Why the Bitcoin Network Just Split In Half and Why It Matters (arstechnica.com) 109
In a report via Ars Technica, Timothy B. Lee explains why the Bitcoin network split into two and why it matters: On Tuesday, a faction of the Bitcoin community launched an audacious experiment: a new version of Bitcoin called Bitcoin Cash that's incompatible with the standard version. As a result, the Bitcoin network split into two mutually incompatible networks that will operate side-by-side. The confusing result is that if you owned one bitcoin before the split you own two bitcoins now: one coin on the original Bitcoin network, and a second coin on the new Bitcoin Cash network. The two coins have the same cryptographic credentials, but they have very different values if you sell them for old-fashioned dollars. On Wednesday morning, one standard Bitcoin was worth about $2,700, while -- on paper at least -- a unit of Bitcoin Cash was worth around $600. [...]
For over a year, the Bitcoin network has been bumping up against a capacity limit hard-coded into the Bitcoin software. Each block in the Bitcoin blockchain -- the network's public, shared transaction ledger -- is limited to 1 megabyte. That artificial limit prevents the network from processing more than about seven transactions per second. Technically speaking, it would be trivial to change that 1 megabyte limit to a higher value. But proposals to do so have faced opposition from traditionalists who argue the limit is actually an important feature of Bitcoin's design that protects the network's democratic character. To participate in the network's peer-to-peer process for clearing transactions, a computer needs a copy of every transaction ever made on the Bitcoin network, which adds up to gigabytes of data per month. This argument has dragged on for more than two years with no resolution. So instead of continuing to bicker, a group of big-block supporters took matters into their own hands. They forked the standard, open-source Bitcoin client to create a rival version of the software.
For over a year, the Bitcoin network has been bumping up against a capacity limit hard-coded into the Bitcoin software. Each block in the Bitcoin blockchain -- the network's public, shared transaction ledger -- is limited to 1 megabyte. That artificial limit prevents the network from processing more than about seven transactions per second. Technically speaking, it would be trivial to change that 1 megabyte limit to a higher value. But proposals to do so have faced opposition from traditionalists who argue the limit is actually an important feature of Bitcoin's design that protects the network's democratic character. To participate in the network's peer-to-peer process for clearing transactions, a computer needs a copy of every transaction ever made on the Bitcoin network, which adds up to gigabytes of data per month. This argument has dragged on for more than two years with no resolution. So instead of continuing to bicker, a group of big-block supporters took matters into their own hands. They forked the standard, open-source Bitcoin client to create a rival version of the software.
Re:Some people got rich overnight (Score:5, Insightful)
Some people, like the owner of this address https://bitinfocharts.com/bitc... [bitinfocharts.com] got $43million richer overnight, if they could cash out all of their bitcoin cash holdings right now.
FTFY
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Except, for the moment, there is nowhere to cash them out.
Re:Some people got rich overnight (Score:4, Interesting)
And as soon as they attempted to, the value of them would plummet.
Re:Some people got rich overnight (Score:5, Insightful)
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Over $400million in volume yesterday. Not exactly "no volume".
Seems like the people on the exchanges got their BCC/BCH and the price actually went up.
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Transaction volume within a currency isn't the same thing as transfer in/out volume. Bajillions of dollars worth of transactions are conducted in USD every day. If suddenly everyone who had USD tried to sell it for some other currency, the price of USD would plummet.
The fact that lots of transactions fly back & forth within BTC doesn't mean you'd find the equivalent in value of people willing to give you fiat currency for your BTC. The guy with $43mill? That's over 10% of the daily volume. Try to s
segwit2 support in core (Score:4, Informative)
core bitcoin is also 'soft-forking' to get bigger block sizes a the same time.
This will in the next few hours / days activate a software update giving the official bitcoin chain bigger block sizes.
To see the activation status see: http://segwit.co/
Bitcoin cash does have some interesting ideas but i'd probably stick with bitcoin as they finally have gotten thair act together and implemented a solution to the problem.
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Wow. Someone's bitter they missed out on a making a lot of money.
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For more information, see FlappyCoin and MoonCoin.
It doesn't matter actually ... (Score:5, Insightful)
Regular Bitcoin is not locked into some doomed course. They can make a block size change on the timeframe they think appropriate; or if Bitcoin Cash does enjoy increasing popularity they can make the change to put an end to the defections to the other side. Either way Bitcoin Cash seems doomed. Although I'm sure some speculators will find a way to make money off the hype.
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Re:It doesn't matter actually ... (Score:5, Interesting)
The original bitcoin had no blocksize limit. Bitcoin Cash simply increased the blocksize from 1MB to 8MB. Bitcoin Cash is the real bitcoin. Bitcoin Segwit changes the way the formula works and should actually be considered an altcoin.
The crux of the politics comes down to the future revenue streams from transactions. 81% of current hashing power is Chinese and that online wallets/exchanges/gateways do not want to send future transaction fees to china. The Bitcoin name is being usurped by an altcoin and a media campaign is supporting this.
Look, I'm not happy with chinese getting 81% of hashing power and subsequent control, i'm also not happy with the wallets and exchanges getting control. I might-as-well stick with VISA for my banking settlement as it is regulated and protects me. The crux about cash in your hand is that you can spend it however you want without regard. The future BTC will not be able to transact as it will become a settlement layer with all real business transactions moving off the chain.
I'll stick with VISA instead of moving to LN.
Re:It doesn't matter actually ... (Score:5, Interesting)
Even if Bitcoin does raise the block size one day, it's still not clear to me how it's ever going to scale high enough to become a general purpose currency. Going from 7 transactions/second to 56 sounds nice and all, but Visa and Mastercard handle about 2000 transactions/second. Each.
Are they going to eventually go to a 600+ MB block size? Or are a sizeable number of transactions going to have to go through bank-like intermediaries?
Re: It doesn't matter actually ... (Score:3, Informative)
Your numbers are a little out of date. Visa last year alone averaged 4500 transactions a second.
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Your numbers are a little out of date. Visa last year alone averaged 4500 transactions a second.
It should be pointed out that "Visa" isn't a transaction clearing system. It's a bank association. Large numbers of transactions are easily handled because there is no single system that all of the transactions flow through. There is a set of card issuing banks, a set of merchant acquiring banks, and a set of clearinghouses that connect them -- for the cases that the acquiring banks and issuing banks don't just connect directly, which they often do.
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None of that matters, he wasn't hailing the virtues of Visa's transaction handling, he was pointing out their transaction rate as a guide to what is required to meet the needs of commerce today. BTC is nowhere near where it needs to be if it is to take over.
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None of that matters, he wasn't hailing the virtues of Visa's transaction handling, he was pointing out their transaction rate as a guide to what is required to meet the needs of commerce today. BTC is nowhere near where it needs to be if it is to take over.
I wasn't commenting on BTC, just correcting a common misunderstanding of how credit card transactions work.
If you want a comment on BTC, though, I'll say this: The only way to scale to very high transaction volumes is by decentralizing. BTC's problem is that it is too centralized, which seems an odd thing to say about a fully decentralized transaction ledger, but it's true. The problem is that there's only one ledger, and all copies of it must be synchronized. I can think of a few different ways this coul
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Segwit, due to be implemented in the original Bitcoin code within a few weeks, allows for side channels (lightning networks) where such quick clearing & settlement can be performed. There's no real limit to how many transactions per second can be done that way, although it's a different kind of settlement than the completely decentralized version that's on-chain.
Re: It doesn't matter actually ... (Score:2)
These side channels look kind of like the bank-like intermediaries to me. If the bulk of Bitcoin transactions have to be made off of the blockchain, doesn't this negate the benefits of an untraceable currency on an untrusted distributed system? Or am I missing something here?
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Bitcoin has never been untraceable, nor marketed as such by anyone who understands the technology. With that said, we'll see MAST and Schnorr signatures as well and that will indeed open up for transactions where the originator cannot be proven, smart contracts (surpassing those in Ethereum) etc.
If you want quick settlements in the thousands per second for people buying lattes I don't think those need to be cleared on-chain, though.
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Even if Bitcoin does raise the block size one day, it's still not clear to me how it's ever going to scale high enough to become a general purpose currency. Going from 7 transactions/second to 56 sounds nice and all, but Visa and Mastercard handle about 2000 transactions/second. Each.
Are they going to eventually go to a 600+ MB block size? Or are a sizeable number of transactions going to have to go through bank-like intermediaries?
As I wrote before: "may adopt a larger block size **or some other remedy** at any time in the future".
My point is that Classic Bitcoin is not going to sit idly by and say: well, the old 1.0 version of our design can't handle our upcoming performance requirements. Lets just pack things up and call it a failure. No, they can implement whatever changes are necessary, block size or otherwise.
Literally a joke (Score:4, Informative)
Most on the mining power for 'Bitcoin Cash' aka 'BCash' was applied as a joke; they have less than 7% of the hashing power of BTC; and could be easily taken over with a 51% attack on mining.
https://bitsonline.com/hong-ko... [bitsonline.com]
it's not split in half, it's split off a sliver.
Disclosure, I own one quarter of one Bitcoin/BCash.
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Re:Literally a joke (Score:5, Insightful)
Exactly to destroy it.
Does this break the limited supply 'feature'? (Score:3)
Its my understanding that bitcoin is not a fiat currency there is no proclamation from anyone with authority claiming its value, as well its not a currency backed by a commodity or good, so controlling the scarcity seems to be an incredibly important factor.
If I understand it correctly, previously the rate was limited to a linear function of time, but now this appears to be very broken as it can be doubled at any time?
And lastly I haven't even looked to see how the market for the currency has been affected but I would assume that it has to decrease as people come to understand the total amount of currency can be doubled or more at any time?
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Agreed, it is inaccurate to claim that the supply of bitcoin doubled. OP is trolling and does not understand blockchains. Anyone can fork bitcoin at anytime, but their fork will likely not have any network support and will quickly fizzle. Bitcoin cash (UAHF) was able to leverage the hype built around bip 148 UASF to gain some traction (7% of the network hashrate) and we shall see how the market reacts to it. An interesting "feature" (that OP failed to recognize in their ignorance of blockchains) is that UTX
Re:Does this break the limited supply 'feature'? (Score:5, Interesting)
It sound more like that they created what is effectively an entirely new currency, after all the two are incompatible.
So somehow, they created a huge amount of value (on paper, at least - good luck converting all these "coins" in real world cash) unless the original BTC has dropped by USD 600 per coin at the same time. Nothing like it is mentioned in TFS.
So originally you had one BTC valued at USD 2,700. After the split you still have your BTC valued at USD 2,700, but on top of that a BTC-Cash that's valued at USD 600. So now your holding has a paper value of USD 3,300.
Weird. But then I've also never really understood the speculation going on in stock markets and futures and commodities and whatnot.
Re:Does this break the limited supply 'feature'? (Score:5, Informative)
If you're like me, you do, but rejected the correct answer because it seemed so silly.
It's explained reasonably well by analogy with the Parable of the Ox Explained here on the BBC's excellent "More Or Less" radio programme/podcast [bbc.co.uk], but if you prefer to read here's the author's post [johnkay.com].
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It's explained reasonably well by analogy with the Parable of the Ox
No, it isn't. At least, it isn't if we're talking about shares in real companies, or quantities of real commodities.
The parable starts out pretty good, but where it breaks down is in its assumption that the scale goes away completely. In the parable, the weight of the ox becomes entirely divorced from any sort of reality, but that doesn't happen in securities, because there is an underlying value in the security: it's future earning potential. The parable really needs to add some notion that the ox, or pa
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Except the value of your BTC-Cash is entirely speculative. It could turn out to be entirely worthless. "Value" is only determined by how much others are interest in having your BTC-Cash. If no-one cares, then all you have is a heap of bits costing disk space.
Creating a new currency is easy and can be done by anyone using anything. Get a post-it off your desk, draw a smiley face and write the number 100 on it. There you go, you have ownership of a new currency. Open Notepad, type a few random words an
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Same for bitcoin and all the other cryptocurrencies. That's why I added "good luck converting them".
The original bitcoin seems to be fairly liquid, and reasonably easy to convert in reasonably large volume, though if someone wants to convert any significant amount (say a thousand of them) they'd likely run into serious trouble already.
It's all speculative, highly speculative. Just like most stocks on the stock market (and all short term movements of their value). There are few if any companies that would be
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1000 BTC would be about 3 million USD. That's an order of magnitude, or two, lower than the daily trading volume.
https://blockchain.info/charts... [blockchain.info]
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So now your holding has a paper value of USD 3,300
Papervalue is meaningless when trading volumes are low. Large volumes of trading causes stabilization.
For instance. I give you a GarbzCoin. It's worth $1000. Try converting it to $1000 by selling it. Personally I won't even given you $1000 for it. I may have told you that's what it's worth but hey that's just the paper value. There's no intrinsic value if no one else will give you $1000 for it, so it's essentially worthless.
Now if I gave you a GarbzCoin. It's worth $1000. Hundreds of other people have Garbz
Re:Does this break the limited supply 'feature'? (Score:5, Informative)
However, creating a new variant doesn't affect the scarcity of the existing variant: there are more 'coins' in circulation overall; but 'coins' from one fork can always be distinguished from those of the other; so the scarcity of Fork X 'coins' remains the same; but now there are Fork Y 'coins' as well.
The really scarce resource is interest: as noted, having your own pet 'coin' and blockchain is extremely trivial; but also likely to be worthless because you can't pass it off as being the 'real thing'; and nobody else cares about it. This incident is somewhat notable not in that it's the creation of yet another cryptocurrency variant(which happens all the time); but that there was enough discontent with the existing arrangement that the fork has actually attracted some attention and isn't completely worthless.
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Its my understanding that bitcoin is not a fiat currency
there is no proclamation from anyone with authority claiming its value, as well its not a currency backed by a commodity or good, so controlling the scarcity seems to be an incredibly important factor.
You just described every modern fiat currency.
Awesome! (Score:1)
Now both projects are exactly half as relevant to their purpose. Good job guys.
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exactly half
Depends on adoption, no?
If I made a WooteryCoin fork, and everyone rightly ignored it, it wouldn't impact the value of BitCoin at all, right?
56 Transactions/Sec? (Score:5, Informative)
So the main feature is that the block size is 8x the size of BTC's. So now instead of the entire network being able to only handle 7 transactions/second it can handle only 56? SWIFT handles ~350 transactions/second on a good day, for comparison. Furthermore, the entire blockchain at this point is currently ~126GB. That's enough to fill up most mobile devices by itself. So with 8x the block size, the blockchain will soon be in the terabytes? Storage isn't getting larger/cheaper at that rate any more. Sounds like someone needs to fix the "you need the entire history of the world's financial transactions" problem next.
Re:56 Transactions/Sec? (Score:4, Insightful)
"Storage isn't getting larger/cheaper at that rate any more. Sounds like someone needs to fix the "you need the entire history of the world's financial transactions" problem next."
Won't happen, can't happen. Idiots still haven't learned the problems experienced in the 70s regarding permissionless distributed databases. Rather, people aren't teaching them because they (foolishly) ignored mathematical proofs, then actual demonstration.
It simply cannot scale with technology and human transactions.
And it's repeating that history as evidenced by this fork (which STILL isn't good enough, the short-sighted idiots.)
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Can you elaborate a little on the issues with permissionless distributed databases?
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Simply put, we'd need our technology to advance by 3 orders of magnitude more than it already is to keep pace with the exponential influx of data that builds up as you have to keep sending data to ALL the decentralized peers, and that gets worse as more and more peers participate in the 'database.' The infrastructure alone that's required to support that kind of growth simply doesn't exist and can't be built out, which is why everything moved right back to having centralized locations.
What's old is new, and
Re:56 Transactions/Sec? (Score:5, Insightful)
To mine you only need to hash the latest block, so long as you can trust other people to verify the transactions you are hashing.
To verify new transactions, you only need to keep the set of unspent transactions around, and you could partition that easily enough.
And you could depend on other people to hold all that data for you. There's no real advantage to everyone storing the whole block chain forever, so long as enough people have a backup copy somewhere.
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And you could depend on other people to hold all that data for you. There's no real advantage to everyone storing the whole block chain forever, so long as enough people have a backup copy somewhere.
There's not even a need for that, for every X blocks create an "account overview" listing all the bitcoin addresses and their value and sign it into the block chain. After it has received X verifications (where X >> than an ordinary transaction) ordinary clients can for practical purposes forget everything before that. If the block chain is subverted, you could rewrite the accounts... but you can rewrite the transactions too, so you're not really more fucked than before.
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systemd-bitcoin (Score:1)
Let's add it.
BitCoin is broken, and the fork is the only hope (Score:1)
What I read was that that block limit is a hack and could be and should be done away with, that the effect of hitting the limit has been to drive up transactions costs. The cost of a transaction should be some microscopic fraction of a cent, but now it's 5.50 USD.
The people who are raking in the money are the huge (and I hate to say it) Chinese mining pools. And *these* people, I read, are launching DDOS attacks on anyone trying to increase the block size.
Finally, I've also read the guy in the charge of t
BTC "investors" are paying for a blockchain test (Score:2)
The enduring contribution of Bitcoin appears to be the blockchain idea, which is being tested in a number of applications the Bitcoin developers never envisioned:
http://www.huffingtonpost.com/... [huffingtonpost.com]
These would enable such things as personal identity to be managed without a central authority.
The BTC split subjects Bitcoin users to an involuntary A/B test of a change to the original blockchain that could support faster transaction processing. Let's see whether the winner is A, B, or none of the above.
Quite frankly "bitcoin" itself is overrated. (Score:2)
It was the first but that doesn't mean it should stay on top. There is no value to it other than what we give it in our minds. There is no reason to stay with it as it does have problems. Both groups should stop using the name "bitcoin". There is room and a need for multiple digital currencies.
Bitcoin is simply not good for consumer transactions. If you can wait 15 minutes to an hour to complete transactions like stock purchases use to take in 1901 then it's viable. If I am dealing in large amounts of mone
Simplify this (Score:2)
When you consider Bitcoin to be a similar value proposition to a stock market, then you understand Bitcoin value better.
And the fork is a unique event, probably causing more trouble than it solves. But value? If Bill Gates liquidated his Microsoft shares, would he impact the price, and therefore his value? Yup. Bitcoin holders are sort of trapped in their market.
Sell twice (Score:2)
If I understand correctly, the owner of a pre-fork bitcoin can now sell it twice, on standard bitcoin and on bitcoin cash.
That is not a huge problem, except for platforms that pretend to handle both bitcoins. I assume they will need to consider them as two distinct currencies.
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