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There Can Only Be One

Transcript By: Bryan Bishop

Tags: Mining, Proof of work, Altcoin

Category: Conference

Bitcoin: There can only be one

Tone Vays

https://twitter.com/kanzure/status/1162742007460192256

Introduction

I am basically going to talk about why bitcoin will basically eat all the shitcoins and why all of them are going away and I am going to point to some of the details. The big graphic right there is my attempt to categorize all of the altcoins, the ICO space, and so on. Everyone is slowly starting to merge mine with bitcoin, since they can’t keep up with the charadde.

Proof-of-work

The word “blockchain” was never seen in the Satoshi whitepaper. It was about proof-of-work and anti double spending. “When they solve the proof-of-work, the block is broadcasted to the network and added to the blockchain”. In earlier writings, it was called a timechain. But now the word has run away and everything is a “blockchain”.

Let’s talk about proof-of-work. People always say that mining is wasteful and it will kill the world and now mining is bigger than some small country, and soon it will be bigger than a medium country or big country. The question of whether bitcoin wastes electricity is at its heart a misunderstanding of the fundamentally subjective nature of value. Electricity is generated worldwide in large quantities to satisfy the needs of consumers. The only judgement about whether the electricity has gone to waste or not, lies with the consumer. So as long as the electricity goes to serve a purpose, it must not have been wasted. We have a purpose: politically neutral money.

The other thing that people don’t realize is that bitcoin was the combination of all the technology that came before it. It wasn’t randomly created. Here is an email exchange from 2001. I am just going to read the very last part: personally I like the idea of hashcash if and only if it is structured like a real currency instead of just PoW. In the real world, you pay for the resources used. In many cases, this should also apply to p2p and other computer systems. Getting hashcash working as a real currency is very difficult. I thought of a scheme that might work: coins are signed by owners, and can only be signed to a different owner by the owner. Unfortnuately, you need a centralized database of the hashcash. It has a double spending problem. This is an attempt to solve PoW on Saturday afternoon in March, 2001. Who wrote it? There we go. It was Peter Todd at 15 years old, writing an email to Hal Finney. After bitcoin, when you see someone show up and say “I solved it, I solved all the problems”— my question is, what were you doing at 15 at a Saturday afternoon? People a lot smarter than you have been working on this basically for their entire lives since they realized what the internet is. Keep in mind where your developers came from, what they were doing and what they were trying to solve before.

Satoshi wanted this to be money. It’s going to be critical, and one of the most important things to it is stability, that things won’t move fast and break. This is why in 2010 he wrote that “the nature of bitcoin is such that once version 1.0 was released, the core design was set in stone for the rest of its lifetime”. This immutability is not a feature of the bitcoin software, which is trivial to change for anyone with coding skills, but rather it is grounded in network effects and the difficulty of getting everyone on the network to adopt the same change to the software.

Hard money

So now that we have talked about the bitcoin tech, let’s talk about the money side of equation. “Hard money, by taking the question of supply out of the hands of governments and their economist-propagandists, would force everyone to be productive to society instead of seeking to get rich through the fools' errand of monetary manipulation”. World leaders keep trying to convince each other to devalue currencies.

Altcoins

Let’s talk about litecoin. They said “litecoin is silver to bitcoin’s gold”, and it must be true because they said so. That’s Charlie Lee. What does that even mean? Bitcoin is gold, litecoin is silver, and XRP are diamonds. I was curious about that. The extreme centralization of XRP makes it share specific characteristics with the diamond market. Centralization allows for some manipulation. At least he went in the right direction, so they all have to fight each other. Everyone says gold is manipulated, but what about diamonds, let’s speculate on the price of diamonds- give me a futures market.

There is no need for micropayments in bitcoin if lightning works. Litecoin has created inflation on top of bitcoin, in a much less secure way. Luke-jr pointed this out in 2013. He said: “scams like litecoin made 3 irrelevant changes: they changed the PoW function, they changed the block frequency to make it faster but it’s not really faste rbecause you need more blocks to get the same security as a few blocks in bitcoin, and they created a large supply of litecoins, but there is more microbitcoin than there is litecoin”. There really is no need for “silver” to bitcoin’s “gold”. Bitcoin is going to scale for smaller and smaller transactions.

What about the privacy side of things? Everyone hypes on monero, beam, grin, and what else is there? Dash isn’t private, but they havent' figured that out yet. Zcash, many others. I try to find as many buzzwords from the bitcoin space that show the things that are going into bitcoin to create fungibility and privacy. Coinjoin, graphroot, joinmarket, MAST, payjoin, musig, taproot, bulletproofs, Schnorr signatures, lightning over tor, and of course the Blockstream Liquid sidechain is flying under the radar. Nobody actually uses monero for transactions, the best use case is hey I am going to take my bitcoin, use a centralized exchange, convert it to monero, and then back into bitcoin and then suddenly I have my privacy. But, you could do that with Liquid. You take on zero exchange risk, zero bitcoin volatility risk, zero currency risk.

So why are there so many privacy coins? The zcash people were testifying to congress etc. It basically comes down to this: “oh my god, I just coded the greatest privacy encryption protocol of all time” and you look at it and ask, is it backwards compatible with bitcoin? Can we add it as a soft-fork? If it could, it will probably get added to bitcoin. So when you come up with mimblewimble, which cannot be implemented in bitcoin as a soft-fork. What happens is, someone says, I want to get rich. I’m going to take this interesting piece of code and I’m just going to monetize it. If it has alread ybeen monetized, like ring signatures or mimblewimble, then it’s a shitcoin. If it hasn’t been monetized yet, then it is a future shitcoin.

It really doesn’t matter how interesting your encryption code is for your messages, if it can’t be added to bitcoin. All you can do is just scam people by monetizing some feature or some individual line of code. This is unfortunate, but it is what it is. When people say, “wouldn’t it be better if bitcoin had encryption from the start right in the underlying protocol?”. Yeah, of course it would have been better. But it also would have been better if the very first car that was created was an electric Tesla vehicle. It would have been better, but that’s not what happened. We have to do the best with what we have. Everything has to be backwards compatible. I could potentially see a hard-fork in bitcoin, but only if the other option is that bitcoin dies. If anything is even vaguely debateable, then nothing will happen.

Sticking with privacy coins, we also have zcash…. they have to find a way to monetize it. Not only do you have to find a way to monetize the code, by turning the code into what you think could be a currency, but you also have to make money. Zcash is collecting 20% of the mining reward and they want the entire 20% in the first 4 years where you have 80% going to the miners, 3% goes to the zcash foundation, another 3% to the zcash company not sure what the difference is, and then you have the remaining 14.2% going to zooko and friends. Of course, since this thing has been around for 3 years, it continues to drop in price. Apparently making 3 million a week is not enough, and now you have to go on another speaking tour and beg for more money. Zooko was banging the hot chick that was running all the Foresight Institute events. So that’s hilarious.

Dash also sucks and so does ripple. Moving on…. DAO, ICOs, …. Ethereum is going to scale by merging with bcash. They think it’s a technological problem. I think they have a major economic problem where, you shouldn’t have to use a native currency to use a service or product. You should be able to pay in a major liquidity currency. Bitcoin is becoming a major currency player in the world, and everyone will have some. Amazon isn’t going to be accepting Amazon stock for its products to sell you. That’s the economic problem of all those blockchains or so-called blockchains (they aren’t even using proof-of-work).

The general problem is that, smart contracts probably don’t need to be decentralized. Decentralization is very difficult and very expensive. You can see how it’s taking up the electricity of a medium-sized country. Doing something that does not require censorship resistance, has no need to be decentralized. All of these smart contracts will probably be executed on AWS or Google Cloud Platform. That’s basically ethereum in a nutshell.

We’ll close out with a tweet from Giacomo Zucco. He said: “Bitcoin maximalism, otherwise known as moderate commen sense)— the two extremes are either you believe that no coins will ever exist, or the multicoiner extremist who says bitcoin is infinitely replaceable and my coin happens to be the best please pay me”. Iti s Nouriel vs Vitalik.