Replies (129)
Thanks for posting, this is the kind of discussion we need to see more of.
Bitcoin has a social contract to its user base. 10s of millions of people view it as a form of money that is better than what they have today. That could grow to 100s of millions. Nobody expected this when bitcoin was created, but that is a sign of incredible success. Protecting those users that have put their trust in bitcoin is obviously something we should do.
There's not really a huge apetite in bitcoin for smart contracts. I have a layer 2 smart contract system MVP working, and there's not a lot of interest in the topic. There is a huge amount of (mind-blowing) potential in using the current (U)TXO system which is completely unexplored. I'm deprioritizing any public roll out of smart contracts over bitcoin taproot and nostr, due to lack of interest. I will use them personally though. I know that this works, and it has been relatively unexplored. This area will get better over time.
Moral responsibilities are tricky things. Everything is evil from someone's perspective, or something's perspective. UTXOs are already powerful, and under utilized. How would you envision making them more powerful when the surface of what they can do has only been scratched?
Be aware that in any project, there are always two groups. One that wants change and one that wants the status quo. Bitcoin is unusual in the fact that stability of the protocol makes it more valuable. Conserving that protocol to date has been done very well, and hard fought, we had to fight 3 civil wars to get where we are today, and the market has responded positively to that.
The biggest threat to bitcoin is not a 51% attack, it's a chain split due to a fork or civil war. We have yet to have a successful 51% attack, and that's not to say it cant happen, but we have had chain splits. Chain splits are potentially fatal to bitcoin, so any protocol changes need to take that into account. It is also easy for bitcoin's enemies to agitate on this front, as we have seen recently and turn or frustrate well meening engineers to be frustrated enough to attack the system.
We do need better ways of discussing the protocol without it becoming dramatic. I still didnt get from your post how you think UTXOs could be made more powerful. Conversations like this are a good start!
Thanks for the valuable contribution. I'm in it for the money and would love to have strong and good privacy for the highest possible number of people.
I didn't find this perspective in Taylor's thoughts, so I find any constructive discussion important!
Rusty Russell
I listened to the What Bitcoin Did Saylor podcast, and I really want to respond, though that may be unwise. But I want thoughtful, fearless content in my feed, so I should start making some, right?
Firstly, while analogies can provide useful guide rails for understanding, listening to people *arguing* using analogies makes you stupider. Debate the thing itself, not the words about the thing: it hurts my head to even think about doing this, so I won't.
Let's set my priors first: I assume we're talking about technically solid, well-vetted, backward compatible protocol changes: this is the minimum bar.
I don't wholesale agree with Saylor's "don't threaten anyone's investment" hard limit. This has happened multiple times in the past, from the dust limit breaking SatoshiDice, enabling Lightning threatening miner fees (real or not), and segwit breaking stealth ASICBoost. These interests can, and will, stand up for themselves and will compete against other benefits of changes.
To be explicit: I consider any protocol change which makes block space usage more efficient to be a win!
Obviously Saylor is invested in Bitcoin the asset, and can afford to do all his business onchain in any conceivable scenario. His projection of a Bitcoin world in which there are 100,000 companies and governments who use Bitcoin as the base layer is interesting:
1. This does not need "smart contracts", just signatures. By this model, Bitcoin Script was a mistake.
2. It can work if Bitcoin does not scale and is incredibly expensive to spend and hold. By this model, the consumer hardware wallet industry is a dead-end and needs to pivot to something else (nostr keys, ecash?)
3. You could do this with gold, today? Bitcoin here is simply an incremental, not fundamental, improvement. I think this is suggestive, though: that such a network would not be long-term stable, and very much subject to capture.
4. In this view, Saylor is simply a gold bug with first mover advantage, shilling his bags. That's fine, but it's important to understand people's motivations.
5. This vision does not excite me. I wouldn't have left Linux development to work on making B2B commerce more efficient. I wouldn't get up at 5:30am for spec calls, and I sure as hell wouldn't be working this cheap.
I believe we can make people's UTXOs more powerful, and thus feel a moral responsibility to do so. This gives them more control over their own money, and allows more people to share that control. I assume that more people will do good things than stupid things, because assuming the other way implies that someone should be able to stop them, and that's usually worse.
I believe the result will be a more stable, thus useful, Bitcoin network. I am aware that this will certainly benefit people with very different motivations than me (Saylor).
Thanks for reading, and sorry for the length!
View quoted note →
Yes indeed!
And maybe we need to remind ourselves that #Bitcoin the protocol uses proof of work, not proof of stake.
A person with a big #bitcoin (the coin) stake should never have a bigger say(lor😉) in Bitcoin's (protocol) future progression. This mindset is the totalitarianism bitcoiners should want to avoid if the cypherpunk and anarchy(no rulers) way is to be pursued and maintained.
Saylor is just a guy. A smart guy, but just a guy. Because he's a wealthy guy some people (weak/jealous/sheeple?) prefer to listen to what he has to say over any normie pleb, like those relatively unknown plebs who ACTUALLY build and maintain the code!?!? 💔
TL;DR: A bigger bitcoin "stake" should not mean a bigger say on the topic of Bitcoin's future. Saylor is a rich and popular influencer, and should be treated as such.
The overuse of analogies makes it apparent he doesn't fully understand what he's talking about. Classic Gavin Belson move. He's mastered the financial side of bitcoin, but when it comes to bitcoin development, he should just shut the fuck up.
"4. In this view, Saylor is simply a gold bug with first mover advantage, shilling his bags. That's fine, but it's important to understand people's motivations."
@StackSats.IO calls Saylor a "bitcoinbug" and I think that explains his incentives perfectly, where Microstrategy is using bitcoin as a means for getting more dollars
Well said. Jihan Wu could not capture bitcoin. Saylor can't either. Not everyone believes it yet.
If cash on the internet is your goal, sounds like you’re looking for BCash. That’s their goal too.
Im not technical, strictly an economic user. I don’t need a solution for spending money. That exists everywhere in the western world. I need a solution for saving money without gambling.
I’m not technical at all but my perspective is that if almost nobody can hold their own UTXOs then I don’t see how it’s much better than gold. It’s still digital and divisible but if you can’t really own it then aren’t you back to banks storing gold for you? We’re probably all in a position where that won’t apply to us but it’s supposed to fix the money for everybody.
We need to ask ourselves:
1) Can the issue be solved in any other way, other than a change to the core protocol? Have we waited long enough for other solutions to emerge?
2) If we must change the core protocol, what is the most limited change we can make that actually solves the problem?
Bitcoin is our hope for the future. We can’t panic and rush out “fixes”.
Indeed! But if I try to argue the analogy, I might say "Satoshi glued the ailerons into a fixed position as an emergency stabilization procedure and we've been flying like that ever since". But there's no evidence that any conclusions we you might draw from that are actually useful in real life!
i disagree with your view of him in the sense that Saylor seems to be very supportive of lightning (and also bitcoin as medium of exchange) so not so much "simply a gold bug with first mover advantage, shilling his bags."
I thought the recent podcast with
@Stephan Livera and
@DETERMINISTIC OPTIMISM 🌞 covered this issue quite well.
The irony of that statement is that both Jihan Wu and Rusty want bitcoin to have low fees and be a medium of exchange.
Like Jihan Wu, Rusty is just another bcasher willing to compromise bitcoin’s decentralization.
Bitcoiners rejected that philosophy once because the community realized that bitcoin’s purpose is to replace central banks and not Visa. Let’s hope we reject this philosophy again.
I certainly haven't felt his support of lightning, but perhaps I missed it? It seems like he very much would have opposed the changes which made it practical, and now he sounds opposed to changes which would make it more effective. Hard to tell, since the conversation was in analogies, not specifics though!
💯
It seems we’re fighting the blocksize wars all over again. It’s like every few years someone thinks bitcoin’s fees are too high and we need to compromise bitcoin’s decentralization to “fix” the problem.
Rusty is making the same arguments the bcashers did. Hopefully the community rejects it a second time.
Changes to the core protocol are always risky. We need to ask ourselves:
1) Can the issue be solved in any other way, other than a change to the core protocol? Have we waited long enough for other solutions to emerge?
2) If we must change the core protocol, what is the most limited change we can make that actually solves the problem?
Lol.
Can you pls send a link to the talk?
Yes.
I think Saylor has learned that speaking about specifics puts you in a world of hurt, but speaking in analogies, you can't lose an argument.
Probably corporate culture and politics also hurts your ability to criticise things directly because HR will call you mean as if you were targeting an individual directly even if you never mentioned the person at all, just their ideas/products.
Anyway, I think this is why I struggle so much to understand him or why so many people think he is so informative. Maybe it's like taro readers, people hear what they want to hear and applaud while I'm genuinely trying to figure out his point other than the fact that he appears to know a lot about things I don't.
Rusty Russell
I listened to the What Bitcoin Did Saylor podcast, and I really want to respond, though that may be unwise. But I want thoughtful, fearless content in my feed, so I should start making some, right?
Firstly, while analogies can provide useful guide rails for understanding, listening to people *arguing* using analogies makes you stupider. Debate the thing itself, not the words about the thing: it hurts my head to even think about doing this, so I won't.
Let's set my priors first: I assume we're talking about technically solid, well-vetted, backward compatible protocol changes: this is the minimum bar.
I don't wholesale agree with Saylor's "don't threaten anyone's investment" hard limit. This has happened multiple times in the past, from the dust limit breaking SatoshiDice, enabling Lightning threatening miner fees (real or not), and segwit breaking stealth ASICBoost. These interests can, and will, stand up for themselves and will compete against other benefits of changes.
To be explicit: I consider any protocol change which makes block space usage more efficient to be a win!
Obviously Saylor is invested in Bitcoin the asset, and can afford to do all his business onchain in any conceivable scenario. His projection of a Bitcoin world in which there are 100,000 companies and governments who use Bitcoin as the base layer is interesting:
1. This does not need "smart contracts", just signatures. By this model, Bitcoin Script was a mistake.
2. It can work if Bitcoin does not scale and is incredibly expensive to spend and hold. By this model, the consumer hardware wallet industry is a dead-end and needs to pivot to something else (nostr keys, ecash?)
3. You could do this with gold, today? Bitcoin here is simply an incremental, not fundamental, improvement. I think this is suggestive, though: that such a network would not be long-term stable, and very much subject to capture.
4. In this view, Saylor is simply a gold bug with first mover advantage, shilling his bags. That's fine, but it's important to understand people's motivations.
5. This vision does not excite me. I wouldn't have left Linux development to work on making B2B commerce more efficient. I wouldn't get up at 5:30am for spec calls, and I sure as hell wouldn't be working this cheap.
I believe we can make people's UTXOs more powerful, and thus feel a moral responsibility to do so. This gives them more control over their own money, and allows more people to share that control. I assume that more people will do good things than stupid things, because assuming the other way implies that someone should be able to stop them, and that's usually worse.
I believe the result will be a more stable, thus useful, Bitcoin network. I am aware that this will certainly benefit people with very different motivations than me (Saylor).
Thanks for reading, and sorry for the length!
View quoted note →
There is a lot to unpack there. I'll just tackle one point out of many. The so-called "blocksize" war was unfortunately named. It was much more a governance war than a war about size. In fact, every side proposed an increase in block space. The bigger question was whether folks like Roger Ver, Brian Armstrong, Erik Voorhees, Mike Belshe and their VCs would run bitcoin, or whether the core devs and community would. Not only did the underdogs win that war, but the market responded positively to it. The problem with the debate was that a governance change was part of the proposal.
I fully agree that those with bigger stake should not have a bigger say though in reality, having bigger stake usually comes with bigger influence.
But those maintaining bitcoin codes also shouldn't have any bigger say. The very fact that they are developers meant they have extreme pressure internally within themselves to want to change things or do cool new things.
Monero embraces your talent with open arms. Just like it did with all the other Bitcoin OGs since early on.
Bitcoin went hard for SoV over MoE and it now reaps the success it has sawn. Just not as peer to peer e-cash. That's now where Monero excels.
If people can’t use it in a self sovereign way and hold their own UTXOs Bitcoin isn’t going to replace anything. That’s the point
Saylor explicitly argued for throughput as a scarce resource one should not simply inflate.
But surely there’s some nuance there. It’s hard to pin down someone’s exact opinion without being very explicit…for example, I doubt he would argue in support for making transactions take twice as much space for no reason.
Too much utility is damaging: we’ll end up with miners being the only ones economically capable of processing covenant transactions due to the demand and we are back to big blocks. It really doesn’t work. Saylor is right.
Didn't saylor do exactly this with DID proposal? Stuffing more data into limited block space
I’m not aware of the proposal.
Nodes run the network... I appreciated bitcoin mechanics recent video where he laments that it is getting more to difficult to run a node (from the recent spam and utxo bloat)
If I may add... "Cash on the internet" is laudably right in the white paper itself... The main impediment, IMO, remains TPowersTB that are determined to have complete identification, surveillance and control over the entire internet--first and foremost financial/transactional!
Though, there seems a window whereby, due to great power competition, their will not be consensus on a complete, global internet control system
Yes, the blocksize was deliberately kept “small” to allow the greatest number of nodes to download and verify the full chain. The goal was increased decentralization.
Since the original 1 MB block size, it had been increased to ~4 MB. This is definitely making it more difficult to run a node.
Please listen to Livera’s podcast with NVK. It’s not possible for everyone in the world to have their own UTXO and use it for everyday transactions. It never was possible. This “dream” — that people have that everyone can be self sovereign — is sold by folks who are idealistic but haven’t done the math.
I would love it too if everyone could be self sovereign. It’s just that I understand the limitations and I’m not willing to chase an impossible dream and compromise the decentralization of the protocol.
If you disagree, do the math. Show me how everyone in the world can have their own UTXO and make everyday transactions on L1 with self sovereignty.
Our objective is to replace central banks. Unfortunately most people in the world will be using bitcoin ecash. It’s not true self sovereignty with their own UTXO but 1000x better than the current system where central bankers control our money and print it at will.
View quoted note →Yep, I remember the 300kb blocksize proposal from long ago (in bitcoin terms)... It's a correct framing/rebuttal to most other change proposals?! Especially those other change proposals that are not patiently attempting to gain a broad consensus before implementation
This approach leads us to an increasingly complex and awkward scripting system, as we add more and more special cases which must be maintained forever.
If we can restore script as it was originally, as a general programming language, we don't have to try to "pick winners", and you don't have to ask permission to do what you want with your own UTXOs. Doing this safely and cleanly is my current area of research.
My favourite thing about this approach is that following soft forks become less about "is we had this new feature we could do X” and more "this would make existing scripts more efficient and allow us to do X% more in a block" which is a much more quantifiable assessment.
I agree. There are changes which could be done to squeeze more stuff into the existing blocks, but it's like a max 20% improvement.
Fundamentally, there's no point owning a UTXO smaller than the cost to spend it. Below that, some compromise is always necessary, such as:
1. UTXO shared with a group of friends/community.
2. Trust, but if they screw up/over they can't steal your funds, only burn them.
3. Trust, but if they fail it costs them far more than they gain.
4. Trust, but they can only try to rug *everyone*, not you specifically.
5. Trust, but you and your friends can combine to pay fees to get a UTXO like #1.
You can add reputation and anonymity in there, you can combine these options, you can play with the balance (e.g. size of bond required) but the minimum UTXO size seems to be a fundamental limit. And it's almost certainly one we will reach for many people.
That is an amazing and inflammatory take, and why people do often avoid serious discussion on such topics :(
Weirdly, there's a great deal of pressure *against* ambitious changes. You're signing up for a half-decade grind, whereas other changes have a much better risk-reward profile. There's a reason I've generally stayed out of Bitcoin development and stuck with Lightning, where life is easy:)
For better it worse, the sophistication of scripting doesn't seem to matter: if you give $1M to the first non-coinbase tx in a block, eventually miners will write systems to take that money :(
If you write any protocol where you let miners choose the winner, you get this problem if the effect of winning is economically significant. Of course you shouldn't create protocols that stupid, but when there's a race to collect money from gullible people, engineering very much takes a back seat.
The real defence seems to be that economically useful actions on Bitcoin can outspend stupidity over the long term. I certainly hope this continues, and I suspect (though cannot prove!) enabling more people to use Bitcoin economically will further tip the balance in its favor.
She uses analogies to communicate. He wants as wide audience as possible.
People who produced more value should have more say. And they in fact do. Economic majority decides the rules.
The main impediment is actually the limited blocksize. You can increase transactions per second by making bitcoin more centralized. That’s not a good tradeoff to make if you want bitcoin to replace central banks.
How is whichever change Rusty advocates for compromising decentralization? Bigger blocks surely did. But you can't claim he's like a bcasher if you can't specify how he's proposing harmful ideas.
Nah. Lightning makes bitcoin a much, much better MoE than Monero can ever hope to achieve.
Fungibility is key to any MoE. I am sceptical this degree of fungibility within LN is enough to make it succesful long term. Also LN is much harder to use non custodially.
Sure, on the mainchain
I primarily want to see bitcoin end the money printer that robs humanity to fund endless war upon them. Personally, having full control of any utxos is secondary.
It’s true that everyone can’t have their own UTXOs. However everyone could hold their own keys if we adopt densification measures (such as the various covenant proposals).
Even then though, it’s infeasible to have everyone using their own keys to do L1 daily transactions. Fortunately, shared UTXOs offer L2 scaling. Lightning is one example.
We must protect #Bitcoin decentralization. We do this by densifying to make ever more efficient use of precious block space.
💯 I've been barking about tx density improvements as well. It also helps crowd out spam like runes/brc20
Sort of, they certainly decide which fork ends up worth more. I think that at some point "Bitcoin" could deteriorate to the point where I'll willingly side with the losing fork. Everyone has a breaking point
You are hitting at the core of the issue. If you do the math with how people use bitcoin today, you’ll get one answer; but if you do the math with how people could use bitcoin today, you’ll get maybe 1.5-2.2x that answer (eg, many users creating multi-input multi-output transaction with only one aggregated schnorr signature hitting the chain). In an ideal world though, this gets maybe 1M transactions per day max.
If you look at L2’s, you’ll get maybe 100-1000x the answer above (random guess, tbh)…but a lot depends on how people use those L2’s. If you look at how I’ve tried lighting, it’s like only a 2x improvement…because keeping a lightning node running isn’t trivially easy. And one can argue this isn’t truly sovereign, just more sovereign than status quo money. And getting to this hypothetical 100-1000x requires time…the 1000x will require 10x longer than the 100x improvement. One could argue the improvement is unbounded, but imho, lightning channels and liquid peg-ins won’t have infinite lifespans.
Then there is a weird category of utxo sharing where the transaction signature somehow communicates what percentage of the utxo is available to the user. I can’t ballpark the efficiency gain here, it might be no improvement on a per spending transaction basis…but could be really big improvement in terms of allowing one output to be owned by 10 or maybe 100 people.
But AFAICT, we are far far away from letting 1B people use the chain once a day.
The issue I have with covenant proposals is that I don’t understand if they can work for small everyday amounts in an environment with rising fees.
For example, if it costs $10 in fees to make a bitcoin transaction, can I get access to $5 in a shared covenant UTXO?
Covenants don’t seem to be a perfect solution because they don’t consider the cost of making the transaction.
To me, the future looks like Fedimint, Liquid, etc where we have geographically distributed federations managing ecash, etc.
Those federations would allow for massive transaction density.
This is how I’m imagine it:
We’ll have many interoperable ecash federations using Lightning to clear bitcoin between each other.
Federated ecash would be perfect for everyday transactions. Anonymous, very small transaction fees.
I’m not aware of any reason why this model cannot scale to billions of transactions per day.
The federations would be geographically distributed with trusted but anonymous federation managers so they’re difficult for governments to attack and suppress.
bitcoin decentralization is fine and does not need your new opcodes to 'protect' it. Bitcoin, as far as I'm concerned, is feature complete.
Covenants will not, by themselves, allow unlimited scaling on L1. What they enable is greater density of key-holders on chain by sharing UTXOs. This could mean multi-party Lightning channels, for example.
Pegged shitcoins are still shitcoins. Holding your keys on Liquid or an eCash mint doesn’t make it sovereign. You can still get rugged by the issuer, or State regulators taking down the issuer, or hackers hacking the issuer, etc. etc.
💡
💡
TL;DR: More key holders = number go up.
Money is a pure speculative good. No matter what the market thinks of your other assets, you speculate that people will want your money. The more people who want your money, the more valuable it is.
Densifying allows more people to hold keys on chain. More people can use the money. More people with a stake in the censorship-resistance and decentralization of #Bitcoin.
It is my belief that more is better regarding people with keys on chain. People who want the money and want to secure it make it more valuable.
For these reasons, I am SELFISHLY pro densification (pro covenant). More key holders = number go up.
The number is going to go up even without your new opcodes, which threaten the security and soundness of the network. Your new opcodes and "innovation" are not required for security, decentralization, nor "number go up" so you can stuff the new opcodes up your ass.
Bitcoin is feature complete.
What I find most amusing is that my 23 word response got "TLDR" from you. This lack of focus and attention deficit issue is probably the reason why you would want to endanger bitcoin by adding new and completely unnecessary opcodes with unknown side-effects to the network.
The only people who want to "innovate" on bitcoin are the people who don't have much of it.
Also important to note that the number will NOT go up if you break the thing by introducing new "innovations" with unknown side effects because you are hasty and greedy.
Bitcoin is working perfectly as the hardest money in the history of human civilization. It is feature complete. Leave it alone.
Can you please explain now covenants would solve the problem?
I specifically have concerns around how they would work in practice if the fees are high and the amounts of bitcoin in the shared UTXO are low.
Sorry, the TL;DR wasn’t based on your message but my own. I was summarizing my reply. I should have labeled it “Summary” instead.
I remain confident that decentralizing Bitcoin by making more efficient use of block space will make it more valuable than it would be otherwise.
If we do nothing, roughly 10-20 million people can hold keys on chain. Everyone else will have to use some kind of trust-based layer on top. 10-20 million is still way better than the status quo (banking), but increasing the number of people with keys is even better, IMO.
It’s always the case that low-value UTXOs may become immobile in a high-fee environment. Sufficiently small value UTXOs are dust—never worth moving even at 1 sat/vbyte. This is true no matter what enhancements we consider (base chain, Lightning, covenants etc.)
What covenants allow is more people holding keys per UTXO. So you could have relatively high-value UTXOs that are still movable in a high-fee environment, but which encode promises to pay a large number of key holders.
In the fullness of time, block space is unbounded. We’ve seen that even though occasionally fees become quite high, they don’t seem to stay that way forever.
Bitcoin will scale with custodians regardless of your new opcodes. Hal explained this to you in 2010.
It's not "better" if you add new opcodes that ultimately break the network because of unintended consequences.
Bitcoin is feature complete. Working as intended. Does not need any new opcodes.
What covenants allow is an increased attack surface and the potential for unintended consequences. Segwit and Taproot helped produce the spam that's currently attacking the network.
Bitcoin is working perfectly fine without new opcodes. It's feature complete. Leave it alone.
Yes, I want more people to have their own keys, but how will this work in practice when fees on the main L1 are high?
People say that covenants are the solution but I haven’t found anyone who can explain how covenants solve this problem when fees are high and growing.
We can’t just make changes to the core protocol if it doesn’t solve the problem, even if it helps in the short term. Bitcoin is for 1000 years. The risk of software changes is too high to just delay the problem for a few years.
So about 250k sats per person now if evenly divided. The ‘everyone should have a utxo’ story, idk how that will happen.. Atm it coast more than 10k sats to tx on-chain depending the timing.. 4% of “my life savings” to buy coffee.
Quick search online said the amount of banks worldwide is "25 000. But sources differ significantly."
If we spin on that taught with doing the numbers; and there are more than 25.000 people who hold a whole btc (probably more toward 100.000 plebs or million idk) and in decades from now having a utxo with 0,1 btc would probably make you financially well-off.
Entrepreneurs with a nice bag of btc who have ambitions to build and invest on whatever is possible on the layers in time to come.. As in the podcast “1000x better than what we have now with fiat banks”..
Lets say we have double the amount of btc-custodians, compared to our current banks number, in the centuries to come who offer to store ones btc, and if they fail they die out quick, many others to choose from, so intensive is to be damn good at what you offer.
So in time and having patience,, let the mysteries of the universe unfold 🌌
*incentive* is to be ..
Trust in time and patience. Make sense?
Good luck to you silent geniuses 😄
I still don’t understand how covenants improve the situation for low value amounts.
If I have $10 in my own UTXO or $10 in a shared UTXO, it will still cost me roughly the same amount in fees to transfer it on the L1 chain.
Why does having more keys per UTXO make anything cheaper if it costs you the same amount in transaction fees?
It doesn’t seem to matter if the covenant encodes a future payment to you if the payment amount is small and fees are high and rising over time. You’re still going to pay a significant amount in fees.
I don’t agree that block space is practically unbounded. Sure we could increase it, but it’s like making more roads to decrease traffic. It just encourages more people to buy cars and fill the roads. Building more roads gives a temporary benefit but eventually the traffic is back to the original level or even worse.
If we lower the economic cost of blockspace, people will just fill it with lower value data (like spam JPEGs) and we’ll reduce decentralization.
Using your shared UTXO example, let’s say we’re using CTV, and you are guaranteed 1/10 of the coin. Somebody has to publish that transaction to get the coins out. For a miner to mine it, the fee must be paid by one or more child transactions whose fees cover both themselves and the parent withdrawal TX.
Now, if you’re in a hurry, then you’re the one who has to pay. But you could also coordinate with others to share the cost. This is indeed a problem. It’s an ongoing discussion to figure out how to make unilateral exit cheaper.
The point I was making about block space is not about increasing size. Keeping a small block size is important for decentralization. It keeps the cost of running a node down so more people will do it.
The point about block space being unbounded is that while the block subsidy will run out around the year 2140, there’s no limit to the number of blocks after that. In the fullness of time (centuries), block space continues to grow at 1MB+ per 10 minutes in perpetuity.
Bitcoin rewards patience with lower fees. If you wait, you can move coin more cheaply.
Covenants are not a “solution” to high on-chain fees. I would not make that claim. If others are making that claim, I don’t know their rationale.
Covenants are a means of increasing the number of people who can hold keys on chain. If anything, this is likely to make fees higher on a per-UTXO basis. But hopefully lower on a per-person basis, as fewer transactions actually settle to chain.
For example, in Lightning, to update channel balances, peers share transactions that are valid but private. They aren’t broadcasted. You don’t open a LN channel just to do one transaction. Rather, you open a channel, do many transactions, then close.
By allowing people to share UTXOs in covenants, similar update schemes are possible. You wouldn’t just join a shared UTXO to immediately exit. That would be worse than just using a regular on-chain UTXO, just like it would be worse in Lightning to open a channel, do one TX and close.
So yes, in your example, the exit may be costly, especially in a high fee environment. But hopefully exit will not need to be frequent. If exits are frequent, then there’s little to no value in sharing (it may even be worse depending on the scenario).
Thank you for the detailed response.
I’m still unconvinced that covenants offer a complete solution to the scaling problem.
You will never know whether the amount you have in a shared UTXO will be “trapped” by proportionally excessive fees, or how long you will have to wait to retrieve it at reasonable expense, or how much you will receive when you do.
I believe that changes to the core protocol carry high risk and therefore should not be partial fixes or merely helpful in some circumstances.
We need to ask ourselves:
1) Can the issue be solved in any other way, other than a change to the core protocol? Have we waited long enough for other solutions to emerge?
2) If we must change the core protocol, what is the most limited change we can make that actually solves the problem?
This is why I would wish for developers to be patient and continue researching the problem until a complete solution is found. It’s also possible that we may all be happy with other solutions that emerge.
Absolutely agree. Once governments are starved of fiat and forced to go on a Bitcoin standard, their reign of tyranny will greatly diminish. The need for true self sovereignty will diminish when the power to enslave your own citizens is taken away.
"Segwit and Taproot helped produce the spam that's currently attacking the network."
This is simply wrong. Segwit increased block size, so you could pack 4MB instead of 1MB into blocks. This worst-case was well understood. And indeed, most nodes didn't notice (block relay is not the majority bandwidth for default nodes).
Without segwit, the spam would have driven up fees much more: they were clearly prepared to spend the money!
"Bitcoin is feature complete."
You keep repeating this mantra. When did this happen? Before or after we did a soft-fork to enable lightning? It seems you are unaware of this?
Because there are things like vaults which do require additional features. Similarly multi-party lightning.
Your absolutist position seems quite hard to justify, though I'm trying to give you an much credit as I can, lest this become Twitter.
I don't give a shit about fees they can go as high as they want it does not matter to me.
And the witness discount in segwit absolutely added to spam.
Bitcoin should have been feature complete before segwit in my opinion. I don't care about vaults, I don't care about multi-party lightning. I care about hard money that can't be debased or stolen, that's it.
My "absolutist" position is simply that bitcoin is working perfectly fine and all your new opcodes are an attack on the network and completely unnecessary for bitcoin's success.
If it aint broken, don't fix it.
Right, so no lightning at all for you then?
At least that's consistent. No zaps for you then!
How did this "spam" affect you, if you're not complaining about fees?
It bloats the UTXO set increasing the cost of validation, among other things
You will notice I do not provide a lightning address in my profile to be "zapped" to. However I would not avoid lightning since it already exists. But Bitcoin would be better without segwit and it's witness discount and would also be better without taproot and it's complete opening of the witness section.
Agreed that caution is warranted.
I’d push back though on wanting/expecting a perfect scaling solution. It doesn’t exist. Scaling comes piecemeal.
For example, SegWit transactions are denser than original transactions. Taproot transactions are denser still. Lightning introduced orders of magnitude more throughput, but with different tradeoffs (always online, coin locked in channels, etc.)
These scaling improvements make better use of block space and increase privacy to boot. But they’re not the end of the story. Likewise, whatever comes next won’t be the last word on scaling either.
No segwit, no lightning.
You really don't understand Bitcoin, so I'm going to balance your opinion appropriately.
This is nothing to do with Taproot or Segwit. You are very confused.
I have been a professional software engineer for 25 years and studying bitcoin specifically for 7. I can assure you I understand the details of the protocol quite well. If you do not understand how the witness section is abused to produce spam then you should study bitcoin more deeply. I am not your tutor.
Incorrect. segwit and taproot decreases density by filling the witness section with spam data and creating utxos without monetary value.
If his Bitcoin is feature complete, then I guess he’ll be done using it by the year 2106.
When did you get the idea that I give a shit about lightning? Of course lightning is impossible without segregating the witness data, that was the point of the softfork. But the result was abuse of the witness section, particularly after taproot opened those floodgates.
I do not care about lightning. If you can scale bitcoin without adding more opcodes going forward, good for you. You probably can't which is why you, in your vanity, would attempt to attack bitcoin by adding new opcodes which will inevitably compromise the network's security.
The good news is that more and more people understand this position, especially with Saylor's recent podcasts where he says the same thing. Over time it becomes more and more difficult to initiate any kind of soft fork attack on bitcoin, which is excellent news.
You can have 1 new opcode every 100 years, starting 100 years from now. Plan accordingly.
There is a difference between maintenance and new feature development.
You are collating two things
1. Everyone can own their own UTXO
2. Use it for everyday transactions
1 is important, 2 is not.
Most people should use e-cash for everyday use. A UTXO would be used in a similar fashion to moving money into a high interest term deposit - where you hold the majority of your money but only make a transaction once a month to once every few years, depending how wealthy you are. A lightning channel to the eCash would allow the balance that's held by the custodian to be minimal.
If a transaction fee exceeds the $10 -100 range even this breaks down.
Agreed with the L1 considerations. As you say, anyone who have done the calculations know that a decentralized money cannot provide L1 transactions for 8 billion people. Magical thinking have zero impact on reality.
Any scaling solution that aims at giving 8 billion people access to Bitcoin must involve a free market of L2-L3 options. The Bitcoin base layer is the proper foundation for healthy free market competition, which in turn brings high degrees of security via game theory.
I would say that there are degrees of self custody. Moving sats away from exchanges, who are government controlled, is a primary aspect of self custody. For significant amounts, custody involving L1 is ideal. For smaller amounts, an archipelago of options competing via game theory is far better than anything we have had before. Unserious and captured options will lose trust and users in benefit of the serious and non-captured options. LN operators are decentralized and sovereign banks, unimpacted by borders since Bitcoin is global and without borders.
Here's my math involving 8 billion people:
If we assume 7000 tx's per block, then the 144 daily blocks gives 1 million transactions. Most blocks will have less than 7k tx's, but let's go with this high tx figure for now just to explore the math.
If we divide 8 billion people by 365 million tx's per year, we arrive at almost 22 years per tx in terms of bandwidth, which impacts the tx fees.
Granted, a certain percentage of the world's population are children who will not need to spend from a savings UTXO on L1. Then there may be a certain percentage that don't use Bitcoin at all. Finally there are hodlers that have a 5, 10 or 15 years horizon for their savings.
If I am optimistic, 1 L1 tx every 10 years should be affordable for most people, so that leaves L1 as primarily a savings layer, while L2-L3 offers cash functions via decentralized banks/nodes.
22 years between average transactions is a bit long. However, we are decades away from having that many people using it. By then a 10x block size increase may be trivial, which would bedrop it to 2.2 years, which is a decent savings frequency.
I agree. Federations could federate over bitcoin itself but also lightning channels or liquid peg in transactions…each of these offers different self sovereignty trade offs, but all are massively better than the status quo.
The Poon Tradja paper does not use anything as ugly as segwit. They have a solution to maleability based on an op code irc
Well, it's more an indication of bandwidth, which in turn impact fees. It is ability to pay the fees that impacts how often people can use L1.
A block size increase would be negative since it would reduce the decentralization aspect, demonstrated in the Block Wars. Without a strong decentralization, the store of value will change to reflect the worsened security; downward.
Besides, an increase in bandwidth will still cause the mempool to be filled up with anything the market is willing to spend XYZ on in regards to tx costs.
The ability and willingness to pay for expensive transactions is the primary driver of fees.
Not only did the Segwit devs increase the block size, but, in their wisdom, actually gave spam a discount!
Yes, the spammers were clearly prepared to spend the money. With the discount, we reduced their fees so now the spammers make even more profit. 🫡
“This worst-case was well understood.”
That virtually all of the block size increase would be filled with spam? I guess if you put spam on sale, you sell more spam, right?
After spending a couple weeks recently to sync a node over Tor, I would argue it wasn’t worth it. We still have high fees and now we struggle to sync our nodes privately. I noticed how you didn’t mention the impact on our Tor nodes. 😔
In second thought, maybe it’s a good thing that the devs slowed down our nodes. Fewer impulsive purchases! Maybe bitcoiners buy fewer useless lambos because they come to their senses waiting for their nodes to sync. 🤔
Idea!💡Maybe since fees are still high, we should increase the blocksize further and give the spammers a bigger discount? Surely if it worked so well the last time, maybe we should do it again? We can never have too much efficiency, amirite? 🤨
I never once heard a mea culpa or any accountability for what seems to be the biggest f’up in core’s history. No post mortem, just gaslighting that everything is “fine” and how the devs “understood” the risks. This ossification talk is probably just a symptom of the lost trust.
The mistake was just increasing the block size to 4MB and giving it a discount. That wasn’t necessary for Lightning was it?
If you have to ask, you don’t understand the second order impacts on plebs. My tor node is incredibly slow now. I can’t run it all the time and it’s not a fast computer. I sync the node when I need to broadcast a transaction. In my last sync I waited weeks.
I say we should allow protocol upgrades every 10 years. That should give us sufficient time to research and debate. In the meantime we just fix bugs and improve performance and privacy.
What prevents people from having their own UTXO now? There are more bitcoin addresses than stars in the universe.
It seems to me that the limitation is not UTXO addresses but rather transaction fees to receive some sats.
I see it in a similar way except that larger transactions will be prioritized meaning that small transactions might wait even longer than 22 years.
I view bitcoin as a replacement for FedWire. Exchanges, ecash federations, countries and whales will use L1. Everyone else will use L2s etc.
I’m not sure these approaches help. It’s like trying to plug a dyke with your fingers. Eventually the water comes in. Any efforts can merely delay the inevitable and risk negative effects like the inscriptions spam.
Fees are going to increase. Trying to delay the reckoning so that we can buy coffee on L1 for a short time longer seems pointless to me. Why not recognize the inevitable and build for that future instead?
insightful post indeed. "we knew the risks" is worse in my opinion than "we had no idea how bad we were fucking up" as it implies malice.
Core fucked up massively with segwit, then again with taproot, and now they won't even fix their filters or address their prior mistakes. Ego or malice, I'm not sure which. Either way core is not to be trusted.
The good news is that more people are realizing just how vulnerable Bitcoin is to the addition of new opcodes and softforks and are starting to gather around the idea that "if it aint broken, don't fix it". Meanwhile vain developers with small bitcoin stacks yearn to make a name for themselves by adding new bullshit to a perfectly functional network. And that's why I tell them to stuff their new opcodes up their asses. Nothing but an attack on bitcoin and deserves no debate on ridicule.
Because human nature is that they just can't leave well enough alone. Have to monkey with it. Have to mess it up. Impossible to just sit quietly and watch. Everyone wants to be a hero.
But thank you for articulating clearly the silliness of their argument. A couple more cups of coffee on L1 indeed...
Adding the extension blocks was not needed for Lightning, no. It was a concession to the parties who wanted bigger blocks. Ultimately it wasn’t enough, and they forked off anyway.
In retrospect, we probably should not have added that extra space, but it’s impossible to say with certainty how history would have unfolded if we hadn’t.
We could soft-fork in a reduction that cuts that back out, or makes it smaller. Or we could fork in a reduction to the main block size. It takes a hard fork to go from 1MB to 2MB, but only a soft fork to limit it to 500kb or less.
or we could leave it the fuck alone.
Yup. Bitcoin is primarily a store of value. E-cash transfers will happen on Bitcoin L2-L3s.
To expand, I would say that L1 fees will be as high as people can afford, regardless of how much optimization is done to L1.
Low value transactions will have to go via L2-L3s.
This irresistable desire some people have to mess with the thing just blows my mind. My only explanation is that the kind of people who want to mess with a perfectly functional network just don't have any bitcoin in their stack and are therefore more interested in "iNnoVat1on" than they are protecting the hardest money ever created.
Bitcoin, in it's current form, solves the problem of the hard money. Messing with it in an attempt to make it do other shit, like parlor tricks, is nothing but risk and adds no significant value.
Innovation in Bitcoin is nothing more than an attack on a perfectly functional network.
If it aint broken, don't fix it. Simple wisdom but so few people actually understand it.
Lesson learned?
Yeah, but a $10 transaction fee will stop daily transactions but it would be ok for transaction greater than $1000, which most people can afford. If fees exceed $1000 transaction would need to be greater than $100000 which would exclude most people.
That’s probably true. I’ll bet Rusty and his family have a small percentage of net worth in bitcoin.
It makes sense that the greater the percentage, the more conservative you likely are.
People should probably not be core devs if they don’t have meaningful skin in the game. Hard to prove this though.
Agreed, but in 50 years bandwidth might not still be as significant?
We will see by that time. I think the L1 bandwidth is fine for the purpose of SoV. At the end of the day, tx fees will be what market participants are willing and able to pay.
I see self custody as a spectrum, starting with people withdrawing their sats from exchanges and other centralized and government-controlled platforms. Game theory will provide efficient and secure options for everyday transactions on L2-L3. Bad actors will lose users and fees. Good actors will benefit with more users and better fees.
Not everyone will want or need to use L1 and high base layer fees will drive innovation toward Lightning and sidechains to solve scaling. I define scaling as providing Bitcoin for 8 billion people. In my view that scaling will happen primarily above L1. L1 fees will find their equilibrium in supply and demand considerations of the market participants.
Bad actors only get caught out if it it feasible to self custody. If the fees are so high that it's not possible then any custodian can make a killing by running a fractional reserve and bankrupt good actors. Bitcoin gets captured by the banks, just as if the block size was too large for non specialised people to run a node.
If this happens I think Bitcoin will fail to dominate and we have an ecosystem of shitcoins
yes. At least we've got Saylor going public on the subject now. Good to have such an articulate and vocal supporter.
"Why doesn't Saylor support core devs"? Cause fuck core, they can't even fix their filters. Those guys do nothing but fuck the network up with their soft fork attacks.
Core is the biggest threat to Bitcoin by far. If Bitcoin fails it's going to be because they soft-forked some bullshit in there that allowed it to be captured.
I still don’t understand the answer to this question:
“What prevents people from having their own UTXO now? There are more bitcoin addresses than stars in the universe.“
I’m wondering if there will be a way for proof of reserves to solve this. There might be a way to know say how much ecash has been issued and how much BTC is held in reserve.
There must be a few core devs who are pushing back on the crazy stuff behind the scenes. Otherwise we could have seen forks for covenants or other stuff already. 🤷♂️
It's the number of transactions that can generate a UTXO with Bitcoin in it. There are a limited number of transactions per block. This can't increase, more demand raises the price and makes it unaffordable for some people.
And I collected the amount via a L2? I think I understand what you’re saying. I’ll think about it.
LN is extremely private
Maybe it's enough for you. But nor for me. I deserve the best privacy guarantees on the market.
I wouldn't be surprised if we see a Bitcoin Saylor fork at some point 😅
Thanks Rusty for your insight.
I like your point that Saylor's self-interest will have to fight against other's people self-interest, like everybody else. We will will see what is the self-interest that wins.
In the end, a consensus will be reached, as always...
Shitcoiners will stream into these covenants like you wouldn’t believe, and guess who will be more than happy to oblige them, miners. Then you need a server farm and huge bandwidth to mine and now it’s effectively an unlimited block size system. I’m starting to think covenants are a psyop to get us to break bitcoin. I’d take a modest blocksize increase over covenants; that and zero sync would be much healthier.
