Understanding the Blockchain

originally posted by: ChaoticOrder

Solving a block requires some amount of computational work...

Well, this is the basic problem with bitcoin.

The more bitcoin is accepted and adopted, the more computational work required to process transactions.

At some point, the computational work required to process the next transaction will exceed the capabilities of all computational power on earth.

At that point, new transactions can't occur. And bitcoin becomes useless, value drops to zero.

Also, already people are complaining that their transactions are taking 24hrs or more to get verified.

That's because the miners need to be "financially compensated" for doing the work of verifying a transaction, and they naturally pick the transactions that "offer higher fees".

So, as more transactions circulate in the marketplace, only those transactions that offer the highest fees will get the attention of the few remaining miners that have invested in the expensive computers required to verify the transactions.

Hence, long before we reach the arbitrarily set limits, the bitcoin market will stall, because smaller transactions will be excluded, as only higher value transactions can offer the higher fees required to attract the miners to look at them.

This means you'll be able to buy and sell your house or car using bitcoin, but won't be able to by a cup of coffee.

By design, bitcoin will act like a sieve, sifting though all the transactions, and dropping all the small value transactions, then only allowing the high price commodities to get fast and efficient settlement.

This is already happening to some degree.

It's only going to get worse as more and more people adopt bitcoin, and it becomes widespread.

Some people have complained that at times they went a whole week without any miner "solving" their transaction. When they complain, they are told to raise their "fee" to attract the miner to their transaction, and try again.

So, bitcoin is destined to come crashing down, as it becomes more widely accepted.

The only question is when.

a reply to: purplemer

Haven't paid much attention to the cryptocurrency market lately so I cannot really tell you, also I don't want to provide any suggestions in case I'm wrong.

a reply to: AMPTAH

The more bitcoin is accepted and adopted, the more computational work required to process transactions.

At some point, the computational work required to process the next transaction will exceed the capabilities of all computational power on earth.

At that point, new transactions can't occur. And bitcoin becomes useless, value drops to zero.

Also, already people are complaining that their transactions are taking 24hrs or more to get verified.

The computational work does not come from processing transactions, it comes from solving the proof-of-work problem. The mining difficulty will only increase when more people try to mine Bitcoin, not when more people try to use Bitcoin. The difficulty cannot get so high mining becomes impossible, the difficulty is determined by how much power all the miners have, however blocks can take less time or more time to solve if the difficulty doesn't adjust quickly enough when a large change in total mining power occurs.

Transactions with low fees may take a long time to be processed because miners will give transactions with higher fees a higher priority and put them in the block they are mining before other transactions. Block space is limited so the miners cannot always fit every transaction they receive into a block and they may have to wait until another block before there's enough room to include it. The target automatically adjusts so that one block is solved on average every 10 minutes, so it can take quite some time to receive any confirmations if your transaction fails to be included in multiple blocks after you relay the transaction.

This means you'll be able to buy and sell your house or car using bitcoin, but won't be able to by a cup of coffee.

I don't deny there are serious scalability issues facing Bitcoin but Bitcoin isn't the only cryptocurrency and much of these concerns are offset by the fact a very large number of alternative coins exist, and together they provide a very large transaction bandwidth, and there are also coins which attempt to solve the scalability issues. Also I don't deny Bitcoin may become primarily used for transferring large sums of money if the fee gets too high, but once again you could just use an altcoin for smaller transactions and use Bitcoin for large transactions.

a reply to: AMPTAH

Just because its slow does not mean its going to crash. There are many coins in the ecosystem and some of them are a lot faster than btc.

there's no way a human was smart enough to devise this

a reply to: ChaoticOrder

Thank you

a reply to: ChaoticOrder

The problem I see with the blockchain is that it isn't instantaneous (and will get slower as proof of work gets harder) and the person with the most compute tech can literally mint new money.

This means that instead of a gold standard for currency, we shift to a 'compute' standard that is non-standards and vapourous.

... and if you make enough you can buy more miners and make more coin.

This is all well and good for those who are in the Bitcoin mining and owning club but it de-democritizes the currency. Not all humans have access to the compute resources required.

The best thing about Bitcoin for me..
Besides the freedom I gained..

The amount of monetary capital being drawn away from the banking system.
What they gonna do soon when it's gone??

originally posted by: Malevotronic
there's no way a human was smart enough to devise this

There is.

It is the result of systems upon systems all built by multiple humans.

It's clever but not inhumanly so.

I suspect that the original paper on Bitcoin, supposedly authored by "Satoshi Nakamoto", was a collaborative effort.

a reply to: chr0naut

www.activism.net...

Wasn't a new idea in 2009 either.

originally posted by: Malevotronic
there's no way a human was smart enough to devise this

It might look that way. But, humans are smarter than you think. Also, this was just a small innovation on existing technology. It's not as if one guy sat down and thought up the whole thing.

To think it's all the effort of one guy, is like saying Al Gore "invented the internet."

a reply to: chr0naut

The problem I see with the blockchain is that it isn't instantaneous (and will get slower as proof of work gets harder) and the person with the most compute tech can literally mint new money.

What transaction system is instantaneous? Try sending an international transaction using the traditional banking system and see how long it takes you. Cryptocurrency allows almost instantaneous transactions to anywhere in the world assuming you have a high enough fee, obviously scalability is becoming an issue with Bitcoin but there are plenty where it's not an issue and several which have mechanisms to solve the scalability issues.

This means that instead of a gold standard for currency, we shift to a 'compute' standard that is non-standards and vapourous.

You do realize the gold standard hasn't been used in decades? Honestly what makes you think federal reserve notes have anything of real intrinsic value backing them?

Not all humans have access to the compute resources required.

I have never mined more than a fraction of a bitcoin and that was many years ago, however that doesn't mean I have no bitcoins. You don't need computing power to acquire BTC.

originally posted by: ChaoticOrder
a reply to: chr0naut

The problem I see with the blockchain is that it isn't instantaneous (and will get slower as proof of work gets harder) and the person with the most compute tech can literally mint new money.

What transaction system is instantaneous? Try sending an international transaction using the traditional banking system and see how long it takes you. Cryptocurrency allows almost instantaneous transactions to anywhere in the world assuming you have a high enough fee, obviously scalability is becoming an issue with Bitcoin but there are plenty where it's not an issue and several which have mechanisms to solve the scalability issues.

This means that instead of a gold standard for currency, we shift to a 'compute' standard that is non-standards and vapourous.

You do realize the gold standard hasn't been used in decades? Honestly what makes you think federal reserve notes have anything of real intrinsic value backing them?

Not all humans have access to the compute resources required.

I have never mined more than a fraction of a bitcoin and that was many years ago, however that doesn't mean I have no bitcoins. You don't need computing power to acquire BTC.

In regard to a standard against which currency has value, we could assume Moores law will hold forever and the growth in compute power would be linear. I would argue that this is an unwise assumption.

We are on the cusp of the quantum computing revolution which will blow a linear rise in computing power away.

For example, yesterday Microsoft released a free development kit, the Q# language and simulator specifically for quantum computing, as part of Visual Studio.

Similarly, they are offering an Azure compute engine that simulates over 40qbits.

So, there will be apps available as the first quantum computers come online.

A cryptocurrency miner would seem to be a good project for a developer of quantum computing software.

Early quantum computing adopters are likely to be aware that the advantage, before cryptocurrencies all hyperinflate as a result, is strictly time limited.

They must mine and transact quickly, converting to things of more substantial and lasting value, or loose any advantage.

Meanwhile, everyone who is now enjoying the cryptocurrency bubble will find their digital wallets full of worthless fluff.

It is inevitable.

Can you go into more detail on Proof of Stake systems or point me to some resources on them? It seems to me like that system, is essentially earning a return on anything you have sitting in your account, so it would discourage ever spending anything.

Oh, one more question, I could probably answer this one myself with some basic research, but what's the general difficulty on the various crypto networks these days alongside some price estimates?

I ask because one idea I've been mulling over recently, is what we're going to do with all the excess computing power we're putting in peoples hands these days. Higher core processors don't really make applications much faster anymore, and more cores will be having even less impact in the future. Is it concievable that content providers will be able to utilize cpu's of people viewing their content to mine cryptocurrencies to fund online activity as an alternative to other funding systems like advertisements and subscriptions?

curious exactly how do they steal etherium or other blockchain tokens......screws it all up.....so i buy land and cattle....some silver, cause i can't write my phone number on a salt or litecoin token

a reply to: Revolution9


What you say has a great deal of truth in it, if you are "Poor" and many are under this system you will be likely waiting for the next begrudged measly handout, which wont be enough, for comfortable healthy living. Even if you are employed the amount of remuneration, does the same. The logical conclusion is that as far as the people concerned with this setup, is that the system no longer works, and its past time to find a societal alternative. Which means facing the fact that after many decades, its either time to start making a new society with other like minded people, or do nothing and suffer the consequences.
All it requires is a hundred or so pissed off people who operate, with a shared objective , organized under a new set of laws which apply to that particular group. But the sad thing is that to get a hundred or so people operating in unison without security breaches is dam nigh impossible. Because the existing system suppresses and uses the dumbest first, who can never get their heads around unified action, they just get bought off. Like the destruction and emasculation of the Labor Unions.

originally posted by: chr0naut

We are on the cusp of the quantum computing revolution which will blow a linear rise in computing power away.

For example, yesterday Microsoft released a free development kit, the Q# language and simulator specifically for quantum computing, as part of Visual Studio.

Similarly, they are offering an Azure compute engine that simulates over 40qbits.

As I explained on the last page: we don't have any true quantum computers right now, we have very specialized machines which use quantum annealing to solve specific optimization problems, but if real quantum computers came about Bitcoin would be in trouble, hash functions would still be ok but ECDSA would be broken. There are however quantum resistant digital signature algorithms which Bitcoin could switch to if it came to that, there is already at least one quantum resistant cryptocurrency that I know of.

originally posted by: Aazadan
Can you go into more detail on Proof of Stake systems or point me to some resources on them? It seems to me like that system, is essentially earning a return on anything you have sitting in your account, so it would discourage ever spending anything.

Just do some Google searching and I'm sure you'll find a great deal of information. But yes it's essentially a system for giving returns to people who own the coin. The exact way it works is quite complicated and even I don't fully understand it, but I would assume it does encourage saving instead of spending, but then again most cryptocurrencies do because they have tightly controlled levels of inflation.

a reply to: ChaoticOrder

Thanks for posting the info CO.
Flagging to read later.