cliff
Active Member
- Dec 15, 2015
- 345
- 854
Shower Thought(s) 2 - RE: Settlement Layer and Fee Market (shower thought 1 here - RE: Scrubbing the History of Bitcoin messaging)
Premises
1. Some small block proponents claim that Bitcoin should be a settlement layer. From that perspective, transactions on the blockchain - due to block size limits - would be rare and more so for special circumstances than for everyday consumer/retail spending (e.g., coffee). This perspective also allows block space to be treated like a commodity (just like bitcoin). Likewise, in the US, various state and federal agencies have characterized bitcoin as a commodity and not a currency (which makes sense if one defines currency as legal tender).
2. Commodity markets are regulated markets. There are reporting requirements and disclosures statements to be made by various market participants - including those running the markets themselves. We know that CFTC sees bitcoin was within its purview and they have already taken actions against some bitcoin start-ups who failed to meet various compliance standards.
3. In a fee market world, a world that is created out of a decision not to scale within a certain time frame and using certain methods (i.e., adjusting blocksize limits), the "free market" (to borrow a term from JG and GA's article today) concept is abandoned and public representations about bitcoin are changed to support the new narrative (see Shower Thought 1 to see how public representations about what bitcoin is has changed).
Thoughts
Given the preceding paragraphs, are there unintended consequences on the horizon with the adoption of a fee market approach? In other words, is Core or any project-based group, cruising for a visit from regulators interested in regulating markets that are subject to manipulation? I am genuinely interested in this question - I can see multiple angles.
Pre-empt - Oh,I get the logic of open-source, distributed, autonomous/anonymous/etc software project development with no chain of command, but this framework seems be a bit candylandish and utterly impractical due to being out of step with how markets operate. In a world where consumers get screwed over everyday by whale-sized market participants, regulators have been charged with leveling the playing field a bit. This extends to all kinds of markets, such as real estat markets and service markets (in these markets, regulators regulate who can participate via licesning as much as the activity in question). In stock and commodity markets, regulators have ratcheted-up their enforcement activity recently, seeking extradition of foreign traders flash crashing markets etc (young 20 year olds day trading in mom's flat in London, IIRC is one recent example) and sanctions against traders using spoofed orders.
In Bitcoinland, I can easily the transaction fee market being manipulated for the benefit of speeding up or slowing down the moving of money within specific time frames etc. Consequently, one has to wonder whether or when regulators will be interested in watching transaction fee markets (the block market is probably a better term since the fee changes based on bids from the senders) and whether or when they might seek to regulate those markets by regulating who can construct the market and the means for participating therein. I wonder if Core folks consulted counsel or a regulatory consultant on this issue before staking out their position - somebody with a very practical and real world understanding (i.e., experienced) about how markets work and are regulated.
On a related note, one thing that I've noticed over the last few months is that many Core folks tend to take the pro-privacy shtick extremely seriously and therefore have a natural alliance with those folks - many earlish adopters - who are interested in bitcoin for opportunities in unregulated gambling, currency exchanging, mixing, revolution, etc. In short, scaling for mass adoption (planning for success as Gavin has said) probably involves a lot of regulation and compliance - for better or for worse - and that's probably not good for a certain segment of folks.
Hence, I would not be shocked to learn that a chunk of the harshest resistance to increasing the blocksize - especially w/ DDOSing (a cyber crime, btw) - comes from those with a monetary interest in keeping bitcoin outside the govt's purview, at least for the next few years while positions are slowly liquidated without generating redflags at banking institutions, etc. Such desires could easily result in paid subversion activities. To be clear, I'm not talking about all small block folks or even most of them - I enjoy the clash of ideas when they're backed with substance - I'm solely talking those engaged in or supportive of criminal or unauthorized activity and who desire to keep it going for a while at least.
TLDR - A critical sub-text in the Blocksize debate may be about delaying the legal obligations and enforcement thereof that will inevitably result from mass adoption; some people don't want their style to be cramped by the man, but delay tactics based on the desire for a healthy fee market may result in more govt scrutiny to the extent it results in a manipulable commodity market RE: blockspace.
Misc Additions
*I haven't even started talking about the digital divide, east-west, north-south, developed vs undeveloped, third-world/first-world issues and political philosophy-type stuff the block size debate implicates. I've seen quite a few speeches about bitcoin being a critical safety valve for those folks who live in countries where their currency has been devalued etc. A fee market certainly hinders this quality.
** Is there an emergency back up plan in place in the event something catastrophic happens with network and its capacity between now and seg wit roll out? Why not code the backup plan out now - send part of the team off to play 'lets make big blocks' and see what they come up with? TLDR2 - Back-up plans good, no back-up plans bad.
Premises
1. Some small block proponents claim that Bitcoin should be a settlement layer. From that perspective, transactions on the blockchain - due to block size limits - would be rare and more so for special circumstances than for everyday consumer/retail spending (e.g., coffee). This perspective also allows block space to be treated like a commodity (just like bitcoin). Likewise, in the US, various state and federal agencies have characterized bitcoin as a commodity and not a currency (which makes sense if one defines currency as legal tender).
2. Commodity markets are regulated markets. There are reporting requirements and disclosures statements to be made by various market participants - including those running the markets themselves. We know that CFTC sees bitcoin was within its purview and they have already taken actions against some bitcoin start-ups who failed to meet various compliance standards.
3. In a fee market world, a world that is created out of a decision not to scale within a certain time frame and using certain methods (i.e., adjusting blocksize limits), the "free market" (to borrow a term from JG and GA's article today) concept is abandoned and public representations about bitcoin are changed to support the new narrative (see Shower Thought 1 to see how public representations about what bitcoin is has changed).
Thoughts
Given the preceding paragraphs, are there unintended consequences on the horizon with the adoption of a fee market approach? In other words, is Core or any project-based group, cruising for a visit from regulators interested in regulating markets that are subject to manipulation? I am genuinely interested in this question - I can see multiple angles.
Pre-empt - Oh,I get the logic of open-source, distributed, autonomous/anonymous/etc software project development with no chain of command, but this framework seems be a bit candylandish and utterly impractical due to being out of step with how markets operate. In a world where consumers get screwed over everyday by whale-sized market participants, regulators have been charged with leveling the playing field a bit. This extends to all kinds of markets, such as real estat markets and service markets (in these markets, regulators regulate who can participate via licesning as much as the activity in question). In stock and commodity markets, regulators have ratcheted-up their enforcement activity recently, seeking extradition of foreign traders flash crashing markets etc (young 20 year olds day trading in mom's flat in London, IIRC is one recent example) and sanctions against traders using spoofed orders.
In Bitcoinland, I can easily the transaction fee market being manipulated for the benefit of speeding up or slowing down the moving of money within specific time frames etc. Consequently, one has to wonder whether or when regulators will be interested in watching transaction fee markets (the block market is probably a better term since the fee changes based on bids from the senders) and whether or when they might seek to regulate those markets by regulating who can construct the market and the means for participating therein. I wonder if Core folks consulted counsel or a regulatory consultant on this issue before staking out their position - somebody with a very practical and real world understanding (i.e., experienced) about how markets work and are regulated.
On a related note, one thing that I've noticed over the last few months is that many Core folks tend to take the pro-privacy shtick extremely seriously and therefore have a natural alliance with those folks - many earlish adopters - who are interested in bitcoin for opportunities in unregulated gambling, currency exchanging, mixing, revolution, etc. In short, scaling for mass adoption (planning for success as Gavin has said) probably involves a lot of regulation and compliance - for better or for worse - and that's probably not good for a certain segment of folks.
Hence, I would not be shocked to learn that a chunk of the harshest resistance to increasing the blocksize - especially w/ DDOSing (a cyber crime, btw) - comes from those with a monetary interest in keeping bitcoin outside the govt's purview, at least for the next few years while positions are slowly liquidated without generating redflags at banking institutions, etc. Such desires could easily result in paid subversion activities. To be clear, I'm not talking about all small block folks or even most of them - I enjoy the clash of ideas when they're backed with substance - I'm solely talking those engaged in or supportive of criminal or unauthorized activity and who desire to keep it going for a while at least.
TLDR - A critical sub-text in the Blocksize debate may be about delaying the legal obligations and enforcement thereof that will inevitably result from mass adoption; some people don't want their style to be cramped by the man, but delay tactics based on the desire for a healthy fee market may result in more govt scrutiny to the extent it results in a manipulable commodity market RE: blockspace.
Misc Additions
*I haven't even started talking about the digital divide, east-west, north-south, developed vs undeveloped, third-world/first-world issues and political philosophy-type stuff the block size debate implicates. I've seen quite a few speeches about bitcoin being a critical safety valve for those folks who live in countries where their currency has been devalued etc. A fee market certainly hinders this quality.
** Is there an emergency back up plan in place in the event something catastrophic happens with network and its capacity between now and seg wit roll out? Why not code the backup plan out now - send part of the team off to play 'lets make big blocks' and see what they come up with? TLDR2 - Back-up plans good, no back-up plans bad.
Last edited:
