Any block expansion aimed at reducing transaction fees is a hooliganism

I don’t know if you have watched Avengers 2, Captain America vs. Iron Man, but the Bitcoin community is playing out the same plot. At least that’s what the media says.

If you don't know the situation, let me explain it to you. The Bitcoin protocol stipulates that each block can carry a maximum of 1MB of transaction data, and it takes 10 minutes to generate each block. The 1MB block capacity was set by Satoshi Nakamoto himself, and the main purpose is to prevent DoS attacks.

"Bitcoin Jesus" Roger Ver recently published an article calling for the lifting of the block size block, I beg to differ with his point of view. Roger Ver is a libertarian, he advocates for the establishment of a free market, and invests in many start-ups, these are all good things. But when it comes to the block size increase, he is doing the wrong thing with good intentions.

In recent years, the topic of block capacity expansion has never subsided, and has even been listed as a front-page headline by the media (including the New York Times) for several consecutive times. Regarding block capacity expansion, some people are too naive: we want the blockchain to handle more transactions, so why not just increase the block capacity? Under the influence of this idea, many people believe that opposing the expansion of block capacity is opposing the development of Bitcoin.

There is a rumor on r/btc that Bitcoin Core developers (some of whom also work at Blockstream) are reluctant to release the expansion code because they want to transfer more transactions to their own private network. People who say this are really stupid.

Blockstream's products are all open source. That is, just like the Bitcoin network, anyone can test, run, and fork Blockstream's code. In addition, Blockstream founder Greg Maxwell worked in the Internet industry in his early days. He once said:

When I worked with Internet protocol developers, they always complained to me that they regretted not having cryptography when they created the Internet… so I didn’t want to make the same mistake with money. If Bitcoin is going to replace other currencies, then we have to improve its privacy.

Maxwell is a man of his words. He created CoinJoin and Confidential Transactions, two protocols that greatly improve the privacy of Bitcoin transactions. Adam Back has been studying cryptography for decades and invented the Bitcoin Hashcash Proof of Work (PoW) system. He thinks that anyone who tries to hurt the Bitcoin network by spreading rumors is ridiculous. Andreas Antonopolous said it well:

Bitcoin opponents can only hinder the development of Bitcoin by spreading rumors, which is a childish method.

In summary, keeping the block size constant involves deeper technical issues and the integrity of the Bitcoin network. I will try to explain them as fully as possible below.

Trading freedom under the Bitcoin model

Roger compared Bitcoin to Starbucks in his article. He believes that the 1MB block capacity is equivalent to limiting the customer flow of Starbucks to 20 people per day. If this situation continues, then Starbucks will never succeed. But Bitcoin is more like a Starbucks that the government has been trying to close down, but they have never been able to do so.

When Bitcoin users transfer money, the transaction records are not written on a single server (Paypal or bank), but are sorted and entered into blocks by miners. If the government intervenes or forces the closure of certain mining companies, there will be tens of thousands of miners willing to stand up for block rewards, as the saying goes, "Kill Xia Minghan, there will be others to come." In this way, the decentralization of the Bitcoin system guarantees its independence, and its centralization (miner mechanism) saves the system a lot of unnecessary trouble.

Therefore, the cost of running a blockchain is very high. Not just ordinary high. Even higher than the price of traditional financial services, because third-party financial institutions such as Paypal only need to guarantee their own credibility, while the transaction records of the blockchain need to be recognized by countless servers.

The magic of Bitcoin is that it can reach areas that other payment networks cannot and dare not reach. When Wikileaks is blocked by banks (Wikileaks aims to expose the corruption of governments and companies), when drug addicts do not want drug transaction records to appear in the deep web, Bitcoin can bring a ray of hope to these areas that are explicitly prohibited by the government.

And Bitcoin transactions are not cheap at all, let alone free. As it stands, Bitcoin is rarely used in retail, which is why wallet companies like Bitpay are struggling to survive despite millions of dollars in financing. People who support block expansion believe this (Bitcoin transaction fees are very low), but real Bitcoin users don't care about high fees, they only care about whether the transaction is free.

Soft fork is the best option

Roger Ver and his supporters' blind obsession with transaction fees will only endanger the health of the Bitcoin network.

According to Roger, the increase in block capacity will reduce transaction fees and bring more users and more nodes. The more nodes there are, the more robust the network is. However, there is no evidence that Bitcoin users care about the cost of using the network.

Most people choose Bitcoin because existing financial services cannot meet their needs, and they will not easily shake their beliefs due to high or low fees. In addition, new Bitcoin users rarely run full nodes. In most cases, they still choose lightweight wallets, which only have transaction functions but do not contribute to the security of the Bitcoin network.

Roger also mentioned the extra storage space, bandwidth and CPU power, saying that these factors are conducive to reducing the cost of block creation. But these are not important, okay? ! For miners, getting block rewards is king. Therefore, the process of publishing the miner's block data after packaging is the highlight, that is, the speed of block propagation is the most important.

Suppose we increase the block capacity, then in order to speed up the propagation, miners will dig out more orphan blocks, which is actually a waste of resources. Suppose another miner announced his block to the entire network before you, then your block is useless. Therefore, in order to reduce the propagation time, the block expansion will increase the centralization of miners to a certain extent (they are likely to share information with others before announcing a new block to avoid duplication).

Moreover, increasing the block size will inevitably lead to a hard fork. Because in the Bitcoin network, the addition of each block requires the consensus of the entire network, and everyone must run the software based on the same core parameters. Increasing the block size will inevitably break these core parameters, so everyone must upgrade immediately, otherwise they will be "ignored" by the entire network. For example, if everyone in the world must upgrade their computer system to the latest version at the same time, otherwise your computer will lose the ability to communicate (the new and old versions are incompatible), what consequences will that cause? It must be a mess.

As the Bitcoin network continues to grow, it is almost impossible to temporarily interrupt it. Therefore, Core developers prefer soft forks. Soft forks do not rewrite core parameters, and network participants can upgrade at any time, and they can use the network normally before the upgrade is completed. This approach is well thought out. I think this is the best way to upgrade.

Lightning Network beats direct scaling

The first half may seem a bit negative, as if only illegal industries such as prostitutes and drug dealers use Bitcoin. Thanks to the unremitting efforts of the Bitcoin Core team, this situation will soon change. Bitcoin will eventually surpass blockchain.

In addition to Ver's Starbucks theory, I have a more appropriate metaphor to explain why block capacity expansion cannot be rushed. Imagine if someone needs to get from Los Angeles to New York in one day. Those who support directly increasing block capacity will definitely adopt the method of forcing growth, that is, increasing the speed of the car to 200 miles per hour. I have a better solution, which is to take a plane. In addition, don't talk about blockchain all the time, we also have the Lightning Network.

To make it short, the Lightning Network is the second underlying technology of Bitcoin. It works similarly to a bar bill. Usually in most bars you can open a bill in advance, and each subsequent beer will be charged to this bill, and then you can pay it before leaving the bar.

Similarly, the Lightning Network allows you to open a payment channel with another person, and you can trade with each other as many times as you want without exceeding the capacity limit, and then close the channel after all transactions are completed. In the end, only two transactions are recorded on the blockchain, one for opening the payment channel and the other for closing the payment channel.

Let’s go back to the bar example. If your friend and you both open a bill with the same bartender, you can ask him to add the amount to your bill and then subtract the corresponding amount from his bill. This process is instant, anti-theft, private (only the transaction participants can view the transaction, which cannot be seen on the public chain), and is also protected by cryptographic verification. Countless "bartenders" can participate as middlemen, thus avoiding the expensive settlement fees and slow confirmation process on the chain.

And as long as you have an internet connection at home, you can become a middleman and collect fees. This is not a plot from a science fiction movie. In fact, there are already several teams developing and maintaining the Lightning Network. Directly increasing the block capacity is the worst option for Bitcoin expansion. Increasing the block capacity has an upper limit and will also bring risks to decentralization. However, the Lightning Network can increase Bitcoin transactions to millions per second without incurring similar risks.

On the Importance of Humility

You should always be humble when it comes to Bitcoin. I don't need to explain the truth that "there are always better people than you". Bitcoin developers are experienced programmers and cryptography experts, as well as economists. They have spent many years studying source code, developing new features, and exploring economic changes. You think you know a lot about Bitcoin, but they always know much more than you do. If you want to discuss topics such as UTXOs, Merkle Trees, and Block Headers with Peter Todd or Eric Lombrozo, you will definitely not be able to explain it without a few hours.

Teaching them about block size increase is like teaching Tom Brady how to play football. Most people are still on the side of Core. Core believes that the safest option is to keep the block size unchanged and seek other ways to increase the capacity. Increasing the block size to 2 MB will not help at all. Supporters of the expansion mistakenly believe that increasing the block size will reduce the transaction fee, but low transaction fees are not what Bitcoin users really pursue.

Core opponents accuse them of trying to create their own monetary system, just like the Federal Reserve. This analogy is ridiculous. The Federal Reserve's political and economic decisions are enough to affect all citizens of the United States. In the system created by the Federal Reserve, you have no choice. Bitcoin is a completely voluntary software project. If you don't like the way Bitcoin works, you can choose other cryptocurrencies.

As individuals with free will, we choose to believe in the market because of its philosophy and products, not politics. In fact, the market has told us many times that Roger Ver’s ideas are wrong. The expansion supporters launched Bitcoin XT, and the leader ran away; then they launched Bitcoin Unlimited, and disappeared; finally, they established Bitcoin Classic. Guess what? No one cares.

Roger and his supporters seem more like politicians, constantly bringing up those clichés. But when it comes to money, ordinary people are not so easy to fool. In addition to the support of blockchain technology, Bitcoin is built on multiple layers of networks. Bitcoin developers, holders, and miners are all aware that directly increasing the block capacity is the worst option for expansion. What we need more is auxiliary functions like the Lightning Network.

I always believe that Bitcoin will eventually change the world. But reform is a long process. And the reform of the Bitcoin network must be decentralized.