SoylentNews is people
SoylentNews
In a test of Bitcoin's ability to adapt to its own growing popularity, the Bitcoin community is facing a dilemma: how to change Bitcoin's core software so that the growing volume of transactions doesn't overwhelm the network. Some fear that the network, as it's currently designed, could become overwhelmed as early as next year.
The answer will help determine the form Bitcoin's network takes as it matures. But the loose-knit community of Bitcoin users is not in agreement over how it should proceed, and the nature of Bitcoin, a technology neither owned nor controlled by any one person or entity, could make the impending decision-making process challenging. At the very least it represents a cloud of uncertainty hanging over Bitcoin's long-term future.
The technical problem, which most agree is solvable, is that Bitcoin's network now has a fixed capacity for transactions. Before he or she disappeared, Bitcoin's mysterious creator, Satoshi Nakamoto, limited the size of a "block," or group of transactions, to one megabyte.
Under the one-megabyte-per-block limit, the network can process only about three transactions per second. If Bitcoin becomes a mainstream payment system, or even a platform for all kinds of other online business besides payments (see "Why Bitcoin Could Be Much More Than a Currency"), it's going to have to process a lot more. Visa, by comparison, says its network can process more than 24,000 transactions per second.
(Score: 4, Informative) by tftp on Wednesday May 20 2015, @05:55AM
In a test of Bitcoin's ability to adapt to its own growing popularity
It doesn't appear that BTC's popularity is growing. Perhaps BTC was in higher demand in the days of the Silk Road, but there is no good reason to use BTC today, in everyday transactions, unless you are a geek with an interest in digital currencies. The huge drop in BTC's value in last years has also reduced interest in BTC among those who were sold BTC with assurance that "it has nowhere to go but up."
Some fear that the network, as it's currently designed, could become overwhelmed as early as next year.
Any payment network that is as much centralized as BTC will become overwhelmed. It is customary to think that BTC is distributed; but there is only one blockchain. Nobody needs to see transactions of the whole world. Credit and debit cards are processed in distributed manner; as matter of fact, they can be split between any number of processing centers to handle any load that is present. The vast majority of transactions are actually small stuff, like groceries or gas, and they do not need to be registered in a planet-wide database. BTC is an overkill for practically all uses. Besides, even from the POV of privacy it is safer to pay with a credit card. Want to find out the BTC address of a BTC user? Follow him to the a store, write down the amount and the time, then write down a few more purchases, the address of the store, and then you can read the address of the person of interest right in the blockchain. Now you can watch for transactions that involve that address. You can't do that with a credit card.
If Bitcoin becomes a mainstream payment system [...] it's going to have to process a lot more
The BTC has to reduce confirmation speed from 15 minutes to 2-3 seconds. And that is something that is not possible - it is limited by the design of the network, by the rate of production of new blocks. Confirmation time of ten minutes may be OK if you send money to China, but it is absolutely unacceptable in retail - or nearly everywhere, to that matter. It doesn't matter how many transactions the network can process if the cashier has to hold people in store for 10-15 minutes. Nobody would ever agree to that.
The blockchain is an interesting idea, that's certain. However it is an extremely expensive technology, and it is not well suited to handling of commercial transactions - neither by the rate of transactions, nor by latency. The transactions are forever "cast in stone" in the blockchain, but it is absolutely not required. It is much cheaper to call the bank and revert one erroneous transaction per million. For example, I was paying at a store a few weeks ago, and their cash register locked up mid-transaction. It started printing the receipt and then froze. The cashier had to power-cycle the terminal and run the credit card again. We both were aware of possibility of a duplicate charge. A couple days later I was reviewing the credit card log and indeed there were two. I clicked a button and marked one of them as a duplicate. The bank immediately cancelled it. But imagine that I was paying with BTC. Who would I complain to? To the store? What level of competence would be required from the clerk to recognize double confirmation and to revert it, without involving the manager? That would be pretty painful, and not every manager would even approve a refund. The bank has a specific contract with me, that's why it had no qualms in reverting the transaction. The store has no contract with me, and they are not legally required to refund me. I'd have to sue them to get the money back. Who is going to do that? What evidence would I need to present to win? That would be ridiculous.
(Score: 3, Interesting) by JNCF on Wednesday May 20 2015, @03:09PM
It doesn't appear that BTC's popularity is growing. Perhaps BTC was in higher demand in the days of the Silk Road, but there is no good reason to use BTC today, in everyday transactions, unless you are a geek with an interest in digital currencies.
There are other dark markets, but I agree that it is of niche interest at the moment.
The huge drop in BTC's value in last years has also reduced interest in BTC among those who were sold BTC with assurance that "it has nowhere to go but up."
Fools are parted with their money all the time. If somebody tells you that an investment has nowhere to go but up, you need to do your own research. I own some cryptocurrencies, but I understand that they are a speculation which could lose all of their value overnight. I don't think foolish speculation has any more to do with bitcoins than tulips.
Any payment network that is as much centralized as BTC will become overwhelmed. It is customary to think that BTC is distributed; but there is only one blockchain. Nobody needs to see transactions of the whole world.
This isn't what people mean when they say that bitcoin is a distributed system, obviously. That being said, I agree that we shouldn't all be storing the entire blockchain locally. See my comment here. [soylentnews.org]
Besides, even from the POV of privacy it is safer to pay with a credit card. Want to find out the BTC address of a BTC user? Follow him to the a store, write down the amount and the time, then write down a few more purchases, the address of the store, and then you can read the address of the person of interest right in the blockchain. Now you can watch for transactions that involve that address. You can't do that with a credit card.
I can't do that with a credit card, but a credit card company or a government can do it much easier. In fact, they do it by default and mine the data. Also, if you use the same address for more than one transaction you're going against the security recommendations of the original white paper. Generally an address is emptied completely when funds are transferred from it, and the excess funds are sent to another address whose private key is controlled by the same user. There is a pretty ingenious system in the works (not stable yet) that allows a bunch of users to cooperatively make a single transaction with a large number of inputs and outputs, effectively obscuring which coins went where (and of course there are centralised mixers already). These tools provide another layer of protection, albeit one that is susceptible to network analysis ("Johnny Prole put 550 coins into the mixer, and eleven addresses which got 50 coins each were subsequently spent in the same place, so they're probably Johnny's coins"), so you have to be careful. I'll take the privacy of Bitcoin over that of a centralised payment processor that requires identification any day.
The BTC has to reduce confirmation speed from 15 minutes to 2-3 seconds. And that is something that is not possible - it is limited by the design of the network, by the rate of production of new blocks. Confirmation time of ten minutes may be OK if you send money to China, but it is absolutely unacceptable in retail - or nearly everywhere, to that matter. It doesn't matter how many transactions the network can process if the cashier has to hold people in store for 10-15 minutes. Nobody would ever agree to that.
To me, this seems like your most valid objection to the system. One proposed solution, which I like despite understanding that it falls short of perfection, is to use another currency with quick confirmations to do small payments and then transfer that value back into bitcoins (or some other more secure coin with long hash times). Quark coin hashes a block every 30 seconds or so, or at least it used to. I understand that this is still too long. Another solution is what I discussed here, [soylentnews.org] having third party payment handlers standing between the end-user and the blockchain, but I don't like it.
. For example, I was paying at a store a few weeks ago, and their cash register locked up mid-transaction. It started printing the receipt and then froze. The cashier had to power-cycle the terminal and run the credit card again. We both were aware of possibility of a duplicate charge. A couple days later I was reviewing the credit card log and indeed there were two. I clicked a button and marked one of them as a duplicate. The bank immediately cancelled it. But imagine that I was paying with BTC. Who would I complain to? To the store?
In your example, there would be issue. Propagating the exact same transaction to the blockchain twice will do nothing bad, it's just slightly inefficient. A better example would be if you accidentally sent coins to the wrong address (one that nobody has the private key to, or one that an untrusted self-interested party has the private key to). In this case, you would be shit out of luck. Just like if you lost a wad of cash. Personally, I don't want to have a third party be able to revoke my transactions after the fact. I see that as a horrible security flaw, and accept the possibility of losing coins as the cost of strong security. I don't want some entity like PayPal deciding that I don't really get the funds that somebody sent me (they do this, generally siding with whatever party complains first).
(Score: 2) by JNCF on Wednesday May 20 2015, @03:25PM
*there would be no issue
(Score: 1) by tftp on Wednesday May 20 2015, @06:01PM
I can't do that with a credit card, but a credit card company or a government can do it much easier
In both cases you have to trust someone. I prefer to trust the bank with which I have a written contract, as opposed to the whole world full of people who have nothing better to do than to mine the blockchain. The bank has no interest in such operations; hackers do.
In fact, they do it by default and mine the data.
Not sure why the government would be interested in my grocery purchases. Regardless of that, use of the blockchain exposes me to *all* governments and all hackers of the world. As you are saying, even if you use a unique address for each transaction, a simple network graph will show what account feeds those one-time use accounts. There is no privacy in the blockchain - only an obfuscation of your identity. If you are extremely careful, you probably can stay anonymous for a while. But it only takes one mistake to reveal your identity and to unwind all your accounts, automatically and at zero cost. Compare to spying by the bank and the government. First, they have no intent to steal your money. Second, the collected data is kept secret, available only to a few analysts. You can already see that a credit card gives you better protection from strangers. And if the government is after you, they will get you - they have $5 wrenches, and rubber hoses, and keyloggers, and search warrants... The BTC is nothing but a thin layer of obfuscation. It may even net you another charge if you are indicted.
These tools provide another layer of protection, albeit one that is susceptible to network analysis
Rest assured that the network analysis will be done, and probably it is already being done. It costs nearly nothing. Once you start feeding the system with real names, the network quickly reveals who is trading with who, and how often. BTC doesn't even come close to cash in terms of privacy. Would you want to pay with cash, letting the government agent write down all the serial numbers on bills? That's what BTC does.
In any case, if BTC becomes widely used, nobody will be following the recommended security practices. It is simply too difficult. People do not want to spend minutes or hours of their finite lives on counting and shuffling their money. That's why they hire banks to do that for them. A BTC wallet that is used by a regular Joe will be stolen and all the money in it lost. Banks insure you against many losses. The BTC leaves you on your own.
Quark coin hashes a block every 30 seconds or so, or at least it used to. I understand that this is still too long.
It is also essential to understand the social costs of running a digital coin network. These costs are HUGE, they are far higher than to run a few AS/400 or larger mainframes. The latency of a few seconds is achievable only with direct connection to the mainframe. This means that 3rd party payment systems are required:
Another solution is what I discussed here, having third party payment handlers standing between the end-user and the blockchain, but I don't like it.
Of course. They make BTC unnecessary :-) And on top of that, we already have them :-) So to implement a BTC-based system we don't need to do anything. We are already there :-) A BTC equivalent, however, could find its use as a global coin for transfers of money between banks. The main advantage of BTC there is that no government can print more of them. The BTC will be a modern equivalent of the gold supply; and each BTC would be enormously expensive. But in this use none of the BTC's problems matter. Then the population could use any currency that their government decides to print - as long as it is fully backed by BTC.
Personally, I don't want to have a third party be able to revoke my transactions after the fact. I see that as a horrible security flaw, and accept the possibility of losing coins as the cost of strong security.
People do want those features. There is a reason why cash remains in use only among the poorest people, those who cannot get a credit card. Besides, why are you afraid of reversible transactions? It's not like they can be done without you knowing. You can debate the chargeback in court of law, if you want to. All the records are available. Chargebacks are not done for no reason at all. The primary reason today is counterfeit credit cards [krebsonsecurity.com]. This is being handled by the chip-and-signature method that has to be implemented in the USA by the end of this year. Many locations already ask for an ID if the purchase exceeds some amount ($50 in one store that I go to.) They are paying the costs of fraud, so they are getting more vigilant. Ideally, a copied card would be entirely useless - and cards with a chip cannot be copied. A copied BTC wallet, on the other hand, is as useful as a briefcase full of stolen cash.
(Score: 2) by JNCF on Thursday May 21 2015, @12:58AM
I am in total agreement that the government is watching and trying to track all Bitcoin transactions, but I doubt they have a full picture. I've never tried to obscure my ownership of coins, but I think it could be done. Some day I intend to, just for the sake of it. It is certainly work, and more work than the average user is willing to put in.
Not sure why the government would be interested in my grocery purchases.
Corporations are mostly interested in marketing to you and making predictions about your life. [forbes.com] Governments, well, they're governments. Read chapter 2 of SuperFreakonomics, titled "Why Suicide Bombers Should Buy Life Insurance." Long story short: they usually don't, and this is a red flag to intelligence agencies who are sifting through metadata in search of terrorists. They're also passing on information to law enforcement agencies such as the DEA (which engage in illegal, unconstitutional parallel construction to cover this up). They're also building a database which any future totalitarian state could use against us. Don't think that your purchases aren't being stored right alongside your emails and telephone conversations, it would be silly if they weren't.
If you are extremely careful, you probably can stay anonymous for a while. But it only takes one mistake to reveal your identity and to unwind all your accounts, automatically and at zero cost.
Disagree. If you've compartmentalised things correctly, a data leak in one part of your operation shouldn't expose all of your addresses' ownership.
Compare to spying by the bank and the government. First, they have no intent to steal your money.
I guess we see taxation quite differently. To me, it seems like they want to steal my money and use it fund wars for the sake of oil companies (among other travesties).
Second, the collected data is kept secret, available only to a few analysts.
Hopefully. Hopefully, they aren't selling it to insurance companies and debt collection agencies. Hopefully, nobody leaks all of your personal information to the internet. Hopefully. I'd rather try to obscure it from everyone, so that I'm not trusting some corporation with my data. It seems that I view this as a more obtainable goal than you do, but I fully accept that I could be underestimating the difficulty. It's impossible to tell what the government's data analysis is capable of, compared to the tools that are public knowledge.
A BTC equivalent, however, could find its use as a global coin for transfers of money between banks. The main advantage of BTC there is that no government can print more of them. The BTC will be a modern equivalent of the gold supply; and each BTC would be enormously expensive. But in this use none of the BTC's problems matter. Then the population could use any currency that their government decides to print - as long as it is fully backed by BTC.
This doesn't seem like an unrealistic outcome to me, but it certainly isn't the only possible outcome.
People do want those features. There is a reason why cash remains in use only among the poorest people, those who cannot get a credit card.
I own a card, but pretty much only use it for occasional online purchases. I prefer to pay in cash for idealistic/paranoid reasons, and I know a couple of people who do the same. Not many, I'll give you that. Most people do like being coddled. I don't think I've ever argued that Bitcoin is destined for mainstream adoption.
Besides, why are you afraid of reversible transactions? It's not like they can be done without you knowing. You can debate the chargeback in court of law, if you want to. All the records are available. Chargebacks are not done for no reason at all.
Courts cost money, and I don't want to deal with their rigmaroll. I've never been bitten by a reversed transaction, but I know people who have (with PayPal, not credit cards). You can't find people who will sell bitcoins via PayPal because it is ridiculously easy for the buyer to get the transaction reversed, PayPal basically defaults to siding with whoever complains first.
I think it comes down to this: I don't want to be treated like a child who is incapable of handling my own funds, and I don't want to trust corporations with data about my purchases. I don't want the government/banks to control my money. I know they're corrupt, and I don't trust them one bit. I see the blockchain as a new model that could replace ones of the needs for these centralised institutions, whether or not Bitcoin is the currency that implements it correctly.
(Score: 1) by tftp on Thursday May 21 2015, @01:38AM
I've never tried to obscure my ownership of coins, but I think it could be done. Some day I intend to, just for the sake of it.
You either do it, or do not. There is no "some day" here. The blockchain contains all the history of your accounts, and they can be tracked backward in time until the chain hits one of your current, known accounts. You can try to break the chain - for example, by selling your coins for cash and then going to another city and buying new BTC, in a different batch size. It's hard on you, but it's not too hard for a computer to calculate probable edges of the graph.
Corporations are mostly interested in marketing to you and making predictions about your life.
I'm not sure how they can market anything to me. I receive no spam, and I don't read flyers, and my answering machine on the phone rejects all incoming calls unless you know a secret code. I cannot say for the rest of the population, but whatever can be gathered from my c/c purchases is entirely useless. It doesn't even correspond to my home address.
If you've compartmentalised things correctly, a data leak in one part of your operation shouldn't expose all of your addresses' ownership.
Most of the population of this country doesn't even understand all the words that you wrote :-) Sure, if you are a crypto geek you can do better than most. Perhaps you don't need to outrun the bear, after all.
I don't think I've ever argued that Bitcoin is destined for mainstream adoption.
Do you know many viable currencies that are not mainstream? The problem here is that there can be only one. Every alternative currency dies out. I can think of only few scenarios - primarily in times of war or instability - when foreign currencies are widely used as a payment instrument. But even then those are mainstream currencies, like USD and Euro, that are a reliable store of wealth.
I understand your approach to money, and you are not entirely alone in this outlook. However you are in a terribly small minority. What you choose and what you do does not really matter to the society. The reason is that most people do not make money into a separate object of value that is worth of complicated housekeeping. To most people money is just a tool, a token that they are in a hurry to exchange for more useful goods. This is why so many companies are trying to further simplify payments - even though they are pretty simple already. That's where all this RFID and NFC comes from, and all those ideas of using a smartphone as a wallet, and lots more. The chance of winning is low, but if they win they own the world, for a while, joining the credit card giants in skimming a little from each and every transaction on the planet. Perhaps BTC is not all that different, given millions of coins generated by early adopters and stashed away. The only clear winner of the BTC craze so far is the companies that manufacture mining equipment. Everyone else loses.
(Score: 2) by JNCF on Thursday May 21 2015, @02:22AM
You either do it, or do not. There is no "some day" here. The blockchain contains all the history of your accounts, and they can be tracked backward in time until the chain hits one of your current, known accounts. You can try to break the chain - for example, by selling your coins for cash and then going to another city and buying new BTC, in a different batch size. It's hard on you, but it's not too hard for a computer to calculate probable edges of the graph.
Disagree. As I noted earlier, there are mixers (and clever decentralised mixers are on their way). I think that it is possible to pseudonymise coins that have previously been attached to an identity, but you must be very careful. Even if somebody did as you suggested - buying the coins with cash in a city you don't have other business in, and have travelled to discretely - they would still be smart to take other precautions.
I'm not sure how they can market anything to me. I receive no spam, and I don't read flyers, and my answering machine on the phone rejects all incoming calls unless you know a secret code. I cannot say for the rest of the population, but whatever can be gathered from my c/c purchases is entirely useless. It doesn't even correspond to my home address.
Good for you. I mean that, I'm not being snarky :)
Do you know many viable currencies that are not mainstream? The problem here is that there can be only one. Every alternative currency dies out. I can think of only few scenarios - primarily in times of war or instability - when foreign currencies are widely used as a payment instrument. But even then those are mainstream currencies, like USD and Euro, that are a reliable store of wealth.
History is weird; wampum beads used to be legal tender in New Amsterdam. Precious metals of various types used to be our primary means of exchange, sometimes interchangeably and with exchange rates set by custom rather than supply and demand. The lines between currencies and commodities aren't always clearly drawn. The paradigm of today is not necessarily the paradigm of tomorrow. A basket of cryptocurrencies with different properties of liquidity, stability, etc., doesn't seem unreasonable to me. It doesn't seem like a sure thing, either. I'm not sure where this train is headed.
The only clear winner of the BTC craze so far is the companies that manufacture mining equipment. Everyone else loses.
That's a bit of an overstatement. Plenty of others have profited from the roller-coaster ride, and plenty of others have lost out. More importantly, we've gained a really cool tool; the blockchain. Even if it is only used by governments and banks to back their paper bills, as you suggested earlier, it's still a great improvement over the current state of printing money willy-nilly (I'm not actually arguing for deflationary economics here, there are inflationary implementations of the blockchain, it's the incorruptible decentralised system that I'm arguing for). Even if we just use it for specific applications, like Namecoin, society will benefit from this. I suspect we will use it for a whole lot more. I can't wait for Decentralised Autonomous Organisations. [wikipedia.org] Those seem reasonable to me.