bitcoin decision point - april 2017
TRANSCRIPT
Enterprise ThinkStrategic architecting and consulting
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BLOQ SUPPORTS BITCOIN
Approach and Point-of-View
•User centric: What do wallet users experience?
•Kepner-Tregoe method: List data points, advantages & disadvantages
POV• Field Experience - Data from actual users in the field is given more weight.
TECHNOLOGY EVOLUTION
PC INTERNET MOBILE SOCIAL BLOCKCHAIN
SemiconductorTechnology
SupercomputerIn Your Pocket
TCP/IP Protocol
BitcoinProtocol
Collaboration/Networks
Bitcoin: Global, Decentralized, Leader-less
Consensus Rules = Bitcoin’s Constitution• 21,000,000 BTC money supply limit• 10 minutes per block• Self-adjustment every 2016 blocks• Bitcoin smart contract rules• ….
All Bitcoin Transactions Are Filtered
Only transactions valid within Current Consensus Rules pass filter.
Miners:Decentralized Filter
Considering Network Upgrades (forks)
•Consensus rules: Rules everyone on network must follow.
•Process of meta-consensus
•How to change consensus rules?
•Akin to U.S Constitution
• Hard and Soft forks can both:
• Remove existing rules, that users may be following today.
• Add new rules, that users must follow into the future.
Soft Forks
•Miners agree to filter network in new way.
•Backwards compatible upgrade
•Changes require minimal approval
•More features, faster
•Asymmetric: Difficult to reverse
• Rule by tiny, few technocratic elite
• Repeated SF = Repeated collusion
• Increased software complexity
• Not opt-in — Entire network locked-in
• Asymmetric: Difficult to challenge
• User node security reduced
• Trust, reliance on miners increased
• Ethereum example
BENEFITS AND RISKS
Soft Fork: Miners Collectively Upgrade Filter
DecentralizedFilter v2.0
Key point: No user consent
Soft fork: Constitution Auto-Update• Soft fork = Enabling Auto-Update for
the Constitution.• No user consent• User transactions subject to new
consensus rules (=new filter)• Users may be kicked off network• Examples: BIP66, OP_CAT)
• Full node security down-graded
Vitalik Buterin:Soft forks are coercive, anti-market…http://bit.ly/2nXlT4B
Soft Forks - tl;dr
Backwards compatibility vs. Governance
Power imbalance: Tiny group of miners or devs set economic policy for all
Hard Forks
•High user consent
•Clear upgrade path, rules.
•Reduced software complexity
• Fewer software changes req’d;Fewer potential bugs.
•Clear user choice + market path.
• Requires long lead time (est. 3-6mo)
• Disruptive: Not backward compatible;upgrade [probably] required.
• On-going network partition
• Users confused
• Ethereum/ETC example - rushed fork
BENEFITS AND RISKS
Segregated Witness
•Messaging: “A capacity increase”
•Major
• In general: Foundational
•Solves transaction malleability
•Addresses UTXO cost
•Powerful upgradeable script vector
• Lightning enabler
• First economic soft fork; New precedents
• Voluntary upgrade — Long transition
• Capacity unlikely before January 2017
• Little user-visible benefit vs. complexity
• Transitional complexity: Wallet/exchange/up-layer software must know two txid’s, two addressing paths, and more.
• Economic complexity: “Two buckets”, new pricing, new fee bidding.
BENEFITS AND RISKS
Segregated Witness: economic changes
•Base block space size augmented by
• Extended block space size
•UTXO discount (75%)
•Analogy: Two buckets of different size, each filled with water at different rates, prices.
Segregated Witness vs. Predictability
Attribute Predictable?
Block period Yes
Block reward, BTC Yes
Block space (1M) Yes
BIP109 Block space Yes
SegWit capacity, bytes No
SegWit capacity, calendar date No
Technology Readiness - Is it out of the lab?• TRL: Technology Readiness Level metric • NASA normally works with unproven tech • System to evaluate tech maturity • Time required to climb each level • Where is SegWit on this chart? • Lightning? • Bitcoin Unlimited?
Time Marches Forward - Mind The Gap• Be pragmatic and realistic about technology readiness• Base Block Size hard fork: Months, at most.• SegWit: Many-year effort.• Lightning: Many-year effort, on top of many-year effort.• The gap: Users left with poor UX, no payment options, high fees until hoped-for
future finally arrives.
Conclusions•Be pragmatic. Mind The Gap.
•A tiny few graybeards choosing bitcoin economics is anti bitcoin’s ethos.
•Soft forks are neither opt-in nor risk-free.
•Soft forks introduce layers of long term complexity, as multiple systems (old & new) must co-exist in router (bitcoind) and upper layer (wallet/exchange/db) for years.
• Time has real costs: Consider the impact of failing to increase capacity on existing users, businesses.
Thank You!
Jeff Garzik Co-Founder | [email protected]/WeChat: @JGarzik
Matthew Roszak Co-Founder | [email protected]
Twitter/WeChat: @MatthewRoszak
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