Topic: New video: Why the blocksize limit keeps Bitcoin free and decentralized - page 3. (Read 15248 times)

I just explained it to you in what I thought were very clear terms.

Processors who deal with fiat are encumbered by all of the baggage that fiat systems and their regulatory apparatus bring along.

Processors who deal directly with a free Bitcoin blockchain simply don't have these problems to pass along to their customers.


You can try to employ various annoying rhetorical devices like labeling off-chain processors 'BTC banks' or 'BTC-credit transfer', but in point of fact, it is technically feasible to enforce just about any model one likes.

Other than that, you statement is hard to parse.  As best I can tell, the most legitimate answer to your concern is that, again, the powers that be picking off a second-tier processor is whack-a-mole and does not threaten the entire Bitcoin economy.  This is particularly true if pretty much anyone can bootstrap to being an off-chain processor by running some freely available software which I see as highly probable.

It would be most common, I suspect, that off-chain processors are incapable of inflating or stealing customers funds by use of multiple signature mechanisms and the like.  This contrasts sharply with our current banking model under fiat systems which are forced by law to give customer's funds back on demand.  Until the law changes as we saw in Cyprus.

That said, other flavors of off-chain processors are perfectly viable including those which could be legitimately labeled 'banks' or 'credit transfer agents'.  As I said, under the right set of circumstances which protect my interests I'd be happy to patronize them myself since I don't believe that they are inherently evil or whatever.

From a customer's standpoint, the choice of which processors to make use of shifts from an economic decision to more of a political one.  I'll be looking for diversity in terms of operational jurisdiction, transparency, customer privacy, promotion of mutual interests, etc.

And least we forget, a vast bulk of my assets would be sitting undisturbed and gathering dust in plain old vanilla Bitcoin with a paper wallet in a very safe place.

That's exactly how I see it, and what I've been trying to articulate to tvbcof.



I'm genuinely trying to understand why you believe BTC banks and clearing houses would be any different than fiat ones, and struggling to understand your reasoning.

How does the medium they process being free prevent them from being subject to the same inefficiencies, over-regulation, and centralization you see in other industries? Gold is free, but trading gold through an exchange is not low cost.

To me, it seems obvious that it's their size and immobility, which comes from the requirement for trust-based relationships between the clearing house and its members, that makes them choke points in a market, not whether they deal in bitcoin, dollars, euros or gold.

Any type of credit-based market will naturally centralize, as a result of people and companies gravitating toward the party with the most already existent connections, and that central point then becomes a critical and easily disrupted point in the industry.


It's inevitable? That's a pretty confident statement, which again, I can't understand the basis for.

Whether there is quality open-source reference software for payment processors and clearing houses is not even that important to my critique of your vision, just an example of one of your claims that I see as pure conjecture.


If there's a major clearing house that tens of thousands of BTC-banks use, it will be subject to the same regulatory obligations as a clearing house that fiat-banks use.


The central clearing house that your free BTC-credit transfers require will be orders of magnitude larger than these entities, which by the way is an exaggeration, as parties much smaller than Dwolla would be able to operate a high-bandwidth node, will be much harder to replace if taken down, is a much more attractive target for governments to attack, and will have a much larger network effect advantage that leads to increasing centralization than those peer-to-peer nodes.

That is not clear.  It depends a bit on the attack surface that Tor exposes and how threats to it will be mitigated.

But if you wish to propose basing the block size limit on what technologies are proven to be able to work around coordinated network level attacks, it would be a metric I would be very interested in.

Intermediary processors can realistically be no more free than the medium they process.  The costs of doing business with fiat processors is directly related to the fact that it costs a lot to comply with the the various regulations which they are forced to comply with.  Also, and hardly by accident, the barrier to entry is high fostering end-user gouging and stifling competition.

Off-chain Bitcoin processors would have none of these problems.  If Bitcoin itself can remain free, off-chain processors can as well, or at least have that possibility.  It is inevitable that open-source reference software which defines best-practice transparency and security will also develop and become the base platform which off-chain processors would use.  This would make the barrier to entry very low and their reliability to end users quite high from the start.

Of course off-chain processors who also wish to have a foot in fiat-land are a different story.  At least some of their fees will be much higher, and their life expectancy will not be very good.  I don't see off-chain transactions as the magic bullet for Bitcoin<-->fiat transfers, but I am hopeful that the need to do such transactions will decline.

I might add that if Bitcoin becomes a size when 'a few thousand' entities have the capability to operate the infrastructure, said entities will be at least the size of Dwolla, OKPay, etc.  And as history has demonstrated, they are far from immune from being pressured into whatever compliance is demanded.  Even if based in Russia.  I will have lost confidence in Bitcoin before it gets baited into that trap.

What you are describing is nothing more than the clearing of cheques between competitive banks at the national level and it has worked well within a single country for well over a century. The trouble is that this does not happen effectively at all between competitive propriety e-money providers on an international level. Try moving money between say Perfect Money. PayPal, WebMoney, OKPay, etc and see how much you will end up paying in fees. By the way if this were possible in a cost effective manner there would little use for Bitcoin in the first place.

The key advantage of Bitcoin blockchain transactions have is that the end users can move the Bticoins themselves across international and sub national borders thereby freeing the respective MSBs from having to be compliant in, and develop trust in, multiple jurisdictions. This places Bitcoin in a unique competitive advantage over other forms of money transmission ranging from Hawala, to PayPal to Credit Cards to Bank transfers to Western Union etc.

Congratulations on the conclusions made. They are exactly as if reading directly my mind. I'm speaking about that for almost 2 years.

Probably that number was chosen considering the current technology level. As internet connections get faster, it can be happily increased.

What if the two private networks have no credit relationship and aren't willing to extend credit to each other until the BTC network payment clears?

How are you going to avoid a $10/20/30/whatever fee in that case?

Nobody really knows why Satoshi set things at 1MB.  He didn't leave a comment.

But an interesting thing happened on the IRC channel a few days ago.  The high priests got to scratching their heads about things and noticed that 1MB just happens to put things right near the edge of what is practical to competitively mine off of Tor.  That's how I read the conversation.  Coincidence?  Who can say...

Ignoring the fact that $20 was pulled right out of someone's ass at some point (and is doubled when it does not sound like enough to make a point...)

I mean they aggregate their internal transactions and square periodically with other entities when they need to.  If at the end of the day they have only a $100 imbalance, they don't even bother to square that day.  They'll just cover something like that with their own buffer of working capital.  In any event, the user see's a UI and can drag-n-drop funds as they please.  Again, with minimal fees.

Using an aggregator is not always possible and will not always happen. There could be two networks that have few transactions occurring between them. How are you going to transfer your currency from one network to another without a $20 network transaction in that case? Use Ripple?

Sure, a blocksize limit is needed, we can't have blocks 10GB big, but the current limit of 1MB is definitely too low.

Anyway, i am checking the latest blocks, they are nowhere near the limit, why? most are 100/200kb big. But there are 19813kb of unconfirmed transactions.

Bringing back up the explanation:

  This is because the aggregate their transactions and perform them periodically.

I fully expect off-chain processors will both denominate in BTC and be able to prove non-fractional operations.  If that is the customer base they cater to at least.

For certain of my spending money stash,  I'll be looking forward to using off-chain processors who ARE using fractional methods.  This because they can pass some of the benefits that they realize down to me.  Of course I'll be demanding visibility into their books or they'll not count me as a customer.

You see, a world with choices is a much more fertile field to play in.  If there is transparency in the core reserve solution, there can be transparency in the second tier.  If there is not, there cannot be.  That is a giant void in our current mainstream monetary solutions and one of the reasons Bitcoin appeals to me.  It offers the potential to remedy this problem.

There are many low-value transaction types other than point of sale, and Bitcoin will always be at least an option in these. There's even a possibility that Bitcoin transactions will be an option in point of sale, if merchants are willing to risk double spend attacks like they risk credit card chargebacks and counterfeit cash today. There are also certain ways to use third parties to mitigate the risk of 0-conf double spends while still not having the transaction go through an intermediary.

I'm suggesting that maintaining the option of making decentralized low-cost transactions is healthy for Bitcoin, even if centralized payment processors end up being better in general and most transactions end up going through them.


Fair enough. I won't respond any more to this, as I'd just be repeating myself.


Even if you/someone invents a method that allows this, there will still be private credit networks that are incompatible with each other, and can only have BTC moved between them through the network. That's not something you can control.

You've conveniently ignored (and snipped) the salient part.  By focusing on the the 'buying your morning coffee' role for Bitcoin, you are betting that Bitcoin's head-start will be a sufficient advantage to compete with systems which do all of these things much better.  And compete in perpetuity.  That is, to me, a huge gamble (and almost a certain loser.)

Bitcoin has the realistic potential to shine as a trusted reserve currency if it retains a highly distributed profile and the security which comes along with it.  And it is a very high value (and much needed) role to fill.  I don't wish to seen that tossed out the window in pursuit of an untenable pipe-dream of the one-world currency for everyone.


As I've said, moving between different off-chain solutions should be frictionless and nearly cost free.  This is because the aggregate their transactions and perform them periodically.   If it's costing you something more than a trivial amount then stop using the ones which are screwing you and choose one of the many which are not.

The easy and free Bitcoin transactions did not save me from Instawallet folding because I would have had to have a time machine also.

Anyway, it would not be impossible to create obstacles to off-chain processors absconding with funds or using opaque and covert fractional schemes.  This was much less the case several years ago when Instawallet was developed.  Off-chain processors who do not erect barriers to fraud in this day and age probably plan on being fraudulent.  So, just choose a different one.

Right, but I've given reasons for why I think you're wrong. You've responded to some of them, but for quite a few, you've simply said "I don't think that's how it will be" without giving reasons for why you think my reasoning is wrong, which doesn't showcase your rationale.


I understand, and this part is solely my opinion: I think it's better to swing for 95% (having a decentralized/low-cost option for everyday payments as an alternative to centralized payment processors) than guarantee 10% (decentralized large value transfers). The 95%/10% I'm just pulling out of the air to underscore the difference in the extent of success I see these two states as representing.


It's possible that you're wrong about larger blocks leading to the end of Bitcoin's decentralization/its-shutdown. I'd rather gamble on it, and risk Bitcoin failure, than guarantee a future where low-cost decentralized transactions on the Bitcoin network are not possible.

This is because I perceive the risk as much lower, and the benefit of low-cost decentralized transactions as much larger, than you do.


Having a financially viable option of using Bitcoin for your everyday transactions, instead of centralized solutions, I think has HUGE value. Even if most people end up using payment processors and transferring BTC-credit around on private networks, I think just having the alternative is useful.

Also, with low cost network transactions, a person can easily move their BTC from one private credit network to another. With $20 transaction fees, you're quite locked in once you've committed to trusting one private network with your currency.