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Long time Bitcoin developer Mike Hearn is claiming that the Bitcoin experiment has failed:
Why has Bitcoin failed? It has failed because the community has failed. What was meant to be a new, decentralised form of money that lacked "systemically important institutions" and "too big to fail" has become something even worse: a system completely controlled by just a handful of people. Worse still, the network is on the brink of technical collapse. The mechanisms that should have prevented this outcome have broken down, and as a result there's no longer much reason to think Bitcoin can actually be better than the existing financial system.
Among the problems he lists are:
- A conceptually wrong new feature.
Allowed buyers to take back payments they'd made after walking out of shops, by simply pressing a button (if you aren't aware of this "feature" that's because Bitcoin was only just changed to allow it)
- Technical problems of the network.
The block chain is full. You may wonder how it is possible for what is essentially a series of files to be "full". The answer is that an entirely artificial capacity cap of one megabyte per block, put in place as a temporary kludge a long time ago, has not been removed and as a result the network's capacity is now almost completely exhausted.
- Extreme concentration of hash power.
Why has the capacity limit not been raised? Because the block chain is controlled by Chinese miners, just two of whom control more than 50% of the hash power. At a recent conference over 95% of hashing power was controlled by a handful of guys sitting on a single stage. The miners are not allowing the block chain to grow.
[More after the Break]
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Censorship on bitcoin.org.
So he decided to do whatever it took to kill XT completely, starting with censorship of Bitcoin's primary communication channels: any post that mentioned the words "Bitcoin XT" was erased from the discussion forums he controlled, XT could not be mentioned or linked to from anywhere on the official bitcoin.org website and, of course, anyone attempting to point users to other uncensored forums was also banned. Massive numbers of users were expelled from the forums and prevented from expressing their views.
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And finally, he traces back the root of the problem to the Bitcoin Core developers.
One of them, Gregory Maxwell, had an unusual set of views: he once claimed he had mathematically proven Bitcoin to be impossible. More problematically, he did not believe in Satoshi's original vision.
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In a company, someone who did not share the goals of the organisation would be dealt with in a simple way: by firing him.But Bitcoin Core is an open source project, not a company. Once the 5 developers with commit access to the code had been chosen and Gavin had decided he did not want to be the leader, there was no procedure in place to ever remove one. And there was no interview or screening process to ensure they actually agreed with the project's goals.
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But the first mistake was already made by Satoshi himself:
When Satoshi left, he handed over the reins of the program we now call Bitcoin Core to Gavin Andresen, an early contributor. Gavin is a solid and experienced leader who can see the big picture. His reliable technical judgement is one of the reasons I had the confidence to quit Google (where I had spent nearly 8 years) and work on Bitcoin full time. Only one tiny problem: Satoshi never actually asked Gavin if he wanted the job, and in fact he didn't.
Is Bitcoin rotten to the Core?
(Score: 3, Interesting) by Thexalon on Sunday January 17 2016, @05:14PM
The problems are inherent to the design of Bitcoin. The big doozies that Bitcoin supporters have yet to find any kind of way of handling:
1. It's deflationary. While that's a very profitable thing if you're both an early adopter and have a sufficient number of suckers^Hlater adopters, it's no good for the long-term prospects because it encourages the currency to be held rather than circulated.
2. It's backed by absolutely nothing. Sure, Bitcoins are now relatively hard to obtain, but they aren't useful in and of themselves, only in exchange. But nobody is required to exchange something useful for Bitcoins, which means that a holder of Bitcoins could very easily find themselves in a situation where they're completely worthless.
Bitcoin supporters claim that, say, the US dollar is backed by nothing, but it isn't, it's backed by 2 rules: A. You need to come up with a certain number of dollars to keep the IRS happy, and if necessary people with guns will come and explain matters to you. B. "This note is legal tender for all debts, public and private", which means that if you owe somebody something (e.g. settle a restaurant bill) and attempt to pay in US dollars (in US jurisdiction of course), they can't refuse and then say you haven't tried to pay them. And again, if they don't understand this, some people with guns have the power to come by and explain things. All of the value of US dollars comes from those two concepts, in other words from the determination of the US government to enforce their value with violence if necessary.
3. Bitcoins were popular among those who opposed banking regulations. Well, it turns out that all those banking regulations existed for a reason. For example, banking laws made it illegal for bankers to just take their depositor's money and run, unlike what appears to have happened at MtGox. This isn't the first time libertarians have been scammed by libertarians: For example, in at least one case a couple claimed at least to be trying to set up a real-life Galt's Gulch in South America, got a bunch of people to buy into it, and then proceeded to just run off with the money.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 3, Insightful) by RedGreen on Sunday January 17 2016, @05:49PM
"Bitcoin supporters claim that, say, the US dollar is backed by nothing, but it isn't, it's backed by 2 rules: A. You need to come up with a certain number of dollars to keep the IRS happy, and if necessary people with guns will come and explain matters to you. B. "This note is legal tender for all debts, public and private", which means that if you owe somebody something (e.g. settle a restaurant bill) and attempt to pay in US dollars (in US jurisdiction of course), they can't refuse and then say you haven't tried to pay them. And again, if they don't understand this, some people with guns have the power to come by and explain things. All of the value of US dollars comes from those two concepts, in other words from the determination of the US government to enforce their value with violence if necessary."
There is that and the fact that the US economy actually produces real goods that have value to people who want to buy them all over the world.
"I modded down, down, down, and the flames went higher." -- Sven Olsen
(Score: 3, Insightful) by maxwell demon on Sunday January 17 2016, @07:44PM
Actually, the vast majority of dollars are not generated by the Federal Reserve, but by the banks giving out loans (that's what fractional reserve banking is all about). And those dollars are backed with actual goods: Namely whatever security you provided for the credit. For example, the house you just bought with that money. Either you manage to pay back your credit, then afterwards the house is truly yours, and the money disappears again. Or you don't manage to pay the credit back, then the bank gets your house, and sells it to get the money back (at which point the money also disappears).
The funny thing is that despite creating money in the loan, the bank still is in trouble if it doesn't get the money back, because the newly created money is not the money they gave you. The new money is on the account of someone who brought real money to the bank. When the bank gave part that money to you, the nominal money on his account did not reduce. Therefore that money was replaced by the new "virtual" money the bank just created. The whole system works because people only take relatively little money from their accounts, so the fraction of it that's real money is sufficient to give them the illusion all the money is there. Of course, if you do a bank transfer, it doesn't matter if you move virtual instead of real money between the accounts. And that's why the virtual money is effectively real: You can do real payments with it.
That's also why bank runs are so dangerous: The bank can only give out the real money, not the virtual money it created when it gave loans.
The Tao of math: The numbers you can count are not the real numbers.
(Score: 2) by RedGreen on Sunday January 17 2016, @08:44PM
Yeah it is called reserve capital that banks are required to keep as percentage of overall deposits. Oh and the mortgages are not given out of banks/your money but by the bond market. That is why the term sub prime was used a lot few years back they packaged up the junk loans then sold them onto the bond market as good assets leading to the crash of 2008 when the scam was revealed. Got to love them Capitalist in the US privatize the profit socialize the losses, that damn evil socialism certainly comes in handy then does it not.
"I modded down, down, down, and the flames went higher." -- Sven Olsen
(Score: 3, Informative) by Thexalon on Monday January 18 2016, @12:25PM
That's not precisely correct.
Banks had reserve requirements, and a bank was required to keep a portion of the loan on its own books. Which is why the vast majority of subprime loans were originated not by banks but by "mortgage brokers", a new kind of firm that wasn't regulated like a bank. Companies like Ameriquest, Countrywide, and DiTech were able to do what they did precisely because they didn't have to follow the rules the banks did. And companies that bought and gambled on the securities those companies generated (investment banks like Goldman Sachs and Lehman Brothers) were able to do what they did because they didn't have to follow the rules they had had to prior to the Gramm-Leach-Bliley Act (made law by Bill Clinton - Bernie Sanders could really hammer Clinton about that if he wanted to).
This whole thing wouldn't have happened had there been a set of rules that used "duck-typing": If it walks like a bank, and quacks like a bank, then it's a bank for regulatory purposes.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 2, Disagree) by RedGreen on Monday January 18 2016, @01:57PM
Pathetic so you quibble with the wording to say in effect the same thing.
"I modded down, down, down, and the flames went higher." -- Sven Olsen
(Score: 2) by Thexalon on Monday January 18 2016, @12:17PM
More precisely, bank runs would be dangerous if there weren't deposit insurance (in the US, that's handled by either the FDIC or CRUA). And the requirement that banks have some reserves also means that they're likely to lose money if they make stupid loans. Yeah, those regulations actually matter and have saved lots of people's behinds (e.g. in the 1980's S&L crash).
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 2) by Beryllium Sphere (r) on Sunday January 17 2016, @07:45PM
Well said and well thought out.
One thing, though -- a good medium of exchange, by making more and more profitable transactions possible, has a kind of intrinsic value.
When Bitcoin allowed transactions across borders cheaper than banks or PayPal, that was real value.
(Score: 3, Interesting) by Thexalon on Sunday January 17 2016, @10:28PM
Was it really cheaper though? I mean, the bank exchange rates (and PayPal, which acts a lot like a bank despite not being one) have all sorts of regulations and insurance and such that help prevent people from being ripped off too badly during the exchange. By contrast, Bitcoin might well have been cheaper on the surface, but there was a much greater risk that the Bitcoins would be lost or stolen, which means that it wasn't necessarily cheaper than doing a straight up currency exchange.
If the foreign currency transfer fees from banks were really exorbitant, that could fairly easily be solved by regulation. They aren't (at least in my experience both doing international travel and doing business across national boundaries), which means the market is more-or-less taking care of it. That isn't surprising, because the richest depositors in most banks like being able to travel internationally without worrying about traveller's checks and similar silliness, so typically it's just a matter of current exchange rates + 1-2% for the bank's trouble in converting the currency when you're, say, charging stuff to your US-based Mastercard in a restaurant in Germany.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.