Fork Christ's Sake: Bitcoin is going to fork. Is SegWit Bitcoin? Whose side should I be on?
Bitcoin will fork. Two communities with different ideologies should and will evolve independently. With the August first deadline, it will happen soon. Whose propaganda should you follow?
There was an agreement in New York?
During Consensus 2017, a group of prominent Bitcoin figures representing 83% of the network hashrate agreed to implement the following in Bitcoin:
- Activate Segregated Witness at an 80% threshold, signaling at bit 4
- Activate a 2 MB hard fork within six months
These were unofficial terms set by some miners that basically boil down to: SegWit now, we will get around to a hardfork block size increase at some point. Although an agreement was formed, these signatories are only signaling their intent, there is nothing binding anyone to any particular choice - especially the 2MB hard fork that is supposed to happen around the beginning of November.
The problem with this whole fiasco is that after SegWit activates, there is nothing enforcing the future blocksize increase. After SegWit activation in the current SegWit2x proposal, the 2x part will undoubtedly be rediscussed and argued over. Signaling does not fake a hardfork.
I am not going to describe the web of potential signaling bits and differences between UAHF, UASF, Segwit2x, etc.. I really recommend visiting Bitmain's page detailing their UAHF contingency plan. Jimmy Song's article and the diagram below help to outline some of the behavior implemented by current production code regarding the imminent chain split.
edit: replaced chain diagram for more accuracy.
Notably, there are some that have voiced their intent to never accept a SegWit transaction and hardfork to a large-block and SegWit-free chain. See www.bitcoinabc.org. Does this position make any sense?
Is SegWit Bitcoin?
SegWit is touted by many Bitcoiners as the "best tested scaling solution" and "has been tested for over a year", both in stark contrast to the iterated 'dangers' of a hardfork. Myself and many others argue that the shift in incentive structures caused by SegWit are dangerous and not fully understood. See discussions by Peter Todd. SegWit Bitcoins might not have the same value properties as Bitcoins - fundamentally breaking fungibility, a key property of Bitcoin.
The argument is not that transaction malleability should not be fixed. - it should be.
The argument is not that all scaling should be done on-chain. - it shouldn't be.
The argument is not against the softfork format anymore. Hardforks can be safer but there is nothing wrong with a uncontroversial softfork.
The argument is not even in the anyone-can-spend update mechanism.
The problem is with SegWit itself. - the problem is in SegWit's implementation.
Bitcrust, a new Bitcoin implementation that uses a unique modular approach and parallel verification mechanism to allow high transaction throughput, has published a clear blog post detailing the dangers of SegWit signatures. I recommend a read if you want to know why I make the claims herein.
https://bitcrust.org/blog-incentive-shift-segwit
In short, SegWit can flip the incentives for some (bandwidth restricted) miners such that they benefit from not downloading or verifying the transaction signatures. For a user, this causes a SegWit transaction to be less secure than a non-segwit one. A non-SegWit transaction is secure with the assumption that no attack is able to obtain more than 51% of the network hashrate. With SegWit, this becomes 51% - (percent of miners with flipped incentives).
If 20% of miners end up in a situation where they are not downloading signatures because it is more profitable for them not to, a 31% miner can attack the network effectively. Security becomes 51% - X.
The bigger problem is that it is very hard to estimate the proportion of miners with this flip in incentives before their portion grows too large and an attack occurs. This basically means that SegWit transactions will always be less secure than normal Bitcoin P2PKH transactions. Even if just by the smallest bit, this is what fundamentally breaks the fungibility of Bitcoin.
Read more here.
What do I support? Well, I like simple hardfork malleability fixes like this or even the BIP140 softfork. I also support the groups who will be maintaining both Bitcoin ABC nodes and running pools that do not accept SegWit transactions. Fundamentally, I support Bitcoin as designed by Satoshi.
But with SegWit, the Lightning Network will solve all our scaling woes
No. No it won't.
Lightning Networks can always be Sybil attacked.
This does not mean that the Lightning Network (LN) will be useless. There will certainly be many applications and uses for payment channel systems. They will not be used for everything.
The solution is not SegWit now, then move all scaling to layer two solutions like sidechains and the LN. That is just the solution that Blockstream wants so their products will have value in the first place.
Radical On-Chain Scaling
Many long-time Bitcoiners and miners are supporting the continued extension of a SegWit-free chain come the August first chain split. The consensus is that this chain will experience the blocksize increases we have desperately needed via hardfork.
Bitcoin ABC represents one of the codebases that implements a radically adjustable blocksize cap.
Clean hardforks are a much better scaling solution than anything proposed thus far. A hardfork is the only safe way to deal with a controversial change.
Moving on
The greatest thing that this UASF movement has brought to Bitcoin is the August 1st deadline. Ethereum has ice ages, what does Bitcoin have? Decentralized communities need definite deadlines to rally behind. The August first deadline is forcing the members of any Bitcoin ideology to have a plan in place for a chain split.
What will different clients enforce?
What client implemented your ideology?
Where are my coins located? Do I possess my private keys?
These are questions for you to sort out yourself. Make sure you own your own public keys so you can make a choice in the future.
Two communities with different ideas should evolve independently.
The beauty of open source software is that it only stays around if people want to use it. - it becomes whatever is useful to its user base.
The 35 billion dollar question is what chain will be the Bitcoin (tm). I hope this chain gets bigger blocks and thinks long and hard about implementing SegWit.
I hope this helps you see through some of the propaganda. Comment your Bitcoin scaling opinions below.
Stay decentralized,
Kyle
Very good post, dropped a follow :-)
The stakes are just too high to let a split happen. If we see a split, there is going to be the biggest unloading of positions we've ever seen in crypto and with the loss in trust will come the loss of business support which the tech is working so hard to be accepted as mainstream.
The powers that be know this and SURELY won't let it happen...
Good insight and I would agree that what ever happens, 'the powers that be' should make sure BTC comes out smelling like roses.
Doesn't even have to be roses. Just simply don't give main street an opportunity to lose trust in what you're doing.
Stakes are high but there will almost certainly be a chain split.
There are two groups. SegWit is not Bitcoin - this might be okay.
Great read thanks Kyle! I think you said it best with,
"Two communities with different ideas should evolve independently."
The question now is how do I hold both types BTC?
*will evolve independently:)
Do you know if you have your Bitcoin private keys?
Where do you currently store your Bitcoin?
Hi Kyle. Very interesting post. I agree that Bitcoin must remain as Satoshi created: descentralized.
One question: I just transfer my btc to Exodus Wallet on Mac OS X.
I exported all my private keys, 12 word phrase, email and password into a regular USB and did the process offline.
Is this safe in your opinion?
Thanks.
Yes very safe - it might be nice to have your private keys on paper though. Now we wait.
Thank you Kyle.
Honestly all my keys are on exchanges or Coinbase...
Well keep in mind that Coinbase will not allow you to keep on both or all chains. Who knows about all the other exchanges.
If you care, you want to move all your coins to a wallet with a public key you control. That way you can make a choice about your coins on each chain. - sell or keep .
Go with https://electrum.org.
Coinbase or any other exchange is crazy not to support both chains, at least temporarily. It's a bit like stealing money.
Yep. I agree.
Although that point is clearly known. It is your fault if you don't have control over your coins.
My concern is that I've directed a lot of non-technical people to use Coinbase to purchase coins. Most of them don't have the technical skills to safely manage their own keys.
In that case, I trust Coinbase to not mess it up too badly. They stay in business by pleasing customers.
The new banks have much less stick and pull compared to traditional banks - something to keep in mind.
Kraken will mostly do the same right?
Not sure, I'd get my coins off their exchange though.
Okay great, thank you :)
Oh, you are big blocker, that explains much :) centralization is the way to go?
Explains what?
Can you detail how larger blocks lead to centralization? We don't need everyone and their raspberry pi to be able to run full nodes. We need scale. Period.
If you want your Bitcoin to be worth anything, economically incentivized parties will buy the Xeon phi cards and scale freaking Bitcoin. We don't care to leave you behind.
Because physics. You can't propagate blocks faster than light. With bigger blocks you need more time to propagate to other nodes - and if they get the blocks too late, they got cut off (orphaned blocks?). Before you see it, only on guy in China will validate all your transactions because he has the funds and free energy to hoard all the blocks for himself. Which almost happened - almost, because UASF.
This is how I see bigger blocks:
You can add more lanes to the highway but it won't eliminate traffic jams. You need new solutions, from public transport to hyperloop. Lightning Network doesn't work? No problem, we will build better layers on top of bitcoin. As far as I know big blockers tried to make their own bitcoin before. How did it end? I don't hear much about bitcoin unlimited. Bitcoin ABC sounds ever more silly.
It would be best to gradually increase block size and add upgrades to bitcoin - but at the moment chinese miners almost took bitcoin for themselves. With bigger blocks it would be much easier for them. Bitcoin is for users, not miners. But that's just my opinion. In the end I like the fact, that there's so much debate, that really smart people (not me!) are trying to find best option. Conflict is an inherent part of this. Cheers.
Well yeah... everything is limited by bandwidth. You don't have much of a point there.
Yeah no. Not quite how the game theory works. Or the economics. Or UASF for that matter.
You do need new solutions. Nobody disagrees there. No LN does not work and is inherently centeralized - is that bad, maybe not but it is not the catch all. All off chain solutions are inherently less secure than a Bitcoin transaction. Do you want Bitcoin to be an extremely centeralized settlement layer?
Small blocks lead to more centralization than larger blocks. Period.
Nobody is talking about 2GB blocks tomorrow. 32MB would serve us just fine for the near term. No centeralization risk there.
Yep a gradual increase is how it should be done. Bitcoin ABC, Bitcoin XT, Bitcoin Classic and Bitcoin Unlimited all support this feature -- Emergent consensus is a thing too.
You are wrong about the Chinese miner thing. How on earth would it make it easier for them. Last I checked Xthin was freaking developed to make it easier for them to propagate blocks. Chinese have a hard time with that great firewall of theirs. How did the Chinese miners almost take Bitcoin for themselves?
Miners are large stakeholders in the network. They are users.
There is a reason I'm the one ponying up hashrate here.
Conflict is absolutely inherent.
If big blocks would be easier for Chinese miners why do most not support them? I haven't followed this really closely but I thought only one Chinese miner was supporting big blocks and the others had signed up for the blockstream segwit solution.
Because, we - the users, oppose :) #uasf
But there is a huge community of users that are all for them? I think the view we have online is skewed. I talk to people every day about bitcoin and I've still never met anyone in person that is against larger blocks. It's a complete disconnect from what I see online.
Not representing the economic majority properly.
Well you can all UASF yourself away from the rest of the hashrate that will be following the Segwit2x chain. Designed especially to prevent the silly UASF movement from causing a chainsplit.
Not sure why you, as a user, want SegWit - not bigger blocks.
Did you read my post here?
The Chinese do support bigger blocks actually.
Signaling acceptance for SegWit (dispite all the problems) does not mean you are against a HF blocksize increase.
Just a reminder:
https://www.reddit.com/r/btc/comments/4211cd/reminder_full_blocks_will_lead_to_far_more/
Brilliantly explained. I have learned a lot. Do you think a split will shock the market?
Oh the market is probably going to be shocked anyways.
Why is LTC booming so hard?
Gives nothing over Bitcoin other than maybe not a hardfork in a few weeks :P
ZCASH
The only thing with Segwit I was interested in was cross chain atomic swaps. As far as I know they never demonstrated this actually works. Everything else segwit offers is like a rube goldberg machine, just increase the block size already.
Great info on some of the finer points of this argument. I hope this thing doesn't get messy!
Hi @ kyle,anderson,
This is a news of today 7/18/2017 in yahoo finance.
Amazon launches a social network for spending money
Daniel Howley July 18, 2017
link: https://www.yahoo.com/tech/amazon-launches-social-network-spending-money-204614612.html
I am reading your article.
Great article! I don't understand some of it but I still find it fascinating.