Topic: Gold collapsing. Bitcoin UP. - page 51. (Read 2032266 times)

I think it is obvious that:
 a) without new technologies we will need 24 GB blocks.  ( 10 billion transactions per/day )
 b) current technology cannot handle 24 GB blocks (and will not handle any time soon)
 c) with SC and LN bitcoin can stay decentralized and handle billions of TPS using small blocks  (maybe bigger than 1MB be we are far from reaching limits of 1 MB blocks)

Regarding the censored post about the 8 MB voting by 44% of the hash power:


https://www.reddit.com/r/Bitcoin/comments/3gm3ww/this_thread_was_removedhidden_from_front_page/ctzc766

But before they need to scale, they just might need some help convincing potential users they are even necessary at all.

Note: This was previous posted and deleted, but has been revised to address some factual inaccuracies.
A lot people seem to be confused about exactly why the developers that are getting a paycheck from Blockstream - most of which you can find on this page - are all so vehemently opposed to any and all discussions about increasing the block size, even by a moderate amount, much less in a way that scales naturally over time in a way miners can influence.
As most regular readers will know, Blockstream received 21 million US of venture capital funding less than a year ago in order to develop sidechain/payment channel concepts for Bitcoin. Among other things, they have joined development on the Lightning Network - for example, Rusty Russel is a Blockstream employee who is a confirmed prototype LN developer.
Now, obviously it would be hard to attract $21M of funding unless you have a plan to make a profit on the development, and while they haven't published any business plan that I'm aware of, it is by now increasingly obvious how they are planning on obtaining this profit.
How the Lightning Network works
The paper presented for the Lightning Network is a whooping 59 pages, and as such, I expect that the actual number of people who have read it numbers in the dozens. There is a more succinct explanation here, but essentially (and highly simplified):
The system is trustless, and no node can run away with funds that haven't been agreed by both the sending and receiving parties, but in case one party misbehaves, funds will be locked down for a period of time until a set timeout occurs.
It is conceptually based on a hub-and-spokes model with large centralized "payment nodes" that numerous people and companies open payment channels with. Payment nodes can be interconnected, thus forming a chain of payment channels from the sender to the recipient.
To open a payment channel, a leaf node (end user) has to commit an "opening transaction" with a specific payment node (or any other leaf node) to the blockchain. The funds committed at this point is the largest amount that can be spend during the life of this payment channel, and every payment channel you open requires one such transaction.
When a payment channel has been opened, multiple transactions can be created and signed on the channel without being published to the blockchain, up to the amount of funds committed.
The funds in the opening transaction are locked to that specific payment channel. To make funds available again for either party, all the final transactions have to be committed to the blockchain, thus finalizing the BTC transfer (if any).
Centralization drivers
The Lightning Network, by design, consists of what is effectively one-way payment channels between two nodes. In order to avoid the need for end users having to open a large number of payment channels (and thus having to commit a large amount of funds for these), it is conceptually based around centralized "payment nodes". If a sender already has a payment channel open to such a payment node, and that payment node has direct payment channel open to the recipient, or can route a chain of payment channels through other payment nodes, the payment is essentially instant. If it's not, a new payment channel has to be created by committing (and waiting for) a blockchain transaction, which is not faster than making a direct transaction on the Bitcoin network.
As a number of blockchain transactions are required to create and subsequently close out a payment channel, and you have to lock down funds for each separate payment channel, most people would only want to have one or a handful of such channels open at any given time.
In other words, payment nodes will be subject to a massive network effect. The more people use it, the higher chance that an existing chain of payment channel can be found, which means that you get a low-fee, almost-instant transfer of coins, instead of an awkward wait for the blockchain to confirm the transaction.
Worse yet, as the signing keys need to be Internet-accessible for payment channels to work near-instantaneously, the payment hubs will require having the full balance that is committed to a payment channel in what is effectively a hot wallet. This will be a huge security risk for most people, further cementing the centralization of that network to those that can manage a highly secure infrastructure.
How Blockstream plans to profit
The essential question of "how can anyone profit from the Lightning Network" is easy: payment nodes will have the ability to charge fees for the payment channels that connect to them. Note that there will be very real costs in running a Lightning Node, both in terms of hardware and in the risk of having funds being locked down in payment channels (and subject to theft), so that by itself is fair enough.
Less connected nodes will a significant handicap and have to charge higher fees for two reasons: first, for the blockchain transactions required to establish their own payment channels to the better connected nodes, and second, because the better connected nodes will presumably charge fees for the less connected nodes to use their payment channels. This assumes that well-connected nodes will allow less-connected nodes to open payment channels at all, which they may opt not to do.
This means that the first mover advantage is incredibly significant in the establishment of this network. And Blockstream, as a significant developer, will obviously be perfectly situated to be the primary provider of this service, and collect all the fees this entails. Depending on the openness of the codebase and timeliness of its distribution, other players may or may not be able to compete, but this isn't known at this point.
How this relates to the block size
The reasons laid out above perfectly explain why these developers completely reject any notion of increasing the capacity of the base bitcoin network. They want a fee market to be established so that when the Lightning Network is ready to operate, there is a significant cost in placing a transaction on the blockchain. This, in turn, will encourage people to shift their transactions over to Lightning, which will allow the payment node operators rather than the miners to collect the fees in question.
Furthermore, the more expensive it is to place a transaction on the blockchain, the more advantageous payment channels will be, and the higher fee can be charged by the payment node operators. It also makes it more expensive to sustain multiple payment channels, which will further boost growth for already well-connected payment nodes.
The Lightning Network is a genuinely revolutionary invention that will allow Bitcoin to scale to a much higher degree than before for micro-transactions and frequent small purchases. However, it is important to keep the bias in mind when you read debates about the block size. It is essentially pointless to discuss it with many of the involved developers, as they have too great a stake seeing the block size remain where it is. The only way the block size will ever be increased is to outvote them and ignore their frequent demands for "consensus" (which will never be reached).
Blockstream developers frequently use the argument that a larger block size will increase centralization of the bitcoin network. This is somewhat hypocritical and disingenuous, as the Lightning Network by its very nature will be far more centralized than the core network with a larger block size will ever be.
tl;dr: Blockstream wants to choke transactions on the blockchain in order to spur adoption of sidechannels and the Lightning Network, where they will be perfectly situated to collect fees for providing that service.

Over on reddit, it looks like Theymos is going to get a lesson in how censorship backfires.
...

...aaaaand now it's back after I messaged the mods, though I didn't get a response from them.
Edit: received a response:
"Just because an alt-coin is using the bitcoin blockchain to vote on something doesn't make it relevant to bitcoin."
To which I replied:
"Showing support for 8 MB blocks is orthogonal to showing support for Bitcoin XT... it could mean support for BIP 100 or BIP 101."

Where did you read that the relay network encourages mining pools to skip the verification of transactions ?  
Imho, knowing that the relay network doesn't verify transactions, a rational mining pool should feel strongly encouraged to verify transactions.

1. Agreed
2. I'm not sure that users waiting for their N confirmations would agree with your point of view
   Anyway, I don't see this point as the most urgent issue and I guess there will be many others challenges to be solved before this one is considered as an urgent problem.

by encouraging non verification of blocks simply to increase the speed of propagation of blocks thru the network increases the risk of forking, imo.

1 If this turns out to be frequent, the difficulty would adjust.
2 If there are no transactions, a block is really not needed.

I would be worried to get support from the fuckups at blockchain.info 

I don't think I agree with the highlighted part.

The structure of the blockchain's proof-of-work on minimal sized headers is itself the mechanism SPV clients use to determine if a chain is valid. Yes they do not verify the chain's contents themselves. Instead they rely on the fact that producing a false longest chain is prohibitly expensive and thus very unlikely.

To effectively pull off a longest but invalid chain attack requires an attacker to spend more mining effort than the rest of the ecosystem, in order to produce a false chain that will never be acknowledged by the p2p network and can only be used to temporarily trick SPV users.

In short, proof of work on headers is itself a form of validation.

Cripplecoiners going down fast:

[–]blockchainwallet 27 points 6 hours ago

Hey all,

It's definitely important to keep the spotlight on this topic.

Blockchain.info is publicly in favor of larger blocks. We think Gavin's approach is diligent and reasonable.

https://twitter.com/onemorepeter/status/595676380320407553

Sincerely, The Blockchain.info Team

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i believe all these dynamics will make mining profits similar to a utility.  just enough to keep them going but not outrageous.  as it should be with banking.

Miners being financially motivated to shutdown for a period of time may not be an issue though.

Let's say that cowouldn'tewards are zero and miners live on fees only, and given a difficulty level it does not make sense to spend electricity until X number of fees/transactions are published.

In such a situation the difficulty will adjust/decrease until 10 minute blocks are restored. This might mean that after a block is found miners turn off for 5 minutes and only turn on after 5 minutes of fees are sent, but the difficulty will have adjusted so that miners are likely to find the next block 5 minutes after turning on. Yes this would also mean that if all miners keep running we would have 5 minute blocks, but they wouldn't be. And if they did then difficulty would adjust back up.

Since these issues develop slowly, I believe we would see that difficulty will continue to adjust to maintain 10 min blocks regardless of the financial incentives of the time.

That seems to be an interesting point illustrating how the best interest of users and miners incentives could diverge.
For users, an empty block is always better than no block because it adds work to the chain and increases the security of the previous transactions.

I'm not sure to understand your logic here.