The chronicle of an emancipationist monetary technology subverted to other ends.
It is painful to watch since we had the chance to free the world.
That chance was missed, likely hijacked and subverted.
Bitcoin gained traction from the earliest days and seemed to offer a viable alternative
path for the future of money.
At long last, after thousands of years of government corruption of money, we finally
had a technology that was untouchable, sound, stable, democratic, incorruptible,
and a fulfillment of the vision of the great champions of freedom from all history.
That was the vision.
Alas, it did not happen.
This 13 years of my life have been spent trying to make Bitcoin and other cryptocurrencies
the money of the future.
The technology has the potential to make the world a radically freer and more prosperous
place and it will end up being one of the most important inventions of all time.
I have spent more than a decade evangelizing about the benefits of Bitcoin, funded
numerous startups within the industry, built my own businesses around it, and have seen
the price increase by more than 6,500,000 percent.
Yet this book is not a love story and I wish it did not have to be written.
The project I got involved with in 2011 has been hijacked and changed for the worse.
Bitcoin was designed to be digital cash, usable in everyday commerce with minimal
fees and fast transactions.
And it worked that way for years.
But today, Bitcoin is thought to be digital gold, not meant for everyday commerce with
high fees and slow transactions.
A complete reversal of the original design.
It's discussed as a store of value with little care for its utility as a payment system.
Some people even claim that Bitcoin cannot work as a payment system because it does
not scale.
These common ideas are simply untrue.
The reason that Bitcoin is no longer used as digital cash has nothing to do with the
underlying technology.
It's because a group of software developers took over the project, decided to change
its design and intentionally limited its functionality, whether due to
incompetence, sabotage, or a mixture of both.
The takeover happened from roughly 2014 to 2017 and it ultimately resulted in
the network splitting in two and the cryptocurrency industry fracturing into
a thousand pieces.
The original design still exists and remains extremely promising, but it no
longer trades under the ticker symbol BTC.
Rapid price appreciation, followed by a crash of 80% or more, is a regular cycle
that has been repeated several times in Bitcoin's short history.
The volatility makes for good news headlines, since the general public is
almost exclusively focused on price.
But for me, Bitcoin has always been more than just a financial investment.
It's a magnificent tool for increasing the amount of economic freedom in the
world.
I think a lot of people are underestimating the way in which Bitcoin and
the blockchain are going to change the power structures in society in
general.
I grew up in the US and I see all these people like, yeah, I nuke
everybody in the Middle East and kill them all.
And then they have the former Secretary of State, Madeline Albright, on 60
Minutes, one of the most popular news shows in the US.
And they asked her, they said, like, there's reports that more than half
a million Iraqi children have died as a direct result of US sanctions.
And she looks back at her with a straight face and she goes, it was
a really tough decision, but I think that it was worth it.
Worth murdering half a million kids because of what the government did.
I apologize for crying, but it just disgusts me from my core when I see
government people murdering people around the world.
It's not just theoretical.
These are real people with real lives and it's real people.
And Bitcoin has the power to undermine everything they're doing to
people around the world.
And I'm sorry for shouting, but it just disgusts me what these
people in government do.
And they do it through central banking and through the control of
the money supply and Bitcoin takes that away from them.
The early Bitcoin community was filled with eccentric people and unusual ideas.
I greatly value human freedom and believe individuals should have
maximum control over their own lives.
Bitcoin was naturally appealing to me as it was designed to operate
without a central governing authority.
People do not have to ask permission to use it.
There's no Bitcoin central bank that controls the supply of coins.
And the technology does not recognize international borders.
Few things have more potential for increasing global freedom than fast,
cheap, permissionless, inflation-proof digital money.
In my mind, Bitcoin gets us one step closer to a more technologically
sophisticated future in which everybody's life is improved.
Armstrong, the co-founder and CEO of Coinbase,
captured this sentiment perfectly in an article entitled,
How Digital Currency Will Change the World.
By stating, digital currency may be the most effective way the world
has ever seen to increase economic freedom.
If this happens, the implications are profound.
It could lift many countries out of poverty,
improve the lives of billions of people,
and accelerate the pace of innovation in the world,
reduce wars, make the poorest 10% better off,
overthrow corrupt governments, and raise happiness.
My enthusiasm quickly turned into evangelism,
and I was nicknamed Bitcoin Jesus
for preaching the gospel of Bitcoin to anybody who would listen
and to plenty of people who wouldn't.
By 2015, Bitcoin had built up so much momentum
that it looked unstoppable.
Prominent companies from Microsoft to Expedia
were starting to accept it for payment
and the young industry was growing exponentially.
The successes started to pile up.
Venture capital increased.
Media coverage became positive.
Bitcoin was on a direct flight to the moon.
Fast forward to today.
Despite being a household name,
Bitcoin has not yet taken over the world.
In fact, there's a grim truth
beyond the headlines and price charts.
The actual usage of Bitcoin has declined since 2018
and many businesses have dropped it entirely
as a payment option.
In times of network congestion,
the average fee can reach more than $50
and transactions can take days or even weeks to process.
High fees, unreliable payments, custodial wallets,
and less usage in commerce.
By other metrics than price,
Bitcoin has not landed on the moon.
It hasn't even left orbit.
On its current course,
Bitcoin will not empower the average person.
The project has stagnated over the past few years,
not because of technological failures,
but because of human failures,
specifically bad leadership in a flawed governance model.
The original scalable design of Bitcoin still exists,
but it's not traded on cryptocurrency exchanges
under the ticker symbol BTC.
It's called Bitcoin Cash and is traded as BCH.
For years, the industry was thwarted
by the BTC developers until 2017,
when a new network was created
to preserve the original vision of Bitcoin
as digital cash with low fees, fast transactions,
and without the need for custodial wallets.
The BCH network is far less well known than BTC,
but it has already scaled its throughput capacity
to more than 30 times BTCs
with plans to scale exponentially into the future.
The word Bitcoin by itself
refers to the underlying technology
that is used on both networks.
Both Bitcoin Core and Bitcoin Cash use Bitcoin technology
and share the exact same transaction history
until they're split in August 2017.
The Bitcoin Core developers decided to pivot
from the original design
while the Bitcoin Cash developers have stuck with it.
If this technology really is revolutionary,
then it threatens the power
of existing financial and political establishments.
But on the current trajectory, if nothing changes,
those institutions will assimilate cryptocurrencies
and neutralize them.
If Bitcoin is going to make the world a freer place,
our window of opportunity is closing.
The industry is approaching two failure scenarios.
The first would be total capture
by existing financial and regulatory systems.
Mass adoption of custodial wallets makes this possible
as transactions are easily tracked and controlled
and governments can force companies
into compliance without difficulty.
The other failure scenario would be people simply giving up
and abandoning the vision
of inflation-proof digital cash altogether.
I have seen many talented minds and competent businessmen
prematurely conclude that Bitcoin cannot scale
because of Bitcoin Core's failure.
This disillusionment can be avoided
if people realize that the original Bitcoin technology
still exists, works well
and can scale to handle global adoption.
Bitcoin Core simply pivoted from this design
before losing faith in blockchain technology.
Entrepreneurs and developers need to first experience
the original version.
I am constantly trying out new cryptocurrencies
and Bitcoin Cash still provides me
with one of the best user experiences after all these years.
To see past the narrative
and truly understand the difference
between Bitcoin Core and Bitcoin Cash,
we must first understand
how Bitcoin was originally designed.
Satoshi Nakamoto had many public communications
about his invention that explained its design.
Other great minds and engineers that succeeded him,
like Gavin Anderson and Mike Hearn,
also explained the Core ideas in a clear manner.
There's no single agency that processes all the transactions
or determines the entries of the ledger.
Instead, it's maintained and updated
by a decentralized network of computers around the world,
giving it no central point of control or failure.
Miners update the ledger
by bundling transactions together into a block
and then adding a special proof.
This proof is a solution to a math puzzle,
which is so difficult,
it takes substantial computer power to figure out.
All over the world,
there are warehouses filled with specialized machines
dedicated to solving these puzzles.
Each one of these machines requires electricity,
which means it costs money to be a Bitcoin miner.
Miners are financially rewarded for their services
with two mechanisms,
transaction fees and a block reward.
The block reward is how new Bitcoins are minted.
Every time a miner adds a block to the chain,
he's given a small number of new Bitcoins.
This reward is cut in half roughly every four years.
Eventually the reward will be negligible,
which will leave transaction fees
as the only source of revenue for miners.
Big blockers see miners as performing
an essential service in the Bitcoin industry
by protecting the network from attacks,
maintaining the ledger
and processing all transactions.
Miners frequently invest millions
or even tens of millions of dollars
to upgrade to more powerful equipment.
Bitcoin mining has high investment and maintenance costs.
Because of this, most big blockers think
that miners should have the greatest say
in the development of Bitcoin.
Blocks themselves are central
to understanding the different philosophies in Bitcoin
which can roughly be split into two camps,
big blockers and small blockers.
The larger the blocks,
the larger the transaction throughput of the network
and the more resources it takes to process each block.
Small blockers want to keep blocks small enough
so that anybody can process them.
Small blockers tend to have a more skeptical
or even hostile view towards miners
because miners are the only ones
that can add blocks to the network.
They have substantial power
and could become a systemic threat
if mining becomes too centralized.
Large mining facilities also introduce
a political risk into the system.
If governments decide to attack, regulate
or control the biggest miners,
they might be able to disrupt or control Bitcoin.
Satoshi Nakamoto described a method
for simplified payment verification, SPV,
that allows users to send, receive
and validate their own transactions with minimal effort.
For most of Bitcoin's history,
the majority of wallets used either SPV
or other similar methods for accessing the blockchain.
This trend is reversing in BTC
due to the proliferation of custodial wallets
but it remains the norm in BCH.
SPV allows you to validate your own transactions
while full nodes allow you to validate
all transactions on the blockchain.
Arguably the biggest difference between the big block
and small block philosophies
is about the role of full nodes.
Big blockers think that the vast majority
of activity on the network
should be between miners and lightweight wallets
that use SPV or similar technology.
They think full nodes are only useful in special cases
where you need to validate many people's transactions
in a short period of time.
For example, if you're running a cryptocurrency exchange
or payment processor.
Since the network gives no financial compensation
to full node operators
and since most people have no need
to validate strangers' transactions,
regular users do not have an incentive
to run such heavy duty software.
Satoshi was unequivocally a big blocker
and as he put it,
the design supports letting users just be users.
Small blockers by contrast think
that full nodes are essential to the network.
They think that users should run their own nodes
which is why having small blocks is essential
since the cost of running a node increases
with the size of the blocks.
In fact, the primary reason that small blockers
have claimed Bitcoin cannot scale
is because big blocks are more expensive
for node operators.
Instead of concluding that regular users
are not supposed to run full nodes,
they concluded that Bitcoin cannot scale.
What evidence do we have
that Bitcoin was purpose built to be a payment system?
Well, everything that its creator wrote on the subject.
In addition to the seminal white paper
that introduced Bitcoin to the world,
we have hundreds of online forum posts
and more than 50 public email correspondences from Satoshi.
They paint a clear vision for the technology.
Let's start with the white paper released in 2008.
Bitcoin, a peer-to-peer electronic cash system.
Satoshi could have called it an electronic store of value,
if that's what he intended,
but instead he called it an electronic cash system.
Next, the very first sentence of the abstract reads,
a purely peer-to-peer version of electronic cash
would allow online payments to be sent directly
from one party to another
without going through a financial institution.
Online payments are literally mentioned
in the first sentence of the paper,
introducing Bitcoin to the world.
After the abstract, the introduction begins.
Commerce on the internet has come to rely
almost exclusively on financial institutions,
serving as trusted third parties
to process electronic payments.
While the system works well enough for most transactions,
it still suffers from the inherent weaknesses
of the trust-based model.
In the first two sentences of the introduction,
Satoshi mentions commerce on the internet,
electronic payments and transactions.
He continues, completely non-reversible transactions
are not really possible
since financial institutions
cannot avoid mediating disputes.
The cost of mediation increases transaction costs,
limiting the minimum practical transaction size
and cutting off the possibility
for small casual transactions.
And there is a broader cost in the loss of ability
to make non-reversible payments for non-reversible services.
With the possibility of reversal,
the need for trust spreads.
These costs and payment uncertainties
can be avoided in person by using physical currency,
but no mechanism exists to make payments
over a communications channel without a trusted party.
In other words, existing online payment methods
have high transaction costs
due to the inherent trust required in the system.
Credit cards, PayPal and so forth
all depend on companies
with expensive dispute resolution mechanisms.
These costs make small casual transactions
effectively impossible over the internet.
By contrast, physical cash payments
do not require trust in third parties,
but there is no way to use physical cash online.
What is needed is an electronic payment system
based on cryptographic proof instead of trust,
allowing any two willing parties
to transact directly with each other
without the need for a trusted third party.
Transactions that are computationally impractical
to reverse would protect sellers from fraud
and routine escrow mechanisms
could easily be implemented to protect buyers.
In other words, Bitcoin is like cash
because the transacting parties
can exchange directly with each other
without going through a middleman.
In the first few paragraphs,
the white paper makes it clear
that Bitcoin is about commerce,
transactions, payments,
merchants, buyers and sellers.
There is no mention of a store of value
in the entire white paper.
Even in Satoshi's emails and forum posts,
the concept of Bitcoin as a store of value
can only be inferred a handful of times.
Sam Patterson, co-founder of the cryptocurrency company,
OB1, wrote a popular article
in which he cataloged every single mention of Bitcoin
as a payment system versus a store of value.
He concluded,
after reviewing all of Satoshi's writings,
I can confidently state that Bitcoin
was not purpose-built to first be a store of value.
It was built for payments.
Satoshi mentioned payments more than four times
more frequently than store of value.
This evidence might be sufficient
for you to disregard the claim
Bitcoin was purpose-built to first be a store of value.
It's not just the white paper
that makes it clear Bitcoin is about payments.
Satoshi was equally clear in the online forums.
The forums are filled with similar discussions
about using Bitcoin in commerce.
Satoshi and others talked about
creating interfaces for online merchants,
tools for physical merchants,
point-of-sale transactions,
use cases where the customer is uneasy
about using a credit card,
keeping small amounts of Bitcoin on mobile devices
for incidental expenses, and so on.
There is no doubt that Satoshi designed Bitcoin
to be used for payments,
even those as small as a few cents.
In fact, the original version of the software
contained unfinished code for a peer-to-peer marketplace
and even the basic framework for virtual poker.
The broader Bitcoin industry too
was building on the assumption
that Bitcoin was a fast, cheap,
reliable payment system for the internet.
Successful companies like BitPay,
the largest Bitcoin payment processor in the world,
had their entire business model challenged
by unreasonably high fees.
In an interview in 2017, CEO Stephen Pearce said,
at BitPay, the Bitcoin blockchain has stopped working for us
and we have a couple of options.
One is we start using a fork of Bitcoin.
The second option is we start using a fork of Bitcoin.
And the third option is we start using a fork of Bitcoin.
We are really at a point where we have no choice
and that's what we have to do.
BitPay was one of the first companies
that integrated Bitcoin Cash after the split.
Brian Armstrong, the CEO of Coinbase,
also shared the same vision for Bitcoin
as digital cash for the world.
And in a 2017 interview,
he explained why BTC's failure to scale
broke his heart.
The reason why I got really passionate
about Bitcoin and digital currency
is that I want the world to have an open financial system
where all payments are fast, cheap, instant and global.
And Bitcoin ended up not scaling to be that.
I believe you could actually operate the Bitcoin network
even at Visa scale for maybe two to three orders
of magnitude less than Visa is charging today.
So it could be something on the order of one cent
or less to send every payment in the world.
But I think other networks like Bitcoin Cash
are all working on this.
And so that vision is going to be realized.
But it was a little frustrating
to not see the original Bitcoin get there.
Armstrong's opinion was common
among early Bitcoin entrepreneurs
and early Bitcoiners generally.
Calling any existing cryptocurrency
a reliable long-term store value is premature
considering the wild price fluctuations
that are a regular occurrence.
The fact that BTC has greatly appreciated in price
over the past 10 years
does not mean it is a store of value.
Saifudin Ammous has one of the most extreme versions
of digital gold maximalism out there.
He envisions a future in which regular people
don't even touch the blockchain
and on-chain transactions are reserved
for high value transfers only.
In the Bitcoin standard, he writes,
Bitcoin can be seen as the new emerging reserve currency
for online transactions
where the online equivalent of banks
will issue Bitcoin-backed tokens to users
while keeping their hoard of Bitcoins in cold storage.
And in an online discussion, he writes,
Bitcoin on-chain payments aren't for the merchant,
they're for central banks.
You can have all the world's payment networks
built on top of Bitcoin only settling on chain.
BTC is like central bank gold under a gold standard.
This sentiment is echoed by popular Bitcoin commentator,
Tour de Meester.
At full maturity, using the Bitcoin blockchain
will be as rare and specialized as chartering an oil tanker.
These ideas are now discussed as if they have been
the dominant vision since the beginning.
But compared to the original design,
they are wild and unnecessary.
Like so many other public personalities
who speak with confidence about Bitcoin,
Ammous and De Meester merely assume
that additional layers will solve BTC's usability problems
without any issue.
Yet when you actually look at second-layer technologies,
their viability remains uncertain,
especially if the base layer does not scale.
These problems are generally not recognized
by BTC enthusiasts who instead believe
that engineers will fix everything in the future,
despite their poor track record so far.
Furthermore, a future of Bitcoin-backed tokens
is a guarantee that arbitrary inflation
will continue plaguing those of us
who are not central bankers.
History demonstrates that currencies
inevitably lose their backing over time,
and if people are forced to trade promises of Bitcoin
instead of actual Bitcoin,
it's only a matter of time before the promises
are inflated far beyond the actual supply of Bitcoin.
Second-layers only make this inflation easier to conduct.
Within the Bitcoin community,
the narrative started shifting from digital cash
to a store of value over a period of several years.
With each additional merchant accepting it,
Bitcoin gained more credibility and utility.
But after the fee spike in late 2017,
rather than admit there was a problem,
the most influential BTC proponents
cleverly started to change the narrative.
In recent years, people have even been encouraged
not to spend their coins in commerce,
because BTC is for buying and holding indefinitely.
Satoshi understood that the transmissibility of Bitcoin
was a central feature that gave it value.
Yet that feature was intentionally destroyed
by the Bitcoin Core developers,
giving BTC almost no unique value proposition
when compared to other cryptocurrencies.
Not only do other coins have lower fees,
they also have superior non-monetary functionality.
The famous internet entrepreneur Kim Dotcom,
founder of Mega Upload,
expressed similar sentiments in a conversation
in January 2020 saying,
in order to be a very successful cryptocurrency,
you need to provide fast and cheap transactions.
There's no way around that.
It's nice to be a store of value,
but if you really wanna succeed in this game,
you need to be electronic cash.
Kim also pointed out that the vast majority of people
still have no experience using cryptocurrencies.
And in order to onboard them,
fees need to be low and reliability needs to be high.
Most people will go with the currency
that gives them the cheapest fees,
the fastest transactions, the most reliability,
and currently, unfortunately, that is not BTC.
By the time Satoshi Nakamoto left Bitcoin,
there were many enthusiastic and talented developers
working on the project,
but two stand out as exceptional,
Gavin Anderson and Mike Hearn.
When Bitcoin was originally coded,
there was no explicit limit on the size of blocks
that could be produced.
That changed in 2010 when Satoshi added a block size limit
to prevent a potential denial of service attack
while Bitcoin was young.
The initial limit was set to one megabyte,
allowing for a theoretical limit
of seven transactions per second.
The plan was to simply increase the limit
or eliminate it entirely.
Ray Dillinger, another early Bitcoin pioneer,
said the same thing.
I'm the guy who went over the blockchain stuff
in Satoshi's first cut of the Bitcoin code.
Satoshi didn't have a one megabyte limit in it.
The limit was originally Hal Finney's idea.
Both Satoshi and I objected
that it wouldn't scale at one megabyte.
Hal was concerned about a potential denial
of service attack, though.
And after discussion, Satoshi agreed.
But all three of us agreed
that one megabyte had to be temporary
because it would never scale.
To this day, the Bitcoin core developers
have refused to meaningfully increase the block size limit
beyond the initial level set in 2010,
despite the massive improvements
in software, hardware, and networking technology.
Instead, they changed the metric of block size
into block weight and claim the new limit is four megabytes.
But this is mostly an accounting trick
and does not correspond to a quadrupling
of throughput capacity.
The simple reason the core developers
refused to increase the limit
is because they wanted to change Bitcoin's design.
The sooner the blocks became full,
the sooner the transaction fees would rise,
which they viewed as desirable.
Jorge Timon, a core developer, stated,
I agree that hitting the limit wouldn't be bad,
but actually good for a young and immature market
like Bitcoin fees.
While Greg Maxwell stated bluntly,
there is nothing wrong with full blocks.
Full blocks is the natural state of the system.
To appreciate just how radical these ideas are,
contrast them with the ideas you would have encountered
in the early days of Bitcoin
when the Visa network was often used
as a comparison for transaction throughput.
All the way back in 2009,
Satoshi was asked about Bitcoin's ability to scale
and said,
the existing Visa credit card network
processes about 15 million internet purchases
per day worldwide.
Bitcoin can already scale much larger than that
with existing hardware for a fraction of the cost.
It never really hits a scale ceiling.
This was the common understanding for years,
though today we would call it part of Satoshi's vision.
It was nearly everybody's vision back then.
Why would the Bitcoin Core developers want high fees?
To the early Bitcoin enthusiast,
or even to the average person,
it sounds like an obviously bad idea.
Peter Wheela, another Core developer, said,
my personal opinion is that we, as a community,
should indeed let a fee market develop,
and rather sooner than later.
They euphemistically call the backlog
of high-fee transactions a fee market,
where users outbid each other
for the tiny amount of space inside blocks.
This bizarre and unnecessary security model
is why the Core developers celebrate
and encourage high fees and a backlog of transactions.
Greg Maxwell claimed,
fee pressure is an intentional part of the system design
and to the best of the current understanding
essential for the system's long-term survival.
So, uh, yes, it's good.
And when fees rose to $25 in December 2017,
Maxwell infamously responded,
personally, I'm pulling out the champagne
that market behavior is indeed producing activity levels
that can pay for security without inflation,
and also producing fee-paying backlogs needed
to stabilize consensus progress as the subsidy declines.
Of course, Satoshi Nakamoto did not design Bitcoin this way.
Satoshi was asked about the long-term revenue model
for miners. He explained,
in a few decades when the reward gets too small,
the transaction fee will become the main compensation for miners.
I'm sure that in 20 years there will either be
very large transaction volume or no volume.
By artificially limiting the block size,
the Bitcoin Core developers found a way
to completely change the dynamics of the system.
Not only did the user experience change
from nearly instant and free transactions
to expensive and unreliable,
the underlying economic model was radically changed as well.
BTC is gambling on the idea that future users
will be willing to pay hundreds or thousands of dollars
per on-chain transaction,
despite having superior alternatives.
Otherwise, miners will have to shut down
most of their equipment,
because they won't generate a profit.
Given this, it's no exaggeration to say
that BTC was hijacked,
and the original design was replaced
with a new speculative one.
This is why Vitalik Buterin,
the co-founder of Ethereum, publicly said,
I consider BCH
a legitimate contender for the Bitcoin name.
I consider Bitcoin's failure
to raise block sizes to keep fees reasonable
to be a large, non-consensual change
to the original plan,
morally tantamount to a hard fork.
Bitcoin Core's failure to increase
the block size limit was not merely academic.
It had real-world consequences
for the businesses building on Bitcoin
or merely accepting it for payment.
After the 2017 fee spike,
the Bitcoin industry experienced anti-adoption
for the first time.
When the popular gaming platform Steam announced
they were no longer accepting Bitcoin,
they publicly shared their reasons why.
With the transaction fee being so high right now,
it is not feasible to refund
or ask the customer to transfer the missing balance,
which itself runs the risk of underpayment again.
At this point, it has become untenable
to support Bitcoin as a payment option.
We may reevaluate whether Bitcoin makes sense for us
and for the Steam community at a later date.
The public was told that high fees are perfectly fine,
that you aren't supposed to use Bitcoin
for everyday purchases,
and that blockchains actually can't scale.
Bitcoin was designed to scale with larger blocks.
So why would anybody think that big blocks are a problem?
Core developer Vladimir Vonderlan stated in 2015,
I understand the advantages of scaling.
I do not doubt a block size increase will work.
Although there may be unforeseen issues,
I'm confident they'll be resolved.
However, it may well make Bitcoin less useful
for what sets it apart from other systems
in the first place.
The possibility for people to run their own bank
without special investment in connectivity
and computing hardware.
There are several problems with this idea.
Bitcoin was designed so that regular people
don't have to run their own full nodes.
A full node downloads a copy of the entire blockchain
and validates every single transaction on the network.
This is unnecessary for almost everybody.
They can use lighter software.
Satoshi designed Bitcoin with simplified payment verification,
SPV in mind,
which allows users to verify their own transactions
with a tiny amount of data.
Satoshi was not foolish enough to design a cash system
where every user had to download
and verify the entire world's transactions.
There's no way such a system could scale.
The fact that the costs of validation
increase with the size of blocks is not a problem.
Satoshi could not have been clearer when he wrote,
The current system where every user is a network node
is not the intended configuration for large scale.
That would be like every Usenet user
running their own Nntp server.
The design supports letting users just be users.
The more burden it is to run a node,
the fewer nodes there will be.
Those few nodes will be big server farms.
The rest will be client nodes
that only do transactions and don't generate.
And also when he stated,
only people trying to create new coins
would need to run network nodes.
At first, most users would run network nodes,
but as the network grows beyond a certain point,
it would be left more and more to specialists
with server farms of specialized hardware.
Satoshi was so clear about this
that it's impossible to misinterpret.
It's fine to dislike this idea,
but it's how Bitcoin was designed.
The other attempt to rescue the small block philosophy
involves an appeal to secondary layers.
Since if most transactions are off chain,
then perhaps the fees can be low on the secondary layers.
While it does make sense to build multiple layers in Bitcoin,
in order to work correctly,
the base layer must be scalable.
If the base layer can only process
seven transactions per second,
it's not even close to being robust enough
to build additional layers on top.
Second layers still have to interact with the base layer,
so high fees remain a fundamental problem.
For example, the Lightning Network
still requires occasional on-chain transactions to use,
and those fees have to be paid by someone.
Right now, many popular wallets
are subsidizing these costs for their users.
But if $50-plus fees are the norm,
that model is simply not sustainable.
Elon Musk is one person who seems to understand
the value of scaling the base layer for cryptocurrencies.
In a Twitter thread about network design,
he shared his thoughts as an engineer.
BTC and ETH are pursuing a multi-layer transaction system,
but base layer transaction rate is slow,
and transaction cost is high.
There is merit to maximizing
base layer transaction rate
in minimizing transaction cost.
Block size and frequency should steadily increase
to match broadly available bandwidth.
If Musk had been around at the time,
he would have agreed with Satoshi,
Anderson, Hearn,
and most of the early Bitcoin entrepreneurs.
There is just no substitute
for cheap on-chain transactions.
This is the small block perspective on full nodes.
Miners have an incentive to hijack Bitcoin
by changing the rules in their favor.
For example, increasing the block reward.
Miners are prevented from arbitrarily changing the rules
because full nodes do not blindly follow
the majority mining power.
These ideas have become the orthodoxy
and both of these claims are false.
At first glance, it might seem like
miners could profit from creating new coins
out of thin air.
However, this overlooks the reason
why Bitcoins have value in the first place.
Value is not intrinsic.
It comes from a complex web of beliefs
that people have about the entire Bitcoin network.
If the miners decided to produce
a billion new Bitcoins for themselves,
they would destroy the underlying trust in the system,
which would destroy the value of each Bitcoin.
They might have a billion more Bitcoins,
but each one would be worthless.
Miners are not a threat to the system.
If anything, miners are least incentivized
to break Bitcoin since their only revenue
comes from transaction fees and the block reward,
both of which are denominated in Bitcoins
that must be sold on the market.
The second major claim is that full nodes
can somehow prevent the rules of the network
from changing. They cannot.
Full nodes can only verify
whether blocks and transactions are valid.
Imagine that a new bug is discovered
in the protocol that breaks Bitcoin
in an important way and the software
has to be upgraded in a short period of time.
The miners will upgrade immediately
since their profits depend on the network running.
But what would happen if everyone else
running full nodes didn't upgrade?
Would the miners be prevented
from upgrading altogether?
Not at all. Miners would continue on
just fine adding blocks to the chain
and the full nodes would simply
split themselves off the main network.
It doesn't require a large network of full nodes
to notify people that the rules have changed.
It only requires a single honest miner
or even a single honest node.
Anyone can prove to the world
that a particular block or transaction
is invalid according to the old rules.
Even if 100% of the miners were in collusion,
a single full node could still demonstrate
that the rules changed.
Therefore it's essentially guaranteed
that everybody would find out.
I want to be able to run a full node
from my home computer.
Does anybody actually care about that?
Satoshi didn't.
His vision was home users running SPV nodes
and full nodes being hosted in data centers.
By the end of 2010,
Satoshi decided that he needed
somebody else to run the project.
So he chose Andresen, who shared
the same vision for Bitcoin.
With Satoshi's blessing and with great reluctance,
I'm going to start doing
more active project management for Bitcoin.
In 2014,
Andresen said he was shifting
from the day-to-day maintenance of Bitcoin Core
to higher level research
and chose Latimir von der Laan
as his successor.
Van der Laan was an active contributor
to Bitcoin's code,
but he ended up being the most passive
of the three project leaders,
allowing critical decisions to go unresolved.
Shortly after Andresen made von der Laan
the lead maintainer of Bitcoin Core,
the internal factions became more entrenched
and hostile towards each other,
and the block-sized debate went nuclear.
Several key Core developers
formed their own company called Blockstream,
which has been by far
the most influential company
involved with Bitcoin software development
and plays a central role in its capture.
Several prominent developers
publicly warned that BTC
was being hijacked while it was happening.
During this period of extreme division,
the general public remained mostly unaware,
and in late 2017
another enormous wave of investment
caused prices to spike amidst the chaos.
One BTC eventually reached
$20,000, while the average
transaction fee spiked to more than
$50, and average transaction
confirmation times exceeded two weeks.
Blockstream executive
Samson Mao captured this sentiment
by flatly declaring that
Bitcoin isn't for people that live
on less than $2 a day.
The new narrative started to solidify
with books like the Bitcoin Standard,
which despite making blunders
on several critical concepts
has enjoyed widespread popularity.
The same ideas have been uniformly
repeated on all the most important
discussion channels, making the small
block philosophy the only perspective
that newcomers encounter when learning about Bitcoin.
The original vision of big blocks
and universal access to the blockchain
was successfully demonized
and its history obfuscated.
The culture is obsessively focused
on the price of BTC
regardless of its underlying utility
or usage. For example, when the
El Salvador government announced that
BTC was going to become an official
currency, there was almost no mention
of the fact that their government was setting up
purely custodial wallets for their citizens,
meaning the government will be able to
track and censor transactions
made through their app, freeze accounts
or easily confiscate coins
if they decide to. Nobody
thought that a maximum throughput limit
of seven transactions per second was a
great idea. That is,
not until 2013
when developer Peter Todd put out an
animated video entitled Why the Block Size
Limit Keeps Bitcoin Free and Decentralized.
I consider Peter Todd's animation
to be the first example of
well-funded, blatant propaganda.
It's so outrageous
that it stretches credulity
to think it was created from a mere
difference in philosophy. We have
an alternative to increasing the block size,
off-chain transactions.
The block size stays the same
and mining stays
decentralized. You'll still
use the blockchain for large
transactions. Small exchanges
will be handled by payment
processors, which means small
purchases like your morning coffee
don't clog the whole system up.
We can use the very same cryptography
that makes Bitcoin secure
to audit off-chain payment
systems as well as effectively
make it impossible to get away
with fraud or theft.
Imagine a plexiglass bank
where you can easily observe
the inner workings.
Unlike the completely public
blockchain where you can't pick
who mines your transactions
or who you trust to do validation,
off-chain transactions
can be both instant, truly
private and you have complete
control over who to trust.
What can you do
to keep Bitcoin decentralized?
If you're a miner
only mine at pools that
support the block size limit
and ask your pool to publicly say so.
If you are a user
ignore anyone trying to change
the Bitcoin software you use
to increase the one megabyte
block size and tell people
you transact with that you support
keeping Bitcoin decentralized
and out of the hands of the existing
corporate system.
Remember, Bitcoin
is democratic and the only way
the block size can change
is if you agree to let that happen.
In the name of John Dylan
emailed the Bitcoin Development Email List
earlier this morning offering a 500 USD
reward, later increased
to 1000, to anyone
who implements a transaction
replacement by fee patch.
That's an idea I posted on the email list
two days ago. Peter Todd proposed
the replace by fee
RBF patch
which said that when two conflicting
transactions are seen,
the one with the higher fee wins.
In his mind,
zero-conf transactions aren't safe enough
and uninformed users just
don't realize it. So
to prevent people from getting attached to zero-conf
transactions, RBF
would break their functionality once and for all
because in his words, if the
miners decided to implement something like
RBF, zero-conf would break
anyway. Replace by fee
prompted many people to speak out against it.
Charlie Lee who was the
engineering manager at Coinbase said
Coinbase fully agrees
with Mike Hearn.
RBF is irrational and harmful to Bitcoin.
Even Adam Back
who later played a big role in derailing Bitcoin
agreed, I agree with Mike and Jeff.
Blowing up zero-confirmed
transactions is vandalism.
Yet in late 2015
RBF was successfully
added to Bitcoin Core.
Zero-conf payments are understood to be
an essential feature in Bitcoin
cash and developers have been
actively working on ways to further improve
their security and reliability.
In November 2013
Dylan was apparently
hacked by some angry Bitcoiners
when his Bitcoin talk account
posted its own thread entitled
John Dylan.
We can leak things too, you trolling pieces.
The post contained
a single link to an archive of private
correspondence from Dylan
as well as conversations about him from other
developers. The authenticity
of the leak has not been disputed.
Dylan appears to be coordinating with Todd
and funding multiple projects that
supported transforming Bitcoin
into an expensive settlement system.
By far the most interesting exchange
is an email between Dylan and Todd
in which Dylan claims
to be involved with the intelligence community
saying
just so you know this stuff about Tor has me worried.
Please don't make this public
but my day job involves intelligence
and I'm in a relatively high position.
These emails read like something out of a spy
novel. It's impossible
to know whether Dylan was telling the truth
but it's worth noting how suspicious
the whole situation is.
All of this happened around the most
revolutionary financial invention in
history which directly challenges
established governmental, financial
and banking powers around the world.
Readers can come to their own conclusions
but in my mind by late
2013 Bitcoin
had already been targeted for capture.
Blockstream
would end up being the most influential
company in Bitcoin's history.
Blockstream was founded as a for-profit company
a fact that made other Bitcoiners
immediately curious about their business model.
Shortly after its formation
the culture shifted, disagreements
turned hostile and the most radical
small block position which hardly
anybody had taken seriously became more
vocal and aggressive.
Blockstream engineers started to insist
that Bitcoin could not scale the way
it was originally designed while censorship
began in the online forums. In a Forbes
interview CEO Adam Back shared
one part of their monetization strategy
saying Blockstream plans
to sell sidechains to enterprises
charging a fixed monthly fee, taking
transaction fees and even selling hardware.
Blockstream has released
their version of a sidechain called
the liquid network. The liquid
network is a federated sidechain
which is better understood as a centralized
sidechain or even an altcoin.
The basic security of their
network requires trust in a small
hand-selected group they call the liquid federation.
In early
2016, eyebrows were raised
when Blockstream completed a
$55 million round of Series A funding.
One of the primary investors was a AXI
strategic ventures, a branch
of the French multinational firm
AXA. At the time
the CEO of AXA was Henri
de Castry, a magnate of the
international financial system.
De Castries was also
chairman of the Bilderberg Group, a
collection of political and business leaders
from Europe and North America that meets
in private every year to debate megatrends
and major issues facing the world.
When Blockstream was created, their
initial funding came from establishment
financial companies including Mastercard,
a direct competitor of Bitcoin.
The digital currency group is another
venture capital firm which has raised
suspicions after investing in a huge
range of cryptocurrency projects
Blockstream included.
Early Bitcoin adopter and internet
personality, Stefan Molinou, had this
concern as early as 2014
when he predicted that existing financial
and political interests would recognize
Bitcoin as a threat and try to
slowly capture it.
My caution, my advice, my concern
is that what I see in the Bitcoin
community is quite
a bit of optimism
and I would also a little bit of
political naivete. I think it's
really, really important to understand
how big
the behemoth is
that Bitcoin
is facing.
There will of course be
efforts made on the part of
the financial
government complex
to keep the technology
at bay. Now, my guess
is that they don't
and they won't. I would say, well
let's not kill it completely, let's not kill it
outright.
Because it's big enough now
that people will see what we've done and nobody
it really disturbs the villagers when a body
falls through the sky. So what they're going
to try and do is they're just going to try
and not
take out the revving engine with an airstrike
but just throw little bits of sand
in it, little bits of sand in it, little
bits of sand in it until
most people find it too difficult
and cumbersome to use and then say, well it was
an interesting idea, just didn't quite work out
the way that people wanted.
Low fees are also critical
to the long-term success of programmable
money. The attitude towards
high fees has shifted today, but
originally even a 5 cent transaction
fee was considered laughably high.
In a famous interview
Vitalik Buterin commented,
Right now, Bitcoin transaction costs 5 cents
which is
fine right now because
PayPal's fees are even stupider
but the internet of money
should not cost 5 cents a transaction.
It's kind of absurd.
Nobody captured this sentiment
better than Mike Hearn in a public
email thread with Greg Maxwell.
Hearn started the email
by quoting Maxwell who was
trying to argue that tiny blocks were
always the plan from the beginning.
Look, it's clear you have decided
that the way Bitcoin was
meant to evolve isn't to your personal liking.
That's fine.
Go make an altcoin where your founding
documents state that it's intended to
always run on a 2015
Raspberry Pi or whatever it is
you mean by small device.
Remove SPV capability
from the protocol so everyone
has to fully validate.
Make sure that's the understanding that
everyone has from day one about
what your altcoin is for. Then when
someone says, gee, it'd be nice if we had
some more capacity, you or someone
else can go point at the announcement
emails and say, no, Greg
coin is meant to always be verifiable
on small devices.
That's our social contract and it's
written into the consensus rules for that reason.
But your attempt to convert
Bitcoin into that altcoin by exploiting
a temporary hack is desperate
and deeply upsetting to many people.
Not many quit their
jobs and created companies to build
products only for today's tiny user base.
Nobody put it better than Mike
Hearn then or now.
After seeing the failures of Bitcoin
and what it's turned into today,
I think Hearn's anger and frustration were
justified and he was certainly not alone.
Andreas Antonopoulos
who has since become a popular advocate
for Bitcoin and cryptocurrencies also
expressed his frustration at the behavior
of the core developers and Mr. Maxwell
in particular.
Maxwell has previously posted several
misattributed quotes and then
failed to retract them or apologize.
The only thing that mattered
in this debate was the opinion of
the three to four developers
who did not want any process
that resulted in anything but what they
had already decided.
They twisted, turned and rationalized
but in the end did exactly what they
intended from the beginning,
censorship of particular opinions
by exclusion and decree.
All hail our new overlords.
They're not just coders,
they are press directors and own Bitcoin
as they often say
if you don't like it, fork.
Mike Hearn and Gavin Anderson
had previously created
an alternative implementation
called Bitcoin XT
to make some non-critical changes
to the software.
It was this alternative implementation
that was chosen to be the big block
replacement of Bitcoin Core.
The block size limit would be increased
on Bitcoin XT
making it incompatible with Core
and if a critical mass of miners used it
the network would be successfully upgraded
at long last
to allow for larger blocks.
Satoshi described this upgrade mechanism
in the white paper stating
proof of work also solves the problem
of determining representation
in majority decision making.
Proof of work is essentially one CPU
one vote. The majority decision
is represented by the longest chain
which has the greatest proof of work
effort invested in it.
Miners vote with their CPU power
expressing their acceptance of valid blocks
by working on extending them
and rejecting invalid blocks
by refusing to work on them.
Any needed rules and incentives
can be enforced with this consensus mechanism.
BIP101
was considered a hard fork upgrade
because it would be incompatible
with previous versions of the software
as opposed to a soft fork
which maintains compatibility.
Peter Willow from Bitcoin Core stated
if we are willing to go through the risk
of a hard fork because of a fear
of change of economics
then I believe the Bitcoin community is not
ready to deal with change at all.
In hindsight the drama surrounding
hard forks looks overblown.
Nearly every cryptocurrency project
undergoes hard forks
because they are an essential mechanism
for upgrading critical code
fixing bugs and reducing technical baggage.
Ethereum regularly undergoes
hard forks. Bitcoin cash
has undergone several since its release
but back in 2015
this precedent was not yet established
and Core was able to stoke fears
that a hard fork could break the network.
With the widespread international agreement
that the block size limit
must be raised
the power and influence of Bitcoin Core
looked like it was coming to an end.
If a super majority of minors
followed Hearn and Anderson
the small block vision of Bitcoin
would be relegated to an altcoin
and the Core developers would effectively be fired.
So there was an immediate
widespread campaign to shut down XT
before it gained too much momentum.
BTC's powerful narrative
repeated everywhere in the media
did not spontaneously emerge
nor was it the result
of free and open discussion among Bitcoin enthusiasts.
The two most important discussion platforms
on which the overwhelming majority
of conversations happened
were BitcoinTalk.org
and the R Bitcoin subreddit.
Both platforms happened to be controlled
by the same person
known by the pseudonym Themos
who also owns the Bitcoin wiki.
That's one person with enormous power
to shape narratives and direct the flow of information.
And when the time came
he was not hesitant to exercise this power.
In August 2015
Themos announced a new
moderation policy on R Bitcoin
that censored all discussion
of Bitcoin XT.
The key message was that all hard forks
are illegitimate without a consensus
of Core developers.
Because of this
Bitcoin XT was not really Bitcoin
and therefore could no longer be discussed
on the platform.
I know almost for certain that there is no consensus
to the change in XT
because Bitcoin Core developers
Latimer, Greg and Peter
are opposed to it.
That's enough to block consensus.
This isn't some democratic country
where you can always get your way
with sufficient politicking.
Get consensus, live without the change
or create your own altcoin.
The Bitcoin community
was livid.
Themos' announcement was another dark milestone
in Bitcoin's history
and it generated a huge reaction.
The threat accumulated more than a thousand comments.
Themos was not shy about his decision
and he revealed his censorship
strategy and conversation
that would eventually be leaked.
You must be naive if you think it'll have no effect.
I've moderated forums
since long before Bitcoin
some quite large
and I know how moderation affects people.
Long term banning XT
from R slash Bitcoin
will hurt XT's chances to hijack Bitcoin.
There's still a chance
but it's smaller.
This is improved by the simultaneous action
on bitcointalk.org
bitcoin.i and bitcoin.org
I do have power over
certain centralized websites
which I've decided to use for the benefit of Bitcoin as a whole.
The decision to
censor all discussion of Bitcoin XT
did not just infuriate
regular Bitcoiners.
It also upset fellow moderators.
A few days after Themos' announcement
a dissident moderator
J. Ratcliffe 63367
wrote a sharply critical article.
Only 10 days after
his public criticism of Themos
he was removed as a moderator from our Bitcoin.
Unfortunately
mass censorship and propaganda
were not the only tactics used against Bitcoin XT.
The core developers were not happy
about the idea of letting miners decide
what the main software implementation should be.
Just like with the block size limit
they argued that it would harm
Bitcoin's decentralization.
Hearn pointed out that without such a mechanism
the obvious threat to decentralization
would be cores monopoly over the protocol.
Right now
the people doing the most to hurt decentralization of Bitcoin
are Blockstream and Vladimir
by telling people that
using the blockchain as a voting mechanism
as was done in the past
is reckless and will destroy Bitcoin's value.
The logical implication
of this argument is that only
Bitcoin core developers
and really only Vladimir
can change big chunks of the Bitcoin protocol
and thus that they are effectively
the CEOs of Bitcoin
which is the opposite of decentralization.
A moderator
of r slash Bitcoin
user hard left one two one
reacted positively to Hearn's post
saying that everyone should read this
it wasn't supposed to be like this
Mike and Gavin are right
hard left one two one
was also removed from his position as a moderator
by Themos.
Brian Armstrong was interviewed by Bitcoin magazine
about Coinbase's position
with regards to BIP101
and Bitcoin XT
he responded
in my view Bitcoin XT is the best option
I've seen so far
not just because it has working code
but also because it has a simple
implementation that is easy to
understand the block size
increases seem about right to me
and I have confidence in the people behind
the project we will upgrade
regardless of whether Bitcoin
core is updated
I've been disappointed to see how slow Bitcoin
core has moved on this issue
and we're open to switching forks
the day that interview was
published it was linked to on our
Bitcoin upsetting Themos
who immediately warned that Coinbase could be
punished and censored from the online
forms for their act of disobedience
if Coinbase promotes
XT to customers on Coinbase.com
and or switches
all of its full nodes to BIP101
software then Coinbase
is no longer using the Bitcoin currency
and it doesn't belong on our Bitcoin
this also applies
to BitcoinTalk.org
where Coinbase would be restricted to the all
coin section Bitcoin.it
and Bitcoin.org have similar policies
in December 2015
Coinbase announced that they were running
Bitcoin XT on their servers
and supporting Bitcoin XT
though they were still open to other proposals
in response the owners of
Bitcoin.org promptly removed
Coinbase from their website
a remarkable move considering that Coinbase
might have onboarded more people to
Bitcoin than any other company in the
world the removal was made
by one of the owners of Bitcoin.org
another shadowy figure known
by the pseudonym Cobra who stated
Coinbase is now running
Bitcoin XT in their production
servers XT
is in contentious hard fork attempt
that will create a new all coin
and split the community and blockchain
should it ever go into effect
if this ever happens Coinbase's customers
may find that they no longer
own any actual Bitcoin
this announcement again
raised the ire of many Bitcoiners
developer Jameson Lopp wrote
the potential for forking
does not an all coin make
until such time as a BIP
101 fork occurs
companies running XT are definitely running
Bitcoin if a hard fork does
occur said companies may still
be running Bitcoin it would have
to be judged which fork is the winner
post fork
removing companies as not running
Bitcoin when no fork has occurred
is jumping the gun
Bitcoin veteran Olivier Janssen
claimed that the move was retaliation
for Coinbase having dared
to speak up against CoreDev
there is something funny about the use of the
term consensus to describe
the position of a handful of core
developers as opposed to the
overwhelming majority of industry participants
if there was any actual
consensus in 2015
it was that the block size limit
needed to be raised immediately
XT posed a real threat to small blockers
so they attacked it
claiming it risked the integrity of the
entire Bitcoin network
because the core developers did not approve
XT was deemed controversial
and therefore too risky
or even reckless for anyone to
support yet this way of
upgrading Bitcoin was described by
Satoshi himself all the way back
in 2010 it can be
phased in like if block
number greater than 115,000
max block size
equals larger limit
it can start being inversions way ahead
so by the time it reaches that block
number and goes into effect
the older versions that don't have it
are already obsolete
when we're near the cutoff block number
I can put an alert to old versions
to make sure they know they have to upgrade
Satoshi's method was simple and
straightforward as usual
he recommended creating a hard fork
upgrade that would increase the block
size limit at a predetermined time in the
future despite the open support
for larger blocks in
BIP 101 in particular
some miners started to get cold feet
due to the controversy created by core
supporters ant pool a mining pool
accounting for roughly 20%
of the hash rate at the time stated
we like the idea of increasing the
maximum block size but if Bitcoin
XT is too contentious we also don't
want the community to be divided
it's not hard to understand why miners
would prefer the easiest option
which would have been core coming to their
senses and raising the block size limit
the entire industry desired the same
thing which is why it took years
before Bitcoin XT was created
however as time went on
it became clear that core would not
change their minds and to believe otherwise
was simply wishful thinking
Bitcoin core would find another way
to obfuscate and delay by organizing
a series of scaling Bitcoin conferences
that tried to persuade miners
to keep running core software
at these conferences they agreed
that the block size limit had to be raised
but only to 2 megabytes
instead of 8 megabytes
miners were urged to keep trusting core
and wait a little longer for more substantial upgrades
in August 2015
the CEO of Blockstream
Adam Back wrote
my suggestion 2 megabyte now
then 4 megabyte in 2 years
in 8 megabyte in 4 years
then reasses
and later in December of that year added
there is consensus from developers
miners that 2 megabyte is next step
over the following years
this 2 megabyte compromise was
agreed to several times with core
ultimately breaking their agreements every time
when XT failed Mike Hearn
considered it a demonstration
that Bitcoin could not overcome the human
social and psychological barriers
limiting its own success
he would later write
that was the point where I decided
it had all become a waste of my time
the vast majority of mining
hash power was controlled by people
who were psychologically incapable
of disobedience to perceived authority
on January 14th 2016
Hearn penned the last of his
excellent essays entitled
the resolution of the Bitcoin experiment
in it he explained
why he considered Bitcoin a failed project
it has failed because the
community has failed
what was meant to be a new
decentralized form of money that lacked
systemically important institutions
and too big to fail
has become something even worse
a system completely controlled
by just a handful of people
there is no longer much reason
to think Bitcoin can actually be better
than the existing financial system
at the beginning of 2016
more than 90% of the network
hash rate expressed support
for increasing the block size limit
to at least 2 megabytes
while Bitcoin XT was not chosen as the
implementation to make the increase happen
another quickly took its place
Bitcoin Classic, led by Gavin
Anderson and Jeff Garzik
immediately gained popularity as a
conservative alternative to Bitcoin Core
by only increasing the limit
to 2 megabytes
like XT, Classic would increase
the block size limit only after reaching
a threshold of 75% of the hash rate
just days after Classic's website
was created, 50%
of the hash rate stated their support
for the new implementation
despite its instant popularity
not everybody was ready to fork away from Core
the strategy
of waiting for Core to increase the block size
was not one with a good track record
Eric Voorhees, the creator
of the extremely popular Satoshi
dice game and the shapeshift exchange
would comment on BTCC's position
urging them to support Classic
if only to pressure Core into compromise
the only circumstance under which
Core would go to 2 megabytes
is if they feel an imminent hard fork
toward Classic or something else
if your desire is to get Core to add
2 megabytes, signing on to Classic
is probably the most affected sick path
by the end of February
2016, it looked like
the pressure was starting to work
an emergency conference was organized
in Hong Kong with several large minors
companies and key Core developers
on February 20th
an agreement was reached now called
the Hong Kong Agreement
the two key components were
a hard fork upgrade to raise
the block size limit to 2 megabytes
a soft fork upgrade
to enable Segwit
Brian Armstrong was a notable critic
and he flew back from Hong Kong
convinced that Bitcoin Core
needed to be replaced as soon as possible
some Core developers
and Adam Back have stated that Bitcoin
is not a democracy
while this description is correct
for the current governance model
with the censorship, character assassinations
attacks against anyone
who disagrees with the party line
and sabotage against free choice
the current governance is more similar to North Korea
the magazine
Cointelegraph covered the story of F2 pool
a Chinese mining pool
accounting for more than a quarter of Bitcoin's
total hash rate
being attacked immediately after allowing their minors
to run classic
the attacks began to target the F2 pool
Bitcoin mining pool almost immediately
after the F2 pool team announced their decision
to test Bitcoin
classic by launching a
sub pool in which minors can mine Bitcoin
classic blocks
once again the attacks proved remarkably effective
Bitcoin Classic
enjoyed its highest support around the middle of March
2016 before rapidly
declining so to a large
number of minors trusting Core
seemed like a safer option
unfortunately their trust was misplaced
and Brian Armstrong's criticisms
would prove prescient
the core developers missed their deadlines for both the
seguit upgrade and block size increase
they did not adhere to the Hong Kong
agreement and the blocks kept getting
fuller
meanwhile the war to control Bitcoin's
dominant narrative was raging
rampant censorship was not the most
extreme tactic used
the owners of key informational websites
became even more brazen
in July 2016
the Bitcoin.org owner
Cobra came up with an idea
perhaps newcomers could be prevented from learning
about Bitcoin's original design
by changing the white paper itself
I feel like the Bitcoin described
in the paper and the Bitcoin described
on Bitcoin.org are starting to diverge
at some point I think the paper
will start to do more harm than good
because it tricks people into believing
they understand Bitcoin
Cobra then makes the extraordinary
claim that the white paper is not
meant to explain Satoshi's original design
but rather to explain
how the present Bitcoin Core software
works I have seen people
promote toxic and crazy ideas
and then cite parts of the paper
in an effort to justify it
academics are also regularly
citing the paper and basing some
of their reasoning and arguments
on this outdated paper
by Cobra's logic even if the
core developers wildly change the code
to lose all resemblance to the original
Bitcoin the white paper should
be altered to reflect those changes
they most immediately commented
on the thread agreeing that the white paper
misleads people interesting
suggestion the paper is definitely
outdated and I do often see people
saying just read the white paper
as if the paper is still a good
way to learn about Bitcoin
fortunately this proposal was met
with sufficient resistance to block the change
though it would not stop them from
trying again in the future
they most would later make another outrageous
proposal that companies should
be required to pledge their allegiance
to the small blocker narrative
in order to have their products listed
on the Bitcoin.org website
Cobra chimed in again criticizing
the white paper and calling for it
to be revised or replaced altogether
the white paper is
to blame for all these dangerous beliefs
we seriously need to rewrite it
or produce a completely new white paper
and call that the Bitcoin white paper
two unknown people
who control the most prominent websites
in Bitcoin are eager to
censor, propagandize
and even rewrite history to push their narrative
the average user does
not even know of the existence of
Thamos and Cobra much less
so the history of how they pushed a version
of Bitcoin that is diametrically
opposed to the original one
neither do prominent investors that I
have significant independent research
or long-term involvement in the industry
to figure out
2016 came
and went without Segwit or a block
size increase and the next year
would become the craziest in Bitcoin's
history
in January 2017
blocks were regularly running at
90% plus capacity
occasionally bumping into the one megabyte
limit and by March the average
transaction fee passed $1
early Bitcoin entrepreneur Charlie
Schramm wrote
if we don't implement bigger blocks ASAP
PayPal will be cheaper
Bitcoin I already pay a few dollars
per TX stop hindering growth
the next alternative
implementation started to gain steam
the Bitcoin unlimited BU team
wanted to replace the hard-coded block
size limit with emergent consensus
the basic idea was
simply to allow miners and nodes
to set their own limit without needing approval
from anyone. Economic incentives
were strong enough to keep the network
coordinated and functional
despite gaining momentum in early 2017
BU was hated
by the typical characters and attacked
on Reddit multiple
anonymous users shared their intentions
to exploit any bugs they could
find for maximum effect
they succeeded and in the middle
of March over half the Bitcoin
unlimited nodes were successfully brought
down in a coordinated attack
the bug did not cause much damage
itself but it did damage
the reputation of BU at a critical time
a Bloomberg article
covering the attacks wrote
unlimited had in recent weeks
when the backing of influential miners
as some decided to give up on reaching
a community consensus after
more than two years of discussion
the bug raises uncertainty about
whether miners will follow through on their support
another conference was organized
this time in New York
the largest economic players were invited
along with key core developers
an agreement was quickly reached
a conservative one resembling
the Hong Kong agreement that was previously
agreed upon Segwit
would be activated with an 80%
minor threshold and a
2 megabyte block size increase
would happen within six months
this would become known as the New York agreement
the overwhelming majority of the industry
agreed that upgrading Bitcoin's capacity
was urgent but the Bitcoin core
developers were absolutely
unwilling to increase the block size
limit at all so other
developers would have to make it happen on a
different software repository
Jeff Garzik was chosen as the lead
developer for this new project
and the code he was working on would be called
Segwit 2X or S2X
once again
core was at risk of being fired
if the majority of miners running Segwit
2X produced a block
larger than 1 megabyte
the miners running core would be forked off
the network perhaps more importantly
the keys to Bitcoin's code
would finally be ripped from core's hands
so another campaign was waged to demonize
anybody supporting Segwit 2X
Greg Maxwell wrote
a couple of well-meaning dips
went to China a few months back
to learn and educate about the issues
and managed to let themselves get locked
in a room until 3 to 4 a.m
until they would personally agree to
propose some hard fork after Segwit
despite claiming for
years in the name of unity
that a fork should be avoided at all costs
core supporters demonstrated
that they had no real desire for cooperation
when the time came
they were ready to divide the community
and attack their opponents by whatever means
necessary if Segwit
turned out to be a bad idea
or if its adoption caused a chain split
or if the 2X block size
increase fell to occur
there had to be a plan B
so an alternative implementation
was created to safely split off
from BTC and form a separate chain
without Segwit
and with an immediate increase of the
block size limit to 8 megabytes
this implementation was called
Bitcoin ABC
the ABC standing for adjustable
block size cap
which would allow miners to set their own limits
without needing the approval of developers
Bitcoin ABC brought about a new network
and therefore a new coin
called Bitcoin Cash
that's how BCH started
not as an immediate replacement for BTC
but as a contingency plan
by the biggest miners in case the BTC
upgrades failed
it turned out to be a good idea
instead of avoiding forks
Bitcoin looked like it would split into 3 different chains
by the end of 2017
the Segwit 1X chain
S1X
the Segwit 2X chain S2X
and Bitcoin Cash BCH
the name Bitcoin
would be assigned to whichever chain accumulated
the most hash rate
regardless of whether it was S1X
or S2X
by September 2017
roughly 95% of the hash rate
was signaling for S2X
practically guaranteeing that the Bitcoin name
ticker symbol
and network effects would go with the 2 megabyte chain
Core became even more aggressive
and tried to get the government involved
Core developer Eric Lombroso
called S2X a
serious cyber attack
and threatened to take legal action against it
stating
a good portion of the community wants to keep the legacy chain
attempts to destroy it
will be treated as an attack on the property
of all these people
it constitutes a serious cyber attack
in decisive action against it
both technical and legal
has been prepared
Blockstream co-founder Matt Corralo
wrote directly to the SEC
to ask them to intervene
and provide consumer protection
from the fork
Samson Mao took to Twitter
suggesting that Coinbase was breaking the laws
of the bit license in New York
tagging both Coinbase
and the New York Department of Financial Services
he wrote
is that Coinbase breaking the terms of bit license
endorsing
2X fork definitely raises
safety concerns
in addition to lawsuit threats
they also used more direct ways of attacking businesses
that did not define Bitcoin
by Bitcoin Core software
wallet providers for example
could face waves of fake one star reviews
on their apps
warning users of potential lost funds
or malware
because their company would not support the
real Bitcoin
another round of DDoS attack started
against the New York Agreement supporters
the constant demonizations
character assassinations
and online harassment
extended even to people who were guilty
of associating with declared enemies
when Bitcoin.org
was discussing the removal of the BTC.com
wallet from their website
Cobra responded
they're associated with that monster Jihan Wu
so I don't mind if they get removed
because of this
they're terrible people
I definitely feel like a line has been crossed here
Jihan Wu is the co-founder of Bitmain
the largest chip manufacturer
for Bitcoin miners
he was also the first person to translate
the white paper into Chinese
despite getting involved in 2011
in building one of the most successful
Bitcoin companies in the world
Wu was smeared as a monster
for his lack of total obedience to Bitcoin Core
in fact since nearly
all the miners were supporting 2X
instead of Core
the narrative quickly shifted to outright hostility
towards miners generally
as if Segwit 2X
was a minor takeover of Bitcoin
the proper role of miners
was no longer to protect, secure
and scale the network
it was to quietly run software provided
to them by the Core developers
amid the controversy and confusion
the cryptocurrency exchange
Bitfinex found a way
to raise the costs of following through with Segwit 2X
unlike most of the industry
they decided that the ticker symbol
BTC would not
be assigned based on hash rate
instead it would be given to the
incumbent implementation
their announcement read
we have elected to designate the Segwit 2X fork
as B2X for now
the incumbent implementation
based on the existing Bitcoin consensus protocol
will continue to trade
as BTC even if the B2X chain
has more hashing power
for the time being
BTC will continue to be labeled as Bitcoin
and B2X
will be labeled as B2X
this will remain the case
unless and until such time
that market forces suggest an alternative
more appropriate
labeling scheme for one or both chains
a few other smaller exchanges
would soon follow the same policy
that meant users could find themselves trading
BTC for one price
on Bitfinex
a wildly different price on Coinbase
and payment processors like BitPay
might not even recognize their coins at all
essentially a nightmare scenario
for the average user
on November 8th 2017
roughly a week before the plan fork
BitPay wrote a letter
calling for the cancellation of Segwit 2X
shortly afterwards
a joint announcement was made by some of its
strongest backers including
the lead developer Jeff Garzik
our goal has always been a smooth
upgrade for Bitcoin
although we strongly believe in the need
for a larger block size
there is something we believe is even more important
keeping the community together
unfortunately it is clear
that we have not built sufficient consensus
for a clean block size
upgrade at this time
continuing on the current path
could divide the community
and be a setback to Bitcoin's growth
this was never the goal of Segwit 2X
as fees rise on the blockchain
we believe it will eventually become
obvious that on-chain capacity
increases are necessary
when that happens we hope the community
will come together and find a solution
possibly with a block size increase
until then
we are suspending our plans
for the upcoming 2 megabyte upgrade
and with that
the New York agreement failed
just like the Hong Kong agreement did before it
and like Bitcoin Unlimited
Classic and XT before that
the failure of S2X would demonstrate
once and for all
that Bitcoin Core had totally captured BTC
and would permanently overhaul its design
anybody adhering
to the original vision for Bitcoin
as digital cash would be forced
to move to a different project
Bitcoin Cash immediately provided that outlet
as big block Bitcoin
without the burdens of Blockstream
and the core developers
3 days after the cancellation of Segwit 2X
Gavin Anderson identified
BCH as the continuation
of the original Bitcoin project
Bitcoin Cash is what I started working on
in 2010
a store of value and means of exchange
Bitcoin's darkest time was during
its Civil War era
and it resulted in a successful hijack
of the original project
but fortunately its story does not end there
maximalist will insist
that the battle for Bitcoin is over
that the core developers are now the final authority
and that the price appreciation
of BTC has vindicated
the small block philosophy
none of these things are true
Bitcoin technology is still new
and with big blocks
it can compete against any cash system
in the world
the core developers might control BTC
but they do not have any control
over BCH
the price of each coin depends on the quality
of information within the economy
if misinformation is currently widespread
then prices are destined
to adjust as better information
becomes known
Bitcoin's original ambitious goal
was to be a fast, cheap, reliable
payment system for the internet
without needing to trust a centralized authority
that project is alive and well
it just got delayed a few years
immediately after the failure
of Segwit 2x
there was a real possibility that Bitcoin Cash
would simply replace BTC
as the real Bitcoin
within a month the price of BCH
went from around $650
to an inner day high
of over $4,000
for a brief period
it looked like Bitcoin was going to free itself
from core once and for all
the momentum did not continue however
and in the face of suffocating information control
the price of BCH
has steadily decreased relative to BTC
for the past few years
Bitcoin core supporters are eager to declare
a victory because of the large price difference
between the two coins
but this is premature
the higher price of BTC is almost entirely
due to the inheritance of network effects
not because people were excited about small blocks
since years later
there is still hardly anybody who understands
the difference between big and small blocks
the most potent weapon
in the arsenal of BTC maximalists
has always been narrative control
so immediately they went to work
using their old tactics of smearing people
and directing the flow of information online
Bitcoin Jesus
was inverted to Bitcoin Judas
a campaign was created
to only refer to Bitcoin Cash
as B Cash
to discredit and distance BCH
from the Bitcoin brand
honest discussion about Bitcoin Cash
was once again heavily suppressed
and often censored outright
having seen these tactics before
many big blockers assumed the B Cash campaign
was coordinated by the same bad actors
and leaked conversations
strengthened that suspicion
in a slack conversation between
Adam Back and Cobra
the pseudonymous co-owner of the Bitcoin.org domain
Back tries to convince Cobra
to hand over the domain to somebody else
because he accuses Cobra of being
secretly sympathetic to the big block
philosophy. To make his case
Back points out that Cobra
just said B Cash has advantages
and didn't call it B Cash
as if merely not using the term
B Cash was suspicious behavior
BCH developer, John Fugbaugh
wrote an article summarizing
his thoughts about the motivation behind the B Cash campaign
he explained it's simple
they want to disassociate
Bitcoin Cash from Bitcoin
they are hoping new users won't even realize
there's another version of Bitcoin
they are hoping those users won't realize
that Bitcoin was originally peer-to-peer
electronic Cash
not the settlement layer that Core is pushing
and ultimately they are hoping
people don't see that Bitcoin has changed course
and that there's a version of Bitcoin
that stayed with the original formula
the Bitcoin maximalist play
book should be clear by now
relentlessly push a narrative
and attack anybody that questions it
censor discussion
and revise history if necessary
utilize social media to harass
shame and bully people
into submission
anybody willing to dig beneath the surface
will quickly find holes in their story
while there are endless examples
of outrageous deceptive behavior
not every criticism
of Bitcoin Cash comes from bad actors
information has been tightly
controlled online for several years
so most people are simply confused
because they have only heard one side of the story
the developers are bad
for the first year after
the Bitcoin Cash fork
this was one of the most popular smears against
BCH but it has become
notably less common since
an event in late 2018
when a BCH developer named
Alminy discovered a catastrophic
bug in the Bitcoin Core software
of all the possible bugs
in Bitcoin inflation bugs
are one of the worst if exploited
it could have allowed somebody to secretly
create new coins out of thin air
Alminy was so shocked
by the severity of the bug
and the fact that it passed peer review
from people like Von Der Laan and Greg Maxwell
that he wondered whether it was intentional
Alminy discovered
this bug in September 2018
despite experiencing the hostility
of the core developers for years
he decided to disclose the bug
to them privately
and not exploit it for financial gain
he could have seriously damaged the reputation
of Bitcoin Core
and the credibility of BTC
but chose not to
his goodwill was not returned
and instead of gratitude
his disclosure was met with more criticism
and the individuals involved refused to take
responsibility for the catastrophic bug
after this event
Maximilis still refused to give Alminy
the respect he deserved
but it did quiet down claims that Bitcoin Core
had a monopoly on all the competent developers
forking away from Bitcoin Core
allowed the Bitcoin Cash developers
to improve more than just the block size limit
other features that
Satoshi built into the original design
have been reactivated
and other innovations have improved BCH's
capacity to create smart contracts
seamlessly
issue tokens and maximize
transaction privacy
entrepreneurs and developers now have
more tools available for them to build directly
on Bitcoin without having to
worry about their product breaking
due to the extreme limitations of small blocks
freed from Bitcoin Core's roadmap
the BCH developers could
finally return to the original focus
in purpose of Bitcoin
the controversial replace by fee feature
was removed making instant
transactions much more reliable
for merchants and payment processors
Schnorr signatures led to the
creation of cash fusion
a privacy protocol that offers a practical
way to recombine fragmented
anonymous transactions in a
secure way without the server
being able to steal the funds
or de-anonymize users
cash tokens enables decentralized
applications on BCH
in a similar fashion to the Ethereum network
with the added scalability
of big block Bitcoin
researchers have long been interested
in pushing the limits of on-chain scaling
Bitcoin cash already has
a 32 megabyte block size limit
but that's obviously
not sufficient for global adoption
all the way back in 2017
Dr. Peter Risen
used the BCH testnet
a sandbox for testing without
affecting the main chain and successfully
mined a one gigabyte block
given the pace of development
of computer technology
Satoshi's statement that
it never really hits a scale ceiling
looks correct
far from the claims of Bitcoin
core supporters, the original Bitcoin
has extreme scaling capability
and it is finally being realized
on the Bitcoin cash network
every cryptocurrency has supporters
that loudly proclaim that their coin
is superior for one reason or another
instead of making abstract
arguments or a marketing pitch
I strongly suggest readers experiment
with Bitcoin cash for themselves
the fees are extremely low
which means you will not lose a bunch
of money and transaction fees by playing around
the experience is so good
when compared to other projects
it speaks for itself
most people simply
do not know the story of Bitcoin core
they do not know that blockchains
can scale just fine
and that the Bitcoin network was intentionally redesigned
to have high fees
they do not know that blockstream profits
by diverting traffic onto their own
proprietary blockchain
they do not know about the failures of the lightning network
and the inevitable proliferation
of custodial wallets
they do not know that the information they consume
online has been tightly
controlled and censored for years
to promote a single dominant narrative
but they are totally
on board with the idea of sound digital money
that is not controlled by a centralized
authority
a beautiful vision that simply cannot
be realized on the BTC network
so in one sense despite the widespread
misinformation
the hardest sell is already done
switching from one blockchain to another
is easy compared to getting sold on the idea
of cryptocurrencies in the first place
we are at the beginning of a monetary
revolution
from a historical perspective
the blockchain is still a brand new invention
and like any powerful new technology
it can make the world a considerably
better or worse place
if we are not careful
it might be co-opted
and used to track and control people
at an unprecedented level
but if we unlock its potential for good
it will usher in a new
era of sound money
personal freedom and prosperity
the benefits of sound digital
money are enormous
as enormous as the risks of unsound digital money
transactions that are not
peer to peer require third parties
to facilitate them
and the old financial system is largely composed
of third parties
banks, payment processors
credit card companies, regulatory agencies
and central banks manipulating the money supply
middlemen are everywhere
profiting in some way
from every transaction they touch
Satoshi's version of Bitcoin
used for everyday commerce
with large blocks and universal
access to the blockchain
routes around these intermediaries
we may never know the true motivation
behind Bitcoin Core's decision
to overhaul Satoshi's design
maybe it happened in good faith
maybe it happened because Core
was infiltrated
regardless the result is the same
a small block version of Bitcoin
that is considerably less disruptive
to the status quo
if interested parties did not directly
corrupt Bitcoin they certainly
benefit from its corruption
the same can be said for the rampant
censorship online
the widespread information control
and the social media engineering
that surrounds this topic
even if the opposition did not cause it
they certainly benefit from it
if any cryptocurrency is going
to compete against existing financial
systems we need to coordinate
with each other the more coordination
that exists on the same project
the stronger it will become over time
if everybody builds on a separate network
none of those networks will succeed
this is why I am focusing
primarily on Bitcoin Cash right now
because I know the underlying technology
can scale and it has
already been battle tested in the real world
the vision for fast
cheap reliable inflation
proof digital cash is still alive
but it requires a network
of people to bring it into existence
software alone cannot improve
the world humans are still
required