleared within a few days, or the check did not clear. If your check didn't clear due to insufficient funds, the merchant could go after you for the amount of the check plus a "returned check" service fee. If you wrote a "worthless check" intentionally, you could be charged with a crime.
Major retailers had their own solutions. I remember Gold Circle (predecessor of the Target store chain) having a check approval counter where you had to get your checks OKed — presumably to make sure you weren't a habitual writer of bad checks. At smaller businesses, it wasn't uncommon to see photocopies of people's bad checks pinned to the wall behind the cash register, or a sign boldly telling staff (and customers) not to accept checks from the below-named people. (There was an episode of "Seinfeld" that involved this, IIRC.)
After 9/11, using the delays caused by the attack as a stated reason, the government and banking system changed it so that now, at most major retailers, writing a check is handled as an electronic debit of your bank account. Many retailers don't even keep the paper check — they print transaction information on it and hand it right back. This caused a little consternation among people who used to "float" a check, writing it a day or two before the money actually made it to the bank and betting the check would arrive after their pay did.
And that's your history lesson. Hope it was worth the read. :-)
We're heading into the Bitcoin end game, where the goal will be for the miners to extract as much money as they can from BTC users via transaction fees until the whole thing collapses. The miners want the network to saturate, and they want people to pay ever-increasing fees to get their purchases on the blockchain. Once the mining reward halves later this year, the incentive to increase transaction fees will be that much greater.
Keeping the network saturated means keeping transaction volume high and the block size fixed, hence the dDOS attacks on nodes running Classic, the spamming of the network with tiny back-and-forth transactions, and the censoring of pro-Classic comments on discussion boards. It all fits with what Hearn has described.
I wouldn't be the least bit surprised to see BTC users paying 0.5% to 2% transaction fees a year from now. It is, after all, what the market will bear when compared to bank and credit card fees.
Its "Classic" as in Satoshi's original design where increasing the block size was expected. Its the current core developers that are deviating from that original. The audience for this debate are the miners who are somewhat technically informed and understand the context. Users are irrelevant to the discussion, only miners control what incarnation of the software gets used.