More chaos in the world of Bitcoin

(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at: lawrence@krubner.com

Apparently having a currency that is outside of the control of the government means dealing with endless bickering and petty politics. Some of these comments are very informative:

This is a fight for control of Bitcoin. It is business interests on both sides fighting for a position of authority. SegWit2x is an attempt to remove control from the core dev team, which while technically strong is full of zealots with questionable motives and terrible management skills. Bitcoin ABC and Unlimited have their own parts to play as factions. It’s getting tense, but it’s been years in the making. Groups unwilling to compromise on the most basic points. I suspect that SegWit2x will end up taking over the network, but I’d rather see a pure large block faction like Bitcoin ABC. Either way the core developers are going to lose control of a 40 billion dollar network, possibly one of the biggest fails in modern technology. They will be left on a minority chain which will have little relevance going forward. I’ve said it before but anyone who put money into Blockstream has to seriously be wondering what the hell they are doing, there CEO should have been kicked out a long time ago, he has no relevant experience to actually running an organization and has royally messed it up.

And the response:

I disagree. SegWit2x is a misguided attempt to make Bitcoin “more efficient” without realizing that it puts at risk the core value proposition of Bitcoin: censorship resistance.

At the root of this debate is a disagreement about what the blockchain is for. On one side, you have all the developers working on the Core project and activists like Amir Taaki or “crypto-economists” like Paul Sztorc (creator of the decentralized prediction market which Augur is trying to re-implement), who believe the blockchain is for financial sovereignty. Bitcoin mining is a way to decentralize transaction validation, after all, such that no central authority can tell you which transaction is valid or not. Therefore, if you cannot run a full node and validate the mined blockchain yourself, Bitcoin is basically pointless because you have lost your ability to transact with censorship resistance. Increasing the size of blocks makes full blockchain validation more difficult. The risk then is miners mining a blockchain and you are not being able to contest it. The miners can decide not to include your transaction, they can require KYC for you to submit a transaction, etc., and you will have little leverage against this because you won’t be able to validate the work they are doing.

On the other side, you have businesses and corporations (BitPay, BitMain, etc.) who believe that the blockchain can replace VISA, essentially, so they will do anything to make the system more efficient. This includes sacrificing decentralization and making it more difficult for users to validate the blockchain. They believe that being a full node doesn’t matter and all that matters is replacing whatever current financial institutions are running with a blockchain.

What the second side of the debate is missing, however, is that the blockchain will never be as efficient as VISA. There is a reason why when over 70 of the world’s largest banks got together at R3 and assessed how Bitcoin can help them transact, they came up with a distributed database called Corda and not a blockchain: blockchains are not efficient [1]. They are inefficient but they are useful because they are decentralized and enable permissionless transactions.

[1] https://www.corda.net/2016/10/r3-corda-makes-different/

Source