The Real Numbers Behind Segwit Activation

It’s important to get your maths right; tricky, even boring though it may be, recent claims from a CryptoNews article have some very flawed claims. The key quote if you don’t want to wade through the whole article is this: “Alternatively stated, the activation of Segwit will likely result in a 75 percent increase on the current 1 MB block size if implemented in an optimum ecosystem.”

For a 400% increase you gain 75%. They are using one form of TX on Segwit and another on standard blocks.

A true comparison:

SegWit (4MB) –  8,865 P2PKH TX in a block

Bitcoin (4MB) –   20,940 P2PKH TX in a block

In essence, Segwit loses on a fair playing field. The graph below is TX rates if Bitcoin was maintained at a rate linked to Moore’s law vs the cap:

The Real Numbers Behind Segwit Activation

It’s important to get your maths right; tricky, even boring though it may be, recent claims from a CryptoNews article have some very flawed claims. The key quote if you don’t want to wade through the whole article is this: “Alternatively stated, the activation of Segwit will likely result in a 75 percent increase on the current 1 MB block size if implemented in an optimum ecosystem.”

For a 400% increase you gain 75%. They are using one form of TX on Segwit and another on standard blocks.

A true comparison:

SegWit (4MB) –  8,865 P2PKH TX in a block

Bitcoin (4MB) –   20,940 P2PKH TX in a block

In essence, Segwit loses on a fair playing field. The graph below is TX rates if Bitcoin was maintained at a rate linked to Moore’s law vs the cap:

Oh Dear More Inaccurate Headlines!

We all know the media can be misleading but sometimes it goes too far. Willian Suberg at CoinTelegraph barks: “Bitcoin Price Eyes New Highs Amid 90 Percent Plus SegWit Support.”

This does two things:

  1. Neatly tries to link the high of Bitcoin to SegWit and…
  2. …suggests SegWit has huge support within the Bitcoin community

Now, that all sounds great but ignores the most crucial part of the Bitcoin industry – the miners.   This cannot be overstated, miners are what makes the system thrive.

So with “90 percent SegWit” support the miners must all be in the SegWit camp, right? Not at all in fact Bitcoin Unlimited is the most profitable, and thus, attractive option for miners.

The muddying of the waters is around the issue of Nodes.  Straight from Satoshi’s keyboard in the old days – “Nodes collect new transactions into a block, hash them into a hash tree…”. That is, Nodes are mining. If you are not mining, you are not running a node, you are just a wallet.  Next, and this is important, ONLY nodes (that is those systems that are mining) secure the network.

From Main.h in the original code [1]:

Further, a system that is not online and connected openly is a problem – ie most home users with wallets acting as nodes and NOT mining.  According to Gavin Andresen:

“Most ordinary folks should NOT be running a full node. We need full nodes that are always on, have more than 8 connections (if you have only 8 then you are part of the problem, not part of the solution), and have a high-bandwidth connection to the Internet.”

(source:  https://bravenewcoin.com/news/the-decline-in-bitcoins-full-nodes/)

The system is designed to scale, but this occurs when businesses run Nodes, not home users running a Raspberry Pi.  Home users running a full copy of the blockchain thinking that this is the only way to be secure and see what is happening is utter nonsense.  (You can sign a transaction on a machine not connected to the internet and copy this in a way that means your private keys are never exposed.  In fact, for large values, this is the best method; it is what is most secure.)

Nodes secure the network by mining. This is clear from the paper [2] – “The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power. 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.” Nodes generate the chain. They mine.

Why all the fuss?  Back to the headline.  It is likely that the “support for Segwit” includes wallets that are not mining…they’re not adding any hash power.  They cannot be called nodes, and they are functionally sock puppets [3] and thus attackers from the spirt of the paper.

Seems to us that sock puppetry is being used to propagate a pro-Blockstream agenda – set up sock puppets that do not mine, and then call these nodes to make it seem that there are more nodes supporting them.  Undermine the consensus mechanism?  Check.  Alter the security of Bitcoin?  Double check.  Propaganda to further your own agenda?  Indeed.

 

References:

https://github.com/trottier/original-bitcoin/tree/92ee8d9a994391d148733da77e2bbc2f4acc43cd
https://bitcoin.org/bitcoin.pdf
https://cs.stanford.edu/people/jure/pubs/sockpuppets-www17.pdf

Oh Dear More Inaccurate Headlines!

We all know the media can be misleading but sometimes it goes too far. Willian Suberg at CoinTelegraph barks: “Bitcoin Price Eyes New Highs Amid 90 Percent Plus SegWit Support.”

This does two things:

  1. Neatly tries to link the high of Bitcoin to SegWit and…
  2. …suggests SegWit has huge support within the Bitcoin community

Now, that all sounds great but ignores the most crucial part of the Bitcoin industry – the miners.   This cannot be overstated, miners are what makes the system thrive.

So with “90 percent SegWit” support the miners must all be in the SegWit camp, right? Not at all in fact Bitcoin Unlimited is the most profitable, and thus, attractive option for miners.

The muddying of the waters is around the issue of Nodes.  Straight from Satoshi’s keyboard in the old days – “Nodes collect new transactions into a block, hash them into a hash tree…”. That is, Nodes are mining. If you are not mining, you are not running a node, you are just a wallet.  Next, and this is important, ONLY nodes (that is those systems that are mining) secure the network.

From Main.h in the original code [1]:

Further, a system that is not online and connected openly is a problem – ie most home users with wallets acting as nodes and NOT mining.  According to Gavin Andresen:

“Most ordinary folks should NOT be running a full node. We need full nodes that are always on, have more than 8 connections (if you have only 8 then you are part of the problem, not part of the solution), and have a high-bandwidth connection to the Internet.”

(source:  https://bravenewcoin.com/news/the-decline-in-bitcoins-full-nodes/)

The system is designed to scale, but this occurs when businesses run Nodes, not home users running a Raspberry Pi.  Home users running a full copy of the blockchain thinking that this is the only way to be secure and see what is happening is utter nonsense.  (You can sign a transaction on a machine not connected to the internet and copy this in a way that means your private keys are never exposed.  In fact, for large values, this is the best method; it is what is most secure.)

Nodes secure the network by mining. This is clear from the paper [2] – “The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power. 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.” Nodes generate the chain. They mine.

Why all the fuss?  Back to the headline.  It is likely that the “support for Segwit” includes wallets that are not mining…they’re not adding any hash power.  They cannot be called nodes, and they are functionally sock puppets [3] and thus attackers from the spirt of the paper.

Seems to us that sock puppetry is being used to propagate a pro-Blockstream agenda – set up sock puppets that do not mine, and then call these nodes to make it seem that there are more nodes supporting them.  Undermine the consensus mechanism?  Check.  Alter the security of Bitcoin?  Double check.  Propaganda to further your own agenda?  Indeed.

 

References:

https://github.com/trottier/original-bitcoin/tree/92ee8d9a994391d148733da77e2bbc2f4acc43cd
https://bitcoin.org/bitcoin.pdf
https://cs.stanford.edu/people/jure/pubs/sockpuppets-www17.pdf

Ripple Expands ‘Blockchain Network’ With 10 New Members

Blockchain payment protocol Ripple has added an additional 10 members to the consortium it now calls its ‘blockchain network’.

The collection of companies, made up of banks and financial services firms, will contribute to the development of Ripple’s blockchain services, giving Ripple access to the consortia-model that has proliferated throughout major blockchain projects.

Hyperledger is perhaps the best example, with the open source project bringing together contributions from over 100 companies for blockchain development, including automotive manufacturer Daimler and American Express.

Ripple’s new partnerships include agreements with BBVA, Yes Bank, Cambridge FX, EZ Forex, Star One Credit Union, and banks SEB and MUFG.

Ripple, which has raised over $100 million in funding to support the development and expansion of its payment settlement blockchain, is hoping the move will help streamline their system process, making it easier for different banking systems to connect.

Asheesh Birla, vice president of product at Ripple, said that the partnership will help Ripple establish a set of common rules and standards, which will make the core technology ultimately more effective, while allowing the company to leverage the local expertise of firms based in different parts of the world.

“You need a whole ruleset, and that’s why we call it a blockchain network and when we say that partners are joining, they’re actually agreeing to the standards and rules that accompany the technology as well…The reason that we chose to work with banks is that they are experts in local regulation. A lot of them have that pull and understand the regulatory environment and we built our product in such a way that it fits within the different regulatory schemes around the world.”

Using distributed ledger technology, the system allows for real-time cross-border settlement of banking transactions through secure, decentralized data exchange on a blockchain – similar to the technology used to power digital currencies like bitcoin.

The global distribution of the new partners has been seen as a further signal of intent from Ripple, who have set their sights on a global rollout of their payments settlement system.

Ripple Expands ‘Blockchain Network’ With 10 New Members

Blockchain payment protocol Ripple has added an additional 10 members to the consortium it now calls its ‘blockchain network’.

The collection of companies, made up of banks and financial services firms, will contribute to the development of Ripple’s blockchain services, giving Ripple access to the consortia-model that has proliferated throughout major blockchain projects.

Hyperledger is perhaps the best example, with the open source project bringing together contributions from over 100 companies for blockchain development, including automotive manufacturer Daimler and American Express.

Ripple’s new partnerships include agreements with BBVA, Yes Bank, Cambridge FX, EZ Forex, Star One Credit Union, and banks SEB and MUFG.

Ripple, which has raised over $100 million in funding to support the development and expansion of its payment settlement blockchain, is hoping the move will help streamline their system process, making it easier for different banking systems to connect.

Asheesh Birla, vice president of product at Ripple, said that the partnership will help Ripple establish a set of common rules and standards, which will make the core technology ultimately more effective, while allowing the company to leverage the local expertise of firms based in different parts of the world.

“You need a whole ruleset, and that’s why we call it a blockchain network and when we say that partners are joining, they’re actually agreeing to the standards and rules that accompany the technology as well…The reason that we chose to work with banks is that they are experts in local regulation. A lot of them have that pull and understand the regulatory environment and we built our product in such a way that it fits within the different regulatory schemes around the world.”

Using distributed ledger technology, the system allows for real-time cross-border settlement of banking transactions through secure, decentralized data exchange on a blockchain – similar to the technology used to power digital currencies like bitcoin.

The global distribution of the new partners has been seen as a further signal of intent from Ripple, who have set their sights on a global rollout of their payments settlement system.

Bitcoin Miners Vote With Their Feet

As we become increasingly wary of adverts, offers, promises and even politicians, make that, especially politicians the increasingly important voice is, of course, our own.

Take a look at tourism industry, TripAdvsior is now so powerful that a new hotel is always worth a visit because they will be falling over themselves to make those early TripAdvisor reviews are as strong as possible. Yes, this can faked but it is still, in the main ‘people power.’

Bitcoin is no different. And as we wade through the arguments and counter-arguments of Bitcoin Core vs Bitcoin Unlimited the pudding and proof thereof are the miners themselves.

That voice is increasingly showing BU as the most important party, the Caramel-Pecan-Chocolate Cheesecake, if you will. Both Coin.Dance and Blockchain.info are showing that BU is evolving as the strongest party since the ignominy of ‘The Fork’ raised its putrid head.

Our own poll last moth suggested that was the popular vote but this is further endorsement of that feeling. This also rather suggests BU is also most profitable for miners*.

The BU Network Support is back up to 48% both on blockchain.info and coin.dance. This is higher than the past 10 day trailing, which means support is increasing, indeed up 77% from April 9th. That’s some ‘growth.’

*Sources close to the coin face inform us miners get greater ROI with the removal of the block size cap.

Bitcoin Miners Vote With Their Feet

As we become increasingly wary of adverts, offers, promises and even politicians, make that, especially politicians the increasingly important voice is, of course, our own.

Take a look at tourism industry, TripAdvsior is now so powerful that a new hotel is always worth a visit because they will be falling over themselves to make those early TripAdvisor reviews are as strong as possible. Yes, this can faked but it is still, in the main ‘people power.’

Bitcoin is no different. And as we wade through the arguments and counter-arguments of Bitcoin Core vs Bitcoin Unlimited the pudding and proof thereof are the miners themselves.

That voice is increasingly showing BU as the most important party, the Caramel-Pecan-Chocolate Cheesecake, if you will. Both Coin.Dance and Blockchain.info are showing that BU is evolving as the strongest party since the ignominy of ‘The Fork’ raised its putrid head.

Our own poll last moth suggested that was the popular vote but this is further endorsement of that feeling. This also rather suggests BU is also most profitable for miners*.

The BU Network Support is back up to 48% both on blockchain.info and coin.dance. This is higher than the past 10 day trailing, which means support is increasing, indeed up 77% from April 9th. That’s some ‘growth.’

*Sources close to the coin face inform us miners get greater ROI with the removal of the block size cap.

Tencent Announces Development of Blockchain Platform

Chinese Internet services company Tencent has announced it is developing its own blockchain platform for a raft of new services, becoming the latest major online brand to increase their focus on the technology.

The company, which is responsible for a variety of online services including WeChat and QQ, said that their blockchain solutions will be designed to meet the requirements of managing digital assets, authenticating user identities, and improving trust online.

The multi-faceted blockchain solution will be designed to leverage the potential of the distributed ledger to introduce improvements across Tencent services, as well as the wider web.

Tencent has described the project as “open-ended”, with no specific cap on the amount or direction of their exploration into blockchain and distributed ledger technology.

The move will be seen by analysts as one of the most determined bids yet from the tech industry to implement blockchain technologies in a range of back-end use cases.

Detailed in a white paper published by Tencent, the company said that government activism is required to help propel this important technology into the forefront, across a range of industries.

“The involvement of government in the development and regulation of block chains is necessary and should encourage in-depth research on blockchain technology and block-chain applications”.

The news is by no means the first involvement of Tencent in blockchain development. In the latter stages of 2016, the company became part of a wider consortium of 31 Chinese companies researching blockchain developments, as well as its subsidiary Webank, which has itself contributed to discussions and forums on the blockchain in the last twelve months.

As one of the largest providers of online services in China, the company’s move in support of blockchain technology will be regarded as another significant step forward for distributed ledger technology.

With capabilities envisaged across a wide range of sectors and industries, all eyes will be fixed firmly on Tencent’s next move.

While there is no certain timeframe for a launch of any eventual system, their progress will likely influence how similar companies in China, and indeed worldwide, adapt to the potential of the blockchain.

Tencent Announces Development of Blockchain Platform

Chinese Internet services company Tencent has announced it is developing its own blockchain platform for a raft of new services, becoming the latest major online brand to increase their focus on the technology.

The company, which is responsible for a variety of online services including WeChat and QQ, said that their blockchain solutions will be designed to meet the requirements of managing digital assets, authenticating user identities, and improving trust online.

The multi-faceted blockchain solution will be designed to leverage the potential of the distributed ledger to introduce improvements across Tencent services, as well as the wider web.

Tencent has described the project as “open-ended”, with no specific cap on the amount or direction of their exploration into blockchain and distributed ledger technology.

The move will be seen by analysts as one of the most determined bids yet from the tech industry to implement blockchain technologies in a range of back-end use cases.

Detailed in a white paper published by Tencent, the company said that government activism is required to help propel this important technology into the forefront, across a range of industries.

“The involvement of government in the development and regulation of block chains is necessary and should encourage in-depth research on blockchain technology and block-chain applications”.

The news is by no means the first involvement of Tencent in blockchain development. In the latter stages of 2016, the company became part of a wider consortium of 31 Chinese companies researching blockchain developments, as well as its subsidiary Webank, which has itself contributed to discussions and forums on the blockchain in the last twelve months.

As one of the largest providers of online services in China, the company’s move in support of blockchain technology will be regarded as another significant step forward for distributed ledger technology.

With capabilities envisaged across a wide range of sectors and industries, all eyes will be fixed firmly on Tencent’s next move.

While there is no certain timeframe for a launch of any eventual system, their progress will likely influence how similar companies in China, and indeed worldwide, adapt to the potential of the blockchain.