How Soon is “Now”?
Tags: Google, Disruption, Bitcoin, Finance, Segwit

The impatience to see Bitcoin dominate is understandable. Its benefits are so manifest and desireable, no man can not want to see it spread like wildfire. It should not and cannot however, spread at any cost.

The argument that Bitcoin will be delivering less value at a higher price because the fees rise is false. In order for this to be true, the price of sending Bitcoin must be greater than equivalent methods (which there are none in terms of utility) and its is premised on the existence of another network or remittance system that is better and cheaper than Bitcoin that does not exist, and that Bitcoin is for remittances. The fact of the matter is that Bitcoin is for what people use it for; it is not for a single purpose. No software is for a single purpose, even if the designer of it had a specific intention. It may be the case that Bitcoin is not destined to be used for buying coffee, but is instead destined to destroy central banks. If it does only the latter, it will have been one of the greatest success stories in human history, right up there next to the Gutenberg Press or the internal combustion engine.

There is no reason of course, why a bespoke layer cannot be built on top of Bitcoin to serve the people who want to use it for small purchases. The Blockchain wallet, for example, is well suited to implement this, with over three million accounts. All they have to do is build an internal MySQL powered layer where Blockchain users can transfer balances between each other “off chain”. If enough users and merchants become Blockchain users, then they will have a huge ecosystem of users and merchants under their direct control, who have access to an instant value transfer system that also has access to the Bitcoin blockchain.

If Blockchain did this, it would increase capacity on the Bitcoin Blockchain. In fact, if every business user of Bitcoin did this, the capacity problems would be diminished over night, because the majority of transactions are happening “off chain”. It means writing new software to sit on top of Bitcoin internally, but that isn't a problem conceptually and the people in these companies are some of the best developers in the world.

This “problem” could be solved in one month if everyone decided to treat Bitcoin as a scarce resource, instead of insisting that the scarce resource change to suit their models that do not accommodate the limitations of Bitcoin. It is not rational to expect a pint glass to accept two pints of bitter; you have to drink one at a time, and who cares if you have to do that? The point is you are in the pub, having a drink.

Concentrating on the price of Bitcoin is nothing more than a Straw Man. The price of Bitcoin doesn't matter; its what the Bitcoin network can do that matters. All the arguments about capacity remain the same whether the price of Bitcoin is high or low. Its the throughput that matters, not the price. Looking at price falls and presenting this as a reason for a block size increase is a Straw Man argument. We've heard these arguments before and they are a little stale, to say the least.

Bitcoin users are not paying more for less. They are paying for access to something very new and novel that is in its infancy. If they are sending money internationally, they are saving money, transacting privately, saving time, indignity and hassle, thanks to, amongst others, Blockchain’s excellent wallet. Bitcoin users who buy goods on Amazon with the Purse.io service are not paying more for less. They are saving money with Bitcoin. What needs to happen is the development of new business models that accommodate Bitcoin’s nature, which for the moment, means there is a cap on the number of transactions per second and the capacity of blocks. If fees go up, this is a reflection of the true price of sending and receiving Bitcoin, and there is nothing wrong with this. What is wrong and irrational is expecting Bitcoin to emerge into the world almost fully formed, needing only tweaks when it is clear that it is going to take new classes of software to bring it to billions of people.

QR Codes, which everyone takes for granted now, were added to Bitcoin as a layer to help people manage the moving of addresses. Using the logic of the Bitcoin Classic people, they would say that the address system of Bitcoin needs to change, because it is not user friendly, and is hurting adoption. We know that QR Codes solve that problem beautifully and also present other opportunities like paying people who flash thier codes on any surface. These uses and possibilities are taken for granted now, but there was a time before Bitcoin had QR Codes; someone had to add them to clients to make this potential happen. The capacity problem is a more difficult one, but only because QR Codes and the developer libraries to create them already exist. If they did not exist, someone would have to invent them, and the “Bitcoin Address Problem” would be a huge task. QR Codes are a novel invention and were patented, by the way.

The idea that Bitcoin can scale by concentrating mining into a small number of super scale super nodes would be perfectly acceptable in a world without the State. That world, if it existed, could never see Bitcoin come into existence in the first place, because in that imaginary world, there is no government to regulate software or steal money by forcing legal tender laws and fiat currency on men. In a free world there is no need for Bitcoin. Bitcoin was written precisely because the State exists and is a threat to everyone. It exists in a distributed network form because centralized e money systems have all failed not because of any technical limitation, but because the State comes in and shuts them down, or regulates them into worthless and difficult to use pseudo banks.

Bitcoin has to be distributed amongst many nodes precisely because it is an Enemy System that is designed to replace the State’s central bank’s fiat currency and it is openly against the Crony Capitalist banks. Centralizing Bitcoin to gain an increase in capacity is simply not acceptable, because the State will kill Bitcoin. We have seen it before, and only a man who does not know his history or the nature of the problem Bitcoin solves wants he number of nodes to decrease and the mining power to coalesce into super nodes. The smart Bitcoin businesses know this instinctively on some level; that is why they incorporate in jurisdictions that favour their business models and not New York. Asking Bitcoin to become centralized for the convenience of a few business owners is like saying you should move your company from Hong Kong to New York because, “you like the Mets”. Bitcoin cannot change to serve your business model or software. If your software and business model has a problem integrating with Bitcoin, you need to change your software and business model. If you are reciving a glut of complaints about a feature your software offers, do not run to change the Bitcoin protocol to solve this problem, change your software to fix the problem.

In the case of a Bitcoin wallet that is having speed problems, a wallet to wallet solution is one possible answer. Cellular telephone operators have been doing something like this for decades. If you have an O2 account in the UK, you pay nothing for calls and SMS to other O2 numbers. If you want to text or call a T-Mobile number, then you have to pay a tiny fee. The effect of this is that families all get SIMs on the same network. Instead of everyone being on their own network, you multiply the number of users dramatically on your own network, because everyone wants to save money by not paying for calls or SMS.

Blockchain, for example, with its three million users, could increase the number of its users exponentially using this effect, and they would have no problems with Bitcoin network speed problems, because all their users are trading balances between each other and not on the Blockchain. Also, it means that people can send a Satoshi to each other in this closed system, because there are no network fees to pay. The dream of buying a Coffee at Starbucks lives! All you have to do is get people onto the Blockhain.info ecosystem and lock them in, just as Apple locks in its customers.

Honestly, I should be charging for this advice.

All of the politics of the scaling debate goes away if service developers form their own internal markets. Bitcoin becomes the “Bankbone” of this system, and of course, development to increase capacity and other neat things like anonymity continue unabated. Bitcoin’s nature remains intact, everyone gets served, including with coffee.

Bitcoin is a free market tool. In order to stay that way, it needs to be kept away from the State. That is more important than anything. Without keeping Bitcoin away from the toxins of the State, it will cease to be Bitcoin. The people who are well entrenched and already operating at scale will still be rich in a Bitcoin that is corrupted, but the idea will have been killed. Some people are not willing to let this idea die, and they prioritize the idea above short term gainst and conveneince. The easy route is to change one parameter. The hard route is to write alot of software, add to your interface, educate your users, test and test again, batten down the hatches and do the difficult work. The people who wrote Bitcoin and who have been dreaming of it for decades are not going to give it up for some milennials who want to buy coffee. They are hardened, principled men; the men who wrote Bitcoin, and they are not going to see it corrupted or wrecked without reason.

Anyone can start their own version of Bitcoin encourage people to run it, mine it and try to profit out of it. In the early days of the internets, men started up email companies and sold their services to the public. There were many companies, CompuServ, AOL, Excite, Pegasus that provided this new and exiting service. You can be sure that Bitcoin clones are going to continue to emerge and some of them will be very large. This is the true nature of the free market; anyone is able to start up a service and then offer it. The free market does not mean that you can take something that exists and then demand that the existing users of it behave in a way that you require to suit your broken business model and software.

It also does not mean that you can run software that amounts to an attack on other people because you have a different business model. The only ethical choice you have is to run the Bitcoin client that everyone else is running and then adapt your private software to work within the limits of the system with the rules that everyone agrees to abide by. This is exactly what all the original ethical email providers did. They do not, like Microsoft, try to embrace and extend email, or HTML standard; they worked with the protocols and standards as they are and then built on top of them. That is why the incredible inbox by Google can send email to anywhere, and still beat all other email clients. Bitcoin companies need to think like that, and not act in a hostile manner to the network. In the end, the network will reject their clients and they will be forced to go along with everyone anyway, so why not be a good democratic citizen and go along with the majority from the off? There is no logical reason not to.

I'm sure everyone would very much like it if Satoshi himself weighed in on this and made a definitive statement to kill or coronate Bitcoin Classic. The original vision of Bitcoin is to bring sound money to the entire globe. Whether this is done directly on the blockchain or by layers on top of it is not important to the user; what is important is the user experience; meaning no inflation and no State interference in sending messages between clients. The world is moving towards this, as companies like Apple explicitly reject the State’s power to control people’s messages. For Bitcoin to centralize now would be a hideous capitulation without a cause, and you do not need Satoshi to tell you that.

Everybody knew from the beginning that Bitcoin was an experiment. It still is an experiment, and nothing about it is set in stone. No matter how much time you have invested in Bitcoin you should be ready to abandon it if it does not meet with your expectations, and do not think for an instant that you can force others to lower their standards or horizons to suit your purposes.

Finally, 2m blocks are coming in Bitcoin. The capacity increase that Bitcoin Classic supporters want is just around the corner. If you want two meg blocks, you are going to get them, so there is no reason to switch clients. This is not about 2m any more; this is now explicitly about who controls Bitcoin, what sort of Bitcoin we are going to have in the future, and who can be trusted with the keys to the kingdom.