An open letter to Bitcoin miners

Dear Bitcoin Miners,

My name is Jonald and I am a Bitcoin investor.

I bought my first Bitcoin in 2013 and have been active on the Bitcointalk forum since March 2014. I am also a small business owner, running a Bitcoin remittance payment business, and have a degree in Computer Science.

Bitcoin investors and miners need each other to succeed, so I wanted to take a moment to connect with you and give you a heartfelt message from a real Bitcoiner.
I'll get straight to the point:

I am concerned. I believe we urgently need to find a scaling solution, and I believe the best solution is to increase the block size.

At least, hear me out.

Why should you listen to me?

There is a lot of misinformation, dishonesty, and politicized agendas in the scaling war.

I am not beholden to any special interest group. No one paid me to write this article. I am not a contributor to any Bitcoin project, but I am very familiar with the topic of scaling because I have been following this topic for a long time. I have enough knowledge to clearly understand the technical details.

I listened to all the arguments on all sides of the debate, and I will tell you that what I wrote was an honest, unbiased, and uncensored understanding.

Let’s start from the beginning

In 2008, Satoshi Nakamoto published a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” Everyone knows this, but the exact title needs to be reiterated here because today the most fundamental aspects of Bitcoin are about to be challenged. Is Bitcoin really “cash” or “digital gold”? Is it really peer-to-peer if we follow Satoshi’s plan?

These questions are not coming from an open investigation, but from a biased agenda. This would have been unthinkable a few years ago, but now things have become so political that some people even want to rewrite the Bitcoin whitepaper.

(Trying to rewrite history is always a favorite tactic of tyrannical elites.)

Satoshi Nakamoto’s Vision for Bitcoin Scaling

Regardless of “which” side of the scaling war you fall into, there should be no doubt that Satoshi Nakamoto has always planned and advocated for simple on-chain scaling.

When asked about how Bitcoin could be scaled to Visa levels, he said:

Before the network was overloaded, users could use Simplified Payment Verification (SPV, Simplified Payment Verification, Part 8) to check for double spends to ensure transaction security, in this case only the block header on the blockchain, or only 12KB per day. Network nodes are only needed when people try to create new coins. At first, most users will run network nodes, but as the network scales to a certain extent, since server farms require specialized hardware, running nodes will be increasingly left to professionals. A server farm only needs to run one node on the network, and the rest of the LAN can connect to this node.

Bandwidth costs may not be as high as you think. A typical transaction is about 400 bytes (ECC is compact). Each transaction must be broadcast twice, so let's assume each transaction is 1KB. Visa processed 37 billion transactions in 2008, an average of 100 million transactions per day. That means that this many transactions should consume 100GB of bandwidth, which is the size of 12 DVDs or 2 HD movies, or about $18 of bandwidth at current prices.

It will be years before the Internet reaches this scale, and by then, sending two HD movies over the Internet may not seem like a big deal.

Satoshi Nakamoto

source

Disturbingly, this simple statement by Satoshi has been edited (deleted) from the r/bitcoin reddit page. I will come back to the issue of censorship in a moment.

Another important fact is that the current 1mb block size limit is a temporary measure. This was well known before the debate over scaling became politicized.

One of the earliest code reviewers, Ray Dillinger, explained that he, Hal Finey, and Satoshi Nakamoto all believed the restriction was temporary.

Satoshi Nakamoto also provided a method for expansion:

It can be implemented in stages, for example:

if (blocknumber >115000)

maxblocksize = largerlimit

Satoshi Nakamoto also explained in an email to Mike Hearn why Bitcoin will never reach its scalability limit (Translator's note: the limit of physical hard disk, bandwidth, etc.).

Of course, Satoshi Nakamoto is not God. The point is not to appeal to his authority, but to remind everyone that Bitcoin has had plans to expand from the beginning.

. . . But the “Core developers” had other ideas

The history of the current group of Bitcoin Core developers has been summarized and described elsewhere.

Explanations have been given as to why the scaling meetings were fruitless, such as the failed Hong Kong agreement and so on, but it should be abundantly clear to everyone, based on their actions (and even their words) over the years, that the Core team does not want to scale by simply increasing the blocksize.

In fact, they (and their supporters) are doing everything they can to prevent scaling, including large-scale censorship.

Their main arguments are as follows:

1. Increasing the block limit is problematic because it would require a hard fork, which is difficult to coordinate.

2. Bitcoin nodes should be run as cheaply as possible, otherwise the decentralization of Bitcoin will be threatened.

3. Without a block size limit, Bitcoin would become unsafe once the block reward drops.

None of the above is sufficient evidence to prevent the block size from increasing.

I’m not saying that these arguments are completely without merit. Few things in life are black and white. But we must weigh the merits of these arguments against other alternatives and against other factors in the Bitcoin ecosystem.

Let's take them one by one:

The “Hard Fork Is Dangerous” Myth

This was the most prominent topic in 2014-2015. However, the truth is that a hard fork (HF) is not necessarily dangerous, especially when the majority of the hashrate supports upgrading the consensus protocol.

Previous developers, including Gavin Andresen, Jeff Garzik, and Mike Hearn, have supported upgrading Bitcoin via a hard fork.

Initially, the discussion was about whether the new maximum block size would be 2MB, 4MB, or 8MB. But what started as a small disagreement among miners inexplicably snowballed into a powerful meme: consensus scaling is hard.

Developers began to fuel the hard fork, creating additional resistance. Yes, it’s easy to claim it’s controversial when you’re one of the controversial people. Core has no formal leadership position or government structure. So they can easily defend their inaction by saying “there’s no consensus.” But because they control the reference codebase, they’re holding back everyone else working on scaling.

In fact, Core has leaders. How else to explain that SegWit was merged into the code (even though it was not activated) with almost no public discussion?

It is also important to note that these prominent Core developers deny that Core decides what code is released, and that they have leadership. This is an example of the misinformation that continues to appear every day.

Back to the hard fork issue:

Many altcoins such as Monero perform hard forks regularly. Coordination between major players in the ecosystem is not a big challenge if everyone is on the same page.

So far, I have not heard of any altcoins having any issues upgrading their network via hard forks, so there is evidence that hard forks can be done safely.

Furthermore, if Core acknowledges that a block size increase will eventually be needed in their roadmap, then why not just do it now when the need for it becomes urgent? It makes no logical sense that doing it now would be riskier than doing it later.

The Fallacy of Decentralization

There are actually several fallacies about decentralization. Let’s talk about the obvious ones:

One of the most ridiculous ideas is that “all users should run full nodes”.

As others have explained, non-mining nodes do not provide security to the network. Only mining nodes protect and extend Bitcoin's distributed ledger.

The white paper explains why most users don’t need to run a full node:

Payment verification is possible without running a full network node. A user only needs to keep a copy of the longest chain block header, and he can keep asking the network until he is sure that he has the longest chain and can connect to the transaction timestamped and packaged into the block through the Merkle branch. He cannot check the validity of the transaction himself, but by tracing back to a certain position in the chain, he can see that a network node has accepted it, and the blocks added later are further proof that the entire network has accepted the transaction... Commercial organizations that receive a lot of payments may still want to run their own full nodes to ensure more independent security and faster transaction verification.

The idea that a large number of non-mining nodes will lead to a more decentralized network (because they can ensure that miners behave properly) is wrong, because SPV (Simple Payment Verification) clients can interrogate the nodes of the network. In general, it is only a problem if the majority of mining nodes are dishonestly colluding with each other, in which case Bitcoin is already broken.

A more reasonable concern is that, as running nodes becomes more expensive, eventually only large enterprises will be able to run nodes. It is true that node costs will increase as the network grows. However, storage, bandwidth, and processing power are also constantly increasing.

It’s also important to note that when capacity increases — let’s say between 3 TPS (transactions per second) and 30 TPS — the network will scale so large that it will appear more decentralized, even though it will cost more to run a node.

At 3,000 TPS, Bitcoin will be globally dominant and utilizing millions of data centers and servers around the world. This has always been our plan.

Even worse is that competing solutions to the Bitcoin vision pose risks to decentralization.

Many users are not aware of the decentralization risks that small nodes/small blocks bring with the Bitcoin concept. Core's conception of Bitcoin is to transform the peer-to-peer cash system into a settlement network of some kind.

While this is a way to keep node costs low, most users are forced to leave the main chain economically because they cannot compete with institutions in transaction fees. They then need to obtain permission from a trusted third party to conduct transactions.

In my opinion, this is a more dangerous form of decentralization than larger blocks and high-cost nodes.

The Fallacy of Fee Market Failure

The main argument of the third small block theory is that eventually, the block rewards will run out and mining fees will become the only source of financial security. They then claim that without limiting the supply of transaction space, mining will desperately fall into a tragedy of the commons price war, which will lead to the collapse of commercial mining as users pay the lowest fees.

There are several problems with this argument:

First, there is a natural market for all goods and services in the world. There have been many price wars, but things that are in high demand have never stopped being produced.

Concerns that the network hashrate will become too low are based on several assumptions and variables, including the number of daily transactions, users’ willingness to wait for transactions to be confirmed, users’ willingness to pay for small transactions, miner behavior, the fee policies set by various wallets, the emergent consensus on what fees are acceptable to the mining community, and other factors, including how low the network hashrate actually is in the first place.

The failure of the hypothetical natural fee market relies on the fact that all of these assumptions lead to undesirable consequences, and that the system cannot self-regulate well using these factors.

But by far the biggest reason this argument is nonsense is that it will take decades for most of the rewards to actually disappear.

What is really stupid is: Over-planning for the future while ignoring the urgent problems that need to be solved today

Why implement a plan that will only help Bitcoin in 20-30 years if it requires you to ruin the user experience now and has the potential to undermine Bitcoin’s adoption and network effects?

In the case of Bitcoin, planning this far ahead is completely unnecessary, and we have already seen the devastating consequences.

This is the biggest reason why Core’s argument doesn’t hold water. Even if their argument has merit, it’s more important to keep Bitcoin healthy, competitive, and growing its user base than to prevent something that may or may not happen in the future.

Even worse, these prevention programs are directly opposed to short-term goals!

It's like asking a bedridden hospital patient who urgently needs rest to go outside and start running laps because "exercise can make you live longer." This is ridiculous.

What about SegWit?

Here is my understanding: at the Hong Kong consensus meeting, miners agreed to implement SegWit and hard fork to increase the block size because they did not trust the Core team to come up with a satisfactory expansion method in a timely manner.

I think their decision is very wise. Core is not trustworthy. But if Core changes its mind today and agrees to 2MB+SegWit as a compromise to break the deadlock, I would support it.

They seem unwilling to do so.

Since miners are unwilling to accept SegWit alone, and Core is unwilling to compromise, the only reasonable alternative is larger blocks, which is the best option anyway.

What Core wants

You might be wondering: how is it possible that people as smart as the Bitcoin Core developers could not see such obvious errors in their thinking?

American writer Upton Sinclair once said:

It is difficult to get a man to understand something when his salary depends on not understanding it.

The Core team and their supporters want to change Bitcoin into a settlement network. They will deny it, but in my opinion, all their actions point to this logical conclusion.

This is why they oppose on-chain scaling, and why they promote the “hard forks are bad” narrative while SegWit provides such poor results.

Additionally, I believe they also want to control public opinion through hiring key figures, through their relationships and regulatory policies on various platforms, and through their army of trolls.

They also intimidate and punish businesses that don’t stand by their side. For example, coinbase.comb was removed from bitcoin.org because they supported Bitcoin XT instead of the Core client.

Regardless of the shenanigans, the company does support larger blocks and on-chain scaling.

Most importantly, they want to scare you, the miner, into believing that the community really doesn’t want big blocks, and that if you mine big blocks you will be forked off and left with a worthless coin and worthless ASICs.

Don't let them intimidate you.

What users want

Most users just want a working Bitcoin. They don’t want slow transaction confirmations and high fees. Most people who regularly use Bitcoin understand the controversy and support larger blocks.

Regardless of all the troll campaigns and agendas, users who own real Bitcoin will absolutely support Satoshi’s scaling plan.

The “Healthy Fee Market” is No Longer Healthy

Even if a centrally planned fee market is a good idea right now, it is not well managed right now. A “healthy” fee market should aim to provide sufficient fee revenue while providing a good user experience that drives growth of the network and user base.

Although miner benefits are appropriate, if the user experience becomes very poor due to slow transaction confirmations and high fees, this will never attract or benefit the growth of the user base.

If keeping the blocksize at 1mb was an experiment to see how the fee market would develop, it has lost its validity. In order to keep fees competitive with other coins, supply must match demand (we must increase the blocksize). But these developers seem to have no interest in doing that. They will continue with their agenda instead of serving users.

What is Bitcoin's store of value as "digital gold"?

The best thing about Bitcoin is that it is both a payment system similar to cash and a store of value similar to gold. These two aspects reinforce each other.

There is also the propaganda that Bitcoin cannot be expanded into a form of electronic cash, and some users say, "That's okay, I can accept Bitcoin as just digital gold." The problem with this idea is that they think Bitcoin has competitors.

If another coin can store value and be traded at low cost, Bitcoin's attractiveness to investors will be greatly affected. At the same time, it also greatly suppresses the demand for actual use. Of course, Bitcoin may survive as some form of digital gold, but this will be a huge disadvantage.

Small blocks destroy miners’ profits

At first glance, the idea that smaller blocks are bad for mining revenue is wrong, as demand for Bitcoin transactions outstrips the supply of block capacity and fee rates have skyrocketed recently.

However, this trend will not last long, as users will only pay so much, and new users and new demands will be shut out of the ecosystem.

Here's an analogy: Who makes more money - the farmer who lives in town A and sells milk (from 1 cow)? Or the farmer who lives in town B and sells milk (from 8 cows)? The people in town A might pay more per can of milk, but they'll only pay so much. They'll drink something else, drink milk less often, or import milk from another town.

If they cap the block size at 1mb, and Bitcoin miners can’t keep up with user demand at reasonable fees that users are willing to pay… then users will look for satisfactory alternatives, which quickly become more plentiful.

The situation would be made worse if Core was allowed to build “second layer solutions” as these could not be free and would further take money from users who are willing to pay fees in order to transact.

This is bad for miners and network security. It will make Bitcoin uncompetitive and money will drain from the ecosystem.

Prices always lag behind fundamentals

Seeing the price of Bitcoin rising, it’s easy to think that everything is fine. If things were so bad, why hasn’t the price of Bitcoin dropped?

However, prices in the short term do not always reflect a market's fundamentals.

In the long run, fundamentals always dictate the direction of the market. Day trades are closed out at the end of the day. Speculators come and go. In the end, only long-term investors and non-speculative demand determine prices.

Bitcoin’s fundamental value comes primarily from its usefulness as a payment system, and if that system ceases to be useful then Bitcoin will no longer have value.

It's time to act. Let's help Bitcoin grow again.

The best thing to do is to fix the problem before it gets worse. As they say, “Prevention is better than cure.”

If we wait until Bitcoin is no longer usable as a currency and the price plummets, it will be too late. By then we may have lost momentum, market share, users, credibility, and merchants.

This is already happening, but there is still time to act.

I urge you: don't be proud.

You are a miner. You have the power. Start supporting bigger blocks today and let us keep Bitcoin Big Brother.

Please forward

If you are not a miner but a concerned investor like me, please spread this message far and wide and ask the miners and mining pools you know to support larger blocks.