So Bitcoin Might Fork. Here’s What to Expect…

It is with some lament that I write this. If everyone agreed on a path forward, then there would be no need for this post, but here we are. There is a strong likelihood that we will need to know what will happen if Bitcoin forks (again). There is a chance that the protocol of Bitcoin will fork, which will cause a chain fork as well. (I discussed hard forks & soft forks from my perspective in a previous post.)

Some Bitcoin miners are signaling that they would accept one of two competing Bitcoin protocol changes: one protocol is Bitcoin Unlimited (BU), which would increase the maximum transactions that Bitcoin can process by 100%. The other protocol, called Segregated Witness (SegWit), is expected to increase this maximum by 70%. As of this writing, 35.9% of blocks are signaling for Bitcoin Unlimited while 26.8% are signaling for SegWit.

Bitcoin miners signaling for Bitcoin Unlimited and SegWit blocks

Bitcoin blocks found by miners signaling Bitcoin Unlimited support vs. miners signalining SegWit support

Bitcoin Unlimited vs. SegWit: Abstractly, what is happening?

Let’s make a hypothetical situation where the proportion of Bitcoin Unlimited to SegWit votes stays the same, but is extrapolated out so that ALL Bitcoin miners MUST choose either Bitcoin Unlimited or SegWit. That would mean around 55% of miners would be supporting Bitcoin Unlimited and 45% of miners would be supporting SegWit. (There is an incentive to go with the “winning” majority chain, so this division of hashing power could be even more severe at the time of a hard fork.)

If Bitcoin Unlimited activated and a block over 1MB was mined, then the SegWit part of the network would reject this block and build off the previous block. With a drastic drop in hashing power but no change in the difficulty target, it would take the Bitcoin network longer to find the winning solution that confirms a new block to the blockchain. With our hypothetical numbers, blocks for Bitcoin Unlimited would come out approximately every 18.2 minutes and SegWit blocks would come out approximately every 22.2 minutes. Any transaction capacity increase promised by Bitcoin Unlimited and SegWit would be delayed until the difficulty target adjustment shakes out. As more blocks were found, the difficulty of each chain would adjust and after about a month (a little longer for SegWit), the 10-minute block time target would be restored.

How would this hard fork affect Bitcoin users?

A Bitcoin user with coins before the hard fork would then be considered to have a positive balance on both ledgers/blockchains after the hard fork. (The Ethereum blockchain forked after last year’s DAO debacle, yielding ETH tokens and ETC tokens (Ethereum Classic) for users who owned ETH before the fork.) But without taking care, a user could intend to spend coins on one chain and unintentionally spend on both chains; this is known as a replay attack, though it’s really not an attack if it’s done unintentionally. Maybe that should be called a replay error so as to not be confused with an intentional replay attack meant to defraud.

How does one guard against a replay attack after a hard fork?

Continue reading

Scan to Donate Bitcoin
Like this? Donate Bitcoin to at:
Bitcoin 1FBrMCMX2Gme6GaLn94rE9odudBJPTpJFe
Donate

What Did Satoshi Do That Was So Great?

It’s a great feeling to understand what problem Satoshi solved.  To understand the spark that led to the implementation of Bitcoin.  That missing link that took so long to figure out. To solve the impossible problem.

Bitcoin's creator, Satoshi Nakomoto, solved the Byzantine General's Problem

In mathematics or network theory there is a question called the Byzantine General’s Problem.  A version of it goes like this:  There are five Byzantine armies that are surrounding a Bulgarian strong hold.  The general at one of the camps want to order all Byzantine armies to attack at the same time.  How can the general get the word out, and know that all armies will follow the same instructions?  How can the armies know the other armies will follow the same instructions?  How can the Byzantines do this with the Bulgarians sending their own messages to the Byzantine armies? If they attack in a coordinated way they will win, but if they are disorganized then each army will meet its own demise.

Satoshi Nakomoto—the anonymous coder or group of coders that created Bitcoin—is credited with solving this problem.  Satoshi’s solution is that any Byzantine general publish their attack time along with the solution of a problem using the attack time that takes some time to solve.  The other armies then encode the attack time and publish a solution of a problem using the encoded time.  Then the armies encode the encoding of the attack time and publish a solution of a problem with the encoding of the encoding.  This forms a chain of encodings each taking some time to establish the next step.  After some time, the Byzantines will attack with at the time that have the longest chain attached.

When the Byzantines attack with this method as long as the Byzantines publish their plans first there is a low chance that the Bulgarians will ever be able to catch up and create a longer chain.  After some time, it’s almost impossible that the Bulgarian armies will attack at different times.  Each step in the chain increases the certainty that all Byzantines will attack at the same time.

The first application of this was indeed Bitcoin.  In this application the goal was not to agree on a time to attack, but rather the state of a distributed ledger.   Each block has all the transactions that change the state of the ledger.  As a new block gets published it contains an encoding of the previous block. With each block the transactions before it become more certain to stay on the longest chain.  As time goes by, it’s almost impossible to create a longer chain than the one already ahead of a transaction, and we can be certain of the state of the ledger.

Scan to Donate Bitcoin
Like this? Donate Bitcoin to at:
Bitcoin 1FBrMCMX2Gme6GaLn94rE9odudBJPTpJFe
Donate

On Forks & Hard Forks: Eschew Obfuscation & Watch Your Language

Blockchain hard forks & soft forks: Bitcoin & EthereumLanguage certainly is an important part of the life of a human. The Sapir-Whorf hypothesis states that the structure of a language determines or greatly influences the modes of thought and behavior characteristic of the culture in which it is spoken. In my study of mathematics, we would often joke that we were really studying language.

In all areas of language, we need clear definitions. The same holds true for math; every concept of mathematics needs to be clearly defined. Without clear definitions, we are forever doomed to nonsensical communication. Some proofs require clear definitions of new objects.

Language can also be used to obfuscate, complicate, or hide information. Presenting information in a confusing or contradicting way can influence an argument, and ultimately be used to try to control the thoughts of others. The current prevailing monetary system is riddled with terms that deliberately hide what’s really being done. New monetary systems should avoid duplicating this aspect of their central banking predecessors; transparency and clarity should be valued traits.

Currently, I find that the meaning of the word fork is either not clear to people or purposely being blurred. The meaning of fork that I find blurred is the same meaning the word has when describing a fork in the road. A fork is a situation where one path or way becomes two paths going in different directions. An open source programing project could fork when it is found that there is another purpose that it could apply to. A project could also fork when there is a disagreement of which way it should go. Forking is the ultimate “Why not both?”

The word fork can also apply to a blockchain. Any block in a chain has a previous block and a next block. When there are two possibilities for the next block, that could be considered a fork. Usually, it’s called a fork in the chain if people are actively building on both possible blocks. If there is a next block which is ignored, that is usually called an orphan block. If an orphan block has a handful of blocks built on top of it but is abandoned, it’s called an orphan chain.

Continue reading

Scan to Donate Bitcoin
Like this? Donate Bitcoin to at:
Bitcoin 1FBrMCMX2Gme6GaLn94rE9odudBJPTpJFe
Donate

Why I Won’t Encourage Businesses to Accept Bitcoin

There are several reasons taken together that lead me to conclude that I should not promote bitcoin to businesses.  Here in New Hampshire there are several businesses that accept bitcoin and I have taken advantage of this fact.  The environment that I want to live in would have even more businesses accepting bitcoin.  However, I won’t promote that businesses accept bitcoin.

Businesses exist for one reason

Businesses exist for only one reason, that is to make money.  As with any voluntary exchange, all parties should benefit.  If you sincerely believe that any extra business that accepting bitcoin would bring in would cover the costs associated with accepting bitcoin, have at it.  Large businesses with many employees might incur a significant training cost however.  Efficiency is difficult to obtain for any business, and introducing outside factors could disturb that efficiency.  It’s hardly ever clear that an extra $100 or even $1000 of sells would make the transition worth it.  This is even more dramatic for low margin businesses such as food service.

Bitcoin cannot support more use

Even with only small 300 byte transaction, bitcoin can only support 175 million transactions in a year.  This means that about half the U.S. population (or 2.5% of the world population) can use bitcoin at most once a year.  This is a hard cap, there is no more capacity without changes to bitcoin that are slow to be rolled out, in my view years late.  As bitcoin gets more use, this problem only gets more severe.  Without being a business that appeals to bitcoin users, this is a small number of possible transactions to promote a business try to capture.

Network congestion makes fraud more likely

During peak use bitcoin blocks can be full.  This results in transactions with lower fees not being confirmed.  In the worst case a transaction will never be confirmed.  This creates an environment where double spends are possible.  What’s worse is that accidental double spends are possible.  What used to be the result of a malicious individual can now happen without trying.  “No double spends” used to be a selling point of bitcoin.  Now it can no longer be assumed.  It does not seem that a solution to this problem will be forthcoming.

Technical knowledge is daunting and helpful

When promoting bitcoin to a business owner, there should be a desire to provide full disclosure.  Two years ago, it could be said that there are reasons payments could not go through, but that’s unlikely.  Today this statement cannot be honestly made.  Given enough time, it’s certain that a business will run into business will run into problems.  Having the technical knowledge can help.  Rebroadcasting a transaction paying the business could help mitigate this problem.  However, this puts the onus on the business owner.  Because the bitcoin network is unstable, explaining the technical facts becomes more important and more difficult.

Bitcoin may be right for some businesses

Of course this argument does not apply to every business.  Businesses based around bitcoin probably will still need to accept bitcoin.  Also online businesses may want to accept bitcoin because of the ease of payment it offers customers.  Online businesses without instant shipping can avoid pitfalls of the bitcoin network congestion quite easily.  The internet remains the natural habitat for bitcoin.  I also feel that a business owner that likes bitcoin for ideological reasons may want a customers bitcoin expertise.  Most hurtles are removed if a business owner finds value in bitcoin independent from their business.

Consider the merchant expierence

If a merchant integrates bitcoin now, and has a bad experience.  It is less likely that the merchant will be open to adopting bitcoin or bitcoin-like payments in the future.  Perhaps it would be best for sustainable scalable solutions to be introduced before promoting integration into the crypto economy.  Bitcoin has given us a glimpse of what is possible, and it’s likely that more streamline technology will be available in the future.

Scan to Donate Bitcoin
Like this? Donate Bitcoin to at:
Bitcoin 1FBrMCMX2Gme6GaLn94rE9odudBJPTpJFe
Donate

Episode 162–The Brexit Happened, Now What?

The Brexit happened, now what?  Negative interest rates take hold in Switzerland.  No clear crypto leader.

 

Direct Download

Notes:

Traditional Markets

Gold $1341.9

Silver $19.75

Oil  $49.28

Dow Jones 17,949

30 Year US Treasury Yield 2.24%

Crypto Markets

BTC $658

LTC $4.18

DASH $7.05

Ethereum $11.09

 

News:

Brexit:  It happened now what?

http://www.bbc.com/news/business-36699642

Swiss interest rates go negative (even the 30 year)

http://www.wsj.com/articles/swiss-national-bank-keeps-interest-rates-steady-1466063646

Scan to Donate Bitcoin
Like this? Donate Bitcoin to at:
Bitcoin 1FBrMCMX2Gme6GaLn94rE9odudBJPTpJFe
Donate

Episode 153–FOMC, QE4, and Shapeshift Hack

Bitcoin NG white paper, Federal Reserve meeting next week, is QE4 on the horizon?  BTCC deploys more nodes,  ShapeShift Hacked is it an inside job?

Direct Download

Traditional Markets

Gold: 1232.20
Silver:  16.95
Oil 43.75
DJIA 18003
30 year.  2.70

Crypto Markets

Bitcoin  462 up over 10%
Litecoin 3.51
Ether 8.09
Dash 6.59

News

ShapeShift an inside job?

http://news.softpedia.com/news/shapeshift-bitcoin-trader-hack-was-inside-job-says-ceo-503057.shtml

Bitcoin NG

http://hackingdistributed.com/2015/10/14/bitcoin-ng/

FOMC meeting

http://www.bidnessetc.com/67733-federal-reserve-bank-april-meeting-expect/

WSJ

http://www.wsj.com/articles/streetwise-markets-putting-faith-in-qe4-1455581461

Node Centralization

http://themerkle.com/btcc-deploys-more-servers-and-announced-bilingual-mining-pool-website/

Scan to Donate Bitcoin
Like this? Donate Bitcoin to at:
Bitcoin 1FBrMCMX2Gme6GaLn94rE9odudBJPTpJFe
Donate

Episode 152–Legal Conference and Brazil Prime Minister Impeached?

Lisa reports on a Digital Currency and Blockchain Technology National Institute conference out of Washington DC.  Brazilian prime minister might be impeached today.  IMF will try to spur more economic growth.  Can they really outlaw math?

 

Direct Download

Show Notes:

Traditional Markets

Gold: 1234.10
Silver:  16.22
Oil 40.40
DJIA 17897
30 year.  2.56

Crypto Markets

Bitcoin  427
Litecoin 3.24
Ether 9.57
Dash 6.44

News

Mycelium Pulled from Apple

http://bitcoinx.io/news/articles/mycelium-removes-their-wallet-from-the-app-store-temporarily-stops-support-for-ios/

Lisa Reports on DC

Impeach Brazil’s Prime Minister

http://www.ft.com/intl/cms/s/0/36ba7be6-02f9-11e6-af1d-c47326021344.html#axzz467D1IR00

IMF to Spur Economic Growth?

http://www.reuters.com/article/imf-g20-lagarde-idUSS0N17400X?feedType=RSS&feedName=usDollarRpt

Outlaw Math?

https://rietta.com/blog/2016/04/08/feinstein-burr-encryption-bill/

Scan to Donate Bitcoin
Like this? Donate Bitcoin to at:
Bitcoin 1FBrMCMX2Gme6GaLn94rE9odudBJPTpJFe
Donate

Episode 151 – Open Bazaar Developer Chris Pacia

Open Bazaar Lead Back-end Developer Chris Pacia joins us in-studio to talk about OB and his viral video about the 1.4 Million dollar TSA app. The Panama Papers drop a bombshell on the elite. Senate Bill seeks to destroy strong encryption in the United States. Japan runs out of Bonds to sell.

 

Direct Download

Continue reading

Scan to Donate Bitcoin
Like this? Donate Bitcoin to at:
Bitcoin 1FBrMCMX2Gme6GaLn94rE9odudBJPTpJFe
Donate

Matt Whitlock and Chris Pacia Debate Replace by Fee Proposals.

Darren moderates while Chris Pacia and Matt Whitlock discuss the merits and drawbacks of four different Replace by Fee proposals.  This is educational as well as a spirited civil discourse.

Direct Download

Scan to Donate Bitcoin
Like this? Donate Bitcoin to at:
Bitcoin 1FBrMCMX2Gme6GaLn94rE9odudBJPTpJFe
Donate