Reversion to the mean (x-post from TOF)

sgbett

Active Member
Aug 25, 2015
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786
UK
Preaching to the converted in here I know, but....

All this talk is so wearing, I've been reading less and less on the forums and thinking.

When I got into bitcoin I saw something with massive potential to be disruptive technology. It looked to me like it could basically replace fiat currency, an opinion that I think was shared by a lot of people back in the day. Sure there was the whole get rich quick thing, and the insane volatility and the less cynical more funny community.

I still believe this fundamental idea that bitcoin can take over the world.

To do that it needs to grow though, and that's why "I am SGBETT and I am a big blocker"... but you all knew that already.

What seems to have happened though, is that a new idea has arisen. The idea that bitcoin *can't* scale, and should instead be used as some kind of settlement layer. That other things should be developed to provide the 'currency' style features.

What I am finding difficult is the whole debate seems to be now centred around the pro's and cons of two exclusive camps. BTC can *only* be store of value and settlement. BTC can *only* be cash. The participants have taken these as axiomatic truths and are arguing the pro's and cons.

At worst this is an intentional strategy, by characterising the argument in this way its easier to justify one position by radicalising the opposing view and arguing against it. At best its just misguided passion for what you believe in. A cynic might think its the former, but I am going to assume its the latter.

Concerns about centralisation are being used as a way to justify not increasing block size.

Concerns about full blocks are being used as a way to justify increasing block size.

The common theme is that in both cases these are just hypothesis. They are predictions of the future and they are fragile. barge said something on reddit earlier about tale's black swan, and how humans are bad at predicting. So lets assume that in both the statements above "concerns about X" are likely to be invalidated by a black swan event.

Where does that leave us?

Well the followup work by Taleb describes Antifragility. This means positioning yourself to benefit massively/protecting yourself from loss should the unexpected happen, which it inevitably will.

Of course this perspective can be twisted to justify pro / anti block size increase. I'll leave it to the small blockers to give there explanation as to how keeping blocks small is antifragile.

My view though, is that having larger than you think you need blocks is antifragile. If there is an unprecedented surge in bitcoin use then transactions can increase massively, fees go up massively miners get paid, we all cheer because bitcoin adoption is taking off (we can surely agree that everyone would like to see adoption no?). If the blocks are much bigger than we need, and they are not needed, nothing happens. An antifragile view (imho) looks at both outcomes and checks to make sure neither results in tragedy.

Lets take centralisation. Massive blocks, really big regularly, means fewer people can run nodes etc. This could happen, but how badly? What constitutes unacceptable levels of centralisation, unacceptable as in 'terminal', can we define this? Is there an actual block size (not block size limit) that causes terminal centralisation? Do 8MB blocks cause this, 16MB, 32... ? Don't forget each doubling is 2 years, so we are already in 2020 before anyone could mine a 32 MB block.

Note, that is *could* mine a big block. If we don't need it, we don't use it, and thats the flip side of the centralisation argument. Nothing bad happens.

You can dissect all arguments for and against block size in this fashion, trying to figure out what course of action is most antifragile.

Fee market - in 2020 with 32 mb blocks. If they are full then a simple extrapolation may be that we have 32x the amount of current fees in a block (about 6BTC). Maybe average fee per transaction has declined tenfold and there is only 0.6BTC a block. Still, the block reward is 12.5BTC so we still aren't exactly in tragic failure mode. If we are still only doing the same volume as today then nothing bad happens.

The closest I think we can get to arguing 'something bad happens' is the terminal centralisation of mining. A hypothetical *extreme* scenario. The fee market argument doesn't hold up because we still have decades before the block size gets small enough that fees are relevant.

I can't fathom why anyone is trying to force a fee market right now whilst the block reward is still so big. The only reason I can see is greed, and that would perfectly fit with all of human history. Bitcoin is the goose laying golden eggs right now, and it feels to me like some people aren't happy with one egg a day.

Why reversion to the mean, because this is exactly what the banks are doing right now. The banks squeeze us for every penny, because they are greedy and we have no choice.

This fee market? Who do you think pays for it, and to whom?

Appeal to authority, yes.
Appeal to emotion, yes.

Isn't that the whole point, doing smart things that feel right. Learning from history. Don't make bitcoin 'the bank', don't let greedy men fool you - it was inevitable that once bitcoin started showing value it would attract those that seek to take that value for themselves.

Bitcoin should be for everyone. Bitcoin should replace 'fiat' money.

https://bitcoin.org/bitcoin.pdf said:
A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.
 

cypherdoc

Well-Known Member
Aug 26, 2015
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12,998
unfortunately we have greedy ppl right there in Blockstream.
 

Bagatell

Active Member
Aug 28, 2015
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The BSers are rapidly becoming a metaphor (proxy?) for all the vices, not just greed.
 

sgbett

Active Member
Aug 25, 2015
216
786
UK
I've tried real hard to figure out if its just me not getting it. (The threat of big blocks causing a problem) but I just can't see how those dangers stack up against the huge risk of *not* increasing the limit.

The only other time I have seen this dynamic, was a long time ago when bitcoin was a dollar and everyone was convinced $100 was better in my pocket, because there was a risk I would lose it all. (the 'paypal gift' years on bitcoinmarket. happy times!)

What they didn't realise that all I could see was the huge risk of not having any BTC if it really did what I thought it possibly could.

They still to this day keep telling me all about how the price has crashed. I just nod and tell them how tough it is ;)

Wish i still had those 100 coins now!

But yes. Greed. Thats all I can put it down to now. They have missed to boat on bitcoin mining and so are trying to find some side channel to gouge people for fees, and shoehorn lightning in by forcing artificial market conditions. Course I have no proof, its just a gut feeling. I hope I'm wrong, because if that is there plan, then I think they are going to go all out to try and make it succeed because they have so much to gain. I just hope bitcoin can survive an attack like that.
 
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cypherdoc

Well-Known Member
Aug 26, 2015
5,257
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@sgbett

there's no doubt in my mind guys like gmax missed out on not only mining but buying coins in single digits. he's always been a Bitcoin Bear and complained about too much and inevitable centralization even back in 2011. of course, he has some from donated mining hardware he scarfed off companies back then, but i'm sure it's minimal.
 
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cbeast

Active Member
Sep 15, 2015
260
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One possible way to save Bitcoin is to completely get away from using it as money and instead use it as a token exchange for private monies, coupons, commodities, and investments. To do that it needs to be removed from exchanges by decoupling the minimum "dust" unit from Bitcoin exchanges and selling these tiny amounts as security devices instead of money. This will require large blocks and yet still won't make bitcoins into money because adoption will only grow with utility and not speculation. This makes bitcoin "dust" units more like stock shares in an index fund where every business uses Bitcoin.

edit: Dust tokens used to contract goods will find equilibrium in the market as John Nash envisioned https://en.wikipedia.org/wiki/Ideal_money
 
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Melbustus

Active Member
Aug 28, 2015
237
884
@sgbett

I don't think it's quite greed on the part of Blockstream; I think it's intellectual arrogance. They are extremely sharp guys. Unfortunately they've demonstrated very narrow thinking as well. That is a powerful and in this case bad combination.

It leads to extreme thinking, and they're demonstrating it. Extreme decentralization at all costs....the mindset that if they don't act to engineer some brilliant and complicated economic rules into the system, we'll end up with a single node or single miner due to a "tragedy of the commons" type scenario. Adam has effectively said just that.

What they (at least Adam, and possible Greg) lack is an appreciation for the power of the free market. This is somewhat stunning, since they're supposedly pretty free-market-dynamic leaning people in theory, but when push comes to shove, they're advocating economic engineering over letting the masses figure it out in the messy but optimal unstructured process. The arrogance of great but narrow engineering ability, I suppose.
 

sickpig

Active Member
Aug 28, 2015
926
2,541
One possible way to save Bitcoin is to completely get away from using it as money and instead use it as a token exchange for private monies, coupons, commodities, and investments. To do that it needs to be removed from exchanges by decoupling the minimum "dust" unit from Bitcoin exchanges and selling these tiny amounts as security devices instead of money. This will require large blocks and yet still won't make bitcoins into money because adoption will only grow with utility and not speculation. This makes bitcoin "dust" units more like stock shares in an index fund where every business uses Bitcoin.

edit: Dust tokens used to contract goods will find equilibrium in the market as John Nash envisioned https://en.wikipedia.org/wiki/Ideal_money
21 Inc. is taking care of the bold part, and since they're active in the mining realm (3-5% of the total hashrate) it seems somewhat they have plans to make all those dust units hit the blockchain.
 
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sgbett

Active Member
Aug 25, 2015
216
786
UK
@sgbett

I don't think it's quite greed on the part of Blockstream; I think it's intellectual arrogance. They are extremely sharp guys. Unfortunately they've demonstrated very narrow thinking as well. That is a powerful and in this case bad combination.

It leads to extreme thinking, and they're demonstrating it. Extreme decentralization at all costs....the mindset that if they don't act to engineer some brilliant and complicated economic rules into the system, we'll end up with a single node or single miner due to a "tragedy of the commons" type scenario. Adam has effectively said just that.

What they (at least Adam, and possible Greg) lack is an appreciation for the power of the free market. This is somewhat stunning, since they're supposedly pretty free-market-dynamic leaning people in theory, but when push comes to shove, they're advocating economic engineering over letting the masses figure it out in the messy but optimal unstructured process. The arrogance of great but narrow engineering ability, I suppose.
Nailed it!
 

Inca

Moderator
Staff member
Aug 28, 2015
517
1,679
Ultimately miners will do what is required to scale bitcoin as far as it can.

Remember before XT that Gavin and Mike could not gain any traction with raising the blocksize. The political situation may have soured, but the debate is now on how and when to raise the blocksize.

I view this as an opportunity for one more chance to accumulate prior to the halving next year ;)