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Scaling Debate Is A Proxy Battle Over Centralization

Speakers: James D'Angelo

Transcript By: Bryan Bishop

Category: Conference

I really appreciated the fact that…. I really appreciated Cory’s talk. I quoted someone in my talk. It was a fairly recent quote. His whole talk was speaking about governance. There’s a lot of governing issues coming into Bitcoin. We like the solving the whole world with technical.

The word that I am fascinated with is the one highlighted here, the word “consensus”. I’m just going to reach out to you guys. Does anyone want to make a stand at telling me what consensus means? Agree? I like that. It’s important that we understand consensus. People say that it’s decentralized consensus. The idea of no one entity controlling it.

When you say entity, no one entity controlling it. It’s an abstraction of agency. A group being able to make an authoritative decision. A group of what? Individuals. I want you guys to think about these terms. When you guys say that consensus is only about proof-of-work and algorithmic consensus, that’s not what I mean. Economy of scale? Does anyone want to tell me what economy of scale is? Connor, you made it in, I’m sure you didn’t sneak in and spoke with someone, I definitely want to talk with you, he’s going to be running big stuff soon… what’s an economy of scale? Production of the point of being able to make profit. Interesting. Anybody? The more you produce something, the cheaper it gets. Matthew, thank you. The more you produce something, the cheaper it gets. Like a flower in June, let’s move.

A pen should write. My talk, which I am starting right now, is that a pen should write. I hope you all learn that today. A pen should write. I can use a pen to defend myself. You take your pen, and then say, oh Amazon, right, and you get the box open. Oh, I ordered cliff bars online even though they cost the same next door. Anybody want a pen? My son has a thousand of them. I hear you. Alright.

I can use a pen to defend myself. That’s pretty cool. I’m sure it’s been done. People have killed each other with pens. How many of you have been in jail? Oh a bunch of libertarians never been in jail? I can use a pen to smoke with, how many of you have done this? I did that. It tastes horrible, by the way. I’ll bet it’s bringing in more carcinogens than the stuff you’re smoking.

But pen manufacturers aren’t going to lose two years talking about how to make pens into better weapons or pipes, are they? It makes sense. The essential feature of a pen is to write. That’s the sine qua non of a pen. Who speaks latin here? You are all liars, nobody speaks latin.

Does anyone know what the sina qua non of a pen? “That which it is not.” If you have a pen, it is essential that it writes. What is Bitcoin’s sina qua non? Non-political money. Settlement support. Permissionless transfer of value? I might end up arguing with all of you.

The “sina qua non” of Bitcoin is decentralized consensus. On top of that you can build everything else. On top of your pen, you can kill people, you can smoke, it can open boxes from Amazon, but it must write. Bitcoin needs decentralized consensus. It’s the only essential feature of Bitcoin.

A decentralized consensus allows for a currency, it requires no third-party. Nothing matters next t this. Anonymity, nope. Lately, however, there has been this little block size scaling debate. Cory might have noticed this. You hear that investors want speed, customers want cheap transactions, just go to 2 MB blocks, I don’t know who says that. “Bigger blocks solve everything”. Yeah right. This block size scaling debate is bunk. Why?

It’s a proxy war. It’s like when the United States goes into Vietnam because they want to fight Russia. It’s a battle against dangerous centralization. If it becomes centralized, it’s no-longer censorship resistant. Imagine a currency where censorship is available. Well, then it’s not a currency. The dream is gone and we have nothing.

“Bitcoin is as decentralized an institution as possible” - gavinandresen, it’s probably a dated quote so I won’t sa yit.

“You have centralization on the low end and the high end” - jgarzik

When you get down to small blocks, you might get centralization that behooves those with more money. You might have to take your money to Coinbase or something. If block size is pushed upward, nodes are pushed off the network, and miners do pretty well. The economy of scale might do pretty well.

“(Centralization at the 1MB end) isn’t a particularly dangerous type of centralization” - petertodd, I kinda agree.

So what is this dangerous type of centralization? Is it the large mining pools? No. Some say it’s off-chain settlement. But these are all subscriber-based centralization. A mining pool doing bad things, you can leave them. Miners can choose to leave pools. It’s a subscriber-based institution. Coinbase is a subscription-based institution. That’s a nice feature of any market dynamic. The bad dangerus centralization is not mentioned in WSJ or whatever. Bad centralization is the owners of the mining hardware.

They are centralizing, but how much? Anyone know how much? Nobody knows how much? I thought this was important. Is it possible that one person right now controls all of mining? Or over 51%? Is it possible that one person can control more than 51% today? It depends on how much money they have. You do mining in China? By the way, I love you guys. I would say a lot of the arguments about China, mostly the people in the United States think they are stupid. You will see why later. It’s a stupid mistake. Are Chinese stupid? Sometimes. Yeah, you have some smart guys over there. Some of you guys like to do backroom deals. I’m Sicilian, so I understand black-room deals, but we just copy off the Chinese. They really know how to do backroom deals. We’ll talk about that.

Last year I was hearing abut a mining oligarchy. I like that term. It sounds cool. Measuring decentralization is difficult. Why can’t we say the miners are Chinese? It’s because we don’t know who they are. It’s probably one guy who owns all this. Measuring decentralization is difficult. Measuring Bitcoin decentralization is impossible. Is it kosher for us to use the word decentralization if we don’t even know if it exists? Maybe we should drop that word.

A centralized consensus is an oxymoron. A centralized consensus is an oxymoron for civil war. Decentralization has nothing to do with hardware, nodes, It has nothing to do with hardware. You can go to Amazon’s cloud and make a million nodes right now. I can do that right now. It would look pretty good. Oh we had 5,000 nodes right now? Oh look it went to a million nodes and 5… great.

Decentralization requires counting human noses. Each nose should have one vote. Bitcoin does neither. In early 2013, almost everyone in Bitcoin meetup groups were miners. But now almost nobody there is a miner. We can’t go back to mining. Folks who own massive amounts of hardware, they choose to opt-in. If they want to centralize, they can do that.

The ugly axiom is that the two are inversely proportional or maybe even impossible. Even if blocks are lowered to 1 kilobyte, big miners are still subject to economies of scale. To assume that the chip manufacturers in China are not colluding, to print cash, it’s utter foolishness. They can sell their old chips to KNC, … etc. What’s your definition of collusion? Check google.

Even if segwit and lightning network, both genius great ideas, even if they were both working today, mining will continue to centralize exponentially. They just make it cheaper for those people to centralize. Dear engineers, not everything can be solved with more technology. No hardware or software solution will return us to 2013 where most people with small rigs were mining.

Satoshi made a fatal mistake. What was that mistake? His mistake was “Proof-of-work is one-CPU-one-vote”. I have 3 CPUs in my house, all of them are crapping out, none of them are making money from mining. He says that proof-of-work, and he’s defining it here for you, he said it’s one CPU one vote. He uses that word vote, I like that word vote, I studied voting. He understood voting decentralized. That’s all he understood about it. The only way to decentralize things is by voting. The only way to decentralize anything is by voting. There has never been any form of decentralization, there never will be, it requires identity, it requires one person one vote. petertodd made a point earlier today, he said we need identity. I think it could work, he disagrees.

Proof-of-Work is just proof-of-wealth. It’s broken. Decentralization can only work if you have real identity. If we voted for miners like we vote for politicians, then we can prove it’s decentralized, we can scale infinitely. It’s infinitely faster and infinitely more scalable. Proof-of-work is just slowing us down.

Is this possible? If so, tihs doesn’t change the most important type of anonymity, which is transaction anonymity. We can either have anonymous miners, a large unscalable network and massive centralization, or we can have Satoshi’s dream. That was decentralized consensus. Unless we inject identity…. this will also help with Bitcoin governance, we can elect people, we can decide on stuff, we can have dates and times and stuff. How long will it take for the libertarian mob to realize that politics has benefits? No governing body has ever been as decentralized as Bitcoin. That’s good and bad. Our governing body, which doesn’t exist, is all of us arguing on Reddit. We can’t vote, there’s no way to do anything, because we wait for the mob to go crazy. What does Satoshi say about governing Bitcoin? Day 1, Satoshi ran Bitcoin on 50 machines we suspect. There was an outage in the first few days.

Maybe he wanted 1 BTC per machine, because 50 BTC was the original block subsidy. I would argue for another reason. If you are going out on day 1, and you are concerned about this project, and there’s a flaw in it, does he want to reach out to the decentralized consensus to make an upgrade? Or does he want to instantly run a 51% attack, slap on an upgrade… he did it to run a 51% attack on Bitcoin. He likely ran hundreds. He also had hidden hard-forks in some of the early git commits.

Early decentralization terrified him. He wouldn’t be able to run updates. This is what he did to make decisions, to move faster, to upgrade things. He sacrificed everything to get to his final goal. To get to decentralized consensus, you must start with centralized decision making. Satoshi was focused on making a pen that writes.

Bitcoin isn’t protected by math. It’s protected by us. It’s a social consensus. It’s people. It requires voting and politics and convincing majorities. Jihi Peng in China could take over Bitcoin right now.

So if you have problems with this, blast me, @JamesGDAngelo. I want to be wrong. That’s it. Do we have time for questions? There’s some time.

Mark Friedenbach: You seem to be making a decision that decentralization is best used by one person one vote. We already have political money. Wouldn’t it be good to try non-political money?

James: Yes, I think it’s good to try. Try away.

Q: Noses are biometric.

James: Well, I think the fact that everyone has some place in the center of their face, I don’t think we need to use software to have a nose. I am talking about counting human souls. I am not the biggest fan of biometrics.

Q: As far as I know, ethereum has been moving away from proof-of-stake. Does proof-of-stake make you feel better about this?

James: Dagger, swagger, slasher, vixon, I’ve been watching this for a while. He has moved into proof-of-escrow instead. There’s some issues. There are economies of scale. The problem is the economies of scale. Miners can buy more hardware, cheaper each time. When we see the hashrate rising enormously, is there an economy of scale? Yeah, there probably is. I am not optimistic that proof-of-stake can work. Does anyone understand NxT’s proof-of-stake? Write it up or something.

Darren Miller: I have a question about the 21 Bitcoin computer and the chip that is in there. What’s going to happen in the future with that? Does it have any effect on decentralized?

A: If we all got together to save the world, I think that’s where 21 is going, they don’t understand the tragedy of the commons there. Most people are not going to invest to lose money. If we all got together and put money into bitcoin to save it, there’s nothing in the history of man, ….. 21 has to solve climate change first. That’s my thing.

Joe: You seem to have a dystopian view on Bitcoin. What do you think we can do to fix this?

James: We need to… we should not make a Bitcoin congress with 1000 individuals, and mine. Governance, immediately. We would all respect them or hate them if they got mining rewards. We have to make sure we have a decentralized base. This happens authentically at about 200 individual humans. It’s hard to rock 200 people with bribery. With a thousand, you might be pretty secure. I think it’s actually amazing, we could go to Visa scaling and type tomorrow, if we did this and if we don’t, then we can pretend that economies of scale don’t work. But they do. It really messes us up.

Q: I am new to Bitcoin. I am from China. I would like to ask, what percentage of Bitcoin is mining in the United States? Since you assume that China has been colluding, and that it’s a large community, then what about the United States?

James: Like the USSR vs the US and we will both make enormous missiles? So maybe the US would buy equally? We don’t know those numbers. We don’t know who’s mining where. We don’t know if the American miners are controlled by the Chinese. You cannot decentralize hardware. You can decentralize people, not hardware.

Why are people not hardware?