As human beings we place value on our possessions, our feelings, our relationships. To measure, transfer and store this value, we invented money. However, every iteration of money through the ages, from shells to paper fiat, have depended on trust. This trust on physical items or trusted parties have been and will always be compromised and/or betrayed.
Bitcoin
On January 3rd 2009, Satoshi Nakamoto, gifted us Bitcoin, and it turned out to be the most perfect form of money ever invented. It is completely trustless, with built in checks and balances, so that no faction can successfully capture the system.
a) The protocol pays for itself, with predictable issuance of new coins and transaction fees which miners fight to win through a brutally competitive proof of work mechanism.
b) Developers maintain and improve different implementations of the protocol with different properties that their followers find useful, which they can then profit from.
c) Users give Bitcoin its' value, build and support the infrastructure to measure, transfer and store this value.
The system is trustless and perfect, and because it is trustless, different groups invariably strive to introduce trust for their own purposes.
Protocol Capture
The first and smallest group are the developers. They are the gurus, the gatekeepers and they will attempt to make theirs the only gate through which everyone must pass. To do this they will use every means of control including persuasion, threats, misinformation and censorship. This in itself is not bad and to be expected. However if a developer group becomes too powerful and tyrannical, users and miners and other developers will bypass them.
The second group are the miners. They strive to accumulate as much mining power as possible but are constrained by the fact that if they gain too much power, Bitcoin becomes less valuable. However, before that can even happen the developers and users will curtail their power.
The system is immune to coercion from all unfriendly entities including governments.
The mechanism by which the system corrects and protects itself is the Hardfork.
Hardforks and Softforks
Softforks are an integral part of the system. It is a simple, noiseless and non consensual way to introduce changes into the protocol. However if the process is pushed too far by introducing unwanted and unacceptable changes that users reject, the system corrects itself with a Hardfork.
A hardfork presents a decision point to the users, which is all of us including miners and developers. It is a noisy process but the result is that the fork that users want to use becomes The Real Bitcoin, because it is we the users that give Bitcoin its' value.
Centralisation and Decentralisation
Every fraction seeks to introduce some level of centralisation and trust into the system from which they can profit and extract value. There has been much talk against centralisation and campaign for full de-centralisation by the very groups that surreptitiously use centralisation to push their agenda.
Total decentralisation while being the ultimate is not achievable. Good enough decentralisation to keep the system in check will do, and if the system gets out of balance it will be corrected by a Hardfork.
Proof Of Work and Proof Of Stake
It comes down to which system delivers less trust. Proof of work is totally democratic. Anyone can participate. They can choose to mine directly with their own miners or mine in the cloud, and the entry cost of cloud mining is very low indeed. This gives everybody who wishes, a chance to get access to bitcoins by purchasing it or mining for it. Over time bitcoin will be widely distributed.
Proof of Stake on the other hand favors the rich. Only the rich can afford to stake their tokens. Over time this system guarantees that wealth gets concentrated in the hands of a few. Tinkering with the Proof of Stake algorithms only seeks to make the system less subject to being gamed. It can never fix the problem of wealth distribution and concentration of power in the hands of the few.
Proof of stake also removes the third leg of the check and balance process. By removing the miners the system is rigged on the side of wealthy token holders and developers. This is a fundamental weakness that over time, will collapse the system from within.
Bitcoin is not a fraud
A fraudulent system requires trust. Unsuspecting victims are enticed to trust the system, and the fraudsters profit by breaking that trust. Bitcoin is totally trustless. You do not have to trust anybody. Not even Satoshi.
Segwit introduces trust
Bitcoin is a continuous verifiable chain of signatures. Addresses and signatures are always available for verification because a large number of participants will keep the full copy of the blockchain as their businesses depend on it.
With Segwit the signature is separated and there is no requirement for nodes to keep the chain of addresses after verification. This will result in the introduction of trusted super nodes that hold the full signature block. These trusted super nodes can then extract fees for providing access.
Privacy
Bitcoin is pseudonymous and not anonymous. This is not desirable but it is something that the authorities can live with. Some users will want transparency, some will want privacy while others will want complete anonymity. Bitcoin can be tailored to fit all users. Total anonymity from the outset will only invite regulatory pressure and slow down the process of bitcoin adoption.
The Real Bitcoin
There can only be one Bitcoin. It is the one that has the most number of users, the most developers, the strongest security, the largest infrastructure, and above all the least trust.
Bitcoin
On January 3rd 2009, Satoshi Nakamoto, gifted us Bitcoin, and it turned out to be the most perfect form of money ever invented. It is completely trustless, with built in checks and balances, so that no faction can successfully capture the system.
a) The protocol pays for itself, with predictable issuance of new coins and transaction fees which miners fight to win through a brutally competitive proof of work mechanism.
b) Developers maintain and improve different implementations of the protocol with different properties that their followers find useful, which they can then profit from.
c) Users give Bitcoin its' value, build and support the infrastructure to measure, transfer and store this value.
The system is trustless and perfect, and because it is trustless, different groups invariably strive to introduce trust for their own purposes.
Protocol Capture
The first and smallest group are the developers. They are the gurus, the gatekeepers and they will attempt to make theirs the only gate through which everyone must pass. To do this they will use every means of control including persuasion, threats, misinformation and censorship. This in itself is not bad and to be expected. However if a developer group becomes too powerful and tyrannical, users and miners and other developers will bypass them.
The second group are the miners. They strive to accumulate as much mining power as possible but are constrained by the fact that if they gain too much power, Bitcoin becomes less valuable. However, before that can even happen the developers and users will curtail their power.
The system is immune to coercion from all unfriendly entities including governments.
The mechanism by which the system corrects and protects itself is the Hardfork.
Hardforks and Softforks
Softforks are an integral part of the system. It is a simple, noiseless and non consensual way to introduce changes into the protocol. However if the process is pushed too far by introducing unwanted and unacceptable changes that users reject, the system corrects itself with a Hardfork.
A hardfork presents a decision point to the users, which is all of us including miners and developers. It is a noisy process but the result is that the fork that users want to use becomes The Real Bitcoin, because it is we the users that give Bitcoin its' value.
Centralisation and Decentralisation
Every fraction seeks to introduce some level of centralisation and trust into the system from which they can profit and extract value. There has been much talk against centralisation and campaign for full de-centralisation by the very groups that surreptitiously use centralisation to push their agenda.
Total decentralisation while being the ultimate is not achievable. Good enough decentralisation to keep the system in check will do, and if the system gets out of balance it will be corrected by a Hardfork.
Proof Of Work and Proof Of Stake
It comes down to which system delivers less trust. Proof of work is totally democratic. Anyone can participate. They can choose to mine directly with their own miners or mine in the cloud, and the entry cost of cloud mining is very low indeed. This gives everybody who wishes, a chance to get access to bitcoins by purchasing it or mining for it. Over time bitcoin will be widely distributed.
Proof of Stake on the other hand favors the rich. Only the rich can afford to stake their tokens. Over time this system guarantees that wealth gets concentrated in the hands of a few. Tinkering with the Proof of Stake algorithms only seeks to make the system less subject to being gamed. It can never fix the problem of wealth distribution and concentration of power in the hands of the few.
Proof of stake also removes the third leg of the check and balance process. By removing the miners the system is rigged on the side of wealthy token holders and developers. This is a fundamental weakness that over time, will collapse the system from within.
Bitcoin is not a fraud
A fraudulent system requires trust. Unsuspecting victims are enticed to trust the system, and the fraudsters profit by breaking that trust. Bitcoin is totally trustless. You do not have to trust anybody. Not even Satoshi.
Segwit introduces trust
Bitcoin is a continuous verifiable chain of signatures. Addresses and signatures are always available for verification because a large number of participants will keep the full copy of the blockchain as their businesses depend on it.
With Segwit the signature is separated and there is no requirement for nodes to keep the chain of addresses after verification. This will result in the introduction of trusted super nodes that hold the full signature block. These trusted super nodes can then extract fees for providing access.
Privacy
Bitcoin is pseudonymous and not anonymous. This is not desirable but it is something that the authorities can live with. Some users will want transparency, some will want privacy while others will want complete anonymity. Bitcoin can be tailored to fit all users. Total anonymity from the outset will only invite regulatory pressure and slow down the process of bitcoin adoption.
The Real Bitcoin
There can only be one Bitcoin. It is the one that has the most number of users, the most developers, the strongest security, the largest infrastructure, and above all the least trust.
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