Is Bitcoin Really Dead This Time Mike Hearn Seems to Think So

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Replace by fee

A counter argument

Lately I have been asked about the replace by fee (RBF) patch by Peter Todd, and the “scorched earth” policy he proposed to go along with it.

I think RBF is a badly thought out idea that won’t work, doesn’t do what it’s claimed to do and would be harmful for Bitcoin if adopted.

In this article I will argue the case against RBF. I am not alone in thinking that this proposal is a bad idea and I hope after reading this you will agree with us:

Repeating past statements, it is acknowledged that Peter’s scorched
earth replace-by-fee proposal is aptly named, and would be widely
anti-social on the current network
— Jeff Garzik

Coinbase fully agrees with Mike Hearn. RBF is irrational and harmful to Bitcoin. — Charlie Lee, engineering manager at Coinbase

Replace-by-fee is a bad idea. — Gavin Andresen

I agree with Mike & Jeff. Blowing up 0-confirm transactions is vandalism.
— Adam Back (a founder of Blockstream)

What is it?

Replace-by-fee-scorched-earth is an attempt to fix perceived problems with unconfirmed transactions and make double spending harder.

Since day one Bitcoin has had a rarely discussed but fundamental rule called the first seen rule. The first seen rule says that given two transactions or blocks that build off the same dependency, whichever one the node saw first wins.

This rule is not something that can be enforced via the block chain itself, but it’s still critical for how Bitcoin works. In the case of choosing which block to mine on, it’s what incentivises people to start building on top of the new block when one is found rather than trying to split the chain by finding another block that’s somehow “better”. In the case of transactions, it’s what allows us to buy things in shops and make payments in seconds rather than hours.

The RBF patch replaces this rule with a new one that says given two transactions, whichever one pays the highest fee wins. It doesn’t propose changing the first seen rule for blocks, although as we will see in a moment, the broken logic that drives RBF applies to blocks just as easily as it does transactions, so this inconsistency makes little sense.

The primary effect of adopting RBF would be to make double spending of unconfirmed transactions very easy. Todd wants wallets to have an undo button in them that broadcasts a double spend transaction with a higher fee that returns the money back to the users wallet.

Scorched earth

This leads to an obvious problem — being able to send money in seconds rather than waiting for blocks is a highly desirable feature. It’s absolutely essential for buying stuff in shops. A currency that can’t be used to buy a newspaper on the street is not going to be seen as a real currency by the man on that street.

So Todd argues for a second thing: what he calls “scorched earth”. It’s actually an idea proposed by a pseudonymous author who called himself John Dillon, although apparently he did not describe this in any public post.

It relies on a second change called child pays for parent. This change was originally proposed years ago (by whom has now been lost in the mists of time), and has been implemented by Luke Dashjr in the Eligius pool. It makes a lot of sense by itself and is hopefully going to be integrated into the next Bitcoin Core release. Child-pays-for-parent means that miners will consider the fees of transaction graphs as a whole rather than just the individual components. Intuitively, it means if there is a transaction with no fee sitting around waiting to be confirmed, then another transaction that spends the first and does have a fee will increase the priority of the free transaction. This makes sense for miners as otherwise there would be stranded money they could take blocked up behind a free transaction, and it makes sense for users and merchants as they can now bump the fee on a transaction that’s taking too long to confirm, by adding a spend-to-self transaction on top.

The idea behind “scorched earth” is that if someone buys something with an unconfirmed transaction, when they walk out of the shop and press undo they double spend the original output to themselves with a higher fee, but the merchant sees this and then adds a spend-to-self transaction on top of their original payment with a slightly higher fee, and then the fraudsters wallet does the same to bump the fee on his chain of transactions, and so on and so on until the entire payment has been consumed in fees. The fraudster gets the goods, the payment is now going to a miner instead of the merchant, and the merchant is left with nothing.

Game theory and rationality

John Dillon argued that by making the initial transaction pay much more money than the actual price of the thing they’re buying (with the merchant sending the difference back to the buyer in a second transaction), an attempt to double spend will result in the buyer losing more money than the product was actually worth and so double spending in this way becomes irrational. Thus unconfirmed transactions would become safe.

Note: this means people will get money stuck in their wallet that’s difficult to spend, because buying something would require committing more money to the transaction than the item actually costs. That would be a severe usability problem, but I’ll ignore it for the purposes of this article.

Additionally, RBF advocates argue that adoption of RBF-SE is inevitable because any rational miner wishes to maximise his income from fees, and as nothing in the Bitcoin protocol enforces the first seen rule it will be abandoned in order to maximise short term profit.

These arguments sound good because they seem to only rely on game theory, a careful arrangement of incentives and some small technical tweaks to the protocol. Also they come with large helpings of cleverness — guaranteed to appeal to Bitcoiners.

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The problem is both arguments rely on extremely dodgy definitions of rationality. If rationality is misdefined then arguments based on game theory can result in garbage conclusions.

The first argument sounds good until you remember that the merchant still lost their product to the fraudster, and the miner gained more than the price of the goods in question. This situation is stable right until the moment miners and fraudsters realise they can team up and split the earnings. That is easy to implement: miners running the patch set just have to add another patch that picks the output which was double spent and then sends some of the double spent value to it (say a quarter). Now the fraudster got the stolen goods and half their money back, so they effectively only paid half price and can now fence the goods for a bit more than that to yield a reliable stream of profit.

In other words, replace-by-fee-scorched-earth collapses completely with only a tiny extra step.

But it gets worse! Even if this collaboration doesn’t happen, the merchant has still lost the goods that were effectively stolen from them. This means any rich company can simply double spend a small competitor into oblivion by repeatedly stealing goods from them. This is much more powerful than market dumping because it works even if the competitor has better products that would otherwise resist below-cost pricing.

In practice, of course, neither outcome would hurt merchants much at all for a stunningly obvious reason: faced with this type of payment fraud they would just abandon Bitcoin and go back to banking. Credit cards might well have chargebacks, but they are ordinary trade disputes and merchants win the case about 40% of the time. It’s easy to forget this in the middle of entertaining but abstract arguments about game theory. Our competition is not some academic ideal, it’s consensus-by-mainframe. If we’re worse than that Bitcoin won’t get adopted.

There’s one final problem. The code Peter Todd is pushing does not implement this system and thus using it would not result in the outcome he suggests, even if we ignore the gaping holes in the underlying reasoning. Specifically he hasn’t implemented the wallet side of the protocol anywhere, not even in obscure wallets, and so in reality nobody would notice the second double spend and start the scorched earth mechanism. They would just lose the entire amount and it’d cost the fraudster one satoshi.

In the end, all this code actually does is make fraud easier. That helps nobody.

The inevitability of failure

RBF advocates tend to argue that replace by fee is inevitable even if it leads to lots of double spending, because a rational miner will always want to take the transactions with the highest fees and nothing in the block chain algorithm stops them from doing so.

This argument also relies on a ridiculous definition of rational.

Whilst rational economic actors do attempt to maximise their profit, the argument ignores that this takes place in the context of varying time windows. In effect it argues that it’s “rational” to take a tiny increase in profit today even if that destroys your business and all the potential long term profits you could obtain tomorrow and the day after. This definition is absurd and no actual business works that way.

In reality businesses attempt to maximise profit over some kind of time period, which is almost always longer than the time it’d take merchants to abandon Bitcoin and go back to credit cards (probably on the order of weeks or days). If we saw massive double spending then large numbers of merchants would find the hassle of accepting Bitcoin to be much greater than the benefits, would stop accepting it, and the resulting loss of confidence would kill the BTC price. That in turn would cripple miner profits and send many of them underwater on their investments.

Only in a world where most miners have literally nothing to lose and have absolute confidence that BTC will be worthless tomorrow would it make sense for them to collectively wreck their businesses like that. Yet the argument for replace-by-fee states that this outcome is inevitable! That’s not showing much confidence in the future of Bitcoin!

Of course, from time to time there will be a miner who has much shorter time horizons than the others. Perhaps they suddenly have an unexpected need for cash, or perhaps they receive notice mining is being banned in their country, or perhaps a bad insider without any stake in the business decides to scam some merchants and run with the money. Bitcoin is designed to tolerate a minority of dishonest miners and a small amount of payment fraud against unconfirmed transactions is tolerable by merchants. What cannot work is a global change to the rules that makes every miner behave this way by default.

RBF for blocks

One problem with the definition of replace-by-fee is that whilst Peter’s patch only implements the logic for unconfirmed transactions, if miners are expected to ignore the rule for new broadcasts it stands to reason they would ignore it for confirmed transactions as well.

Put simply, if a miner sees a broadcast double spend of a confirmed transaction that would result in fees higher than the expected cost of forking the chain, miners implementing the RBF policy completely would then start work on forking the chain from that point. And as they would all do it simultaneously, this would then incentivise broadcasts of yet more double spends against already confirmed transactions that have only tiny fee increases — but as miners are working on a rewrite of the timeline anyway, it costs them nothing to go back and include other double spends as well.

So RBF taken to its logical conclusion not only results in unconfirmed transactions becoming useless, but confirmed transactions too!

This is why the abstract to Satoshi’s paper states:

As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they’ll generate the longest chain and outpace attackers.

Both a plain reading of Satoshi’s paper and common sense will tell you that going back in time and double spending is an attack on the network.

Quoting Satoshi again:

In this paper, we propose a solution to the double-spending problem using a peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions. The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes.

Making miners ignore the “chronological order of transactions” by default converts them all into dishonest attackers, which would break the system completely.

Is Bitcoin really protected by honesty?

Although Satoshi’s paper used the term honest where these days we would say rational, sometimes people have trouble with the idea that Bitcoin is reliant on lots of people sticking to the rules rather than pure mathematics.

I suspect the belief that Bitcoin is protected by pure maths has its roots in the word cryptocurrency, which is a false friend. After all, everyone knows that nobody can crack an encrypted message no matter how many people agree it should be done. So it stands to reason that cryptocurrency would give the same hardness to money that cryptography gives to messages. But nothing in Bitcoin is encrypted. All it does is produce a couple of documents — the ledger and an audit log showing how the ledger got into that state. The interpretation of those documents is and always will be up to people, who can ignore them entirely or selectively whenever they want to.

So: money is not a mathematical construct. It’s a social construct. The fact that Bitcoin uses some fairly basic maths to coordinate social decisions over the internet doesn’t change that.

Is RBF happening already?

Occasionally someone claims that RBF is already in use by miners and so this policy is already here and we might as well just deal with it. In fact there’s a guy named Tom Harding who monitors the Bitcoin network for double spends. He has observed attempts at exploiting RBF and discovered that for transactions spaced 10 seconds apart it only works about 1% of the time. This is higher than the ideal of zero, but with a 10 second gap some of that can be explained just through slow propagation and anyway, wallets can watch out for a propagating double spend and tell the merchant to abort the transaction. So in practice it’s easy to avoid losses due to this type of attack. 10 seconds is still a lot better than 10 minutes.

A Bitcoin Believer’s Crisis of Faith

Mike Hearn, a British computer programmer, holed up in his two-bedroom apartment in Zurich over several days and nights last week, writing a cri de coeur.

Two years ago, Mr. Hearn quit a cushy programming job at Google’s Swiss headquarters to devote himself full time to what was his great passion: the virtual currency Bitcoin. He was one of a handful of developers around the world dedicated to maintaining the basic software that governs both the creation of new Bitcoins and the network on which the financial transactions take place.

But a nasty fight has torn apart the small brotherhood of Bitcoin developers and raised questions about the survival of the virtual currency. Mr. Hearn, until recently one of the most prominent leaders of the Bitcoin project, became so disillusioned that in December he sold the few hundred Bitcoins he had left and quietly took a job at a new start-up.

The impassioned blog post he was working on last week was an announcement that he was leaving Bitcoin behind entirely: “Bitcoin has gone from being a transparent and open community to one that is dominated by rampant censorship and attacks on bitcoiners by other bitcoiners.”

The dispute — which grew out of a question about the number of transactions the Bitcoin network can handle — may sound like something of interest only to the most die-hard techies. But it has exposed fundamental differences about the basic aims of the Bitcoin project, and how online communities should be governed. The two camps have broadly painted each other as, on one side, populists who are focused on expanding Bitcoin’s commercial potential and, on the other side, elitists who are more concerned with protecting its status as a radical challenger to existing currencies.

The divide has led over the last six months to death threats against Bitcoin developers and hacking attacks that have taken down Internet providers. The sense of betrayal is strong on both sides. One of Mr. Hearn’s primary antagonists, a bearded California-based programmer named Gregory Maxwell, also appears to have pulled back from his work on Bitcoin after receiving anonymous death threats.

These internal struggles have surfaced at the same time that the Bitcoin technology is gaining credibility on Wall Street and in Silicon Valley. Throughout the various controversies that have plagued the virtual currency — including many instances of theft and fraud — the basic software has continued working as expected. That consistency has pushed the value of all outstanding Bitcoins above $6 billion and led many venture capitalists to imagine the technology as the future of finance, a cheaper and faster way to carry out financial transactions of all sorts.

Part of the basic appeal of Bitcoin has been its promise to provide a more reliable and trustworthy alternative to existing currencies and financial networks. Unlike the Federal Reserve and Wall Street, institutions that are managed by humans, Bitcoin was supposed to rest on the infallible logic of math and computer code. In this system, programmers like Mr. Hearn, who often volunteered their expertise and effort, were viewed as neutral technicians.

The current dispute, though, is a reminder that the Bitcoin software — like all computer code — is an evolving product of the human mind, and its deployment is vulnerable to human frailties and divergent ideals.

There may yet be a middle ground on the question that began the fight, but for the moment the sides are deadlocked, and that has left the Bitcoin software — and the virtual currency itself — in a state of limbo. Mr. Hearn is convinced that the stalemate will soon make it hard to complete even simple transactions and will eventually drive away users and lead to a price collapse. Mr. Hearn’s concerns about this impasse have been echoed, often in less strident tones, by a growing number of other developers, as well as by start-ups that buy, sell and hold Bitcoins.

Gavin Andresen, a close collaborator of Mr. Hearn’s and one of the longest-standing contributors to the Bitcoin software, said the dispute was likely to cause disruptions in the short term, but he disagrees with the notion that it will damage Bitcoin’s long-term prospects. Other Bitcoin leaders have expressed a similar sentiment, and investors have been inclined to believe them: The price of a Bitcoin has actually risen in recent months, to about $430 this week.

Some of Mr. Hearn’s allies in the battle are hoping the deadlock can be broken if the largest Bitcoin companies get behind something like Bitcoin Classic, a new version of the basic Bitcoin software that was announced this week, and that aims to expand the network’s capacity while also introducing new standards of governance.

But Mr. Hearn is convinced it is already too late. During nighttime walks in the woods near his apartment in Zurich, he has been trying to figure out where Bitcoin went wrong and what it means for the idealistic beliefs that led him to the project in the first place.

“It never occurred to me that the thing could just fall apart because of people getting crazy and having fundamental political disagreements over the goals of the project,” Mr. Hearn said in a Skype interview from his apartment. “It’s really shaken my faith in humanity.”

An Early Advocate

Mr. Hearn, 31, grew up in Manchester, England, where he played music and went rock climbing in his free time. He was one of the first serious programmers to take an interest in Bitcoin, back in April 2009, just a few months after its mysterious founder, known as Satoshi Nakamoto, let it loose in the world.

At the time, Mr. Hearn was working on mapping software at Google, a job he’d had since graduating from Durham University, in England. He had no professional involvement with finance or currencies, but the financial crisis convinced him that national currencies were vulnerable to politics and bad decision-making. When a web search led him to the primitive website for Bitcoin, he immediately emailed Satoshi, as the founder had become known.

“So many questions,” Mr. Hearn wrote. “But it’s rare that I encounter truly revolutionary ideas.”

Like many of the programmers who took an early interest, Mr. Hearn admired the rule-bound nature of the system. Only 21 million Bitcoins would ever be created. And the distribution of new Bitcoins was clearly laid out, relying on mathematical algorithms that left no room for human meddling.

Satoshi had written the software containing these rules, but after it was released, anyone could see the code and make changes. The people downloading this open-source software essentially voted on which changes to accept based on which version of the software they chose to use. If Satoshi proposed changes that they didn’t like, they didn’t have to download and run it, and anyone could offer an alternative. Bitcoin, like many other open-source projects, was a sort of leaderless democracy — a new way of governing human behavior online. One computer, one vote, with anyone able to propose new laws.

It took a while for Bitcoin to catch on, but by late 2020, when Mr. Hearn started contributing to the code, the currency had begun developing a passionate following. The apparently leaderless structure and seamless functioning of the software won Bitcoin renown among libertarians and anarchists, and soon enough, among entrepreneurs and venture capitalists, drawn to the transparent, mathematical foundations of the project.

Mr. Hearn joined a small but growing group of volunteers who worked on the basic Bitcoin software from various corners of the globe — the most committed of whom became known as the core developers. They met in person only a handful of times, but they would chat constantly online and send emails discussing potential changes. The leader of this effort, after Satoshi bowed out in 2020 (without ever revealing a real identity), was Mr. Andresen, a genial father of two from central Massachusetts who kept everyone on the same page.

Mr. Hearn was always a bit different from the rest of the core developers. Whereas most of them were classic techies, with patchy facial hair and ill-fitting clothes, the clean-cut Mr. Hearn had a taste for fashionable jeans and skateboard shoes — as well as an easy sociability. Within Google, Mr. Hearn became an informal spokesman for Bitcoin, answering queries from the Google co-founder Sergey Brin and leading an in-house email list discussion group that had attracted 400 employees by the time Mr. Hearn left.

Mr. Hearn was also, along with Mr. Andresen, of a practical mind-set, most interested in improving the basic experience of holding and using Bitcoins. He was not given to making the big pronouncements common to the more ideological members of the community, about the currency displacing the dollar or euro. He was more focused on the immediate challenges that could trip it up.

When tension cropped up among the developers, Mr. Andresen kept the peace by brokering compromises.

Things Turn Sour

The bonhomie began to fall apart last year because of what appeared to be a positive development: the continuing growth in the number of Bitcoin users and transactions.

The problem was that, early on, Satoshi established a limit on the number of transactions that could be processed by the network every 10 minutes. The cap was meant to ensure that the computers supporting the network, and processing the transactions, would not be overwhelmed by an enormous quantity of data. But Satoshi had suggested that the limit should be temporary, and as the number of transactions coursing through the network inched closer to the cap, delays started to occur and transactions were not going through.

When Mr. Hearn began pushing for changes to the core Bitcoin software to allow for larger blocks of transaction data, he faced immediate resistance. Gregory Maxwell, a largely self-taught programmer who had worked on Wikipedia and the Mozilla web browser, both open-source projects, said that larger blocks of transaction data would be harder for ordinary computers to process. The result, Mr. Maxwell warned, would be to hand control over the network to big companies that could afford powerful computers.

For Mr. Maxwell, slower transactions seemed to be a secondary issue to protecting Bitcoin from centralized sources of authority.

“It’s far from clear to me that the world will get a second shot at this in the next several decades if Bitcoin lapses into the same-old, same-old,” he wrote to other developers.

Mr. Hearn retorted that the technical issue wasn’t such a big deal; ordinary computers could mostly process the larger blocks of transaction data. More important, he argued, was that Bitcoin needed to succeed first as a cheaper, faster payment network, like PayPal or Visa. If Bitcoin wanted to ever compete with mainstream payment systems, which could process tens of thousands of transactions a second, it would have to do away with Bitcoin’s existing limit of fewer than seven transactions a second.

The debate was complicated by the financial interests of the people involved. Mr. Maxwell and several of his supporters were then working for a Bitcoin start-up called Blockstream, with $21 million in funding from venture capitalists. Mr. Maxwell’s start-up was trying to make it possible to break off some transactions from the Bitcoin network, making the number of transactions the network could handle less important.

After leaving Google, Mr. Hearn had begun taking a salary for his Bitcoin work from the venture capital firm Andreessen Horowitz, one of the most prominent supporters of Bitcoin start-ups in Silicon Valley.

As the debate grew increasingly fractious, friendships among the core developers fell apart.

In the past, the leader of the Bitcoin software project, Mr. Andresen (no relation to Marc Andreessen of Andreessen Horowitz), would have stepped in to mediate. Mr. Andresen says that as “lead maintainer” he always sought consensus, but on the few occasions when there was irresolvable disagreement, he made the final call, acting as a sort of “benevolent dictator.” But Mr. Andresen stepped back from his day-to-day role in 2020 and gave the job of lead maintainer to another volunteer on the project, Wladimir J. van der Laan, a Dutch programmer, who said he did not intend to follow Mr. Andresen’s lead.

“I cannot be the decider for network-level issues,” Mr. van der Laan said via email this week. “No one ‘owns’ Bitcoin. No one can decide over Bitcoin as if it’s some kind of company.”

Mr. Hearn and Mr. Andresen ultimately decided late in the summer that the only way forward was to give the vote to the people actually using the Bitcoin software. They put together their own version of the core software — largely the same as the current software, but with an allowance for more transactions — which they called Bitcoin XT. If a clear majority of the system’s users downloaded the software, it would become the new law of the land — what is known in open-source terminology as a fork.

Forks are part of the open-source process and had been used to make small, agreed-upon fixes to Bitcoin. But no one had tried the sort of divisive fork that Mr. Hearn and Mr. Andresen devised, largely because of the risk that it could result in two incompatible Bitcoin networks and create questions about the legitimacy and value of existing Bitcoins.

“So this is it. Here we are. The community is divided, and Bitcoin is forking,” Mr. Hearn wrote on Aug. 15, announcing the new software.

The release of Bitcoin XT was viewed by Mr. van der Laan and Mr. Maxwell as an act of betrayal. Yes, it was democratic, but they said that decisions about the core software should be made by technical experts — not by populist campaigns.

In an interview with Vice a few days after the announcement, Mr. Maxwell compared the Bitcoin XT team to a “guy standing on the sidelines with a beer cup hat.” One of Mr. Maxwell’s confidants likened it to an attempted coup. Their supporters blocked Mr. Hearn’s announcement of Bitcoin XT — and any discussion of it — from the website and several other online forums where Bitcoin members met to discuss the project.

The fight took on a new dimension when a powerful hacker distributed Bitkiller, malicious software that sought out computers that downloaded the Bitcoin XT software and overwhelmed them with traffic. One Internet provider on Long Island said the Bitkiller attacks brought down service for part of southern Long Island for several hours. The biggest American Bitcoin company, Coinbase, was taken entirely off-line for brief periods after declaring support for XT. Not surprisingly, this scared away many Bitcoin users from downloading the new software or even declaring support for it.

The hacker responsible for the attack, who appeared to be based in Russia, told Mr. Hearn in an online exchange that someone “payed me for killing XT” — though he declined to say who was responsible.

In the late fall, Mr. Maxwell and his supporters tried to engineer a compromise. They organized meetings in Montreal and Hong Kong where the leading developers met to discuss alternative ways to scale the Bitcoin system. Mr. Andresen went to the first of these, where Mr. Maxwell’s allies announced their own, more gradual plan for increasing the network’s capacity. But Mr. Andresen and Mr. Hearn both felt that the recommendations didn’t go far enough. Mr. Andresen, who is not normally given to sniping, began to harden his position.

“It’s likely that the current developers will get fired, and some other team will replace them because they are not listening to their customers,” he said in an interview last week.

Mr. Maxwell was equally dismissive of Mr. Hearn’s camp — saying that they had politicized what should have been a technical decision. Then he suddenly dropped out of the conversation in mid-December. He has not explained his absence, but colleagues say he was tired of the rancor.

An Uncertain Future

Mr. Andresen said a number of large Bitcoin companies had been asking him to come back in and lead a new version of the Bitcoin software. But if he did return to his old role, he said, he would insist on clear rules about decision-making.

Mr. Hearn says he thinks that getting the opposing camps together will now be very difficult. He believes that the dangers of the current impasse have not been reflected in the price of Bitcoin because the full debate has been censored in many of the online forums where Bitcoin is discussed.

Despite the discord, Mr. Hearn has not lost faith in all of the ideas behind Bitcoin. The start-up in New York where he has taken a job, R3, is developing Bitcoin-like networks for banks to enable cheaper and faster ways to trade assets of all sorts. The start-up aims to take advantage of the less-centralized record-keeping methods of Bitcoin, but still allow for someone to be in charge, to handle the software and to manage access to the system.

This work lacks the purity of Bitcoin, but after months of sleepless nights, fretting about betrayed promises, he said, “I want to be in a professional environment again where people are grounded in some sort of business reality.”

Bitcoin Is Dead (Again), Long Live Bitcoin (Again)

Oh, the drama, such drama. Last week longtime Bitcoin developer Mike Hearn declared “the Bitcoin experiment…has failed,” and marked his resignation from that community with a fusillade of verbal grenades (and a New York Times profile of his dissent.) This in turn provoked a whole torrent of hot takes and reactions, which mostly had one thing in common: contempt for all who disagree.

Bram Cohen, the founder of BitTorrent, wrote Hearn’s rant off as “whiny ragequitting.” Greg Slepak posted a detailed, point-by-point technical rebuttal of Hearn’s accusations; a redditor did much the same on /r/Bitcoin, as did Ron Gross on Medium. Vivek Wadha declared “R.I.P., Bitcoin. It’s time to move on,” for the Washington Post, and posted the same article under a slightly less inflammatory title, er, here. Which in turn provoked another angry line-by-line response by Sam Patterson. Are you exhausted yet?

Beneath all that sound and fury, though, I promise you, something interesting is happening.

Bitcoin is, in fact, far further from death than it was all the (many) other times its demise was gleefully, and wrongfully, proclaimed. (Hearn’s central argument boils down to: “Bitcoin is failing because it has grown too popular!” Uh-huh. “Nobody goes there any more, it’s too busy.”) What does seem dead, however, is one particular vision of Bitcoin’s future; Hearn’s. Hence his parting broadside, which was roughly 70% sour grapes … and 30% valid concerns.

The apparent cause of the Great Bitcoin Schism Of 2020 was a technical dispute over Bitcoin’s block size. Long ago, Bitcoin’s implausibly mysterious progenitor Satoshi Nakamoto added a last-minute size limitation to the cryptocurrency’s “blocks” of transactions (which in turn make up its now-famous “blockchain.”) This was intended as a temporary anti-spam measure.

But that single line of code also limits the overall capacity of Bitcoin, which has grown so popular that is beginning to approach that hard limit — a limit that cannot be modified without a “hard fork,” which could (to oversimplify) split the Bitcoin blockchain in two. As long as a supermajority of the Bitcoin network quickly adopted the new code, this wouldn’t be disastrous — but it would still be a highly fraught exercise, and one that would inevitably leave some of the existing network behind.

If this were only a technical dispute, though, it would provoke far less rancor. What’s really at stake here are two far more contentious things: what is the future of Bitcoin? And who gets to define it?

1/ People are conflating two separate debates in Bitcoin blocksize discussion: which technical measures to take and who ‘decides’

8/ In any case, I think the ‘debate’ would benefit from an explicit separation into proposed approach for tech and governance

As the always-perspicacious Fred Wilson put it, describing the first debate, “I liken it to this. Should Bitcoin be Gold or should Bitcoin be Visa.” Hearn’s vision was Bitcoin-as-Visa; a single vast transactional network. The alternate vision, now apparently in the ascendant, is Bitcoin-as-Gold … with, eventually, a semi-separate Visa layer built atop it.

Personally I too think the latter is the right decision. But the most important question, the crux of this Great Bitcoin Schism, is: who gets to make it?

In theory, the Bitcoin miners who have put many millions of dollars into their custom hardware decide what happens to the Bitcoin network. But they’re not expert developers. They can only choose whether or not to run the code presented to them. In practice, as is so often the case, an enormous burden of authority and responsibility accrues not to they who own the hardware, but they who write the software.

Bitcoin is an open-source project, but it’s fair to say that its core development has been largely conducted by a fairly small number of developers. This team–call them “Bitcoin Core”–is frequently accused (albeit on Reddit) of blatant conflict of interest, because several of them co-founded a well-funded startup called Blockstream, which is building, and presumably planning to monetize, various “Bitcoin 2.0” technologies. Bitcoin Core is staunchly opposed to the plan by Hearn (and Bitcoin developer Gavin Andresen) to immediately introduce the “hard fork” described above. Bitcoin Core favors a different plan to increase Bitcoin’s capacity.

I don’t think they are afraid that a hard-fork capacity increase will interfere with Blockstream’s business model; I think they genuinely (and correctly) believe that it is a (currently) technically unnecessary and strategically dangerous idea. But I also think they have explained themselves with the kind of dismissive lack of clarity all too common among brilliant engineers, and have misinterpreted and misunderstood the concerns of the rest of the Bitcoin ecosystem.

As a result, while Hearn may be gone, the hard fork lives on. A new alternative called Bitcoin Classic, introduced by a group of technically inferior but politically wilier developers, appears to be winning considerable (though not decisive) support.

I suspect things would have gone very differently if the Bitcoin Core folks had made what Ryan Shea calls “the scaling announcement they should have made.” And I suspect that, as cooler heads correctly observe, these are inevitable growing pains, a healthy clash of cross-pollinating ideas that will be good for the Bitcoin project and ecosystem in the long run…

…but let’s not all sing Kumbayah together just yet. As I noted above, Mike Hearn’s swan song may have been 70% sour grapes–but it was 30% completely valid concerns. Bitcoin’s runaway success, and the Great Bitcoin Schism Of 2020, have heightened the two uncomfortable fundamental contradictions still lurking darkly at its heart like Grendel.

The Bitcoin network must be decentralized, permissionless, and trustless. Otherwise it literally has no reason to exist.

[email protected]_armstrong should bitcoin be controlled by you personally? or andresen horowitz? it’s a p2p currency with decentralised control

@adam3us @tedmrogers A Bitcoin where only a small no. of large companies use the chain is not really Bitcoin anymore. It’s inefficient Visa.

But Bitcoin “mining,” the process of forging and securing the all-important blockchain, has become an industrial rather than artisanal activity, which (for technical reasons) only makes financial sense for companies who run their own custom-built mining chips in places with extremely cheap electricity. Hearn’s outrage that “the block chain is controlled by Chinese miners” may be one step removed from xenophobia, but the larger issue — that this decentralized system unfortunately happens to incentivize, maybe not centralization, but something a lot like oligarchization…

On stage right now: people representing approximately 90% of the Bitcoin hashing power. Truly an historic moment.

…is very much an internal contradiction, and one that won’t go away any time soon.

The Bitcoin Core folks know this. Indeed, their opposition to increasing the block size is partly rooted in a concern that it will centralize mining even further. But, unfortunately, the second internal contradiction is that the decentralized Bitcoin project needs some form of technical governance and guidance. “Rough consensus and running code” sounds great; but rough consensus among whom? Miners don’t have the technical chops to guide and evolve the Bitcoin codebase. Very few people do, right now — and most of them are part of Bitcoin Core.

Which means that “decentralized” Bitcoin, especially now that the influential Hearn has flounced away, arguably already does have a de facto governance group… one that happens to be unwritten, informal, and largely employed by a single for-profit company. However well-intentioned Bitcoin Core may be (and I personally completely believe in their good intentions) and despite the “rough consensus” from the Scaling Bitcoin conferences, it’s easy to see why many others find the situation awkward at best, and unacceptable at worst.

I don’t have a solution for the first contradiction. But I do for the second. I submit that Bitcoin has grown in size and importance to the point that it now needs some equivalent of the IETF or ICANN. (Before anyone brings it up: no, not like the Bitcoin Foundation.) That’s a deeply staid, boring, bureaucratic notion, I know, especially for a revolutionary anarchic decentralized cryptocurrency. But technical decisions made under that kind of political aegis would be easier to accept for all concerned. Perhaps the time has finally come for Bitcoin to become just a little bit more boring.

Вариант 6

Раздел 1. Аудирование

Вы услышите 6 высказываний. Установите соответствие между высказываниями каждого говорящего 1—6 и утверждениями, данными в списке A—G. Используйте каждую букву, обозначающую утверждение, только один раз. В задании есть одно лишнее утверждение. Вы услышите запись дважды. Занесите свои ответы в поле справа.

Нажмите , чтобы прослушать запись

A. For some people, old habits never die.

B. Sometimes it is a mistake to write a letter

C. Writing letters in English is good practice

D. Letter writing is a Waste of time

E. It is a waste of time making your views known

F. Persistence eventually gives some results

G. Seven together will be better than one

Определите, какие из приведенных утверждений A— G соответствуют содержанию текста (1 — True), какие не соответствуют (2 — False) и о чем в тексте не сказано, то есть на основании текста нельзя дать ни положительного, ни отрицательного ответа (3 — Not stated). Занесите номер выбранного Вами варианта ответа в таблицу. Вы услышите запись дважды.

Нажмите , чтобы прослушать запись

A. James prefers Paris to Nice.

B. Katie thinks that it is good to have countryside nearby

C. Katie thinks that it wasn’t worth seven weeks work to pay for the holiday.

D. James thinks Katie’s brother made a better choice

E. James booked an expensive restaurant without consulting Katie

F. James has eaten at La Cambuse before

G. They plan to be up all night

В заданиях 3—9 обведите цифру 1, 2 или 3, соответствующую выбранному вами варианту ответа. Вы услышите запись дважды.

Нажмите , чтобы прослушать запись

Watching the displays at the exhibition the speaker was eager to test personally

1) only some of them..

2) the first twelve

The speaker came to the exhibition

3) with a group of friends.

The speaker managed to do well in the

1) Brush boarding.

2) Roller skiing.

3) Land yachting.

The speaker didn’t do well in the Aquathlon because

1) he didn’t take it seriously.

2) he was saving energy for Kite surfing.

3) it was technically tricky

The secret of successful Kite surfing lies in

1) choosing the largest possible kite.

2) ‘jumping’ and landing smoothly.

3) avoiding getting dragged in the air.

The speaker stopped Kite surfing after 30 minutes because

1)of extreme tiredness

2) there was an off shore wind.

3) the instructor suggested it.

All the displays were

1) experimental models with designers used as instructors.

2) real practiced sports.

3) computer installations of real sports.

Раздел 2. Чтение

3. Eventful life

4. A curious case

5. Reduced Expectations

6. Royal brother

7. Royal ancestor

8. Double trouble

A. I am a mother of identical, mirror-image boys — David and John. No one but me can tell them apart. I am constantly amazed at how close they are. Once when they were babies David was ill, but it was John who begun crying wildly. I tried to calm John first since nothing was wrong with him. But he only cried louder. Finally I gave some medicine to David — who really was unwell. As soon as John sensed his brother felt better, he immediately settled to sleep.

B. The 12 year old was playing near the Platte River in North Bend, Nebraska. The river was high and as the boy stepped in, the current pushed his legs away. He floated off, spinning in the powerful current. At the last possible moment before the rapids, his yells were heard by his dog. It jumped in, reached the boy and towed him ashore. Another second and the boy would have been swept away to certain death.

C. Armgaard Karl Graves, referred to in press reports as ‘the Glasgow Spy’, was convicted in Scotland under the Official Secrets Act (1911) for spying on the British Navy. He spent years successfully creating an identity as an Australian doctor and in Scotland even conducted important clinical experiments. But he was eventually caught by a suspicious post office worker as he sent and received post under a variety of assumed names.

D. Zsa Zsa Gabor was born in Budapest on February 6th, 1917. Now in her 90s she has had a long and varied life. She was a beauty queen and singer before becoming a famous screen actress. She was married 8 times but only had one child with second husband, Conrad Hilton. Her last marriage to Frederic von Anhalt gave her the honorary title Prinzessin von Anhalt.

E. “Who do you think you are” is one of my favourite TV programs. Each episode re¬searches the family history of a celebrity, back into the mists of time. In the UK there are good records of births, marriages and deaths going back hundreds of years. One of the best episodes was on Boris Johnson, the Mayor of London. He was thrilled when he discovered he was directly related to King George II.

F. Paris Hilton is a famous socialite, media personality, actress, model and singer. In 2007 her grandfather Barron Hilton pledged 97% of his estate — a value of more than 2 billion US dollars — to a charitable foundation. Many now believe that Paris and the other grandchildren have had their potential inheritance sharply reduced. Others have commented that this news was unlikely to change her future life style.

G. Andy always travels well equipped for any potential possibility. He has a sewing repair kit and a small medical kit with aspirin. These are, I suppose, perfectly sensible. But what about a ball of string, tape measure, masking tape, Swiss army penknife, disposable cutlery, disinfectant, dry bags and an inflatable back rest? Andy says you never know what might happen and it’s always best to be prepared.

Установите соответствие тем 1 — 7 текстам A — F. Занесите свои ответы в соответствующее поле справа. Используйте каждую цифру только один раз. В задании одна тема лишняя.

1. due to basic human instinct that

2. is still early to judge

3. are simply the cycles of fashion

4. but more usually the stars are members

5. that the television phenomenon

6. is a type of programme that

7. seem to have disappeared

Reality TV seems to dominate broadcasting these days. But what is it, how did it emerge and why on earth is it so popular? The first question is easily answered. Reality TV A ___ presents unscripted, dramatic or humorous situations or events. It can involve celebrities В ___ of the public. Reality TV has been gradually growing in importance for over 60 years. “Candid Camera” — the show that filmed ordinary people reacting to set ups and pranks — started in 1948. Some people, however, believe it was the Japanese with their awful shows in the 1980s and 90s that brought reality TV to centre stage. Others believe С ___ that is called “Big Brother” was the show that spawned the reality TV age. But why are the shows so popular? Different theories come to life. Some believe that it is D ___ we like to watch horrible behaviour: the same instinct that once inspired the ancient Romans to go and watch gladiators destroy each other at the Coliseum. Others suggest a kind of voyeurism is involved there — an unhealthy curiosity to spy on other people’s lives. Whatever the real reason — the trend seems to have already peaked. A lot of such shows E ___ or are expected to go in the near future. And the replacement seems to be talents shows — watching competitions in dance, singing and general entertainment. Does it mean that people are changing? It is too early to say. Most agree that these F ___ .

Прочитайте текст и выполните задания 12—18, обводя цифру 1, 2, 3 или 4, соответствующую номеру выбранного вами варианта ответа.

For the first ten years of my life my father was in the RAF (Royal Air Force). This meant that he was frequently posted to different air bases around the UK and I, as frequently, changed schools. One year we moved no fewer than three times and each time I tried, in vain, to settle and make friends. For a young child this frequency of change can only have a detrimental effect and I still have school reports stating that I was “lazy” and a “dreamer”.

When I reached ten, my worried parents decided I needed a personal tutor. She turned out to be a kindly and patient old lady who presented me with a large, black book of tests. She made me complete it as a home task and I scored about 20 out of 100. At out next meeting, on a Saturday morning, she went through it with me item by item, until I completely understood each task. She then made me retake the test and of course I got almost every question correct. Then we again moved house!

In our new town I took and failed the 11 plus exam (my excuse was that I was still only ten!) and my prospects looked dim. I was destined to go to the local comprehensive which had a reputation for being quite rough. But also nearby was an ancient public school, set in a castle. This was a place for rich kids only — apart from every year they gave 2 free places to the highest performing local boys (it was a boys only school) in their entrance exam.

My crazy parents decided I should enter the exam. I had as much chance of succeeding as going to the moon — or so I thought. But when I sat down to take the test, a rather familiar black book of 100 tests was placed on the desk!

I did the test and kept quiet and the next term, as a terror struck 11 year old in an ill fitting suit, I arrived for my first day at “the castle”.

Clearly I was going to have problems in this new, intensely academic environment and I did. There were 31 boys in my class and in every subject, despite my best efforts, I finished in the bottom 5 in every test, exam and report.

We were then streamed into “sets” for each subject and I ended up being taught with boys closer to my own ability. I worked really hard and at the end of my third year there, I won my first form prize. I was top of the bottom class! But I was really motivated and in time got “promoted” to higher “sets”. I worked really hard and won prizes every year until I left after A Levels. My grades were all A’s — the highest you can get – and I was offered a place to study at a prestigious university.

So when a certain old Lady presented me with a large black book full of tests, you could say it was my lucky break. Although I would argue that if you work really hard and keep your wits about you — then you begin to make your own luck.

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