Monday, October 30, 2017

A branch of SJWs: deniers of Bitcoin miners' power

The Bitcoin has forked to several currencies and a new fork will materialize in the middle of November. Arguments between various people connected with the Bitcoin are the reasons why these branches of the Bitcoin are being created.

These arguments may look like some unimportant technicalities about details you couldn't possibly care about – like the splitting of the Christian church (Martin Luther wrote 95 theses exactly half a millennium ago, more than a century after Mr John Huss was burned at stake, and Protestantism was born).

But when you study the details a little bit and especially when you discuss with the champions of both sides, you will realize that the basic argument isn't technical at all. It's basically a standard argument between "pro-capitalists" and "fans of meritocracy with rules" on one side; and "communists" or "SJWs" on the other side. Why is it so? What's going on?

First, we must understand what kind of people are connected with the Bitcoin. Read Satoshi Nakomoto's original paper to understand what is really new about the Nakomoto-based cryptocurrencies.

First, someone holds the Bitcoins. For example, Tony has several Bitcoins left after he got a highly suboptimal "sell" recommendation from a guy who isn't an Oracle of Pilsen. ;-) The price of one Bitcoin is over $6,000 and there are some 17 million Bitcoins "in circulation" – their number will approach some 21 million in the future (the difference from 21 million is exponentially shrinking).

Given the fact that there's some software which is analogous to the Internet banking, these holders of the cryptocurrencies are analogous to owners of any currencies or, somewhat more accurately (because of the huge volatility etc.), commodities. They may be considered clients of the "financial institutions" – analogously to clients of banks who have their Internet banking. They don't need to learn almost anything. They just own "something" that they very rarely use to buy something, e.g. a pizza for $60 million.

Who are the financial institutions? That's an interesting question. A financial institution is an organization that may charge you some fees for remembering how much money they store for you, that may allow you to pay to others, guarantee that you won't lose the assets too easily, and so on.

In the case of the regular commercial banks, who are the banks? Well, it's some abstract companies, legal persons. But who are companies? The people who own them are the companies – the shareholders. The stockholders of a bank own parts of the bank. And owning really means having a control over it. If you own something, you can control it. If you can control something, you own it. Some everyday decisions may be done by the CEO and managers, not the stockholders, but those are picked by shareholders at the shareholders' meeting.

The managers are being chosen instead of the stockholders themselves because the stockholders aren't quite qualified to do the expert work; they are often too rich (many of them are spoiled brats who inherited the wealth) so they don't need to do any work at all; so they just pick someone who will do not only the straightforward work but who will also make some decisions that may affect the profits and the value of the company but the assumption still is that if the managers are chosen well, they will serve the company i.e. the stockholders much more nicely than what the stockholders could do themselves.

Now, who are the stockholders of the "bank" called the Bitcoin? It's clearly the miners. Nakamoto constructed the Bitcoins so that the decisions about the confirmation of transactions are done simultaneously with the mining of new coins, and these newly mined coins are also the fees that the miners are charging for playing this important role. So the analogy is perfect. The miners are "stockholders of the bank" responsible for the Bitcoin payments and they're making profit from the transaction fees, much like regular banks – although the precise rules determining the magnitude of the fees are much more complex and dynamical.

Like stockholders of banks, miners may in principle lack any real expertise. A stockholder of a bank may just write a "buy" order on his e-broker application and he buys some stocks. Google or Exxon or McDonald's are bought equally easily – you don't need to tell the difference between a Google map, oil, and a hamburger. Similarly, miners may buy lots of GPUs (graphics processing units), the hardware, and ask someone to run the code that is needed for mining of the Bitcoin. Like the stockholders of regular banks, miners' main role is that they're the owners i.e. the people who can ultimately decide about everything. It doesn't mean that they decide every small technical detail – they're too lazy or rich for that, as I have previously mentioned. But when there is an argument between an owner and a manager, it may be resolved once the owner says "you're fired" to the manager.

It's how it works in the Bitcoin world, too. The validation of transactions is done simultaneously with the mining and the miners – collectively, while the relative power is proportional to their "hash rate", i.e. how much or how fast hardware they run – have the ability to validate the transactions, charge the fees, and/or modify the rules. The miners are some rich people who can buy lots of hardware, if you wish, and they don't need to be top experts in cryptography and lots of other things. It's supposed that they can hire someone who does these technical things for them. But they're the "capitalists" owning the "financial institution" that guarantees the integrity of the payment system.

Bitcoin forks and the sides of the conflict

At some basic level, all the conflicts are basically conflicts between the miners on one side; and various developers running the websites, fans, random clients (owners of the coins) etc. on the other side. I will repeat the same point several times but again: Who is right about the "rules and fees" when there is a serious argument? By definition of the Bitcoin, the miners are right. They "vote" by their relative hash rate. Everyone else is either their employee (coders) or a client (owners of coins). This statement results from a simple combination of "basics of capitalism" with the "basics of the Bitcoin philosophy".

What is the main topic driving the disagreements?

Well, it's actually simple. Miners generally want the would-be currency to be usable for lots of transactions so they want to make them cheap and easy enough. When the transactions are kept relatively cheap (and they're already much more expensive than payments done without any cryptocurrency), there's a hope that the Bitcoin may actually be used for buying regular things in the future. This is how they see the future of the Bitcoin. It won't really become a currency because the volatility prevents people from defining fixed Bitcoin prices of anything. But if you hoped that the Bitcoin will be used to buy a hamburger again sometime in the future, you just want the fees for such small purchases to remain relatively low.

How do you achieve it? The miners want a relatively straightforward ledger or blockchain where lots of transactions may be simply written down without too much calculation. In particular, this means "large blocks". The version of the Bitcoin that is still called BTC, "the Bitcoin", has blocks that are at most 1 megabyte in size; see latest blocks, the limit is almost always saturated. These blocks look increasingly insufficient for a growing number of transactions that the clients want to make and various recipes have been proposed to fight this "scaling problem". The most straightforward recipe was to increase the maximum size of the block – to 8 megabytes. Bitcoin Cash was born in August.

So Bitcoin Cash with these larger blocks is a favorite solution by the miners. There will be another fork of the Bitcoin, the Bitcoin 2x currency from mid November. They differ by numerous other technical things (e.g. Segregated Witness, SegWit, replay protection yes/no, and others), but let's only focus on the block size because it seems really essential in the sectarian conflict between the Bitcoin cultists.

Fine, so Bitcoin Cash (BCC or BCH) and Bitcoin 2x (B2X) will be two of the forks that miners like because they allow relatively cheap transactions in the future when the number of transactions grows large. On the other hand, you have the main Bitcoin (BTC) and Bitcoin Gold (BTG) that branched a few days ago but the coins will only be mined and transferred on November 1st. BTC and BTG are the favorite cryptocurrencies of the SJWs. I will explain who they are and what they want momentarily.

One important point is that BTC remains the most valuable coin because it's considered the "original one" that Satoshi Nakomoto created. But this very statement is already very fishy. Whenever the Bitcoin forks, both children are born almost symmetrically and there's no truly canonical way to identify one of the children with the parent. Changes of the detailed rules can be made in general so just the existence of some change isn't a reason to say that one of the forks is "real" and the other is "not".

Because of the irrational behavior of the people, the brand "the original Bitcoin" automatically makes the coin more attractive among the clients. The original Bitcoin has actually increased its share of the cryptocurrencies' capitalization slightly above 50% in recent weeks. OK, if you control (also, if you own) a currency that people call "the original Bitcoin", you have a big advantage.

What the anti-miner SJWs want

OK, I said that the miners want a sensible thing, to keep the fees low enough, at most "dollars", so that the would-be "currency" could be used to buy mundane things in the future. When you increase the block size, as the miners want – and as they did when they established the Bitcoin Cash – there's one extra consequence that is considered "negative" by some folks: the mining becomes more centralized because the larger blocks are less likely to be found by small players. It's really natural for the centralization to increase. In some sense, the miners are naturally creating "cartels" like in the 19th century capitalism because it makes many things better for them. It also means that the average relative size of the top 50% miners tends to increase. And some people want to fight against this natural, spontaneous evolution of the "capitalist" system.

The Bitcoin is in principle "decentralized" – that's how it differs from a trusted classical bank. But you may ask "how much decentralized" it is. And when you have a bigger block size, the answer just happens to be "less decentralized". And this is apparently a big problem, a self-evidently ideological problem, for some people non-miners, the SJWs, because they don't want the Bitcoin to be just a decentralized currency in principle. They want it to be as decentralized as possible. It's almost equivalent to the statement that they want a maximum number of small miners to participate i.e. as big redundancy and wasting of energy coming from it as possible. The decentralization is the main pillar of their religious belief and they want to maximize it – even if it meant to pay a $50 transaction fee for a hamburger. ;-)

If you have the feeling that I make it sound as if this side is composed of batšit crazy nut jobs, the reason is that this side is composed of batšit crazy nut jobs, indeed. OK, they reject larger blocks and other things that would be helpful to make the Bitcoin more usable as a currency.

But it's worse than that. They don't really understand who is in charge. Every system that works must make it rather clear – ideally defined through operational procedures – who is in charge. And the Bitcoin is a well-defined meritocracy in this sense. It says that the power over the validation of transactions and changes to the rules of the Bitcoin is done by the miners. I must emphasize that this isn't a rule that must be interpreted and imposed by some human judges; instead, it's a summary comprehensible to human ears of the effective behavior of the algorithms inside the Bitcoin. They just guarantee that a majority of miners has quite some power. As I have explained in several previous blog posts, someone has to have this power if any improvements and fixes are supposed to be possible at all. Who has the power to introduce improvements and fixes? Nakamoto's answer is clear: it's the "stockholders of the bank", namely the miners, with the relative power given by their hash rates. Everyone else who wants to talk about the system and algorithms is just their employee.

I have interacted with numerous Bitcoin cultists who aren't just obsessed with the Bitcoin. They're also obsessed with their jihad against the miners. Given the fact that the "Bitcoin" really means "Power to the Miners", this combination of religious beliefs is crazy but craziness is their defining characteristic. And in this obsession, they completely overlook the main – and only – clever idea that Nakamoto has really brought to the world of digital currencies, namely that the power to decide may be weighted by the "proof of work" (PoW), by the hash rate. The "voting" is an actual procedure that is not just vaguely defined but it is fully implemented by algorithms that Nakamoto has already written – and others have improved them just a little bit. When the nodes and miners are connected in the appropriate way and equipped with the relevant programs, it's guaranteed that the miners automatically vote and their number of votes is proportional to their hash rate – basically a number of GPUs they run.

Are there alternatives to this system? Yes, there may exist alternatives but they're much less successful. The proof of work (PoW) may be replaced with the proof of stake (PoS). Essentially the same decisions are obtained by a vote but the "voting power" is proportional to the number of coins you own. A problem is that if you (or a coalition of you and your friends) buy over 50% of the coins, you may crowd out the remaining ones – and rob them of everything. And it seems easy to create such coalitions etc.

There exist other ways to define the power of the votes which completely change the system.

But the SJWs who want maximum decentralization want a completely different system. They want all the decisions to be made by some screaming obnoxious trolls and SJWs such as themselves and the only criteria that would decide about the strength of someone's vote is "how much they scream that they are smart", "how much they talk about the Bitcoin community", "how much ideologically blinded they are", "how much mindlessly they verbally support maximum decenralization", and stuff like that.

If you think about what they are actually proposing, it is very clear that they want to turn the whole system into complete mess. They want to eradicate the meritocracy altogether. First of all, the "Bitcoin community" isn't even a well-defined term. If the "Bitcoin community" were deciding, would I vote as well? I have some fraction of a Bitcoin but I think it's ludicrous to suggest that this may become a currency. If I get a vote, how strong will it be? Will owners of some Bitcoin exchanges count? Webmaster at key Bitcoin websites? And so on. It makes no sense. There is no way to define the "Bitcoin community" and if decisions depended on definitions of such vague terms, the whole system would be a complete mess.

The mess would become even worse if you tried to impose the additional criteria and would-be advantages of the pro-Bitcoin nut jobs.

So whether they like it or not, the basic rules of logic imply that in any well-defined operational system, there exists some procedure that determines who is really powerful to influence some decision. In the case of the Bitcoin, it's the miners. They have some interests and may listen to smart coders from organizations with would-be impressive names. But they don't have to listen to them and when there's a disagreement, miners may decide what they use their hardware for (what cryptocurrency, according to which rules, they will be mining). You may say that the coders are competing for jobs but the miners have the right to pick – and the miners are in no way obliged to pick a random or representative coder or a member of a majority in any sense. For this reason, referendums done among the coders are irrelevant for the Bitcoin – unless the miners decide to listen to their outcomes voluntarily.

It just means that the mostly Chinese miners are in charge of all these decisions. They still seem to be "mostly private" entities. They may be nationalized and the decisions would become much more centralized – they would be made in an organ of the Chinese Communist Party. But that's how the Bitcoin works. There is no other Bitcoin where decisions would be made according to "how much you are an insufferable SJW aßhole" and if you tried to create such a currency, it would be lethally defective from the beginning.

Let me also mention that it's normally said "the miners follow the money" which means "they mine for the currency that is most profitable". This slogan is supposed to downgrade miners into dull, predictable automatons. But it's important to understand the character and limitations of this "kind of truth". It's true in some long run and when you omit any short-term tactics as well as long-term strategies. When things are simple, it may be expected that the miners focus on the most profitable currencies. But it's still very important to realize that they are not obliged to do so and they may pursue various short-term and long-term goals that invalidate simple predictions obtained from the "immediate profit theory". Miners may also make short-term financial sacrifices in order to unlock some new long-term profits resulting from complex strategies and they may affect the inner workings of cryptocurrencies much like stockholders may affect strategies of their bank and whoever neglects this fact unavoidably misunderstands the main source of free will in this game as well as the diversity of the cryptocurrencies and banking strategies.

An hour ago, I had a Twitter exchange with one of these far left anti-miner Bitcoin loons. He was obsessed with the idea how smart he is but he just couldn't understand, even in the case of the regular companies, why it's essential that the owners are those who are finally making the decisions in the case of any deep disagreement. It's essential because it's the whole difference between capitalism and communism. The owners may fail to be the most ingenious people in the world but they care about their profits, about their assets in general, so it's in their own interest to listen to smarter people who could give them good advises or provide them with services that require some expertise.

This far left loon says that a coder in some self-anointed Bitcoin organization is automatically smarter than the average miner, so the coder must decide. But that's just completely missing the logic that makes capitalism work – and that makes communism fail. Everyone can claim he is smart but there must be mechanisms that actually choose who is right. And they only work if one's well-being is affected by his results. And that only works if the owners are those who are actually making the ultimate big decisions (e.g. at the stockholders' meeting).

In communism, apparatchiks may be praised for being ingenious but most of this praise is just hogwash. It's just propaganda needed to make people believe that the system works – because it clearly requires the people in charge to be smart and skillful enough – except that the system self-evidently doesn't work. Communism doesn't have a real power to choose the skillful people for the jobs. And even if they were skillful, they will soon or later switch to efforts to work for their own personal interests which may be very different from the interests of the company or the nation exactly because they don't actually own the company or the nation.

Nakamoto has introduced a new kind of meritocracy, one that allows networks to vote by their hash rates. The miners may be decentralized to some extent and this fact may make them look more trustworthy from some viewpoints. However, these insufferable communist SJWs would like to replace the Bitcoin meritocracy with another pile of committees of whining feminists, environmentalists, and other red Bolshevik dumplings. I am sorry but if a currency were based on these principles, it would be absolute junk, the least trustworthy thing in the world that you may imagine.

Bitcoin brand and hash rate

I have mentioned that a part of the battle is a battle to get the brand of the "main Bitcoin". Because people are irrational and think that one of the current currencies must be "the same" as the original Bitcoin while the other forks of the Bitcoin are "different" – even though this assumption is rubbish because the four Bitcoin forks have split from the very same parent and copied the block chain up to some moment (and because they should look for the best currency, not the "oldest one", anyway) – it's important for many to get the "main Bitcoin". So a possible plan of the miners for November 2017 is to bring BTC to a big trouble, make it effectively unusable and worthless, and declare B2X (currently worth about $1,000 according to the futures) to be the "main Bitcoin". (Be sure to have the Bitcoins at a place where you will have an access to the new B2X fork in two weeks – the price of B2X will be at least a sizable fraction of your wealth and BTC may be completely destroyed if an ambitious miners' plan works.)

Most of the large Bitcoin exchanges are rational and they realize that this may happen. When the consensus of the miners works in such a way that it kills or disfavors or suppresses the price etc. of the BTC, it makes sense to promote "another child of the parent Bitcoin" to the "main new Bitcoin". So Coinbase and others have mentioned a branding convention they will follow:
"The main Bitcoin" will be reserved for the child with the largest integrated difficulty.
So you basically calculate how much GPU effort was needed to calculate all the blocks in a given chain – and the Bitcoin child that has consumed the largest amount of the GPU operations (quantified in a proper way) should be called the "real Bitcoin". This is fully in agreement with Nakamoto's basic thesis that the miners vote with weights given by their hash rates. Normally, the miners are validating blocks with transactions and they compare several trees – and choose the tree with the largest number of blocks.

But if and when the Bitcoin splits into several currencies, the trees start to be very different and become incommensurable. In that case, it's better not to compute just the number of blocks because they can be "different size blocks" or "different blocks". It's better to compare the chains by the total number of GPU operations or something like that. If the miners spend a greater number of operations on B2X than BTC in coming months, it makes a lot of sense to say that B2X is the "real Bitcoin".

This makes absolute sense and is fair. Note that the decision is made according to an operational procedure that generalizes Nakomoto's consensus underlying the whole Bitcoin.

The obnoxious SJW Bitcoin cultists often say things like "Bitcoin is just Bitcoin, no miners can change what the Bitcoin is". Statements like that prove that they are completely and utterly clueless. They just don't understand at all that "which of them is the real Bitcoin" is a matter of conventions and there should exist a well-defined procedure that allows the exchange to decide which of them will be called the "real Bitcoin".

What's going on is obvious: the SJWs also want an "operational procedure" to calculate which Bitcoin is real: ask a few leading sheep in the herd which of them is real, they just pick something according to their ideology or their breakfast, and the remaining stupid sheep will just say that "this cryptocurrency is the real Bitcoin" because their leading sheep have named it BTC. They misunderstand that a choice has been done according to some – totally fishy, emotional, arbitrary – criteria as well. They don't care. They just want to parrot random junk and claim that they're smart when they do so.

You're a bunch of breathtakingly stupid idiots, SJW Bitcoin cultists. The Bitcoin cannot be a currency for many reasons but it's still some kind of a meritocracy where the miners vote according to well-defined rules. You are trying to make everything relative, poison it just like you, feminists, environmentalists, and other toxins have poisoned so many parts of the society. I sincerely hope that this toxic influence will be defeated and the miners will defend what the Bitcoin is against lots of organized SJW trolls who spread their idiocy and try to intimidate everybody.

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