news.bitcoin.com Bitcoin’s 'Existential' Challenge: Core Developer Warns of a New Era of Internal Struggles May. 12th, 2024 Bitcoin faces a pivotal period that echoes the past block size wars, according to Bitcoin Core contributor Matt Corallo. In a recent blog post, Corallo examines the ongoing struggles within the Bitcoin community that could determine the future of the pioneering cryptocurrency. From Freedom to Fragmentation In his latest blog post, Matt Corallo outlines the progress and setbacks in Bitcoin’s development over the years, emphasizing the community’s efforts to maintain bitcoin as a tool for financial freedom. “To most of us, bitcoin was always a tool for freedom—freedom to transact with who you wanted without trusting any third-party who could prevent you from doing so— But this is now a question,” Corallo explains. Despite these ambitions, the presence of untrusted parties in transaction processes remains a challenge, potentially undermining the decentralized ethos of Bitcoin. The developer also discusses the regulatory challenges that have increased as Bitcoin has grown more mainstream. He notes a significant shift in the ecosystem, with many participants now prioritizing investment security over the foundational principles of non-KYC, decentralized payments. Corallo criticizes the community’s focus on securities reform over more pressing issues like transaction privacy and decentralization. “We squandered it expending all of crypto’s political capital pushing for securities reform to ensure token issuance is (maybe) legal rather than trying to ensure people can meaningfully transact without the entire world learning what they’re doing,” he states. Lastly, Corallo addresses the centralization of mining operations and the risks it poses to the network’s autonomy. He expresses concern over the centralized nature of bitcoin mining and the lack of enthusiasm for decentralizing this crucial aspect of the Bitcoin network. Despite these challenges, Corallo sees a path forward that includes enhancing wallet privacy, investing in regulatory changes, and expanding scalability solutions beyond the U.S. “Sadly, all of these areas are horribly underinvested in,” he laments, calling for a collective effort to realign with Bitcoin’s original goals. On the social media site X, Corallo expressed that these “next few years are as existential for bitcoin as the [block size] wars. Back then it was about who got to decide what bitcoin was, now it’s about what bitcoin is,” he noted. Following Corallo’s post, the statements generated considerable attention from the community. “Framing @reardencode’s tweet as an event indicating we’re ‘on the cusp of another civil war’ is needlessly divisive and hyperbolic,” responded Olaoluwa Osuntokun, Lightning Labs co-founder and CTO. “We should be uniting all efforts on the goal to improve privacy+scalability, not tear down fellow devs ready to take up the torch,” Osuntokun added. Osuntokun was referring to a specific X post from @reardencode (Rearden) that states, “Loving this rumor that miners might try to activate CAT. Embrace forks,” Rearden wrote. “What I’m curious about: who will sell against CAT? I won’t, even though I think there are better paths for Bitcoin next than CAT. I’ll hold both if this turns into a chain split.” Rearden’s post on X delves into the contentious Bitcoin Improvement Proposal (BIP) aiming to reintroduce the OP_CAT opcode to Bitcoin. In a subsequent X post, Corallo also tackled the topic of miner-activated forks. The Bitcoin developer stated: Several individuals responded to Corallo’s latest comments. “According to this Bitcoin Core developer, ‘every layer of bitcoin is centralized and ripe for regulatory capture,’” Blockchair’s lead developer Nikita Zhavoronkovsaid in response to Corallo’s statements. “And after refusing to scale Bitcoin, they suddenly don’t ‘have any great solutions’ for ‘making bitcoin actually useful for transacting.’” While reposting Corallo’s X post, Drivechain developer Paul Sztorc wrote, “As usual, the top Bitcoin minds are catching up to the things I was saying 24 months earlier.” As the Bitcoin community grapples with another identity crisis and scaling challenges, the collective of BTC proponents finds itself at a critical crossroads reminiscent of past internal conflicts. To some, the discourse and developments underscore a pressing need to recalibrate Bitcoin’s trajectory toward its foundational principles of decentralization and privacy. Despite diverging viewpoints and the looming threat of regulatory encroachment, the path to a unified and resilient Bitcoin ecosystem hinges on collective efforts to overcome the entrenchment of centralized elements. Some argue that mining has become centralized, while others with differing views contend that Bitcoin’s development at the protocol level is both centralized and stagnant. The reality is, whether people agree or not, both may require significant restructuring. At 4:00 p.m. Eastern Time on Sunday, the X vertical trend “Bitcoin Core” was trending with a few thousand posts on the subject.
No reaction yet?? This sounds like a real crisis that could result in internal rift. It seems like we're going down the same rabbithole as the Communist International. Anyone old enough to remember the rivalry between Stalin and Trotsky?
decrypt.co Bitcoin’s Future Is ‘Bleak’ and Ripe for Regulation, Core Developer Says May 14th, 2024 One of the most prolific contributors to Bitcoin development warns that the leading blockchain network is on a dark path toward global regulation. In a blog post on Saturday, Matt Corallo said Bitcoin’s long-assumed mission to be a private, scalable, and trustless monetary tool is now being called into question, with years of effort failing to implement that vision in any practical sense. “Sadly, all the ideas for making Bitcoin (or any cryptocurrency) actually useful for transacting trend towards having some untrusted party in the flow of funds,” wrote Corallo. “We just haven’t cracked building cryptocurrency payment rails without an (untrusted!) party being involved.” The end result will be regulatory capture, he predicts, a world where government authorities succeed in restricting or controlling crypto toward their own ends. “I’m not saying these things aren’t great or don’t provide scalability, they often are and do,” Corallo told Decrypt, “but that they rely on intermediaries, often of the centralized variety.” Bitcoin scaling technologies in use today—such as sidechains like Liquid or Rootstock—do enabling faster and cheaper payments, but also require users to trust a company or federation to not steal their funds. Meanwhile, Corallo adds, the more popular Lightning network has a notoriously poor user experience, requiring custodians and Lightning service providers (LSPs) to build front ends for practical use. Corallo’s criticism also extends to rollups, a newer form of Bitcoin scaling tech that takes inspiration from other blockchains. In fact, the developer believes trustless scaling remains elusive to cryptocurrencies at large, since even more programmable blockchains like Ethereum have failed to crack the code. “The point of highlighting that this is cryptocurrency-wide and not Bitcoin-specific is that this isn’t solvable with some kind of soft fork to increase expressivity,” Corallo told Decrypt. “This isn’t passing judgment on if we should or should not do any specific soft fork to increase expressiveness, but pointing out this is largely an unrelated problem.” Roadblocks in these areas have contributed to a visible change in how Bitcoin is perceived by its users. Many new participants, Corallo wrote, are “only interested in a 21M coins limit and seeing any form of non-KYC payment rails as hostile to the value of their investment.” Over the past year, some of Bitcoin’s most avid institutional supporters have outright dismissed the asset’s role as a medium of exchange. Paypal co-founder and Lightspark CEO David Marcus said in September that BTC “is not the currency that people will use to buy things," asserting that fiat currencies on the Lightning network will be the preferred payment rail of the masses. Earlier this year, MicroStrategy executive chairman Michael Saylor extolled Bitcoin’s role as a store of value while calling its role as currency “a distraction” that is “controversial” with regulators. Indeed, the U.S. government recently arrested the developers of Samourai Wallet, a Bitcoin wallet designed to facilitate private transfers through CoinJoin transactions. Samourai’s software never took control of user funds, though it did require a centralized server to coordinate transaction mixing, giving it a single point of failure for regulators to target. The clampdown prompted a “final warning” from famous U.S. government whistleblower Edward Snowden, who pushed developers to implement a Bitcoin protocol-level privacy change. According to Corallo, the crypto industry has already squandered its chance to ensure regulatory protection for non-custodial crypto intermediaries, instead focusing its efforts on securities law reform. What’s worse, the present state of mining pool centralization has left even Bitcoin’s foundational layer “ripe for regulatory capture.” “With where Bitcoin is today, it's hard not to see a bleak vision of the future,” the developer concluded. “If Bitcoiners want to preserve what we’ve built and fight for it, the focus needs to be on drastic improvements to default wallet privacy across the ecosystem, aggressive investment in regulatory change, and operation of scalability solutions across the world.”
My take, and I'm by no means an expert on this given that its getting highly technical, is that if there is a split, the only decision you have to make is which fork to follow. John of course can give us first hand experience of what happened the last time, but the smart ones stayed with the old fork, and the new fork dropped in value tremendously. (and the smart ones switched and got double the coins!) The unknown, which was brought to light already, is which one will the ETFs follow. This could be seen as a huge issue. But my perspective is that everyone will fight, and even if nothing happens, bitcoin continues to churn out blocks. If there is no update, if there is no fork, if there are no improvements, bitcoin still goes on. Its kind of like the earth and global warming. Even if 90% of people die, the earth lives on. The other animals will flourish, and eventually humanity will as well. We started with perhaps only a few hundred thousand people around 100,000 years ago, and even if we nuke 99% of the population, those people who have genetic ability to fight radiation will do well and the rest of us just die off. So I'm honestly not that worried. Nobody who believes in bitcoin is going back to central bank money. And I also believe that no country will prosper in the next few decades if all it does is rely on central bank money. The world is global and best technology wins, and this includes money. The US is kind of like a zombie company, kept alive only by money printing. If it doesn't find some way to get it together, the game is over. This has to include some sort of devaluation and a switch to harder money. Pretty soon the US is fighting wars externally, and also internally, and I think a revolution is likely, and this will also mean a new monetary system.
Some questions to ponder. What if Bitcoin is hijacked by the rich and powerful like Blackrock and Saylor? Do you have no concern about them dictating the future of Bitcoin and how it should be handled? (I'm sure some don't care one way or the other as long as price keeps goes up.) But don't you ever wonder if Bitcoin is going according to its original plan, or that it might not become corrupt just like FIAT without any adequate protection in place? I get the feeling that's what Corallo is talking about.
In order to answer this question, you have to understand what it means to be hijacked. Since its decentralized, nobody really has control over it. Anyone can make any change to the protocol, but if your change causes a hard fork, everyone has to agree to use it, and if they don't, then your hard fork is worthless. Lets take an extreme example where someone wants to change the issuance of coins. To do this, you would have to change the equation that governs how bitcoins are distributed. The equation is that every 210,000 blocks, there will be half issued per block. (50... 25... 12.5... 6.25.... and 3.125 where we are now) Suppose miners wanted to keep their profits, so they want to eliminate the next halving and stay at 3.125 bitcoins. All they have to do is change the equation. So a miner can mine a block with this new code, but all the other nodes have to agree that this is valid. If the node wants to stick with the old software, this block will be seen as invalid and rejected. This node will only accept blocks from the original code. So if the miner doesn't find enough nodes to accept this block, this new chain is essentially dead. Maybe the miner gets 10% of the nodes out there to agree to this new code, but this means the chain split in two with 10% running the new code, and 90% running the code. Every person on the network has to choose which chain to follow. If you're gonna accept bitcoin from someone, you have to make a choice if you will accept coins on the new chain. If you think this new rule is garbage, you don't accept these coins, your node doesn't accept these transactions, and that chain ends up being worthless. If the idea is really good, maybe you get 80% of the nodes to agree to this change and slowly, the other 20% realize they lost, and this new chain wins over. Now lets compare with the current system. Who agrees that the Fed should be able to print money and devalue the money you have? Clearly people who live off government stimulus don't mind, or the super rich, but most everyone else can see they are hurt by this. Nobody likes this system, but we have no vote. It doesn't matter what politician you vote for either. If this system was put to a vote, like you vote with your node, you would see the elite 1% love this since they benefit from money printing, and the 10% living on government stimulus love this, but the other 89% would vote for a system where Fed doesn't print and can't inflate the currency. So when you ask about Saylor or Blackrock hijacking Bitcoin, we have to really wonder what they would do and how they would do it. If they introduce a change that is good for the majority, then yes, they could so call "hijack" bitcoin. But chances are, whatever change they want will not benefit the majority of the bitcoin community, and their change won't be accepted. Them owning so many bitcoins does not in any way give them more voting power. They would have to canvas door to door, so to speak, and beg each node to accept their new code. But if I see their change is going to be inflationary, why would I accept this change? Stay tuned for part 2.
So the second part is a bit more worrisome to me and this deals with fractional reserve banking. I do fully believe that bitcoin will become a bit centralized in that most people won't be interacting with the base layer, but via Layer 2 and some sort of custodian. I'm ok with this. I can see every government in the world having some sort of sidechain. Instead of the Canadian dollar for example, there will be C-BTC... Canadian Bitcoin. So here, Canada has bitcoin in the treasury, and they issue C-BTC for use in commerce. You get paid and spend in this bitcoin derivative. You're not interacting on the base chain, but you're still kind of using bitcoin. At this point, you're dealing with sats of course. For it to be successful, you would of course always need the ability to peg out to some other bitcoin derivative, and hopefully this would be cheap and easy. If not, then likely that sidechain would fail. But the idea of all this is to keep fees down, and give value to each country that uses this. The fear is that maybe Canada says that they have 100k bitcoins to cover however much C-BTC is in circulation, but we might never know if they in fact inflate this away. The good thing though is that you can always peg out to something else, and if you have enough reason to, and enough funds, you could always interact with the base chain. The nice thing is that ideally, Canada would have to prove they own that many bitcoins, and it should be easy to audit. It would also ideally limit how much C-BTC they can issue, because they need the real bitcoin in reserves, but I can see games happen here. But this system is still leagues ahead of what we have now. If you're scared they are lying, you just peg out. No country would want to face pulling a fast one and then losing the ability to trade on the global stage. So clearly there are incentives for each country to not lie. Bitcoin will of course be also running via many different federations, and this in the fact the Fedimint protocol. I just think that at some point, the banks will take over and also offer this. At the root of all of this though will always be the main chain, and what should keep everyone honest is the interoperability between all these different mints/sidechains. Some might turn out to be scams, but that will be dealt with much faster I'm sure than the scam that is USD currently. They can print unlimited amounts, and nobody even knows if there is any gold in Fort Knox. Its clearly the worst system. So the super rich might be able to interact with the mainchain, but most of us will be using some sort of custodial solution, but all of this will still be pegged to the main chain, and any discrepancy should at some point come to light. It might happen that if you add up all outstanding side chains, its adds up to 50M BTC, and then you know you have a problem since there can only ever be 21M, but this is at least an excellent starting point for keeping everyone honest.
Hypothetical risks = no urgency I'm not even aware of a BIP that is controversial right now Bitcoin mining concentration has been a fud for 10 years, except in the past it was in China, now it's in the US (public companies) But Russia and Iran and Chinese bitcoin miners are supposed to be a concern by the anti-crypto army in the US politics Anyway, nothing to see here... maybe later, who knows Bitcoin will go to $1,000,000/btc before end of the decade