Similarly a bank can use whatever amount of decimals they wish to store their dollar amounts, it doesn't create new money. You can also divide gold into infinitesimal amounts.

You can already send millisatoshis on the Lightning network, which is rounded to a nearest satoshi when it's settled on the blockchain.

Yes and no. Some technology changes the balance of power.

One of the best examples is the innovation of gunpowder weapons and the rise of democracy. It's not the case that the invention of the musket and cannon was solely responsible for the fall of monarchy and the rise of democracy. But it certainly helped.

Is crypto-currency that sort of innovation? I guess we'll find out.

The work around for this is what they call a coin tumbler - it takes your coins and those of say 5 more people, mixes them up real nice by moving them around a couple of wallets in many complicated transactions and then hands them back to a wallet you want from thousands of these mixed up addresses.

https://www.forbes.com/sites/benjessel/2020/01/06/ernst--you...

https://www.ey.com/Publication/vwLUAssets/ey-total-cost-of-o...

States stop the exchange of goods within, into, or out of their jurisdiction of types or in manners not sanctioned by the state all the time, it's called “law enforcement”, and either the military or paramilitary police forces or both are often involved in it. It's never airtight, but it doesn't have to be to have a big effect.

But anyways, isn't that pretty much the anarcho-capitalist vs statist conflict that cryptocurrencies are ultimately trying to aim us towards?

I'll grant those can be characteristics of cryptocurrencies, but they're only advantages to people who need those things. And they're only advantages on net if what goes with those characteristics ends up being net beneficial to somebody. E.g., the "inflation-proof" bit is a nice line, but most of the world had good reason for getting rid of fixed currencies after the collapse of Bretton Woods. And being "inflation-proof" implies a degree of value stability that Bitcoin most certainly does not have in practice.

I'll also grant that pseudo-anonymity and decentralization are useful to a very small set of people, but I think that's pretty well covered under the first part of my sentence. There are also some people who like those things for theoretical, quasi-religious reasons, but I don't think satisfying that counts as any sort of practical advantage.

And, more importantly, governments see those attributes as a downside, and would no doubt clamp down hard on crypto on-ramps in the event that they ever started getting significant uptake.

The current system where every user is a network node is not the intended configuration for large scale. That would be like every Usenet user runs their own NNTP server. The design supports letting users just be users. The more burden it is to run a node, the fewer nodes there will be. Those few nodes will be big server farms. The rest will be client nodes that only do transactions and don't generate. https://bitcointalk.org/index.php?topic=532.msg6306#msg6306

It's funny you say that pro block-size increase people don't understand the decentralization, privacy and reliability trade-off, while the people against a block-size increase have never defined or quantified these trade-offs. And very often they also have the notion that "everyone must run a full node" that implies they don't have a good understanding of Bitcoin at all.

There are few people who are interested in crypto-currency and have not heard this argument in many forms. Crypto-currency fans generally either don't care or don't think it's true.

This is not true. We have simply adopted a system where it is a feature. We did not have steady enforced inflation until the 1950s. There are entire schools of economics that believe the concept of controlled inflation should be relegated to the past, and replaced with market ruled inflation / deflation.

I'm not saying I understand how such a fictional world will work (and I am a finance professional so I understand this very well already), but people always saying "inflation is necessary" are people with no imagination who don't look at history.

Greenspan thought we'd solved the problem when he realised he could just keep lowering interest rates and growth will keep on happening. Turns out Bretton Woods withdrawal and the stagflation of late 70s gave enough cushion for him to test his hare brained schemes on the world and lead to the explosion of growth that came afterward. And then 2008 happened. Turns out Mr.Yes-Market was wrong all along.

I think bitcoin is a really innovative idea (and kicking myself for not acting on my initial instincts when I read about it on HN in 2010 - when mining software said "please don't use your GPU"!) but I don't buy this "people laughed at the internet too, so bitcoin must be important!" line.

Why? Really, I would like to know why you think this. Append-only data structures have existed almost since the dawn of computing. Making it distributed and trustless doesn't seem to solve any real problems, which is why over a decade since they entered the public consciousness they are used for almost nothing interesting, and nothing that couldn't be done better in a centralised system.

That's not to say there are none, but a fuck ton of people have tried to come up with cool ideas and approximately zero worked out, like at all.

https://www.youtube.com/watch?v=agppUdX9YvI&feature=youtu.be...

An actual market-powered mechanism for data-pruning. As the price of new transactions rise, the amount paid by old (rebroadcast) transactions rise more. Network hits equilibrium where data in == data out.

Would you say that the credit card network, or PayPal, has exponentially increasing storage requirements? It's possible for Bitcoin (for example) to be decentralised and useful to the world and only require linearly increasing storage space.

Fortunately it seems that storage technology will continue to scale linearly over the coming years too:

https://images.anandtech.com/doci/15064/seagate-roadmap.png

"Decentralization" is a means to an end. Not everyone have to run a full node, as long as there's enough.

It's amusing that LN is touted as a solution, since decentralized routing is an unsolved problem, meaning that LN will be more centralized than what it's supposed to solve.

And cryptocurrency does not provide immutability anyway. Remember the DAO Ethereum fiasco where they lost a bunch of money and decided to roll it back.

Every fork is vulnerable to the same attack, which is why such a switch doesn't make sense. There's no way to prevent Chinese miners from mining on the "Western" bitcoin if it's the more profitable option. The censorship can be easily made reactive: first, all Chinese miners have to register and report their hash power. If the total hash power for any specific network is below X (eg. 65%) they don't have to censor. The moment they do, they start orphaning blocks that don't comply with the Chinese law. Note it also increases their profits!

The same forces (lots of cheap electricity) that resulted in the concentration of sha256 hashing in China also work for any other PoW; switching to a GPU-based PoW would at best only prolong the inevitable. Most likely GPU PoW is also China-dominated.

Proof of work has infinite economies of scale and the winner can take all property. The second property makes it profitable for the majority of hash power to cartelize and exclude others. If the cartel was smartly set by the Chinese government - allowing access to all Chinese miners and making it illegal to create smaller cartels - everyone in China would join and after a while it would be enough to mine with only ~20% of the available hash power. That's a 5x increase in revenue per watt hour!

Why? Initially, Chinese miners can mine with >65% of global power, excluding competitors. They do it until everyone else goes bankrupt, giving them 100%. Then, each individual miner can start mining with only 20% of their total power. To prevent fraud, it's enough to make everyone mine with 100% for one hour every week, all at once, to prove their total individual hash power. If some foolish foreign competitor arrives with more than 20% of the Chinese hash power, every Chinese miner turns everything on. This monopoly would be almost impossible to defeat.

However, even if you assume someone defeats it somehow - the only way to defeat it is to have an even bigger centralized entity! All that happened is a new monopoly, not decentralization.

All of this means bitcoin can never become "refuge from the growing foreign and domestic militarization of money. [..] an indispensable weapon against civil asset forfeiture, international sanctions, deplatforming, and mass surveillance" to any noticeable degree. It's currently left alone only because it's irrelevant except as a speculative toy.

Do existing approaches have problems, especially the legacy ones? Sure. Nobody denies that. But Bitcoin needs to be better in practice, not just in theory.

I'm sure you do believe that Bitcoin is on the cusp of change. But Bitcoin has been on the cusp of change for 10 years. It's the same routine some Christians have been running for 2000 years: Jesus is coming back any day now. When they predict a specific date, they always turn out to be wrong, but that does not change things: https://twitter.com/williampietri/status/1071833726294749184

I was very interested when Bitcoin appeared a decade ago. It's an interesting idea backed by interesting technology. Of course, so was 3D TV. In both cases, however much the respective fan groups are sure it's superior, in practice the great majority of humanity turns out not to care because the other options turn out to be as good or better for their actual needs.

That's conventional wisdom and applicable in lots of other places, but not in cryptosystem design. People have to accept that cryptosystems in general and cryptocurrency in particular are different domain from most other software engineering they're used to.

Any single error or bug can result in the complete compromise and failure of the entire system. The old rules of calculating acceptability of risk and errors based on whether they enable more value creation than they put at risk, no longer apply, because any/every error can result in total loss.

I believe different world views on this issue is one of the root causes of the schism in Bitcoin.

>The funny thing is, the inaction of the Bitcoin devs have made it fail at one of the core features of money. You cannot consider it to be acceptable, as fees are so expensive they price out a lot of people. Money should be easy to move around, and you should be able to buy large and small things with it.

That's a "nice to have" for sure, but not at the risk of a Global Financial Crisis style event happening to Bitcoin itself. The prudence of the Bitcoin devs has made it succeed at avoiding that so far.

>Yet this is somehow preferable, because doing otherwise would make Bitcoin "fail at sound money", whatever that means.

There's no need to be confused about that term, it has a simple, clear and easy to understand meaning. Sound money is money whose supply and value is both transparent and un-manipulatable.

When you choose to store savings in that currency, you know how it works, and you know it can't be changed in the future (to either your detriment or benefit). Sound money is a social contract that can't be broken or reneged.

By way of counter-example, in the GFC, the US Fed pumped up the money supply to prevent the failure of the banking system, risking devaluation of dollar-based savings and hyperinflation to the detriment of everyone else.

For another counter-example, the US Govt's inability to control its deficit and debt may one day result in it having to monetize the debt (print more dollars to pay for it), devaluing the dollar and dollar-based savings, and harming global confidence in the dollar as a reserve asset.

Cryptocurrency as sound money is a hedge against that, and that's the ultimate killer app. But if you lose enough decentralization, you lose this characteristic of it. Then its worthless, regardless how good of a payment system it makes.

And it will never be better than Paypal and other centralized payments services at merely transferring money quickly and cheaply, so if it has no other value proposition like sound money then its worthless.

no, that's just wishful thinking. Laws of economics are a description of human behaviour, and unless the human condition changes, it will always reflect self-interest and greed. Physical laws aren't "laws" in the same sense as human laws, but descriptions. Economic laws are the same; they describe what people would do under different incentivization schemes.

In this case, despite the proponents of crypto wanting it to be a currency, it has still languished as a commodity. This is due to the economics of using it, the interactions of it with the wider economy, and various other factors that i've termed under the umbrella of 'law of economics'.

So you are going to reorg after many blocks (enough to be sure a transaction is being censored). This sounds extremely undesirable as it kills finality. Today you can very reasonably be sure that after say, 6 blocks, a transaction is irreversible. That's not the case with this new rule.

Another aspect of crypto is the ability to simply leave the oppressor's territory, taking your money with you.

I'm absolutely not saying this is a perfect solution, or that government is powerless in this situation, but it seems hand wavey to say they'll just seize control of every economic transaction. That's a VERY difficult thing to do.

Fact is that each LN "channel" needs a committed amount of Bitcoin that can only be withdrawn by closing the channel. If you want your Bitcoins "secured" in you wallet, you need to close the channel. Otherwise you will - by design - have to constantly monitor the LN for malicious actors trying to withdraw you funds from your channels - which by the way is also only possible with an extremely reliable internet connection. Ultimately it's only possible to "secure" your funds against malicious actors by closing the channel. This leads to nice DoS attack vectors, see below.

Opening and closing a channel requires an on-chain transaction. This means when you only calculate with the US population, you need at least ~700 million on-chain transactions per month, assuming people get paid once a month, which is absolutely underestimating reality. Also assuming business don't trade with each other.

Assuming 7 transactions per second for the Bitcoin network (which in reality is much closer to 3 by the way), you get 7×60×60×24×30 = 18,144,000 transactions per month. So LN cannot even serve 5% of the US.

Reading the LN white paper should give you an idea on how bad it is when you compare it to reality and how people are actually using money.

From where I sit, it seems like BTC was designed to be a currency that would free us from financial regulation, it has failed on both counts, and crypto enthusiasts are trying to turn it into an over-elaborate debit card because the alternative is for it to become a historical curiosity.

However, 250 GB is approximately 25 GB per year (since Bitcoin started in 2009), which, if you multiply it by 100, is 2.5 TB per year. That means it will take about 6.4 years to fill a 16 TB hard drive, which should cost less than $600:

https://www.techradar.com/uk/news/worlds-largest-hard-disk-d...

It's not hard to imagine someone paying under $100 per year to run a full node, whereas on the day that TechRadar article was published, the average price of a bitcoin transaction was $4.58 as seen here:

https://bitinfocharts.com/comparison/bitcoin-transactionfees...

But you corrected your assumption in the other comment thread, so I'll continue the conversation there.

> I think it would need to check all candidate blocks with lower heights to see if their chains contain any transactions that aren't in a longer chain.

Yes. You wouldn't need to store all these, though, you just sweep them up once you find the transactions included in the longest chain.

> What happens if I mine off of a very old block and include my own transaction in it, and present it to you... how do you distinguish between what I just did vs the longer chain having censored the transaction this whole time?

Broadcast all transactions you have which aren't already in the longest chain to the network, and wait for them to include them.

I'm not 100% sure, but I think transactions get rebroadcast automatically already until they're included.

You won't want to open up a payment channel to them, but you don't need to. You just need an already open payment channel to someone who is, or (more importantly) there is some route of payment channels between you and them through any number of intermediaries.

There won't be a way to enforce KYC on the network itself, and you don't need trust for this to work.

But because of the inherent cost / time / complexity reduction benefits of just maintaining big channels between large entities, normal people and businesses will inevitably be incentivized to just work through banks to do this. The banks can just hold all their money and handle keeping the channels between themselves open and funded.

And that's where I think you're correct. It leads to a world where KYC can be required easily because the vast majority of legitimate use cases will be through centralized endpoints.

Let's say Bank A loans $1000 to a customer. It creates a $1000 bank deposit in that customer's account. On the balance sheet it looks like this:

Bank A:

(Asset) Loan to customer of $1000

(Liability) Bank deposit in account of customer $1000

Bank A created the $1000 at will out of thin air. This is how it happens most of the time.

The best resource is financial twitter (fintwit). The news breaks there, the discussion happens there, and loads of meme-ing also takes place (which is always a nice to-have in a serious place). The only drawback is that most of them lean exactly the way I do. So I can bear the place, but I miss out on a bunch of opposing opinions and it's always a challenge finding someone on the opposite side of the fence.

> I assumed you meant manually. This method isn't possible to automate under PoW, because any such actions require global time, but PoW is what provides time itself, creating a contradiction. What this means in practice is network splits.

I don't think you need global time to do this. More on this later in this post.

> as what would happen is nodes that were online and observed the situation would follow one chain, but everyone else that joins later wouldn't be able to confirm that censorship actually happened, and follow another. If you have a solution that solves it, you solved the fundamental problem - absolute order - some other way and PoW becomes completely superfluous.

This situation resolves itself naturally via the mechanism I proposed.

Let's follow the scenario you propose and see how it resolves. The following events happen in this order:

1. The Chinese government decides to censor transactions from a certain address, refusing to accept blocks which include transactions from that address.

2. A transaction from that address is broadcasted.

3. Chinese miners mine 5 blocks that don't contain the transaction. Nodes which have been on the network the whole time notice the censored transaction, and go to the next-longest chain, creating a fork.

4. A new node joins the network. From the new node's perspective, there are two chains, but the Chinese one is longer so you go with that. However, you still have the signed transactions from the shorter chain, and your node notices that the Chinese chain doesn't contain some of those transactions. At the time of joining, as far as you know, that transaction simply hasn't been included in the longest chain yet.

5. Chinese miners mine 5 more blocks that don't contain the transaction. The newly-added node now notices the censored transaction, rendering the current chain invalid, and goes to the longest valid chain, which is the one everyone else was on. Consistency achieved.

The implication of this solution is that when you join the network, you now have to wait for 5 confirmations to ensure none of the transactions you have are being censored in the longest chain (i.e. it takes 5 confirmations to know that the longest chain is valid). Which is certainly an important implication!

Note that absolute order doesn't matter here. We don't have to know the order of the transaction, only that it has existed for some number of blocks without being included in the chain.

> Then there's a problem of: what happens when there are contradictory transactions on two different chains at once? How do you decide which one is valid? This gets complex very fast.

The way you've worded it, that's not really all that complex--that's the same as a double spend, and it's resolved the same way any other contradictory transaction is resolved: follow the longest (valid) chain (where part of the definition is "valid" is "containing all transactions I've had for 5 confirmations").

However, I think you might have left out part of what you meant here, so I'll try to explain what I think you're hinting at. There's a sophisticated way for China to hide their attack. It works like this:

1. The Chinese government decides to censor transactions from a certain address, refusing to accept blocks which include transactions from that address.

2. A transaction from that address is broadcasted. We'll call this the censored transaction.

3. Non-Chinese miners mine a block that includes the censored transaction. This becomes the root of what we'll call the censored branch.

4. Chinese miners ignore the mined block that includes the censored transaction, and mine a block which doesn't contain the transaction. This block becomes the root of a branch we'll call the red herring branch. In that block, they include a transaction which they never broadcasted to the network. We'll call this the red herring transaction.

5. Due to superior Chinese mining capability, the red herring chain quickly becomes longer. However, after 5 confirmations, the network notices the censored transaction isn't being included in the red herring chain. So they invalidate the red herring chain and go to the longest valid chain, which is the censored chain.

6. 4 more blocks are mined on the censored chain.

7. A new node joins the network.

8. At this point, the censored branch doesn't include the red herring transaction, and the red herring branch doesn't include the censored transaction. So our previous resolution strategy doesn't work, because we don't know whether it's the red herring transaction or the censored transaction that's being censored.

First, I want to say, this is a really sophisticated attack and I want to congratulate you for coming up with it.

Second, I think this problem can be solved by sweeping up ALL the transactions in EVERY block you receive, even if they are in blocks which haven't been confirmed, and treat them as if they were broadcast to you on the network. This way, the red herring transaction gets included into the censored branch. This gives us a new resolution:

1. The Chinese government decides to censor transactions from a certain address, refusing to accept blocks which include transactions from that address.

2. A transaction from that address is broadcasted. We'll call this the censored transaction.

3. Non-Chinese miners mine a block that includes the censored transaction. This becomes the root of what we'll call the censored branch.

4. Chinese miners ignore the mined block that includes the censored transaction, and mine a block which doesn't contain the transaction. This block becomes the root of a branch we'll call the red herring branch. In that block, they include a transaction which they never broadcasted to the network. We'll call this the red herring transaction.

5. Due to superior Chinese mining capability, the red herring chain quickly becomes longer. However, after 5 confirmations, the network notices the censored transaction isn't being included in the red herring chain. So they invalidate the red herring chain and go to the longest valid chain, which is the censored chain.

6. A new block is mined on the censored chain. Since we've swept up all the transactions from the red herring chain, this block includes the red herring transaction.

7. A new node joins the network and assumes the red herring chain is the longest valid chain.

8. After 5 blocks, the new node sees the red herring chain does not contain the censored transaction, invalidates the red herring chain, and goes to the longest valid chain, which is the censored chain. Consistency achieved.

What is the point of cryptocurrency if your freedom can be impinged upon by being compelled to pay taxes? What's the point of it isn't the primary medium of exchange? If it's not that, then it's just a deflationary store of value, functioning like gold, which nobody uses for daily transactions, therefore of limited value.

Why would that state accommodate your ability to convert crypto into local currency that they ultimately control? The only rationale would be to hurt their presumptive rival: the state you fled.

And more importantly, even if that works at the individual level for you and a few others who work that kind of deal with a state, how does that model scale to populations of multiple 10s of millions?

Another state may allow a few people to make that personal optimization in their territory, but they won't negotiate such agreements with millions of people. If you are a rare wealthy person able to strike such a deal with a state, you are then effectively an oligarch, and part of the state power structure.

States are made of people, and people only trust other people who they believe have skin in the game.

[1] https://community-development.makerdao.com/makerdao-mcd-faqs

[2] https://docs.makerdao.com/

The risk adjusted return on whatever that crazy contraption is is almost certainly negative, and probably incalculably so.

The idea that any sane financial instrument could increase its return by two points by the holders of it voting to do so is... I haven't the words.

Correct. I'm not going by what Satoshi said, but by what development the bitcoin core team is aiming to create now.

> If blocks had been 10 times bigger, the blockchain would still be less than 3 TB

Correct. The aim of the project is to keep it as small as possible. 3 TB may not seem prohibitive today, but that's because there's hardly been any usage of the network compared to what the real world looks like. If bitcoin truly competed with Visa / Mastercard, both of those numbers will start looking a lot bigger. If the compressed version was 3TB, the bigger blocks version now becomes 30TB - suddenly far out of consumer grade storage for a normal person.

And it needs 3TB?? Cmon, that's not lot of gain for a lot of loss of control by the average.

Do you know what asylum is? I can permanently move to plenty of countries without asylum, I think you're getting a bit off track..

The very fact that you guys are not recognising this means that you still don't understand the concept of decentralisation and want to settle with the altcoin route of making up the word as you go along and if it fits your narrative. If your entire chain was at the mercy of a few large mining corporations, you are dead in the water. The attack vector is easily compromised and you have no leg to stand on.

Each node would need to download 1.4 TB of data per day (500TB / 365) to keep up, and the UTXO set would presumably expand dramatically with a volume increase of that magnitude, making it impracticable to store even a pruned state on a consumer hard drive.

It's true that the interest rate can be arbitrarily voted up. Despite this, 1.46% of all existing Ether (currently valued at $210,036,816) is staked as collateral in the system, so it's not accurate to say nobody would do this.

Isn't this just a revolving credit line?

MakerDAO has a list of vendors who accept Dai today [1]. The list also contains a number of payment processors that enable businesses to accept Dai. It's true that it's not widely used now, but every product has to start somewhere. I don't think I'm going to be getting paychecks in Dai within my lifetime, but that's no reason to discourage its growth.

> All they've done is create a bank and sprinkled the fairy dust of "tokens" on it so the Fed stays away.

You say that as if creating an automated decentralized bank that generates an asset pegged to the US dollar is something that just anybody could do. Regardless of how Dai is ultimately used, creating the system and deploying it to the public is a successful proof of concept in itself.

[1] https://github.com/makerdao/awesome-makerdao#spend-dai

In the event that the value of their collateral doesn't cover the debt, the Maker system has a surplus account that would cover the difference. In the event that the surplus can't cover the remainder of the debt, MKR token is created and auctioned off to to cover it.

Since this devalues MKR, holders of MKR token are incentivized to ensure that the system always runs at a sufficient surplus to cover these events and that loans are liquidated early enough to prevent having to dip into the surplus.

In addition to this, interest on loans are paid in MKR token and destroyed when the loan is closed, which also incentivizes holding MKR.