Trending Topics bitcoin price increase, Segwit vs BU, Ethereum price, Coinbase and the IRS
Venezuelans are in a very bad situation. They’ve lost control of inflation and have entered hyperinflation. That’s not new to listeners, but what is new is that bitcoin has been getting some press as a way to help these people. Reason came out with a story about citizens of Venezuela are mining bitcoin with free electricity. This is an example of “bitcoin as humanitarian aid”.
A new article from Reason exposed that the Dread Pirate Roberts account was being used after Ross was arrested. This is huge. I hope he gets a new trial out of this. If you’d like to support Ross in his fight for freedom donate at FreeRoss.org.
On Nov 26th a hacker was able to lock up the San Francisco subway with ransomware. The hacker was requesting 100 btc (~$73,000 at the time). Officials scrambled letting every ride free, saying they never even considered paying the ransom. You can see daily ridership numbers on their wikipedia page. With an average fare of $5, I calculated the lost revenue from free fares at $1,795,505. That’s a net loss of $1,722,505 instead of paying the ransom. Nice choice BART.
This will continue to happen, and as the costs become more well-known cities will start paying. Bitcoin adoption isn’t a choice.
California legalized cannabis last month and are setting people free from prison. California police made “8,866 felony pot arrests in 2015.” Yet only roughly 2,000 will be freed. I hope everyone gets out, and people that have enforced these brutal insane laws get taken to task. Hey police goons, you’ve locked people away for possessing a flower. Does your brain not work? Don’t follow evil orders pussies.
There’s been a lot of mudslinging in the wake of the Bitfinex hack. Finex blames bitgo, bitgo blames bitfinex. My bottom line is that bitgo is selling regulatory compliance to do business with Americans. Bitfinex did a shitty implementation of their software, but bitgo should have never allowed such a bad use of their service. Anyway, now Bitgo is in testing with OKCoin. Why? OKCoin doesn’t knowingly allow Americans, which is the biggest selling point for Bitgo.
The State of Illinois had a PR this week announcing a comment period for their own version of the bitlicense. The comment period is open until Jan 18th, 2017.
A Japanese insurance firm is going to be the first company to insure a major bitcoin exchange. This is one more piece in making Japan a lead in the bitcoin world, and make me want to trade there.
I recently had an exchange on twitter with user @KenyaCoin and @pesa_africa when they tweeted about M-pesa being down again. I didn’t know much about it, so I read up. M-Pesa has seen pretty rapid growth, expanding into a dozen or so countries, including the holy grail, India albeit in very limited fashion. Their growth is hampered by having to comply with a maze of banking regulations in each country, and internationally by using companies like Western Union and Money Gram for cross-border payments. They aren’t some unstoppable train banking the unbanked. They’ve failed to get a sizable foothold in South Africa, Afghanistan, India or Eastern Europe though their efforts are relatively new in some of those countries. They need a very sizable unbanked population of people and friendly regulations for M-Pesa’s narrow service offerings. I think they will focus on expanding in India because, well I would.
Though their financial setup was audited in Kenya and found to be “robust”, the actual IT solutions have constant issues. They were using European hosting and suffered a setback where their was a poweroutage and damage to the servers in Germany in 2012. In 2014, Safaricom started bringing hosting to Kenya, but still today they are racked with constant outages, both network wide and for individuals.
My overall impression of M-pesa is less awesome than I had before I started reading up on it. Yes, it’s positioned as an incumbent that directly competes with bitcoin’s value prop, and yes, it has had pretty large success in providing innovative payments where none existed before it, but it has major weaknesses. First, they are heavily regulated and rely on banks in the countries they move into. The fees are outrageous, as high as 60% on $1 sends to none registered users or 27% for the same payment to a registered user. There is no insulation from corrupt governments. In fact, I think M-Pesa actually exposes its users to more systemic and TTP risk than the cash it replaced. I think people will eat bitcoin up if they are used to M-Pesa, but are aware of the fees and the technical disruptions. Also, there hasn’t been any major growth in the last 1-2 years.
The slow motion train wreck that is Ethereum continues. They had an unintentional hard fork due to micro-managing it’s blockchain. Two of their implementations forked parity and geth fell out of consensus as developers tried to clear up some addresses on the blockchain. #fail
Looks like the winning team was Tuck School of Business at Dartmouth. Here’s their entry. 91% bitcoin, 9% ethereum. FYI, I said 100% bitcoin at the time, so sorry guys, I win.
Maybe Andreas is listening to Bitcoin & Markets. This presentation signifies a big switch in Andreas’ rhetoric. He switches from painting a rosy picture of a bitcoin future, to the harsh reality of currency war. Bitcoin media has been way too timid for mass adoption. Freedom fighters are stronger than ever thanks to the internet and the backstop of bitcoin. The timid anarchist and libertarian rhetoric is coming to an end. People follow strong rhetoric and leaders.
60% of Italians voted “no” to more centralized power and tighter European binding. This is a big problem for the Italian banks. They were counting on a private bailout from investors buying equity. That is no longer a viable option, and so they will need a bailout. The European economy is slowing and showing signs of inflation picking up. These facts will all affect the ECB meeting this week as they decide on their QE tapering schedule. They will likely extend the program by 6 months. This will in turn affect the Fed and their decision about rates next week.
If the dollar surges and UST rates increase this week, the Fed will find it very difficult to raise rates, and with 100% of traders expecting a rate increase not raising could have bad consequences itself. This is an all out currency war, and the Italian referendum just poured some gasoline on the fire.
Today’s ending material is via Pieter Wuille on github. It’s a scaling post he wrote in July 2015.
Many people want to see Bitcoin scale over time, allowing an increasing number of transactions on the block chain. It would come at an increased cost for the ecosystem (bandwidth, processing, and storage for relay nodes, as well as an impact on propagation speed of blocks on the network), but technology also improves over time. When all technologies depended on have improved as well as their availability on the market, there is no reason why Bitcoin’s fundamental transaction rate cannot improve proportionally.
Currently, there is a consensus rule in place that limits the size of blocks to 1000000 bytes. Changing this requires a hard-forking change: one that will require every full node in the network to implement the new rules. The new chain created by those changed nodes will be rejected by old nodes, so this would effectively be a request to the ecosystem to migrate to a new and incompatible network. Doing this while controversy exists is dangerous to the network and the ecosystem.
Furthermore, the effective space available is always constrained by a hash rate majority and its ability to process transactions. No hard forking change that relaxes the block size limit can be guaranteed to provide enough space for every possible demand – or even any particular demand – unless strong centralization of the mining ecosystem is expected. Because of that, the development of a fee market and the evolution towards an ecosystem that is able to cope with block space competition should be considered healthy. This does not mean the block size or its limitation needs to be constant forever. However, the purpose of such a change should be evolution with technological growth, and not kicking the can down the road because of a fear of change in economics.
Bitcoin’s advantage over other systems does not lie in scalability. Well-designed centralized systems can trivially compete with Bitcoin’s on-chain transactions in terms of cost, speed, reliability, convenience, and scale. Its power lies in transparency, lack of need for trust in network peers, miners, and those who influence or control the system. Wanting to increase the scale of the system is in conflict with all of those. Attempting to buy time with a fast increase is not wanting to face that reality, and treating the system as something whose scale trumps all other concerns. A long term scalability plan should aim on decreasing the need for trust required in off-chain systems, rather than increasing the need for trust in Bitcoin.
In summary, hard forks are extremely powerful, and we need to use them very responsibly as a community. They have the ability to fundamentally change the technology or economics of the system, and can be used to disadvantage those who expected certain rules to be immutable. They should be restricted to uncontroversial changes, or risk eroding the expectation of low trust needed in the system in the longer term. As the block size debate has been controversial so far – for good or bad reasons – this BIP aims for gradual change and its effects start far enough in the future.
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