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I witnessed the events as they unfolded yesterday, I'll try to give as objective summary as possible. Here's what happened:
The bitcoin blocksize is currently limited to 1MB. Two out of five bitcoin developers who have access to repository are worried that this is not enough to compete with VISA (in the number of transactions processed per second). The dispute to increase the blocksize has been ongoing for months. The two developers suggested to use the bitcoin built-in voting process (which has been designed in it ages ago), where the voting goes as follows:
1. the software is updated in such a way that larger block sizes are not used unless 750 out of past 1000 blocks are mined by miners who in the blockheader say "yes to bigger blocksize".
2. If such blocks (which are still below 1MB, but simply have this "yes" vote) are not mined, then the status-quo remains and nothing happens.
Three other developers have blocked any commits, and dedicated themselves to maintain the even stronger status-quo, by simply disallowing such vote to proceed. The two other developers finally decided to publish a new bitcoin client, called bitcoin XT, which has only one small change that would allow such voting to proceed. The linked blogpost presents one side of this argument, honestly I couldn't find a blogpost that would present the opposing viewpoint. If someone here has a link to nice writeup done by the other side of this argument please let us know.
The bitcoin reddit got furious yesterday night (to the point of a civil war with moderators), when the top voted and most discussed thread "why is bitcoin forking?" was deleted by one of the moderators. Interesting to note, that it had 528 upvotes at the moment of deletion and currently it has 687 upvotes, and also googling for 'why is bitcoin forking' links to this deleted thread. Before it was deleted the discussion seemed reasonable, now it's just a Streisand effect about censorship and about how few influential people are trying to prevent the voting from happening.
What it means for regular bitcoin users? Here's how it goes:
1. If the voting rejects the larger blocksize then both bitcoin clients, 'bitcoin' and 'bitcoin XT' will work as normal on the same blockchain. And in fact nothing will happen, people will be able to choose which client to use and eventually the 'bitcoin XT' will lose its momentum, fade out and stop being used.
2. If the voting goes in favor of larger blocksize, then both bitcoin clients will start operating on two different blockchains. The 'bitcoin XT' blockchain will have 75% of hashing power (by the definition of how this vote is implemented), and the 'bitcoin' blockchain wil have the remaining 25% of hashing power. Shops and exchanges will run aghast in circles trying to protect from double spending by quickly upgrading their software to use the stronger 'bitcoin XT' blockchain. The weaker blockchain with only 25% hashing power will be susceptible to attacks. And whatever bitcoins you have right now will co-exist twice in each of those blockchains. You would be able to spend them in one of the blockchains and keep them for yourself in the other blockchain. People who have changed to 'bitcoin XT' client beforehand will be safe from whatever might happen with the weaker chain, since their clients work with both blockchains, until they acquire the voting 75% majority.
The voting process as it happens can be seen live on site that shows number of clients and mined blocks that opted for larger blocksize.
I know that perhaps I am not as objective as I wanted to be. I tried to present the facts only, if I failed, then blame me and correct me in the comments. Happy discussing!
(Score: 2) by JNCF on Sunday August 16 2015, @04:27PM
Fiat is the wrong word. Bitcoins seem comparable to fiat currencies because they aren't backed by any tangible asset, but this isn't the only property of fiat currencies. A fiat currency has some institution which is responsible for issuing it. Fiat currencies and crypto currencies are both valued based on supply and demand, but in the case of crypto currencies there is no central authority that can arbitrarily increase supply. New bitcoins get 'mined' at a predictable rate, programmed to taper off into nothingness eventually. They're designed to be deflationary. Other crypto currencies (such as Dogecoin) have no cap on total coins, meaning they're inflationary. But even these aren't fiat, because the rate of inflation has been predefined; there is no entity that can decide to make more dogecoins than the code allows to be made during a given time.
(Score: 2) by SubiculumHammer on Sunday August 16 2015, @05:20PM
The U.S. fiat currency is backed up by something called taxes and the threat of prison for not paying those taxes. Bitcoin does not have such legal authority to impose taxes with threat of punishment for not paying them. Thus there is always demand for dollars but not always demand for bitcoins so long as USA remains a thing.
(Score: 2) by JNCF on Sunday August 16 2015, @05:34PM
Threat of force isn't generally considered a tangible asset. I understand that the US government's threat of force adds stability to the price of the dollar, but I don't think this fact is relevant to whether or not it is fiat currency.
I'm certainly not arguing that BTC is less volatile than USD. That would be crazy.
(Score: 2) by Runaway1956 on Sunday August 16 2015, @06:04PM
JNCF answered well enough. I'll add that fiat money includes pretty much any money that has no intrinsic value. Gold doubloons retain their value after hundreds of years, if they are found again. Gold has an intrinic value, no matter how long they lie on an ocean floor, or stay buried in a pirate's chest. Few currencies in the world today have any intrinsic value. One day, Federal Reserve Notes will have just about as much value as Confederate dollars. You and I may be long gone before that happens, but the day is coming, nevertheless. Even our coins will one day be considered valueless, since we continue to decrease the valuable metal content in them. Our coins have been mostly base metals for decades already, they can't be made much more cheaply.
(Score: 2) by SubiculumHammer on Sunday August 16 2015, @11:35PM
Golf has value because way it does outside of the several useful industrial processes.
(Score: 3, Funny) by SubiculumHammer on Sunday August 16 2015, @11:39PM
Typing on phone sucks.
(Score: 0) by Anonymous Coward on Monday August 17 2015, @11:03AM
Typing on phone sucks.
Well, it definitely results in sub-par comments.
(Score: 0) by Anonymous Coward on Monday August 17 2015, @10:39PM
We're talking about the way golf was badly mis-explained, right? I don't play, but I believe some of the value of golf is related to business transactions, not industrial processes.
(Score: 2) by Justin Case on Sunday August 16 2015, @06:55PM
> The U.S. fiat currency is backed up by something called taxes and the threat of prison
Yes and I can hand out lollipops and threaten to shoot anyone who doesn't bend the knee and worship them, but that doesn't bestow actual value on the candy. Well not more than it already had, which is more than the intrinsic value of green paper.
(Score: 3, Interesting) by tftp on Sunday August 16 2015, @08:16PM
Yes and I can hand out lollipops and threaten to shoot anyone who doesn't bend the knee and worship them, but that doesn't bestow actual value on the candy
This example demonstrates just the opposite to what you are claiming. Imagine that you are an absolute monarch, and you just decreed that anyone who does not worship a certain lollipop will be put to death. Don't you think that this will create a significant demand for lollipops? If previously out of 100,000 citizens a lollipop maker sold 1,000 on weekends, to children, now he needs to supply 100,000 per week - if not per day (don't know how long they last.) The candy maker can now dictate his prices, and people will pay because the alternative is death. As matter of fact, the lollipops will be valued more than money, and they may even become money/barter on their own.
Perhaps you were thinking that your example does not work because you had no intention to ever implement the threat. However governments do not hesitate to arrest, try and imprison people for failing to do what the government tells them to do. If a monarch requires people to own lollipops, and the same time installs gallows, people will pay attention.
(Score: 2) by Justin Case on Sunday August 16 2015, @09:16PM
I'm saying running an economy at gunpoint is not a desirable approach. Although the Soviets had a good run at it, for a while.
(Score: 1) by tftp on Sunday August 16 2015, @11:37PM
The guns come into play not because of fiat money, but because the government wants something from the citizens.
(Score: 2) by linuxrocks123 on Monday August 17 2015, @02:04AM
That has almost nothing whatsoever to do with why dollars are accepted. Dollars are accepted because they are difficult to counterfeit and are useful for obtaining goods and services from businesses and individuals in the United States.
People with no or little income who live in the United States do not owe taxes. They still use dollars. The above is why.
If the US required taxes to be payed in screwdrivers, it would result in an increased production of screwdrivers to pay the government, and everyone would buy screwdrivers with dollars once a year to satisfy that stupid and arbitrary requirement. The government would probably have to set a screwdriver/dollar exchange ratio by fiat since people don't measure their income in screwdrivers, and the value of screwdrivers would otherwise vary wildly throughout the year because of this requirement. And then the government would have a lot of useless screwdrivers, which it would either have to sell or destroy.
The US doesn't require taxes to be paid in screwdrivers because that would be incredibly inefficient. Everyone already uses dollars, so why not use them for taxes?
I personally like the current system a lot better than the screwdriver approach.
(Score: 3, Interesting) by bradley13 on Monday August 17 2015, @06:02AM
I think you misunderstand. If the US government were to use screwdrivers as currency, it would do three things (oversimplified, but you'll get the idea):
- Control screwdriver production: it would be illegal for anyone else to make them.
- Pay people in screwdrivers: tax refunds, social security, government contracts - all would be paid in government-manufactured screwdrivers.
- Require the banking system to use screwdrivers, which then flows down to people's salaries, mortganges, etc).
That's exactly what the US government does with green pieces of paper. Those pieces of paper have value precisely because the US government says they do. That's what a fiat currency is.
Everyone is somebody else's weirdo.