bitcoin status report - on-chain scaling aug 2016
TRANSCRIPT
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TECHNOLOGY EVOLUTION
PC Era Internet Era Mobile Era Decentralized Era
SemiconductorTechnology
TCP/IP Protocol
SupercomputerIn Your Pocket
BitcoinProtocol
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9 FACTORS OF BLOCKCHAIN
Trust Shifting Decentralization Automation
Cryptography Permission-less Validity
Immutability Uniqueness Authentication
MACHINE TO MACHINE
PKI LIKE THE INTERNET CONTINUAL SYSTEM SELF & CROSS CHECKING
NO REWRITES NO DOUBLE SPENDINGS EVERY ACTION IS AUTHENTICATED
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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.
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Background - Block Space Economics
• Fixed supply resource
•Changing Capacity = Changing Supply of a Resource
• Large change, when blocks full:Supply shock.
•Has control of supply of an economic resource ever led to problems, in history?
• Users bid for space inside a block
• Users speculatively bid, attaching Tx fees to Tx prior to sending.
• Fee signaling inherently complex for miners and users; compounded by stupid software.
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Background - Economic Actor Tension
• Not centralized vs. decentralized
• Not small blocks vs. large blocks
• Hypothesis:
• Tension: Asset class vs. Payments
• Bitcoin-as-Asset-Class
• Not fee sensitive
• Bitcoins as payments
• Fee sensitive
• Current practice (0conf) vs.Long term (Lightning)
• Emerging blockchain applications
• Fee sensitive
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Recent Metrics
•Price $575 (+149%)
•Average Tx Fee: $0.14 (+206%)
• Tx/Day: 225,000 (+63%)
•Difficulty +314%
• Nodes: 4810 (-24%)
• Median block is 98% full
• Econ. transition from “usually not full” to “usually full”
• Number of miners to achieve 95%: 8
365 DAYS
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Recent Bitcoin network improvements
•Dynamic Fee Adaptation viaMemory Pool limiting
• signature validation w/ libsecp256k1
•Compact Block Relay
•Child Pays For Parent
•CLTV, CSV: Check-LockTime-Verify
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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.
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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
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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
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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
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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.
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Segregated Witness and 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
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Conclusions•Block space: Replace humans w/ algos ASAP (both BIP109 and SegWit fail, here)
•A tiny few 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.
•Comm.: Give both sides of an analysis to users.
• Time has real costs: Consider the impact of failing to increase capacity on existing users, businesses.
•SegWit is a useful + complex foundational change - Should be hard fork.
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Thank You!
Jeff Garzik Co-Founder | [email protected]/WeChat: @JGarzik
Matthew Roszak Co-Founder | [email protected]
Twitter/WeChat: @MatthewRoszak
Blockchain Solutions for Enterprise