Dr. Craig Wright exposes Blockstream’s false narrative

Don’t believe the lies, according to Dr. Craig Wright. Bitcoin is incentive-compatible.

On Tuesday, the nChain chief scientist took the stage at the inaugural Deconomy 2018 blockchain forum in Seoul, South Korea, to debunk the myths perpetuated by Blockstream, which were designed to take away the power of Bitcoin and basically tell everyone that it needed to be fixed.

“One of the issues you are told is you need to run a full node and verify everything,” Wright said. “No, you don’t. No, you can’t. You can sit there and verify things if you want, but you don’t actually do anything as a node unless you are a full node, and a full node, if you read the white paper, mines. You vote with CPU power.”

The people behind Lightning Network think Bitcoin works as a mesh, according to Wright. In actuality, Bitcoin is an overlay network that pulls everything into a tight ball as it forms, with every machine connecting to everything it can—or what is also referred to as near-complete.

“You connect as much as possible as a miner because you’re incentivized to,” he said. “What this actually means is we start connecting all over the place, so we are resilient because we connect everywhere.”

Wright also debunked the notion that an outfitted Raspberry Pi can be used as a full Bitcoin node, saying that there is not a single piece of data on the Bitcoin network that has ever been verified by a non-miner.

“By the time any Raspberry Pi ever existed on the network has verified a packet, every single miner has decided whether to mine it or not,” he said. “You’re not helping because there’s nothing altruistic in Bitcoin. Nothing. Bitcoin is money. It is working because it is competitive. It is working because people fight to get their transactions on the blockchain fast.”

Watch Dr. Craig Wright’s presentation here:

Note: Tokens in the SegWit chain are referred to as SegWit1X (BTC) and SegWit Gold (SWG) and are no longer Bitcoin. Bitcoin Cash (BCH) is the only true Bitcoin as intended by the original Satoshi white paper.  Bitcoin BCH is the only public block chain that offers safe and cheap microtransactions.

source: https://coingeek.com/dr-craig-wright-exposes-blockstreams-false-narrative-video/

Gregory Maxwell leaves Blockstream for independent ‘deep protocol work’

As early as November 2017, there have been reports circulating in the crypto community that Gregory Maxwell is leaving or has left Blockstream to pursue other endeavors. This has been confirmed recently in a circulated email from Linux Foundation by Maxwell himself.

In the email, made publicly available early Friday morning, Maxwell announced that he left Blockstream two months ago “in order to spend more time working independently on deep protocol work.”

Maxwell said he plans to extend his interest in cryptographic privacy and security technology for Bitcoin and other blockchain-related innovations.

The Bitcoin Core developer has been known to praise high fees and 300,000 transactions stuck in the mempool of legacy Bitcoin, otherwise known as SegWit1x (BTC), saying, “Personally, I’m pulling out the champaign that market behaviour is indeed producing activity levels that can pay for security without inflation, and also producing fee paying backlogs needed to stabilize consensus progress as the subsidy declines.”

Maxwell admitted that when he co-founded Blockstream his concern was that “there was significant underinvestment in Bitcoin technology,” noting that while Bitcoin had the technical community to back it up, it didn’t have the “industry support” to scale at the time. This was how Blockstream began as a corporate initiative to improve the use-specific codes surrounding Bitcoin, according to Maxwell.

Things have turned rather sour of late, though, as it seemed that Blockstream’s new implementations eroded standard procedures. Recently, an attack against r/bitcoin was allegedly found to have been perpetrated by Maxwell when he was still with Blockstream.

Incidents like these dismayed BTC supporters like Cøbra of bitcoin.org and bitcointalk.org, who tweeted: “The way @Blockstream is promoting LN use on mainnet is very irresponsible. People will lose money and LN reputation will be damaged. A few weeks ago, I received a disgusting and accusatory email out of nowhere from someone very high up their chain of command. Terrible company.”

Maxwell said that he will now be pursuing newer technologies like Bulletproofs, signature aggregation, as well as optimization methods for block propagation and synchronization. The Blockstream team page has since been taken down in light of Maxwell’s departure.

The news comes after years of allegations leveled at Blockstream (and Maxwell, by extension) by crypto enthusiasts over how the company has managed to destroy the ecosystem by centralizing its decisions to a single, supposedly elite team of coders.

Contrary to this, the aim of bitcoin should begin without leaders, every decision must be consensus-based, formed from a decentralized community. This has been demonstrated through community responses to a tweet from BTC supporter @CobraBitcoin somewhat praising Bitcoin Cash, saying, “Parts of the Bitcoin Cash community are excellent and very passionate, in fact, in some ways I see more passion from them than almost any other cryptocurrency community. Sad their “leaders” are all frauds though.”

In just a few moments, his tweet was met with kind tips from BCH community members, with a few like @cryptokidd replying: “In the #BitcoinCash community…we’re all leaders…we’re passionate to expose the fraud, not to support it. This community understands we’re all part of something bigger, not under someone’s thumb.”

Note: Tokens in the SegWit chain are referred to as SegWit1X (BTC) and SegWit Gold (SWG) and are no longer Bitcoin. Bitcoin Cash (BCH) is the only true  Bitcoin as intended by the original Satoshi white paper.  Bitcoin BCH is the only public block chain that offers safe and cheap microtransactions.

Lightning Network can’t scale, needs another layer

Devs propose yet another layer to save the legacy chain.

Correction: Jameson Lopp’s analysis of the Lightning Network were incorrectly interpreted in the original post. These have been removed.

How the Lightning Network works

In the Lightning Network—Bitcoin Core’s scaling solution of choice for the legacy chain, users do not transact on the blockchain directly. Two users open a “payment channel” and transact through that channel or second layer (Lightning Network) on top of the blockchain. The only time anything is recorded on the blockchain after opening this payment channel is when these two users are done transacting for the time and “close” the payment channel, at which point the final balances of the two parties are recorded on the blockchain, using it only as a “settlement layer.”

Such a system would off-load regular transactions between two parties to the Lightning Network and take off some of the load from the blockchain. It also saves users from having to pay transaction fees over and over. But this only works economically if the two users intend to have multiple or repeating transactions, otherwise, they’re better off just transacting on-chain for one-time transactions. Why?

For a one-time transaction with a user who does not have a direct connection or open payment channel with you, one can pass through or “hop” through their connections’ channels or “branches” to get to their intended recipient—provided that each of the users between you have enough balance to pass on the funds. It’s not as simple as money passing from one hand to another, however. It’s actually a simultaneous handoff: the person who has an open channel with the intended recipient has to send him the funds and sort of get “reimbursed” the exact same amount from the original sender.

Imagine a row of people and I’m trying to pass $100 to a person sitting five people away from me to my right. Instead of asking people to simply pass my $100 bill to him, each person between us will have to take out $100 from his own wallet, and simultaneously pass it on to the person to their right while also receiving $100 from the person to their left. They all end up with $100 except for me, the original sender.

So in such a scenario, a user is better off saving himself the trouble and just transact on-chain, since they would still need to “open” and “close” a channel—both instances would take time on the legacy chain to be confirmed, as opposed to simply sending their funds directly to each other and just having to wait once for that transaction to be confirmed, paying only one transaction fee as well.

Lightning Network can’t scale on 1Mb blocks

In mid-2017, Electron Cash wallet developer Jonald Fyookball posted a mathematical proof debunking the Lightning Network as a decentralized scaling solution.

Lightning Network can’t scale, needs another layer

 

According to his post, at one million users LN becomes an “unworkable system,” where the only way it could work is either everyone deposits more money than their anticipated transactions into the channels (so they can also route other users’ transactions), or everyone relies on large centralized hubs.

“To reach anyone in a big network with a series of branching channel connections, you either need a large number of channels, or a large number of hops.

Both are a huge problem. A large number of channels means users have to divide up their funds and can’t do anything except tiny purchases. And a large number of hops means everyone’s money will be tied up routing everybody else’s money.”

Jonald Fyookball cites Lightning Network’s promise as a scaling solution:

“using a network of these micropayment channels, Bitcoin can scale to billions of transactions per day”

And goes on to say that the promise fails to mention a major detail:

“What it doesn’t tell you is that this can only be accomplished by using large, centralized ‘banking’ hubs.”

Since then, a simulation of LN with 10 million users has been conducted, and it shows that it is technically possible—but it would require 200 million channels and at least 1,400,000 BTC locked up in the payment channels for routing at a given time. But if there are more transactions going on, more funds would need to be locked up. And some argue that the longer the routes are, the more vulnerable it is to attack.

The case for Lightning Network is further weakened by this problem: Blockstream core tech engineer Christian Decker himself admitted that there is a limit to the number of payment channels that can be made on top of the legacy chain, which ultimately renders Lightning Network’s promise (above) false.

Talking about how many payment channels can be built on the legacy chain’s 1Mb per block limit, he wrote:

“It turns out, it’s not that many. It’s a few million every week, which is still a long ways from serving the full Earth’s population.”

Moreover, Lightning Network does not relieve the skyrocketing transaction fees, as Decker’s message to the mining community reveals. In his effort to appease miners, Decker committed the same fatal error majority of HODLers are guilty of: he simultaneously alienated users by focusing on high profits in fees for the miners—which will be coming out of users’ pockets.

In case many have forgotten, these users are the entire population Bitcoin was made to primarily serve.

Lightning does not reduce the fees that the miners may collect, it increases their reach into transactions that they could not otherwise serve.

The transaction fees are high because an on-chain payment requires a lot of resources, i.e., storage, processing and bandwidth. These applications suddenly become possible with L2 protocols, so this adds to the reach of Bitcoin itself.

…On the other hand Lightning requires strong guarantees that the transactions will be settled in a certain timeframe, for its security. Hence, Lightning will always attach higher than average fees to the on-chain transactions for setup and settlement of its channels. This is okay since coins on these channels may have been transferred hundreds if not millions of times back and forth, so the these high on-chain fees have been amortized over time, and we happily pay them.

With the (1) extension of Bitcoin’s reach and (2) the higher than usual fees for setup and settlement, I’m absolutely convinced that miners will have a net gain when Lightning rolls out. Lightning is not cutting into the miner’s profit, it opens up new possibilities. Christian Decker on the mailing list.

In the message above, he goes on to explain why transaction fees are high. Although it’s hard to justify how storage, processing and bandwidth (plus electricity) that blockchains incur would trump the expenses of the traditional banking industry and lead to equal or even higher transaction fees. And it definitely defeats the main purpose of the blockchain—quick, cheap, trustless transfers.

Still no block size increase, but an entire additional layer—and the same high fees (possibly more)

Instead of conceding to the need for both on and off-chain scaling, Core devs are persistent in doing everything and anything but upgrade the core infrastructure—the blockchain that is the backbone of all these.

To solve the problem, Decker along with ETH Zurich researchers Conrad Burchert and Roger Wattenhofer released a new paper, proposing an entire new layer to be added between the legacy chain and Lightning Network, bumping LN from being “layer 2” to being “layer 3.” And this new layer would supposedly enable up to 15 users to be in the channel so any two of them can transact on the now higher layer, Lightning Network.

In a Medium post, security researcher Egor Homakov criticizes the Lightning Network (LN) and its Ethereum counterpart, the Raiden network. According to Homakov, although the Lightning Network is definitely not vapourware, the economic incentive to use Lightning Network is in fact, non-existent.

With Bitcoin’s original protocol, as Dr. Craig Wright wrote in his paper, Proof of Work as it relates to the Theory of the Firm, the security mechanism is not just cryptographic but economic. There is economic incentive to use the system and keep it secure, whereas attacking the system is too expensive and has very little benefit. To amass enough hash rate for a 51% attack, one has to spend billions of dollars on processors, electricity, and other overhead expenses, and will gain very little from the attacks they can instigate. Most importantly, if someone theoretically was willing to spend billions of dollars to gain that percentage of the network, it would be exponentially more profitable to just use that hash rate to mine the Bitcoin blockchain rather than attack it. Efficiency and security in the Bitcoin blockchain (or its original state, at least) results in bigger rewards for miners. It is this economic incentive that helps direct the motivations and actions of actors within the Bitcoin ecosystem, and therefore keep the blockchain secure.

We have yet to delve into the entirety of the new layer proposal—what the topology of the legacy chain will look like with the new layer—because it most definitely will not look anything like the distributed, peer-to-peer network envisioned in the original Bitcoin white paper.

Ultimately, from a mass adoption point-of-view, the main thing that matters is how fast this process is, how secure, and how much it costs. On top of that, how soon will all this be deployed? With several blockchains and cryptocurrencies on the race, every month of delay makes a huge difference.

Note: Tokens in the SegWit chain are referred to as SegWit1X (BTC) and SegWit Gold (SWG) and are no longer Bitcoin. Bitcoin Cash (BCH) is the only true Bitcoin as intended by the original Satoshi white paper.  Bitcoin BCH is the only public block chain that offers safe and cheap microtransactions.

Lightning Network can’t scale, needs another layer

Devs propose yet another layer to save the legacy chain.

Correction: Jameson Lopp’s analysis of the Lightning Network were incorrectly interpreted in the original post. These have been removed.

How the Lightning Network works

In the Lightning Network—Bitcoin Core’s scaling solution of choice for the legacy chain, users do not transact on the blockchain directly. Two users open a “payment channel” and transact through that channel or second layer (Lightning Network) on top of the blockchain. The only time anything is recorded on the blockchain after opening this payment channel is when these two users are done transacting for the time and “close” the payment channel, at which point the final balances of the two parties are recorded on the blockchain, using it only as a “settlement layer.”

Such a system would off-load regular transactions between two parties to the Lightning Network and take off some of the load from the blockchain. It also saves users from having to pay transaction fees over and over. But this only works economically if the two users intend to have multiple or repeating transactions, otherwise, they’re better off just transacting on-chain for one-time transactions. Why?

For a one-time transaction with a user who does not have a direct connection or open payment channel with you, one can pass through or “hop” through their connections’ channels or “branches” to get to their intended recipient—provided that each of the users between you have enough balance to pass on the funds. It’s not as simple as money passing from one hand to another, however. It’s actually a simultaneous handoff: the person who has an open channel with the intended recipient has to send him the funds and sort of get “reimbursed” the exact same amount from the original sender.

Imagine a row of people and I’m trying to pass $100 to a person sitting five people away from me to my right. Instead of asking people to simply pass my $100 bill to him, each person between us will have to take out $100 from his own wallet, and simultaneously pass it on to the person to their right while also receiving $100 from the person to their left. They all end up with $100 except for me, the original sender.

So in such a scenario, a user is better off saving himself the trouble and just transact on-chain, since they would still need to “open” and “close” a channel—both instances would take time on the legacy chain to be confirmed, as opposed to simply sending their funds directly to each other and just having to wait once for that transaction to be confirmed, paying only one transaction fee as well.

Lightning Network can’t scale on 1Mb blocks

In mid-2017, Electron Cash wallet developer Jonald Fyookball posted a mathematical proof debunking the Lightning Network as a decentralized scaling solution.

Lightning Network can’t scale, needs another layer

 

According to his post, at one million users LN becomes an “unworkable system,” where the only way it could work is either everyone deposits more money than their anticipated transactions into the channels (so they can also route other users’ transactions), or everyone relies on large centralized hubs.

“To reach anyone in a big network with a series of branching channel connections, you either need a large number of channels, or a large number of hops.

Both are a huge problem. A large number of channels means users have to divide up their funds and can’t do anything except tiny purchases. And a large number of hops means everyone’s money will be tied up routing everybody else’s money.”

Jonald Fyookball cites Lightning Network’s promise as a scaling solution:

“using a network of these micropayment channels, Bitcoin can scale to billions of transactions per day”

And goes on to say that the promise fails to mention a major detail:

“What it doesn’t tell you is that this can only be accomplished by using large, centralized ‘banking’ hubs.”

Since then, a simulation of LN with 10 million users has been conducted, and it shows that it is technically possible—but it would require 200 million channels and at least 1,400,000 BTC locked up in the payment channels for routing at a given time. But if there are more transactions going on, more funds would need to be locked up. And some argue that the longer the routes are, the more vulnerable it is to attack.

The case for Lightning Network is further weakened by this problem: Blockstream core tech engineer Christian Decker himself admitted that there is a limit to the number of payment channels that can be made on top of the legacy chain, which ultimately renders Lightning Network’s promise (above) false.

Talking about how many payment channels can be built on the legacy chain’s 1Mb per block limit, he wrote:

“It turns out, it’s not that many. It’s a few million every week, which is still a long ways from serving the full Earth’s population.”

Moreover, Lightning Network does not relieve the skyrocketing transaction fees, as Decker’s message to the mining community reveals. In his effort to appease miners, Decker committed the same fatal error majority of HODLers are guilty of: he simultaneously alienated users by focusing on high profits in fees for the miners—which will be coming out of users’ pockets.

In case many have forgotten, these users are the entire population Bitcoin was made to primarily serve.

Lightning does not reduce the fees that the miners may collect, it increases their reach into transactions that they could not otherwise serve.

The transaction fees are high because an on-chain payment requires a lot of resources, i.e., storage, processing and bandwidth. These applications suddenly become possible with L2 protocols, so this adds to the reach of Bitcoin itself.

…On the other hand Lightning requires strong guarantees that the transactions will be settled in a certain timeframe, for its security. Hence, Lightning will always attach higher than average fees to the on-chain transactions for setup and settlement of its channels. This is okay since coins on these channels may have been transferred hundreds if not millions of times back and forth, so the these high on-chain fees have been amortized over time, and we happily pay them.

With the (1) extension of Bitcoin’s reach and (2) the higher than usual fees for setup and settlement, I’m absolutely convinced that miners will have a net gain when Lightning rolls out. Lightning is not cutting into the miner’s profit, it opens up new possibilities. Christian Decker on the mailing list.

In the message above, he goes on to explain why transaction fees are high. Although it’s hard to justify how storage, processing and bandwidth (plus electricity) that blockchains incur would trump the expenses of the traditional banking industry and lead to equal or even higher transaction fees. And it definitely defeats the main purpose of the blockchain—quick, cheap, trustless transfers.

Still no block size increase, but an entire additional layer—and the same high fees (possibly more)

Instead of conceding to the need for both on and off-chain scaling, Core devs are persistent in doing everything and anything but upgrade the core infrastructure—the blockchain that is the backbone of all these.

To solve the problem, Decker along with ETH Zurich researchers Conrad Burchert and Roger Wattenhofer released a new paper, proposing an entire new layer to be added between the legacy chain and Lightning Network, bumping LN from being “layer 2” to being “layer 3.” And this new layer would supposedly enable up to 15 users to be in the channel so any two of them can transact on the now higher layer, Lightning Network.

In a Medium post, security researcher Egor Homakov criticizes the Lightning Network (LN) and its Ethereum counterpart, the Raiden network. According to Homakov, although the Lightning Network is definitely not vapourware, the economic incentive to use Lightning Network is in fact, non-existent.

With Bitcoin’s original protocol, as Dr. Craig Wright wrote in his paper, Proof of Work as it relates to the Theory of the Firm, the security mechanism is not just cryptographic but economic. There is economic incentive to use the system and keep it secure, whereas attacking the system is too expensive and has very little benefit. To amass enough hash rate for a 51% attack, one has to spend billions of dollars on processors, electricity, and other overhead expenses, and will gain very little from the attacks they can instigate. Most importantly, if someone theoretically was willing to spend billions of dollars to gain that percentage of the network, it would be exponentially more profitable to just use that hash rate to mine the Bitcoin blockchain rather than attack it. Efficiency and security in the Bitcoin blockchain (or its original state, at least) results in bigger rewards for miners. It is this economic incentive that helps direct the motivations and actions of actors within the Bitcoin ecosystem, and therefore keep the blockchain secure.

We have yet to delve into the entirety of the new layer proposal—what the topology of the legacy chain will look like with the new layer—because it most definitely will not look anything like the distributed, peer-to-peer network envisioned in the original Bitcoin white paper.

Ultimately, from a mass adoption point-of-view, the main thing that matters is how fast this process is, how secure, and how much it costs. On top of that, how soon will all this be deployed? With several blockchains and cryptocurrencies on the race, every month of delay makes a huge difference.

Note: Tokens in the SegWit chain are referred to as SegWit1X (BTC) and SegWit Gold (SWG) and are no longer Bitcoin. Bitcoin Cash (BCH) is the only true Bitcoin as intended by the original Satoshi white paper.  Bitcoin BCH is the only public block chain that offers safe and cheap microtransactions.

Scaling Bitcoin 2017 at Stanford, Day 2

Day 2 at Scaling Bitcoin 2017 Stanford, was again a day of fantastic research, aimed specifically at making best of an artificially restricted blocksize. This day was perhaps the more Blockstream aligned of the two days.

Early in the peace we had Joi Ito who gave a keynote presentation. His views on ICOs in particular seemed grab the interest of the audience. Joi’s view was that ICOs in general are of a scam-nature. When an audience member asked “Can you name an ICO that you think is doing things right, and an ICO that you feel is doing things wrong?” Joi responded with “I haven’t looked into enough to name anyone that is doing it right, so that by definition names the ones that I think is doing it wrong…” His answer drew a laugh from the audience.

Aviv Zohar gave a surprisingly very honest presentation on “how to charge lightning”. Lightning transactions as we know are the holy grail of a Segwit enabled Bitcoin. Zohar’s presentation described different theoretical models on how certain transactions would work, and best methods for keeping a lightning channel funded, and other costs associated with keeping it alive.

Zohar’s honest description of how it all works came with some interesting points:

“On chain transactions have a fixed fee for blockchain use… On Lightning its somewhat unknown. But if you think about it, if you do a large transaction on the lightning channel, you shorten the life of the channel more than you would if you do a small transaction”.

He stated that in certain conditions with large transactions, it is much more worthwhile transacting directly off the blockchain. “Both of these sources of transactions are trying to touch the blockchain for different reasons. One is to establish lightning channels, and the other is to do direct transfers, and it is not entirely clear which one drives up the price for the other… do they both co-exist?”

Two high level topologies were presented, one with pairs, and one with a hub. Zohar admits that the hub connecting people would be highly centralized.

Another point made is that the Lightning Network would reduce fees heavily for miners. Moreover, according to his analysis, if we were to double the blocksize, fees would reduce to more than half. This is an interesting point, because it shows that a bigger blocksize has a curved relationship with fee reduction.

His conclusion was that Lightning definitely helps, but he believed that it was not everything he was hoping it would be… “I was frankly expecting Lightning to do a lot more… in some sense I wanted a factor of 100 on transaction throughput…” he stated. “A 2x blocksize helps a little but not that much”.

Moving on, another highlight of the event was Andrew Poelstra’s Scriptless Script. His method provides off-chain capabilities for smart contracts. But more so, he looked at some very clever ways of achieving hash preimages and giving incredible potentials for truly private contracts.

Andrew’s talk titled “Using chains for what chains are good for” is surprisingly consistent with nChain’s view for how the contracts can be applied to blockchains. This is a notable departure to Ethereum’s distributed processing methodology.

Karl-Johan Alm presented a neat fee estimation optimization by actually looking at the mempool. Current methods are blind to the mempool and therefore, miss opportunities to reduce fees when the mempool is empty. I noted that, although this reduced the fees, it also created more volatile swings. I asked Karl-Johan on how he perceives user experience to be impacted by this, and he responded with “it will definitely affect user experience… I’m counting 100% on users using RBF (replace-by-fee).” The RBF is an inescapable aspect of Core’s philosophy on Bitcoin it seems.

All in all, we found quality technical work throughout. But frustratingly, there was very little if any work presented from the big-blocker camp. Also, notably absent were the miners, except for perhaps BTCC… At such events, one would think that miner participation would be crucial… perhaps the Segwit2x drama was too much… Also, glaringly absent were some key Core and Blockstream representatives. This was perhaps a boycott due to the invitation to Bitcoin Unlimited, who presented the day prior.

Later in the day, I had the opportunity and privilege to catch up with Roger Ver, who, wasn’t at the conference, but happened to be in the area. The short interview with him, will also be posted here on CoinGeek tomorrow, along with Peter Rizun as well.

Eli Afram
@justicemate

Scaling Bitcoin 2017 at Stanford, Day 2

Day 2 at Scaling Bitcoin 2017 Stanford, was again a day of fantastic research, aimed specifically at making best of an artificially restricted blocksize. This day was perhaps the more Blockstream aligned of the two days.

Early in the peace we had Joi Ito who gave a keynote presentation. His views on ICOs in particular seemed grab the interest of the audience. Joi’s view was that ICOs in general are of a scam-nature. When an audience member asked “Can you name an ICO that you think is doing things right, and an ICO that you feel is doing things wrong?” Joi responded with “I haven’t looked into enough to name anyone that is doing it right, so that by definition names the ones that I think is doing it wrong…” His answer drew a laugh from the audience.

Aviv Zohar gave a surprisingly very honest presentation on “how to charge lightning”. Lightning transactions as we know are the holy grail of a Segwit enabled Bitcoin. Zohar’s presentation described different theoretical models on how certain transactions would work, and best methods for keeping a lightning channel funded, and other costs associated with keeping it alive.

Zohar’s honest description of how it all works came with some interesting points:

“On chain transactions have a fixed fee for blockchain use… On Lightning its somewhat unknown. But if you think about it, if you do a large transaction on the lightning channel, you shorten the life of the channel more than you would if you do a small transaction”.

He stated that in certain conditions with large transactions, it is much more worthwhile transacting directly off the blockchain. “Both of these sources of transactions are trying to touch the blockchain for different reasons. One is to establish lightning channels, and the other is to do direct transfers, and it is not entirely clear which one drives up the price for the other… do they both co-exist?”

Two high level topologies were presented, one with pairs, and one with a hub. Zohar admits that the hub connecting people would be highly centralized.

Another point made is that the Lightning Network would reduce fees heavily for miners. Moreover, according to his analysis, if we were to double the blocksize, fees would reduce to more than half. This is an interesting point, because it shows that a bigger blocksize has a curved relationship with fee reduction.

His conclusion was that Lightning definitely helps, but he believed that it was not everything he was hoping it would be… “I was frankly expecting Lightning to do a lot more… in some sense I wanted a factor of 100 on transaction throughput…” he stated. “A 2x blocksize helps a little but not that much”.

Moving on, another highlight of the event was Andrew Poelstra’s Scriptless Script. His method provides off-chain capabilities for smart contracts. But more so, he looked at some very clever ways of achieving hash preimages and giving incredible potentials for truly private contracts.

Andrew’s talk titled “Using chains for what chains are good for” is surprisingly consistent with nChain’s view for how the contracts can be applied to blockchains. This is a notable departure to Ethereum’s distributed processing methodology.

Karl-Johan Alm presented a neat fee estimation optimization by actually looking at the mempool. Current methods are blind to the mempool and therefore, miss opportunities to reduce fees when the mempool is empty. I noted that, although this reduced the fees, it also created more volatile swings. I asked Karl-Johan on how he perceives user experience to be impacted by this, and he responded with “it will definitely affect user experience… I’m counting 100% on users using RBF (replace-by-fee).” The RBF is an inescapable aspect of Core’s philosophy on Bitcoin it seems.

All in all, we found quality technical work throughout. But frustratingly, there was very little if any work presented from the big-blocker camp. Also, notably absent were the miners, except for perhaps BTCC… At such events, one would think that miner participation would be crucial… perhaps the Segwit2x drama was too much… Also, glaringly absent were some key Core and Blockstream representatives. This was perhaps a boycott due to the invitation to Bitcoin Unlimited, who presented the day prior.

Later in the day, I had the opportunity and privilege to catch up with Roger Ver, who, wasn’t at the conference, but happened to be in the area. The short interview with him, will also be posted here on CoinGeek tomorrow, along with Peter Rizun as well.

Eli Afram
@justicemate