Hearn: The resolution of the Bitcoin experiment [LWN.net]

Hearn: The resolution of the Bitcoin experiment

Posted Jan 15, 2016 6:20 UTC (Fri) by b7j0c (guest, #27559)
Parent article: Hearn: The resolution of the Bitcoin experiment

> If Bitcoin is indeed failing as the article says, it's failing due to project governance issues rather than technical or regulatory problems.

he directly addresses a technical issue in his post...one hinted at in the original satoshi paper...52% of mining capacity is now in the hands of two pools in china, which are alleged to be controlled by a common leadership

to post comments

Hearn: The resolution of the Bitcoin experiment

Posted Jan 15, 2016 18:43 UTC (Fri) by kjp (guest, #39639) [Link] (35 responses)

Who wouldda-thunk that people (miners) would choose to form a cartel (and gain leverage over the rest) instead of staying "lone wolves". /s Looks like that experiment is finished, indeed.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 15, 2016 20:20 UTC (Fri) by ken (subscriber, #625) [Link] (34 responses)

Well if the miners is a real problem all you need to do is change the hash function to something that they can not use the current accelerators on and in an instance you have redistributed the "power".

sure its easier said than done at this point since there is a problem spreading out the new "code" to every user especially since there is several implementations of the bitcoin protocol at this time.

But the point is that its the users (wallets) that has the final say if they want a different protocol than the miners, The miners is the ones that in the long run will lose that power struggle.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 15, 2016 20:55 UTC (Fri) by Cyberax (✭ supporter ✭, #52523) [Link] (13 responses)

> Well if the miners is a real problem all you need to do is change the hash function to something that they can not use the current accelerators on and in an instance you have redistributed the "power".
And how would you do that? Miners can simply ignore your fork and continue on with the current hash function.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 15, 2016 21:13 UTC (Fri) by ken (subscriber, #625) [Link] (12 responses)

to what end ??? if the clients do not accept the data they mine anymore.

It used to be that every client also was a miner not just in pools with special hardware and that would be what happens again if you change the hash algorithm. At least for a while.

But you need to be on the winning side as this would mean a split in the blockchain and if you coins exists on the loosing side you end up with nothing.

So far the problems has not been big enough so nothing like this has really happend yet.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 15, 2016 21:26 UTC (Fri) by Cyberax (✭ supporter ✭, #52523) [Link] (11 responses)

> to what end ??? if the clients do not accept the data they mine anymore.
Which clients? Nobody controls the developers of client applications, they do whatever they want.

What do you think client developers are going to do when faced with two choices: support the old blockchain that is steadily growing and is used by pretty much all other clients or fork to a new blockchain that has no clients and uncertain future?

Keep in mind, that we're talking about actual clients that do actual business transactions. Not a group of people who want to accumulate more "coins" by doing nothing.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 15, 2016 21:39 UTC (Fri) by ken (subscriber, #625) [Link] (7 responses)

>> to what end ??? if the clients do not accept the data they mine anymore.

>Which clients? Nobody controls the developers of client applications, they do >whatever they want.

But ?? that is exactly my point! if the miners is the problem they will lose as there is much much more users "clients" that can change the protocol regardless of what the current miners wants.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 16, 2016 0:18 UTC (Sat) by Cyberax (✭ supporter ✭, #52523) [Link]

> But ?? that is exactly my point! if the miners is the problem they will lose as there is much much more users "clients" that can change the protocol regardless of what the current miners wants.
Why? Clients do not particularly care about miners. In fact, sky-high cost of new blockchain blocks is a selling point for them.

It's a free market! With all the problems of monopolies and externality costs.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 21, 2016 21:34 UTC (Thu) by Fats (guest, #14882) [Link] (5 responses)

> But ?? that is exactly my point! if the miners is the problem they will lose as there is much much more users "clients" that can change the protocol regardless of what the current miners wants.

No, clients only generate transactions and transactions only have value if included in a block by a miner. A cryptocurrency using another hash functions can hardly be called bitcoins. Clients already have the choice of a whole bunch of alternative cryptocurrencies but the only one that currently can be used for anything more than a curiosity is bitcoin.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 21, 2016 22:20 UTC (Thu) by nybble41 (subscriber, #55106) [Link] (4 responses)

> No, clients only generate transactions and transactions only have value if included in a block by a miner.

Clients also validate the blocks they receive before appending them to their own local copy of the blockchain. If a block isn't seen as valid by a majority of clients, regardless of how many miners approve of it, then the block is effectively not part of the blockchain. Clients will not show the transactions in that block as confirmed (including the coinbase transaction though which the miner gets paid), or recognize other blocks which depend on those transactions as valid. As a result, miners cannot effectively avoid following any rules which most clients choose to enforce.

Miners do have more power when it comes to *rejecting* blocks, since even if you get a majority of other clients to accept your block as valid, the other miners can simply ignore it and build a longer alternative blockchain by virtue of having significantly more computing power at their disposal; the longest valid chain will be seen as the authoritative ledger. Changing this property would make it much more difficult to ensure convergence.

A change in the hash function would be a rule enforced by the clients. Assuming a majority of clients backed the change, miners who continued to use the old hash function would find that their blocks carry little weight. Transactions spending the mining reward and fees from blocks using the old hash function would only be seen as valid by a minority of clients, who in turn would only be able to spend what they receive within the limited circle of clients following the old rules; network effects would push the remaining holdouts, both miners and clients, to switch to the new hash function.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 21, 2016 22:42 UTC (Thu) by Fats (guest, #14882) [Link] (3 responses)

>Clients also validate the blocks they receive before appending them to their own local copy of the blockchain. If a block isn't seen as valid by a majority of clients, regardless of how many miners approve of it, then the block is effectively not part of the blockchain. Clients will not show the transactions in that block as confirmed (including the coinbase transaction though which the miner gets paid), or recognize other blocks which depend on those transactions as valid. As a result, miners cannot effectively avoid following any rules which most clients choose to enforce.

Again no, miners are by design the entities in bitcoin that enforces rules and build the blockchain. Clients who don't follow will in the end not be possible anymore to generate transactions that will be included in blocks mined by the miners. Of course you can ignore bitcoins send to you in a block you don't like but you can't send bitcoins a second time that is already in a block accepted by the miners.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 21, 2016 23:04 UTC (Thu) by nybble41 (subscriber, #55106) [Link] (2 responses)

> miners are by design the entities in bitcoin that enforces rules and build the blockchain.

Again no, miners may build the blockchain, but by design all nodes enforce the rules. (And any node that contributes to building the blockchain is a miner by definition, so the first part is a tautology.)

> Clients who don't follow will in the end not be possible anymore to generate transactions that will be included in blocks mined by the miners.

In blocks mined by the miners using the old rules, you mean—blocks which will be ignored by the majority of clients following the new rules. No loss there. Clients will just get their transactions included in other blocks mined according to the new rules.

> Of course you can ignore bitcoins send to you in a block you don't like but you can't send bitcoins a second time that is already in a block accepted by the miners.

You can if the other block wasn't accepted by most clients because it didn't follow their rules. Those clients will not see your transaction as double-spending, because they don't acknowledge the existence of the other block or the conflicting transaction it carried.

To change the rules to allow previously invalid transactions or blocks you need the support of a majority of the miners, because a majority of miners working together can always block a valid transaction from appearing in the blockchain. However, to prohibit previously valid transactions or blocks you only need the support of a majority of the clients. Even if every single (existing) miner was opposed to the change, it wouldn't be enough to make those transactions or blocks appear valid to the majority of recipients, which is where the real power lies.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 21, 2016 23:20 UTC (Thu) by Fats (guest, #14882) [Link] (1 responses)

> In blocks mined by the miners using the old rules, you mean—blocks which will be ignored by the majority of clients following the new rules. No loss there. Clients will just get their transactions included in other blocks mined according to the new rules.

OK, now you are talking different. Now you are talking about a hard fork, e.g. if there are miners that use different rules the clients have the choice which miners to follow. I agree with that but that is all the power they have. But the whole scaling discussion is so difficult because hard forks are so difficult; nothing something easy the clients can choose as you seem to indicate.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 22, 2016 4:56 UTC (Fri) by nybble41 (subscriber, #55106) [Link]

>> In blocks mined by the miners using the old rules, you mean—blocks which will be ignored by the majority of clients following the new rules. No loss there. Clients will just get their transactions included in other blocks mined according to the new rules.
> OK, now you are talking different. Now you are talking about a hard fork, e.g. if there are miners that use different rules the clients have the choice which miners to follow.

Actually, that is exactly what I've been saying all along. However, it's not like the miners form some sort of invite-only cartel. Clients have the option of becoming miners themselves, if no one else wants to do the job according to their specifications. Ergo, they always have a choice of miners to follow.

Hard forks are difficult for social reasons more so than technical ones. No one wants to see a situation where a significant minority backs the losing fork, even if it is short-lived. It makes for bad press. This is why hard forks generally require 95% or higher buy-in before they take effect, and why Bitcoin XT was roundly criticised for setting a lower threshold before it started accepting and mining larger blocks. However, there can be little question that it's ultimately the merchants who accept bitcoin as payment who determine the minimum standards for acceptable blocks. The miners can notarize whatever transactions they want, but they won't get any worthwhile reward unless their blocks are considered valid by the merchants holding the goods and services they wish to purchase.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 16, 2016 3:12 UTC (Sat) by drag (guest, #31333) [Link] (2 responses)

> What do you think client developers are going to do when faced with two choices: support the old blockchain that is steadily growing and is used by pretty much all other clients or fork to a new blockchain that has no clients and uncertain future?

It's not a either or choice. Clients can continue to support using the old block chain, and then support using the new one.

This is the sort of thing that appears to be happening with the 'Classic Bitcoin' and it's predecessor effort 'TX' (which got shutdown due to massive DDOS attacks). I am not a big fan of bitcoin itself, but I think the concept has merit. So I am not 'hip' to all the technicalities.

This is what they claimed with TX:

> Bitcoin XT supports a larger block size.[9] As of version 0.11A the following is implemented to determine the maximum block size.[10][11]

> If a block is mined before the minimum forking date of 11 Jan 2016 00:00:00 UTC, the maximum stays at 1MB.

> According to mining consensus rules. If less than 750 of the last 1000 blocks (75%) support a bigger block size, the maximum stays at 1MB.

> After a block is encountered that triggers the 75% majority, a grace period of 2 weeks starts, during which the maximum stays at 1MB.

> Unless the above rules restrict size, the maximum block size starts at 8MB, doubling approximately every 2 years for a maximum of 10 times.

> This makes the new maximum block size range between 8MB and 8192MB depending on when the block is mined.

The thing that most people miss about free markets is that the 'client' or the 'consumer' is the one that has the real control, not the producers. Unless they face some sort of significant force/violence preventing them from acting in their own best interests.

The 'miners' can do whatever they want, but it's only the clients that assign what they doing any value. It's a lovely idea to be able to make 'free money' by mining bitcoins, but the reality is that they are compensated for providing what amounts to a public service. They are not the ones in control of the situation even though they seem to be trying to take control through other channels (DDOS, etc).

The point of bitcoin is to allow transactions _after_ the numbers are mined out. It's inevitable that the number of miners are going to drop down to small numbers because the cost of bitcoin mining is going to continue to rise exponentially as the pool of available numbers drops closer to zero. After a certain point it only becomes feasible for people with access to cheap power and cheap hardware to keep going.

I don't know if bitcoin itself is fatally flawed (it seems that it's very likely due to reasons unrelated to the newest drama or lack of active miners), but it's a massive step forward for the internet. The potential is to allow cheap and easy way to transfer wealth and lower transaction costs in significant way. a way that is not controlled by a small handful of banks (debit/credit cards) or a single company (paypal). Maybe even make things like 'micro-transactions' possible so a large number of internet folks will be able to survive the coming 'advertising market implosion' apocalypse.

So maybe not bitcoin, but what comes after bitcoin, or even after that.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 19, 2016 3:32 UTC (Tue) by smoogen (subscriber, #97) [Link] (1 responses)

My limited understanding was that miners will always matter even if all the coins have been mined. Instead miners will be needed to "sign" the next block chain and are to be paid the transaction fees in that block. Thus there is always a market for a lot of miners over time as that is how the costs of who wins the "fees" gets solved.

However that may be flawed as it was from a talk a couple of years ago.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 19, 2016 16:10 UTC (Tue) by drag (guest, #31333) [Link]

Could be true. I don't know enough about the technicalities. I know there is transaction fees for signing.

Looks like economic pressure worked on the Chinese minors. They seem to now be switching to 'Bitcion Classic' and are increasing their block sizes to avoid a crash in the price.

https://news.ycombinator.com/item?id=10920902

Hearn: The resolution of the Bitcoin experiment

Posted Jan 15, 2016 23:54 UTC (Fri) by rgmoore (✭ supporter ✭, #75) [Link] (19 responses)

Well if the miners is a real problem all you need to do is change the hash function to something that they can not use the current accelerators on and in an instance you have redistributed the "power".

The problem is with who makes the decision to change the hash function. There's no centralized group that has the authority to make changes like that unilaterally; lack of a central authority is the whole point of Bitcoin. So what you're proposing is effectively a fork of the system, with all the problems of inertia that generally make forks difficult, plus the problem that winding up on the wrong side of the fork could cost people real value in their bitcoins. Forcing a switch is not going to be easy.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 19, 2016 6:57 UTC (Tue) by shemminger (subscriber, #5739) [Link] (18 responses)

The whole wasting of kilowatts of energy to create virtual currency seems to be one of those ideas that was a mistake to start with.
There probably wasn't a better way in the original design. But with a total anonymous creator who could you ask why?

Hearn: The resolution of the Bitcoin experiment

Posted Jan 19, 2016 7:09 UTC (Tue) by Cyberax (✭ supporter ✭, #52523) [Link] (17 responses)

No, that's a feature. Kilowatt-hours are necessary for a "proof of work" to make bitcoins valuable.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 19, 2016 21:34 UTC (Tue) by drag (guest, #31333) [Link] (9 responses)

Value is not derived from 'work'. The whole 'labor theory of value' _should be_ thoroughly debunked right now if it wasn't for the fact that it's been institutionalized into academic and policy organizations (which itself leads to whole bunch of really poor policy decisions on the part of governments. Sort of like putting a creationist in charge of MIT)

Value is derived from each individual's perspective. Something is valuable if the 'end user' or 'consumer' finds use in it. The fact that you can do something useful financially with bitcoin is the source of the value. What makes bitcoin useful to individuals (and thus the source of it's value) is because it's a limited set of verifiable numbers and that those numbers can be transferred around in what is supposed to be a secure and verifiable manner and thus can be used in financial transactions.

Typically other forms of money originate from commodities.. ie: gold, silver, wheat, tobacco leaves, shells, etc. etc. So they already had market value that served as a 'security' for their use as money. They get elevated to the status of money once people more-or-less accept them universally in any trade.

Bitcoin 'kilowatt hours' doesn't work like that. With gold-based currency it was still gold... it was still it's original commodity. Obvious bitcoin is not a form of battery so you can't input the numbers into your computer and get back those electronic force.

So-called fiat 'government money' usually is derived from money that was once based on commodities, but has long since been divorced from it's original meaning... ie: the dollar (being the 'international standard'. Dollar originally was just a specific measurement of weight of gold or silver, but it threw off it's shackles and went off the gold standard in the late 1970's). Bitcoin is more like that, although without the force backing it and the fact that it's based a finite set of numbers you are not dependent on the USA Federal government to behave itself.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 19, 2016 22:47 UTC (Tue) by nybble41 (subscriber, #55106) [Link] (6 responses)

> Value is not derived from 'work'. The whole 'labor theory of value' _should be_ thoroughly debunked right now ...

Agreed, but that isn't the point. The work (and thus energy cost) required to mine each block contributes not only to ensuring scarcity, but also to providing for a reasonably fair initial distribution and a predictable average inter-block interval, all of which are essential to the Bitcoin system. It isn't sufficient to ensure that there will *be* value, of course, but without that energy cost bitcoins would have no value to anyone.

> Typically other forms of money originate from commodities.... So they already had market value that served as a 'security' for their use as money. They get elevated to the status of money once people more-or-less accept them universally in any trade. ... Bitcoin 'kilowatt hours' doesn't work like that. With gold-based currency it was still gold... it was still it's original commodity. Obvious bitcoin is not a form of battery so you can't input the numbers into your computer and get back those electronic force.

You're comparing apples and oranges here. Bitcoin is not equivalent to kilowatt-hours in exactly the same way that gold is not equivalent to the energy and other resources which required for gold-mining. However, the market value of those kilowatt-hours act as a price floor below which additional bitcoin mining is no longer profitable, just as the cost of gold-mining determines the lowest price you'll be able to pay for newly mined gold.

The difference is that in the case of Bitcoin, the rate of new supply is fixed by the algorithms that automatically adjust the mining difficulty. More competition in mining just means a higher energy cost for all miners, and no additional bitcoins. The demand for gold-mining is limited by the rate of increase in the demand for gold; over-supply drives prices down and makes mining uneconomical. However, since it has no long-term effect on the supply, the demand for bitcoin mining is limited only by the associated energy cost. A fixed difficulty would have been more realistic, and probably cheaper and less volatile, but under such a system it would be hard to account for improvements in computing capabilities. It would also be less secure against attempts to run a 51% attack, where the cost of the attack is the only viable deterrent and the attacker is unlikely to be deterred by a drop in market value due to over-supply.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 19, 2016 23:34 UTC (Tue) by jhhaller (guest, #56103) [Link] (5 responses)

And this suffers from the same problem which caused the US depression in the late 1800s - there was insufficient fiat currency because it was based on gold/silver, and there wasn't enough for the economy, causing trade to collapse. To be a valuable currency, rareness is much less important than stability. Stability requires a certain amount of rarity, but not to any particular absolute level. Only speculators win when a currency is volatile. Inflation (when currencies become less valuable) is a problem to lenders, while deflation is a problem for borrowers. Bitcoin doesn't suffer from this yet, because no one is borrowing or lending to any great degree, and probably won't with a volatile currency. But, one can't build an economy with borrowing and lending. One could index the loans according to bitcoin value, but to what end as long as there are real currencies which are relatively stable. One also loses the anonymity of bitcoin with borrowing and lending, as no lender in their right mind would lend bitcoin when they didn't know who was supposed to pay back the loan, and if they were likely to do so.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 20, 2016 15:29 UTC (Wed) by nybble41 (subscriber, #55106) [Link] (4 responses)

> ... there was insufficient fiat currency because it was based on gold/silver, and there wasn't enough for the economy, causing trade to collapse.

That is simply nonsense. The problem wasn't the amount of gold or silver. In the absence of fixed exchange rates, the prices of the metals will simply adjust to accommodate the current supply and demand. (Short of the price becoming so high or low that the amounts required become inconvenient to deal with, at any rate, but gold and silver have never reached that point.)

The real problem was that the U.S. government issued notes for more gold and silver than it actually had, and eventually went bankrupt (in effect, though they didn't use that term) and refused to honor its banknotes according to the original terms. First they restricted the exchange of notes for gold by individuals, then they repeatedly redefined the notes as smaller and smaller amounts of gold, partially repudiating their debt. In the end they stopped honoring the exchange value of the notes altogether.

There have been many issues with the use of precious metals as currency in the United States (bimetallism and the over-issue of banknotes beyond what the government could repay being two obvious examples), but an insufficient supply of precious metals for use in trade was never one of them.

> To be a valuable currency, rareness is much less important than stability.

I agree about the need for stability, but volatility is not an inherent part of Bitcoin. It's volatile now because it's still new, and growing rapidly. Like any new currency, the rate of inflation is very high, outstripped thus far only by the rate of increase in demand. Over time the rate of inflation will decrease, eventually to zero, and demand will stabilize.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 20, 2016 19:01 UTC (Wed) by Cyberax (✭ supporter ✭, #52523) [Link] (3 responses)

> That is simply nonsense. The problem wasn't the amount of gold or silver. In the absence of fixed exchange rates, the prices of the metals will simply adjust to accommodate the current supply and demand.
Yes. For example, by causing deflation.

Just ask Hitler about it - it helped him a lot.

> The real problem was that the U.S. government issued notes for more gold and silver than it actually had, and eventually went bankrupt (in effect, though they didn't use that term) and refused to honor its banknotes according to the original terms.
During which of about 10 crises that happened before the Gold standard?

Hearn: The resolution of the Bitcoin experiment

Posted Jan 20, 2016 19:22 UTC (Wed) by corbet (editor, #1) [Link] (2 responses)

Perhaps this suggests we're getting close to the Godwin point in this particular thread?

Hearn: The resolution of the Bitcoin experiment

Posted Jan 20, 2016 19:36 UTC (Wed) by nybble41 (subscriber, #55106) [Link] (1 responses)

It's not Godwin unless someone makes a comparison between their opponent(s) and the Nazis; simply discussing the conditions in Nazi Germany doesn't count. Just the same, any time someone complains about the supposed dangers of deflation it's probably time to wrap up the thread. Deflation doesn't cause economic problems. There are studies showing that there is no consistent correlation between instances of deflation and economic difficulties. It can sometimes be a *symptom* of deeper issues, like in the case of the American Great Depression, where the deflation followed a period of significant inflation and was accompanied by a major credit contraction which also wiped out a significant fraction of everyone's savings.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 20, 2016 19:41 UTC (Wed) by Cyberax (✭ supporter ✭, #52523) [Link]

> Deflation doesn't cause economic problems. There are studies showing that there is no consistent correlation between instances of deflation and economic difficulties.
[citation needed]

Hearn: The resolution of the Bitcoin experiment

Posted Jan 19, 2016 23:49 UTC (Tue) by Cyberax (✭ supporter ✭, #52523) [Link] (1 responses)

Here's a "1" for you! I value it at $100000. Would you agree to buy it from me for that sum?

I don't think so. In reality, it's scarcity that drives the price. The labor/work required to produce an item might be one reason for the scarcity, but it's certainly one of them. Note, that scarcity alone does not determine the value - it's a necessary but not a sufficient condition.

In case of Bitcoins the only way to guarantee scarcity is to make it hard to mine new coins. It's a distributed system, there's no other way.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 20, 2016 0:19 UTC (Wed) by karath (subscriber, #19025) [Link]

"In case of Bitcoins the only way to guarantee scarcity is to make it hard to mine new coins. It's a distributed system, there's no other way."

Mostly I agree with this but there is one key bit that I think is over-simplified. It's called mining but the activity is not actually creating Bitcoins. The miners are calculating signatures for the blockchain, so that the transactions are publicly logged and irrefutable. As a reward for this activity, the miners are awarded newly created Bitcoins. These Bitcoins are literally created from 'nothing' at a consensually agreed rate. Once all possible Bitcoins are created, the same 'mining' activity will take place but the miners will be awarded Bitcoins from the fees charged to the transactions.

And I hope that I won't be embarrassed by having got this wrong :D

Hearn: The resolution of the Bitcoin experiment

Posted Jan 21, 2016 23:11 UTC (Thu) by ken (subscriber, #625) [Link] (6 responses)

> No, that's a feature. Kilowatt-hours are necessary for a "proof of work" to make bitcoins valuable.

Well not really, it has noting to do with value actually.

The whole mining thing would not have to take massive amount of resources to do. What bitcoin needs is a way to create the next block of transactions about every 10 minutes.

The way its done now is that every full node in the system accumulates transactions and could potentially create the next block. To decide what node will actually do it the current implementation of the bitcoin protocol basically do a big lottery and the winner creates the block.

the lottery thing is what is taking so much calculation as you are trying to find a special number that starts with only 0 bits, and the amount of 0 bits is dynamically altered so the entire network on average gets a new block every 10 minutes.

But this lottery system can and in my opinion have to change in the future so that every node can participate equally. The current system is wasting way to much resources on the consensus so its fewer and fewer nodes that actually participate in the lottery.

There is people working on alternatives. search for bitcoin and consensus algorithm

But if the block size change is any indication doing that change is probably going to start a real war or something.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 21, 2016 23:24 UTC (Thu) by Cyberax (✭ supporter ✭, #52523) [Link] (5 responses)

> The whole mining thing would not have to take massive amount of resources to do.
It has to, unless you want to have some kind of a centralized agent.

> But this lottery system can and in my opinion have to change in the future so that every node can participate equally. The current system is wasting way to much resources on the consensus so its fewer and fewer nodes that actually participate in the lottery.
No, it can not. Finding the next block is by design _hard_ and requires expending significant resources.

Otherwise nobody stops me from creating 1000000000000000000 fake nodes and winning the "lottery" every time.

> There is people working on alternatives. search for bitcoin and consensus algorithm
There are no real alternatives to a hard "proof of work" for a decentralized system.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 22, 2016 0:33 UTC (Fri) by ken (subscriber, #625) [Link] (4 responses)

> Otherwise nobody stops me from creating 1000000000000000000 fake nodes and winning the "lottery" every time.

Yes that is the tricky part but I do not think its impossible to create something that is going to work better than the current way but its going to be a lot more complicated.

In worst case you end up in the same spot as today only difference is that they have to create nodes instead of running this brain dead hardware that just calculate checksums.

But you are probably right that some type of proof of work is probably needed but it has to be done in a different way I think so that its not so local as it is today.

A lot of people is thinking about this, in 2014 there was apparently about 140 papers written on consensus algorithms. Somebody is going to find a way to get around this wasteful use of energy that is the current way.

Hearn: The resolution of the Bitcoin experiment

Posted Jan 22, 2016 3:00 UTC (Fri) by Cyberax (✭ supporter ✭, #52523) [Link] (3 responses)

> But you are probably right that some type of proof of work is probably needed but it has to be done in a different way I think so that its not so local as it is today.
Please, no. Then it will require not only boatloads of coal to generate electricity, but also tons of network bandwidth.

> A lot of people is thinking about this, in 2014 there was apparently about 140 papers written on consensus algorithms. Somebody is going to find a way to get around this wasteful use of energy that is the current way.
No, they won't.

It's a fundamental problem - if you want currency to be usable then it has to be scarce. And if it's decentralized then it means it should be _hard_ to get.

Is wasting electricity required?

Posted Jan 26, 2016 14:31 UTC (Tue) by pjm (guest, #2080) [Link] (2 responses)

> it should be _hard_ to get

Even so, we should still ask whether it absolutely needs to be so *wasteful* to get, as the originator of this sub-discussion wondered. Perhaps the proof of work could still *use* lots of resources, but delivering some side benefit to society that a miner can't directly monetize for themselves.

Is wasting electricity required?

Posted Jan 26, 2016 14:49 UTC (Tue) by nybble41 (subscriber, #55106) [Link]

> Perhaps the proof of work could still *use* lots of resources, but delivering some side benefit to society that a miner can't directly monetize for themselves.

Not a bad idea, in principle, but there are only so many classes of problems which are uniformly hard for computers to solve, with adjustable difficulty to account for variations in technology and computational capacity, and yet very easy for other nodes to check. The stochastic element where every potential solution has an equal chance of being valid is also desirable to ensure fairness, and any system which relies on a trusted server handing out work-packets is unworkable in terms of decentralization. So far no one has managed to come up with an alternative proof-of-work with the necessary properties.

Is wasting electricity required?

Posted Jan 26, 2016 19:31 UTC (Tue) by Cyberax (✭ supporter ✭, #52523) [Link]

There are some projects that attempt to do it, but it's hard to find suitable problems for that. Search for Mersenne primes is marginally better than finding hash codes with consecutive zeroes, but only marginally so.