Goodbye Mike and Some Thoughts About Bitcoin

On Mike

After reading Mike Hearn's

farewell letter to the community, I've decided to finally draft my thoughts on the blocksize debate, but first a few things about Mike. Hearn, joined the Bitcoin community back in May of 2009 and has been an active contributor for as long as I can remember in some capacity or another. He's also an incredibly bright and creative person who brought a lot to this ecosystem in its earliest days.

The point of decentralized systems is never to reach ubiquitous consensus about truth. Settling upon a final truth is pyrrhic at best and almost certainly a sisyphean endeavor. The goal is to facilitate the free flow of ideas and provide an effective framework to actually test them with something at stake.

Mike was a voice for a certain philosophy and regardless of whether you feel that philosophy is correct, it is a terrible tragedy that our community descended into the murky swamps of censorship and personal attacks. I will miss Mike and want to extend a profound thank you for all he has done and good luck on future projects.

All this said about Mike's contributions and positive influence on the space, I would be remiss if I didn't comment on his core argument that the Bitcoin project has failed. It's not only wrong, but utterly offensive to the thousands who have contributed weekends, painful explanations about the nature of money to their friends at bars and the repeated scorn of having to endure the scams, exchange failures and regulatory misunderstandings.

Burt Wagner was arrested for legally selling bitcoin and had to spend his life savings to have the State of Colorado accept its own laws. He's still in the Bitcoin space. Many of the thousands affected by the collapse in MtGOX are still in the space. There are hundreds of meetup groups actively evangelizing, onboarding their local communities and coming up with creative solutions to various problems. A colleague of mine even paid for a recent meal at the Shard with Bitcoin thanks to the magic of Xapo (American beef is still better :) ):

So Mike I'm terribly sorry that you lost the XT fight and it's definitely true that it wasn't a fair fight, but don't take your anger out on Bitcoin the experiment nor the Bitcoin community:

So how does one resolve this seemingly intractable problem? The naive and kicking the can down the road solution is simply to increase the blocksize from X to a new arbitrary amount- say X(1). If Bitcoin continues to grow, then we'd have the same debate all over again in a few months or perhaps years (

see US Debt Ceiling Debates). This said, one could develop either an algorithm to scale blocksize via some set of network parameters or increase it at regular intervals similar to how coinbase awards are cut in half every four years.

One could also increase the rate of block production (referred to as the block interval). There have been several proposals to do this in a way that wouldn't increase the amount of stale blocks and Ethereum even implemented one called

GHOST developed by Zohar and Sompolinsky. The basic concept is turn Bitcoin's blockchain into a directed acyclic graph from an append only linked list. This path is reasonable, but doesn't resolve the issue of data bloat (more on this later).

We could approach the problem from the other side by examining transactions. Again the most naive approach is to reduce the size of transactions from Y to something smaller say Y(1). Again this approach doesn't solve the fundamental problem that future growth will push blocks to their cap.

Along the same line of thought, one could create a mechanism to gradually retire transactions (called pruning) or reduce the amount stored on chain. There have been some interesting ideas proposed like

segregated witnesses and Pieter Wuille has been a great mind in considering pruning. It's a nice efficiency improvement and something that could definitely help the network, but again doesn't solve the core issue of long term growth.

Finally, one could push transactions off-chain so they don't appear in the Bitcoin network at all or eventually in a reduced form. This idea is seen in efforts like the

Bitcoin Lightning Network and the Sidechains project. It's the most politically friendly of all proposals as there are already many projects exploring how to facilitate the offchain infrastructure without necessarily requiring a fork of the Bitcoin protocol (or at least a dramatic hard fork). As a side note, It's probably not an accident that a large pool of the Bitcoin core developers happen to work for the company spearheading these approaches.

I recall the argument to get merchants to adopt bitcoin is to use services like Bitpay, yet then we go back to the solution to asset volatility of our decentralized network is to connect all the merchants to a centralized service provider? The same applies for transaction scalability solutions for the Bitcoin network. Seek decentralization wherever possible!

All the parts are wired together with some form of crypto. The block body is connected to the header via a merkle tree data structure. The headers are wired together via hash pointers. And proof of work provides a mechanism for validating a given collection of blocks (the proposed blockchain) is the correct one via the notion of algorithmic weight (the proposed chain with the most work wins).

So we have been given a menu of options to change the core protocol to reflect the goal of more transactions. Increasing the blocksize makes the block contents heavier (larger merkle tree), but has no impact on the block header. It's an interesting question to consider the impact of larger blocks on block propagation times. I'd highly recommend this

excellent paper studying propagation in general by Decker and Wattenhoffer.

Reducing the block interval will likely involve changing the structure from a single hash pointer to multiple hash pointers to different blocks, but no impact on the block contents. Inclusion of double spend transactions and longest chain selection rules are the topics of primary interest here. I'd recommend two papers to get a deeper understanding. First, Sergio Lerner's

DAG-Coin proposal and then Lewenberg et all Inclusive Blockchain Protocols.

Pruning means that over time certain leaves in the merkle tree should be removed or perhaps even entire blocks replaced with different representations. It's also interesting to consider what other authenticated data structures could be put into the block headers to improve scalability or better facilitate pruning schemes without compromising trust. The Bitcoin wonderkid researcher Andrew Miller has

done some foundational research with Katz and others.

And finally off-chain means that we are effectively wiring something more onto the block via the header or more likely in the block contents. The concept here is separation of concerns and layering. For example,

rootstock is discussing how to do smart contracts via a sidechain of bitcoin. This area reduces the need for whole sets of transactions by simply having them done outside of the main Bitcoin blockchain in different domain. It also modularizes the set of things a client has to download.

The separation of block headers from the block contents does suggest a path to heterogeneity via light nodes holding only the header collection; however, again this action isn't forced upon anyone.

Now enter 2016, Bitcoin is a very different animal. The Bitcoin blockchain has grown considerably. Mining is heavily centralized:

I feel that this debate has exposed more than certain people's inability to work productively with each other or the need for a new set of reddit moderators. It has exposed that Bitcoin is basically at a philosophical impasse. There really isn't a clear direction for the Bitcoin ecosystem to take. Is it supposed to be the ultimate payment system with a super cool deflationary digital gold coin backing it? Is it a settlement layer for many systems to eventually clear upon? Is it the arbiter of digital truth providing a cryptographic beacon, notary services and a logical clock? Is it a system for decentralized governance?

Fair arguments can be made for any of these directions and there is a legion of good tech to sneak into the protocol to make Bitcoin better suited for these tasks. In general, Bitcoin could basically be the entire financial stack:

Should Bitcoin be blind and deaf to other systems and cryptocurrency or does it need to talk to them on a regular basis? Are we going to tokenize all assets like gold and USDs and trade them in a decentralized network? Or are we going to trade them on exchanges and move them between exchanges using some connection to the Bitcoin blockchain? If there is a dispute, then is arbitration connected to the data held on a blockchain?

Each of these questions and the hundreds more have a dramatic impact on what needs to go into a transaction, how of many per second we need to include in the Bitcoin blockchain and also the intended set of users. Let's be intellectually honest, have we answered them? Where do you even go to start that process? Who gets to decide?

In effect, we don't have a blocksize crisis, we have a governance and philosophy crisis. And the pain will continue until this crisis has been resolved either out of some cabal gaining control of the network or by a new mechanism to decide things in a decentralized manner (See

DAOs).

Second, adopt the plan devised at the scaling bitcoin conference. It's reasonable and doesn't require dramatic action. Segregated witnesses in particular are a very solid concept. Furthermore, scaling bitcoin should really be a bi-annual event moving forward- get people talking to each other on a regular basis.

Both of these actions will take the pain off of the network and give us some breathing room. We have to then move on to phase II, which is investing in some foundational technology to radically improve the entire network.

Until the development of Bitcoin is free from outside corporate influences, it can't be discussed in an objective and fact based way, and the stakeholders of the system are able to decide instead of a cabal of well capitalized actors, we aren't going to gain the resilience of the crowd.

This phase is probably an innovation of the size and scale of Bitcoin itself and thus is unlikely to materialize immediately, but organically over a collection of hundreds of experiments. And like Bitcoin, it would fundamentally change the very nature of organizations, their mandate and the flow of funding.

Thanks for Reading!