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?

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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 stronghold.  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 Byzantine 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.

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.

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Bitcoin Unlimited: Special Interview with Roger Ver

In this bonus episode of Neocash Radio, Bitcoin angel investor & Bitcoin.com CEO Roger Ver talks with JJ, Darren, and Randy about Bitcoin Unlimited, a new initiative that lets Bitcoin miners dictate the block size they want to use. Could this be an end to the BTC block size debate? Will this require a hard fork? Could that create two different Bitcoin chains like what happened with Ethereum? What does Roger plan to do if Bitcoin doesn’t scale and loses its value? We also discuss censorship on Reddit’s r/bitcoin channel, the Lightning Network, SegWit, and more!

Bitcoin Unlimited: on-chain scaling -- Roger Ver interview -- Neocash Radio podcast

Stream this special episode here:

or Direct Download the MP3 – Roger Ver interview: Bitcoin Unlimited – scaling Bitcoin on-chain & an end to the block size debate?


Did you catch this week’s Neocash Radio podcast yet?!

The European Central Bank wants more regulations on cryptocurrencies. The Deutsche Bank saga thickens. Wikileaks shows Hillary Clinton’s plans to “covertly” invade Syria. UK’s spy agency has been illegally operating for 17 years. Ethereum ain’t afraid of no fork. Bitcoin Unlimited gets some major support. Netflix releases documentary on mass incarceration and slave labor in the U.S. … and more!

Listen in: Neocash Radio episode 178 – (October 19th, 2016)


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[VIDEO] Decrypting Bitcoin: Blockchain Technology Explained

Two of the co-hosts of Neocash Radio—JJ Epic and Randy Clemens—created this video to explain the benefits of using Bitcoin, as well as to provide an informative overview of how Bitcoin works under the hood to someone who may have never even heard of it.

If you’re new to cryptocurrencies: WELCOME! And if you’re an expert, we hope this intro video will be a valuable tool that you’re inspired to pass along to curious friends and family!

Through our new media studio—5th Quill Studios—we will be producing more in-depth videos to explain Ethereum, DASH, Steemit, and the Federal Reserve soon! (We’ll also be upgrading Neocash Radio to be a video podcast in the coming months!)

Bitcoin is so much more than just an electronic payment system…

Many call cryptocurrencies like Bitcoin “the future of money,” but a majority of people don’t really know much about them. What are cryptocurrencies? How do they work? How do you get them? Where can you use them? And what makes them safer, faster, and often cheaper to use than cash or credit?

We created this helpful video to answer these questions and more, walking you through an in-depth overview of this paradigm shift in money. You’ll see how Bitcoin is already benefitting millions of users across the globe, and you’ll learn how you can be one of them.

Join us as we decrypt Bitcoin, from its enigmatic beginnings in late 2008 to a look at its promising future. We’ll also explore the breakthrough technology underneath Bitcoin—”the blockchain”—and how it can change more than just our relationship with money; it can transform our societies, our governments, our businesses, and possibly our every interaction. Continue reading

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.

Score One for Consensus, Maybe?

Today it was announced by eight major players in the bitcoin space that they would be running software that is comparable with BIP101 by December of this year. If BIP 101 is adopted, then the capacity of the bitcoin network would octuple, and be followed by scheduled capacity increases.

Of the five main developers, Pieter Wuille of Blockstream supports a modest network capacity increase in 2017 long after a transaction backlog is expected. Gregory Maxwell also of Blockstream also opposes BIP 101. Jeff Garzik promotes his BIP 100 but is concerned about inaction if BIP 100 isn’t accepted. Wladimir J. van der Laan also has a BIP proposal that is not numbered yet. While Gavin Andresen has helped release software called Bitcoin XT that will implement BIP 101 not before January 2016 only if the network supports the change.

There are other developers that have weighed in on this topic. There’s Mike Hearn who originally wrote Bitcoin XT. When Bitcoin XT was first written, it did not change the capacity of the bitcoin network. BitcoinXT was the first client that would support the lighthouse project which allows crowd funding campaigns with bitcoin. It was Mike Hearn who agreed to implement BIP101 in Bitcoin XT with the help of Gavin Andresen.

Other developers currently against BIP 101 include Peter Todd, and Luke-jr.  With so much division it has been impossible for Bitcoin Core to adapt to bitcoin’s expected growth. This fact is probably responsible for the hundreds of Installations of Bitcoin XT and  a few BIP101 blocks that were mined last week.  Some reaction to this divergence from Bitcoin Core spurred many comments about consensus.  There was a growing concern that this sequence of events would lead away from consensus.

Alas, these concerns may not be valid. As there is now a workable, and fairly convenient solution to allow for the growth of the network. This could serve as a rally point. People may now see a path to the next generation bitcoin network. There seems to be no indication the bitcoin core team will not break out of its division and inaction that has plagued that team for over two years. In fact Luke-jr has even suggested that he might change his mind. Could this be the very beginning of the building of a consensus that some people have been clamoring for? Time will tell, time will tell.

Special interview with Beau Davis

 

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Beau Davis joins us for a special episode. Beau is famous for filming and editing 101 Reasons Liberty Lives in New Hampshire. This film highlights the advantages of moving to and living in New Hampshire. This movie is professionally and beautifully presented by Beau. Neocash Radio is honored to host Beau for this special content. You can encourage Beau by donating to 1Nj22kwZGZWr4kbmJip3CYmHXmRMQSp8CS or here.

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Love Liberty? New Film Gives 101 Reasons You Belong in New Hampshire

Feature-Length Documentary Chronicles Efforts of Free State Project to Move 20K Libertarians to Small NE State; Interviews Include Free-Market Titans of Finance, Agriculture, Business, and Media

The Free State Project (FSP) started with an idea: if 20,000 libertarian activists could all move to one small state with a friendly culture, that would be enough to create true “Liberty In Our Lifetime.” In 2003, New Hampshire was chosen. Since then, more than 16,000 people have signed the Statement of Intent to move when the target is hit – and over 1,600 participants have already made the move.

Today, two of these early movers have released an original documentary on the project, entitled 101 Reasons: Liberty Lives in New Hampshire, now available for free on Youtube.

The film is a love letter from these 21st century pioneers to their newfound home. It is told through the personal stories of fellow FSP participants and interviews with liberty’s leading lights, including investor Peter Schiff, Food Inc.’s Joel Salatin, Patrick Byrne of Overstock.com, Nick Gillespie of Reason Magazine, and several more.

For the first time, viewers are taken inside this intentional community to understand how it functions and why it chose a rural Northeastern state as its refuge. The filmmakers show a face of New Hampshire that even lifelong residents may not have seen before. For instance, the state is now home to one of the largest communities of active users of Bitcoin, the digital currency that has global fanfare and intrigue in its first few years of existence. Also, FSP participants have inspired the New Hampshire legislature to lead the charge against unconstitutional federal legislation, setting a defiant example to other states on issues from national ID cards to Obamacare.

But aside from what they’ve brought to their new home, many Porcupines – as FSP participants call themselves due to the animal’s agreeable nature and spiny defenses – remark on how much they appreciate New Hampshire for what it already is: a place where small is still considered beautiful. The film celebrates the state’s high rate of small business ownership, accessible political system, and tolerance of eccentric individualism. Speaking of New Hampshire, famed independent farming advocate Joel Salatin says, “I salute any environment that unshackles innovation and creativity from industrial-scale compliance and protocols.” Mike Vine, former organizer of the FSP’s annual PorcFest, puts it another way: “New Hampshire chose freedom, and it is now the wealthy state among its neighbors. It’s like a microcosm of what happened with America and people moving from Europe… we chose freedom and this is where the opportunity was where anyone could come and make a life for themselves.”

But life is not all business in the Granite State. Two participants explained how moving to New Hampshire allowed them to realize more charitable dreams. Kate Baker, of the Network for Education Opportunity, uses New Hampshire’s generous education tax credit program to secure scholarships for students to attend alternative schools. Amanda Bouldin operates a charity called Shire Sharing, which, with the help of her fellow Porcupines, now delivers Thanksgiving meals to over 300 families across the Merrimack Valley.

“What [participants of] the Free State Project are managing to do is to put their money where their mouths [are]. Physically getting up, across the country, and saying, ‘let’s go someplace, let’s demonstrate the power of these ideas,’” explains Emmy-winning investigative reporter Ben Swann. “There’s a lot of philosophy that surrounds liberty, there’s a lot of pontificating, there are a lot of people thinking about it and talking about it, but here in New Hampshire, people are doing it.”

101 Reasons: Liberty Lives in New Hampshire reflects the most optimistic and touchingly human story to come out of the waves of discontent that led to the Ron Paul Revolution, the Tea Party, and the Occupy protests. For this small but growing group of pioneers, there are 101 reasons to stop being cynical – and start a new life in New Hampshire.