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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: 3, Insightful) by Thexalon on Sunday August 16 2015, @09:07PM
The basic problem is that Bitcoin is based on a fundamentally flawed idea, namely that you can have a currency with absolutely nothing to back it up.
The things that have backed up currency at some point in known history:
- Sometimes the currency is a useful physical resource, such as grain, livestock, bronze tools, or real estate.
- Sometimes the currency is a precious metal of some kind, like gold or silver.
- In more modern times, the currency is valuable because its use in taxes and business transactions (cash is always a legal attempt to settle a debt, at least in the US) is mandated by law. And while that seems extremely abstract, it does mean that if you don't follow the rules of the fiat currency, the government has the right to send people with guns to explain things to you. (The reason fiat currency is an extremely useful economic innovation is that it allows a central bank to create or stop inflation, which helps counter natural business cycles without having to, say, ramp up or down gold mining.)
Compare that to Bitcoin, which is backed by ultimately nothing valuable. You can't eat a Bitcoin, they aren't durable like precious metals, and government isn't enforcing their societal role. Those very characteristics that made Bitcoins so attractive to those of an anarchist or libertarian bent also do a very good job of making it not work as intended.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 3, Informative) by frojack on Sunday August 16 2015, @09:33PM
Well, the miners performed a great deal of computational work, which of course becomes easier with more modern computers, but is still fairly hard to do.
The difficulty of creating/obtaining something (scarcity) is a measure of value that has been recognized far longer than any form of money.
No, you are mistaken. I've always had this sig.
(Score: 3, Insightful) by Thexalon on Sunday August 16 2015, @09:57PM
The problem with that is that the difficulty in obtaining something (a.k.a. the supply) is not the sole factor in something's value. The perceived usefulness of whatever it is also matters a great deal.
For example, let's say somebody invents a new doohickey at a maker lab somewhere, making 1 with a 3-D printer. They try playing around with it for a while, and then come to the conclusion that the doohickey isn't all that useful or exciting, and promptly throws it away. That doohickey is incredibly rare - exactly 1 exists - but because nobody perceives it as useful it has no value (actually, negative value if you factor in the cost of trucking it to the landfill).
By contrast, there are billions of houses in the world, but they're quite valuable because almost everybody sees their potential use.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 2) by frojack on Monday August 17 2015, @01:05AM
Couple points....
1) Anything made on a 3D printer can be replicated any number of times. Because nobody bothered to make another doesn't make it valuable. Because its easy to do should any one want to do so. Remember I said
difficulty of creating/obtaining something (scarcity)
.
2) Perceived Usefulness may appear to be a desirable feature of a medium of exchange, but there are many cases where this is not true [wikipedia.org]. US Dollar bills have just about no value (other than patching bicycle tires) [blogspot.com] were it not for the government edict that it is legal tender.
But often perceived usefulness in a currency is a good idea, especially when you are not too sure of the scarcity. You can always make things out of gold, even if some new discovered reserves doubles the amount of gold in the world. Same with livestock. Use for currency in some places, but you can eat it if the market crashes.
3) There are lots of houses, but building a new one takes a lot of money. So even old houses cost a lot of money. It takes a lot of effort to obtain a house. You will spend at least 30% of your life's earnings on housing (on average). As a unit of exchange houses make a poor currency. Not too liquid, not all that portable, hard to make change. So not a good medium of exchange.
No, you are mistaken. I've always had this sig.
(Score: 0) by Anonymous Coward on Sunday August 16 2015, @11:04PM
Except a currency does not need government backing to have a societal role, it only needs societal backing - at any scale of "society".
Just look at any nation where the government totally fucks up monetary policy. People use the "official" currency only for taxes, and something else to perform every other transaction - dollars, euros, yuan, etc. This happens even when said government expressly refuses to back the alternative currency, or forbids it from being used to pay taxes, etc.
And before anyone points out that those dollars are backed by the US government, I'd like to point out that the people of Zimbabwe didn't give two shits that they could pay US taxes with the dollars they were using amongst themselves. What they cared about was accessibility (enough volume available to keep the local economy going), stability (will be worth approximately the same tomorrow as today), and reliability (difficult to counterfeit).
In the short term, that's all Bitcoin needs to be an acceptable currency to the masses - availability, stability, and reliability.
(Score: 3, Interesting) by Thexalon on Sunday August 16 2015, @11:33PM
The reason government backing matters is that government has the option, with a fiat currency, of enforcing that currency's value with the legal use of force.
For the purposes of this discussion, assume I am paying a restaurant bill in the US, and the restaurant has not given me any prior instructions about how they expected to be paid.
If I attempt to pay the bill in the US by leaving sufficient amount in US cash to cover the bill on the table as I walk out, I have not committed theft, even if the restaurant doesn't normally accept cash, because as is written on the bill "This note is legal tender for all debts, public and private". If the restaurant tried to either get the police or a civil lawsuit to intervene, they wouldn't succeed because I made a legal offer of payment and it's not my fault that the restaurant was unwilling to take it. And if they decided to engage in another action to recover the value (say, opening my car and taking something worth the same amount as my meal), I can use the governmental authority, including police officers making use of lethal force if necessary, to get my stuff back (yes, it's highly unlikely that anyone's going to get into a shootout over a hamburger, but theoretically it's possible).
If I try the exact same thing with Bitcoins or any other non-governmental currency, the restaurant now has a legal right to refuse my proffered payment and demand I use something else in order to settle my debt with them.
The US government also requires that employers pay their employees a certain number of dollars per hour (again, enforced by lethal force if necessary), which pretty well guarantees that most people will have dollars on hand, which makes dollars a pretty convenient way to ask people to use to pay their bill.
Both of those make it likely that US-based businesses will only invest in charging people in dollars, because they have to accept them no matter what, and their customers will generally have them on hand. Which makes them by far the most convenient medium of exchange.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 1) by khallow on Monday August 17 2015, @12:35AM
The reason government backing matters is that government has the option, with a fiat currency, of enforcing that currency's value with the legal use of force.
In Zimbabwe? I wouldn't be surprised if a good portion of the US Dollar currency in Zimbabwe is relatively high quality counterfeit currency. Even that is better than the native currency when hyperinflation happens.
The point of the previous poster was that the US dollar and other currencies get used in a lot of places that are outside the reach of the legal issuers of the currencies. A good currency has an inherent value beyond what the issuing authority can do.
(Score: 2) by Thexalon on Monday August 17 2015, @11:45AM
In Zimbabwe, the US dollar is valuable because it can be used to buy things from the US at its US-government-enforced value.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 1) by khallow on Monday August 17 2015, @11:44PM
In Zimbabwe, the US dollar is valuable because it can be used to buy things from the US at its US-government-enforced value.
The US government doesn't enforce any particular value. And once again, Zimbabwe is not the US. The US government has no power to enforce value there.