A Bitcoin Believer’s Crisis of Faith

http://www.nytimes.com/2016/01/17/business/dealbook/the-bitcoin-believer-who-gave-up.html?_r=0

by chollida1 • 11 years ago

96 45 11 years ago

smaili• 11 years ago

A bit off topic, but did he literally let a reporter into his house and take a photo of him in his bed - or is that just a stock photo? Either way a bit creepy...

Hermel2• 11 years ago

I think this is a couch.

darkr• 11 years ago

Looks like a big pouffe to me

seibelj• 11 years ago

I can imagine the photographer saying, "We need a hacker shot, look like you stay up all night coding alone in your dark apartment. Excellent"

chollida1• 11 years ago

I thought this article was interesting because it highlights the problem when there is a lack of strong governance in an open source project.

After talking to a bunch of financial firms about bitcoin I've got the sense that the strong consensus is that they don't believe the core bitcoin team "has their act together" in terms of a coherent road map, or possibly more charitably, that the core team isn't at all interested in having the transaction limit increased.

This means that that if bitcoin, or other related technologies like the block chain are going to be adopted by companies to run real businesses on then either the companies themselves will own the technology roadmap or some other entity with a fair bit of credibility will have to step in.

roymurdock4• 11 years ago

It's fascinating to me that someone paid the Russian hacker to develop such a comprehensive and powerful solution to kill XT. That couldn't have been cheap. But it also wouldn't make sense for a large GPU/ASIC miner to block the move to XT, as it would have favored their hardware over those mining on regular CPUs.

So it must have been an ideologically-driven attack? But it defeats the main ideological purpose of the protocol - democratic consensus as nodes decide to accept or reject changes to the client. Weird and paradoxical.

droffel• 11 years ago

ASICs are basically it these days, GPUs and CPUs are only used by hobbyists at this point. The reduced energy requirements of ASICs over GPUs has made it basically a requirement to use ASICs, as energy costs can't be amortized over the lifetime of the miner (while the fixed cost to buy the miner can).

CyberDildonics• 11 years ago

The moderator of the now heavily censored (they've blocked many original developers along with the biggest bitcoin companies) reddit/r/bitcoin took donations a long time ago to build a forum and when the value shot through the roof he ignored anyone's pleas to give back the money - valued around $3 million at some point (I think). He is also one of the primary people threatened by an increase in blocksize as it will threaten the company he is involved in - blockstream. So there are some very plausible theories as to who would do something like that.

brazzledazzle2• 11 years ago

My first thought was someone with a financial interest in a company like Blockstream since they seem to have a vested interest in the status quo.

TD-Linux2• 11 years ago

The Bitcoin Core team does have a roadmap: https://bitcoin.org/en/bitcoin-core/capacity-increases-faq

HappyTypist3• 11 years ago

But it's arguable if it's a good one. It's main proposal, "soft fork segwit" isn't really a soft fork. It reduces the security of every single existing node to "Accept every transaction miner says, don't do valifation". That's because existing nodes don't know SegWit, and would by default reject these transactions as designed.

So the core devs are proposing to reuse "Anyone can spend" op codes to "SegWit", just so old nodes won't complain. That means a malicious miner can spend Bitcoin they don't own and nodes will happily accept it.

Why do they want soft fork SegWit? Because if they hard fork, they might as well as simply increase the block size. And some "core developers", with a strong correlation to those employed by a company named Blockstream Inc, absolutely oppose it.

What does Blockstream do? They're making a "layer 3" transaction network called "Lightning" that bypasses the Bitcoin network and charges it's own set of fees.

maxmax• 11 years ago

"This means that that if bitcoin, or other related technologies like the block chain are going to be adopted by companies to run real businesses on then either the companies themselves will own the technology roadmap or some other entity with a fair bit of credibility will have to step in."

Like banks and the Fed?

profeta• 11 years ago

well, it fits. the blockchain is already too big to fail.

roymurdock4• 11 years ago

Yes, there is no such thing as a purely decentralized, trustless protocol.

The major innovation here is that the miners have the option to vote with their feet by either accepting or rejecting new monetary policy from the developers. Banks can't just dump all of their USD and US bonds if the Fed makes a decision they don't agree with. So there's a different power dynamic built into the network.

roymurdock4• 11 years ago

Unlike the Federal Reserve and Wall Street, institutions that are managed by humans, Bitcoin was supposed to rest on the infallible logic of math and computer code. In this system, programmers like Mr. Hearn, who often volunteered their expertise and effort, were viewed as neutral technicians.

This is the key. If the neutrality and technical/economic/ethical character of the lead developers is called into question, Bitcoin (just a flavored brand of blockchain) is done. An untrustworthy/biased dev team could adjust the cap, difficulty, etc. for their own gain or that of their sponsors. While this would probably cause the majority of nodes to fork the chain and reject a bad update, it would leave the protocol without strong leadership and call the brand into question.

Will be interested to see how this plays out with the dev environment around bitcoin becoming so toxic and ideologically split.

jimrandomh2• 11 years ago

Disagreement over an important technical decision gets politicized and spirals out of control. An anonymous DDoS and death threats against developers fan the flames, and key figures bow out.

Who did that?

There is a significant contingent of people promoting Bitcoin as a force that will eventually undermine the power of governments. This can hardly have escaped their notice. Perhaps one of them saw a conflict brewing, and decided to opportunistically fan the flames?

guelo• 11 years ago

There's really no need to add unfounded conspiracy theories like yours to the public discussion.

jimrandomh2• 11 years ago

It's a known fact of psychology that people fight less if they believe they have a shared enemy. In this case, there is what looks like enemy action (anonymous DDoSing and death threats) directed at both sides of the block-size conflict, appearing to come from across the aisle but definitely anonymous. Why not speculate on possible third parties that could be responsible? Maybe it'll make them notice they both just want Bitcoin to succeed.

doctorfoo• 11 years ago

Most people in the Bitcoin community have a pretty shrewd idea who is responsible for the DDoSing. But no proof, of course.

(Hint: Certain libertarian leaning early adopters who want Bitcoin to remain as a government-proof store of value, viewing any small reduction in decentralisation to be a terrible thing, and not caring about its use as an actual payment network)

Hermel2• 11 years ago

Here is what will happen (my guess): as Bitcoin usage continues to grow, the limited capacity will start to hurt over the coming months, with the planned "segregated witness" proposal not helping much. Also, the block reward will be cut in half this summer to 12.5 Bitcoins per block, driving many miners out of business and reminding the rest that they could earn more with larger blocks. Furthermore, some of the affected companies (e.g. Coinbase) will announce rewards for larger blocks mined (e.g. 1 Bitcoin reward for each block above 1MB for the next 1000 blocks), making the first miners jump to the new protocol (the much feared hard fork), with the others following soon after the most popular exchanges announce that they will not accept "old branch" coins.

HappyTypist3• 11 years ago

To give everyone some background on the block size debate, here is a recap:

"Small blockers" propose keeping the block size at 1 MB, essentially 5 real transactions per second. They argue that the bigger blocks are, the less people will be able to run a fully validating node, and the network will less decentralised. They want Bitcoin to be a base layer for bank and network settlement.

A 1mb limit means that there is a very low "production quota" for block space. As with every quota, prices will rise - ie Bitcoin network fees will go higher. Currently fees are about 4 cents per transaction. They're anticipating a three orders of magnitude increase.

But that's okay, or they say. Banks can pay $400 to move a million. A typical user can't. So they must use something else.

Most of the "small blockers" are employees of a VC-funded company named Blockstream.

They are building things that bypass the Bitcoin network, occasionally settle, and charge it's own set of fees. Oh yes you don't pay Bitcoin fees. You pay our fees. That's claimed to be a major selling point.

Also, bitcoin currently handles "zero confirmations" pretty well. That's because the miners will refuse to mine double spends if it knows about them. These big blockers have removed that functionality. Yes, lightning handles 0 confirms!

On the other side, there are "large blockers". These people believe the block size should be raised in accordance to natural evolution of hardware progression. 2MB today, 4MB in 2 years, dynamic adaptive limit, whatever.

They think there shouldn't be a artificially ceiling on Bitcoins transaction volume, and people should be able to use the Bitcoin network directly. Fees would be reasonable. Instead of 10 people paying $4, they want 100 people paying $0.40 or 1000 people paying $0.04. Pretty simple.

I think you might be wondering why there is a limit in the first place. Back in 2010 someone made huge blocks. So satoshi put in a crude, static anti DoS limit. Back then the average transaction volume was 10 kB, so the limit was set to 100x the average transaction load.

pbreit2• 11 years ago

As ingenious as this all is, it seems even more preposterous. I think I'll go spend some money now without thinking about for even a nan-second.

Animats2• 11 years ago

The Bitcoin "core developers" don't matter. It's the big miners who matter. Both of them. What Antpool[1] and F2pool[2] decide is what Bitcoin does. They have 52% of mining capacity. Jihan Wu, CEO of Antpool, and Wang Chun, chief administrator of F2pool, rule Bitcoin. They're the ones in charge. Not the "core developers". And certainly not the Bitcoin Foundation clown car.

[1] https://www.antpool.com [2] https://www.f2pool.com

roymurdock4• 11 years ago

It is often asserted (for example, in the Bitcoin white paper [22]) that a cartel can double-spend Bitcoins. In a strict sense, this is true: a cartel can spend a Bitcoin by paying it to a player Alice, receiving goods or services, and then shifting the consensus choice of history to a branch where that coin is instead paid to a different player Bob. However, we argue that double-spending by a cartel has a limited payoff. Bitcoins have value because people are willing to trade them for goods and services. If players were unwilling to accept Bitcoins for trade or unwilling to spend Bitcoins for fear of having their payments nullified, the value of Bitcoins would diminish significantly as players lost confidence in the system. Worse, because players are encouraged to generate a new identity for each transaction and because identities are not linked to any side information, players cannot easily determine whether a proffered payment is coming from the double-spending cartel or an honest user. Thus, a rational player should refuse to accept any payments when there is a significant threat of double-spending. As a cartel must outmine the entire Bitcoin network and thus outspend the entire Bitcoin network for as long as it would remain a cartel, we believe it is very unlikely that a cartel could double-spend enough to recover the cost of the attack.

An interesting facet of mining cartels is that they can censor certain transactions. The cartel can choose to ignore any transaction it does not want appended to the log. Further, the cartel can choose to treat any blocks appended by others to the log as forks which it will not attempt to extend. Thus, other players will naturally also abandon these transactions, possibly even consciously if the cartel announces that certain transactions (or transactors) are disfavored.

https://www.cs.princeton.edu/~kroll/papers/weis13_bitcoin.pd...

fragsworth• 11 years ago

It's still not obvious whether or not bitcoin is economically secure.

With ETFs and other instruments, a mining cartel can potentially spend less money performing a 51% attack than they can make from a massive short sale of the currency.

ufo• 11 years ago

However, we argue that double-spending by a cartel has a limited payoff

I find this "cheating the system is against your rational self-interest" argument to be very unconvincing. The whole point of the proof-of-work system is to allow for a decentralized and trustless system. If you are going to trust the miners with more than 50% of the network than you might as well centralize the ledger and stop burning coal to mine transactions.

afreak2• 11 years ago

There are three types of people who are into Bitcoin:

1. People who are in it out of sheer curiosity.

2. People who are in it to get rich quick.

3. People who have been scammed into it.

The people who are in it out of curiosity are the people I don't take issue with. At its beginnings, I found Bitcoin to be a curious thing because it was a novel and new idea. However, as things progressed and I learnt more about how it all worked, I saw it as a cumbersome idea that wouldn't effectively replace anything and as a result now I'd rather make jokes about it than take anything about it seriously. I've never spent more than $20 CAD on Bitcoin and I have gotten it all back for that matter too.

People who get scammed into Bitcoin typically get scammed either one of two ways: they're either being coerced into using it because they've gotten something like malware on their machines (CryptoWall and its variants) or they see it as an investment alternative. The only times I've ever seen non-technical people experience Bitcoin is when I have to tell them that the malware on their computers will only release their unbacked-up data requires a payment using the cryptocurrency to get it all back. And that is really what a non-technical person's experience with Bitcoin is going to be: it's a way to pay thieves.

As for the get rich quick people, they tend to fall into the third category or they themselves are scammers.

Right now there are two forces dominating the Bitcoin community: the miners and those who are holding out on whatever magical unicorn rainbows makes the coins have value. The miners don't want to see changes to the software because it'll hurt their bottom line and the people holding and exchanging it want to see these changes so they can benefit. So as a result, Bitcoin has entered a war of attrition and is starting to show its problems. Mike Hearn's leaving is definitely a consequence of this problem.

Earlier yesterday [1], I made a quip about how it's insulting to suggest that we get those who are "unbanked" as a result of living at no-fixed-address (ie: "homeless") should eventually move on to Bitcoin as an alternative to mainstream financial institutions. It's really for the reasons that Hearn made: would you want to wait a random period of time ranging from maybe a few minutes to a few hours for your transaction to go through? It's already insulting enough that they're living at the bottom of society, so why would we want to get them to use a bottom-tier financial system? Why not instead suggest making it easier for them to participate within mainstream banking schemes?

I anticipate based on my last remarks that the responses to this post will consist of feckless anecdotes and pointless accusations that I and others have a "problem" with Bitcoin. I guess to a certain extent the statement of me having a problem is true, but at the end of the day Hearn is right.

Bitcoin is a failure and if you invested into it then you're getting what you deserve.

[1] https://news.ycombinator.com/item?id=10898408

SatoshiRoberts2• 11 years ago

Bitcoin is a failure and if you invested into it then you're getting what you deserve.

How do you quantify a failure?

afreak2• 11 years ago

How do you quantify a failure?

I think that Hearn's article can answer that for you.

JulianMorrison• 11 years ago

4. People buying drugs.

grubles2• 11 years ago

Cash has failed!

grubles2• 11 years ago

Why did you double post this? It's borderline FUD.

namecast• 11 years ago

Worth reminding people:

On August 15th, 2015, Mike Hearn announced Bitcoin XT, and his attempt to fork the blockchain: https://medium.com/faith-and-future/why-is-bitcoin-forking-d...

On January 14th, 2016, 5 months later, Mike has unilaterally declared Bitcoin to be a failed experiment.

In the intervening period, support for XT was at best minimal, and that's being charitable.

There is a phrase we use in my neck of the woods when developers behave like this, and "responsible grown up behavior" isn't it.

brazzledazzle2• 11 years ago

There's some serious accusations of sabotage in that article. It hardly seems like a hissy-fit in that context.

seliopou• 11 years ago

tl;dr: "Money" is political. If you don't think it is, well, that's a political statement about "money."

runn1ng• 11 years ago

This is the actual medium post, where Mike expresses his frustrations and what this article is referencing.

It explains things rather well.

https://medium.com/@octskyward/the-resolution-of-the-bitcoin...

dang• 11 years ago

Since https://news.ycombinator.com/item?id=10905118 is also on the front page and is the original source, we've demoted the current thread as a dupe. But both are worth reading.

(We plan to build something to aggregate related URLs, so this should become less of an issue at some point.)

pbreit2• 11 years ago

If bitcoin is such a disaster, why is the price holding firm or even increasing?

A Bitcoin Believer’s Crisis of Faith

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