BitFury CEO: Calm down, Bitcoin will keep moving forward

I grew up in Latvia and watched my parents’ life savings disappear overnight in 1991 when the Soviet Union and its banking system collapsed. It was a nightmare to see all their dreams go with them, and my own investing dreams were shattered by the global financial crisis of 2008. I knew as a child, and now as an adult, that as a global technology community, it can and must do better.

I wrote my first computer code at the age of eight. Math was my language of choice and trust. In 2010, I discovered the exciting open source technology of Bitcoin. My business partner Valery Nebesny and I realized that this new way of handling and transferring assets could actually make the world a better place, making life more equitable for people everywhere (in developed and developing countries), and that math, cryptography, and programming languages ​​are the foundation of Bitcoin's trust value. Fast forward five years, and the world of Bitcoin has far exceeded our expectations. It remains a vibrant ecosystem of innovation and is growing every day.

Regarding Mike Hearn, needless to say, it is disappointing that this former Bitcoin contributor recently wrote a long article saying that "the Bitcoin industry is dead and Bitcoin is a failed experiment." Perhaps, for Hearn, this road has come to an end, but for me, many of my colleagues and Bitcoin blockchain experts, it is safe to say that we have just started on this incredible road and we see a promising future.

Of course, Mike is entitled to his opinion, and I thought I would take a moment to respond to some of his comments. I would caution that many of the things that happen in the Bitcoin community are very complex and may not be fully understood by those who are not well versed in math and science.

Let me state some facts:

Fact 1: Bitcoin is not an electronic payment system like PayPal

Many new Bitcoiners see the Bitcoin network as another electronic instant payment system, like PayPal or Visa. We have very different opinions on this. Bitcoin was never designed to be an instant payment system.

As smart contract author Nick Szabo writes:

“Visa and PayPal already exist, and within national borders, these payment systems already work pretty well. Trying to turn Bitcoin into another Visa and PayPal is foolish.”

Does this mean that Bitcoin cannot be used for instant payments? Of course not, you just need to build an additional system on top of the Bitcoin blockchain (the blockchain as a settlement layer). These systems already exist on wallets and exchanges. But the bigger issue is that the potential of Bitcoin is far greater than just competing with PayPal.

Fact 2: Bitcoin is not free to use, nor should it be

Although the Bitcoin network has greatly reduced transaction costs, the reality is that the Bitcoin blockchain is not free to use. The blockchain is supported and protected by a huge amount of computing power, and transaction fees are an important incentive to support computing power.

Currently, the Bitcoin network is constantly developing, and in order to maintain a high level of security on the network, transaction fees also need to increase. This is mentioned in BitFury's white paper on Bitcoin security incentives:

http://8btc.com/doc-view-351.html

The transaction fee market is currently developing actively, and the proportion of market-based transaction fee margin trading has increased from 22% in March 2015 to nearly 40% in October 2015.

Just like instant payments, expensive on-chain Bitcoin transactions don’t mean someone can’t use Bitcoin to transfer value cheaply. Overlay networks, like the Lightning Network and sidechains, address these challenges.

Fact 3: Bitcoin transaction processing is not currently blocked

There is no observable evidence that Bitcoin transaction processing is currently blocked. Statistics collected by http://statoshi.info/ over the past few months show that the pool of unconfirmed transactions has remained relatively stable at 10,000 transactions, with a significant increase to 75,000 during the "stress test" in September 2015. According to the CoinTape website, most of the unconfirmed transactions are due to no or close to zero transaction fees.

For Bitcoin wallets that add modest fees, these congestion challenges simply don’t exist. According to CoinTape’s estimates, the optimal average transaction fee on the Bitcoin network was less than $0.1 in January 2016.

Fact 4: Miners embrace Bitcoin’s popularity

Bitcoin miners and transaction processors, such as BitFury, are likely the biggest supporters of the Bitcoin ecosystem, and any conclusion to the contrary is absurd. Bitcoin miners invest a lot of money and energy in maintaining and developing Bitcoin mining hardware. Bitcoin Scaling Conferences have shown that miners generally support cautious block size increases, and that too rapid an increase could undermine the foundation of the Bitcoin network. BitFury specifically mentions these views in its white paper.

Fact 5: Bitcoin mining is decentralized

Most existing mining pools are public, meaning they are made up of tens of thousands of independent miners who are free to join or leave at any time. Private mining pools, on the other hand, are set up by companies that sell mining equipment publicly, including BitFury.

Even if only 10 entities controlled Bitcoin mining (which is not the case), this would still not be a threat. Many Bitcoin nodes are not controlled by miners, and these nodes would act as a barrier to rogue miners' misconduct. However, a rapid increase in block size could cause most nodes to stop working because users would lack the appropriate hardware to perform transaction processing, which would make Bitcoin truly centralized.

Fact 6: The rules of the crowd don’t apply to Bitcoin

There are some daydreams in the Bitcoin community, and some people believe that the management of the system should be decided by full nodes participating in voting. This approach is not only impractical, but also unsatisfactory. Most ordinary users do not have their own full nodes. If they do so, assuming that the Bitcoin block undergoes rapid expansion, these ordinary users may not be able to afford the maintenance costs. Bitcoin users should have their own say in the development direction of this technology, but in order to continuously ensure the security of the blockchain, it is necessary for all those who are proficient in this technology to play a leadership role.

Fact 7: Bitcoin XT does not solve Bitcoin’s challenges

Bitcoin XT is seen by some as a remedy to the problems of the Bitcoin ecosystem. However, upon closer inspection, XT still retains some of these problems. The reality is that XT does not make transaction confirmations instant, nor does it reduce the risk of double spending of unconfirmed transactions.

in addition:

1. XT will not eliminate transaction fees, it will simply delay the development of a fee market. (The idea of ​​no fees is always bad, and as block rewards steadily decrease, the security of the Bitcoin network will eventually take a nosedive.)

2. XT does not solve the problem of “mining centralization.” In fact, it will make things worse by forcing small mining pools out of business.

3. XT will not contribute to the decentralization of Bitcoin, and the maintenance requirements of full nodes will become higher.

4. Bitcoin XT and its improvement proposal BIP 101 have not received support from the Bitcoin community because they contain too many controversial points, which could greatly reduce the value of Bitcoin if not handled with care.

in conclusion

I believe in Bitcoin and I believe in blockchain. I know the great potential of these technologies has only just begun to unfold. I hope Mr. Hearn gets along well with his R3CEV colleagues. It is important to respect different voices, but it is even more important to resist them at the same time.

Bitcoin is not an instant payment network, it is not a substitute for PayPal or Visa. It is first and foremost a decentralized system that sacrifices speed but helps with security. The main feature of decentralization is that it provides users and developers with a permissionless entry point. It is precisely because of this feature that Bitcoin has gradually grown. It is not just a currency, but has become a platform for blockchain innovation.

I believe in Bitcoin because I believe in democracy and an open society. As Churchill once said, "Democracy is the worst form of government, but for all else it is just the opposite." Open source projects are not perfect, but they bring together the best and most innovative thinkers, and I am honored to be a part of them.

Original article: https://medium.com/@BitFuryGroup/keep-calm-and-bitcoin-on-4f29d581276#.rkq8ilscs
Author: Valery Vavilov
Translator: Satuoxi
Source (translation): Babbitt Information (http://www.8btc.com/keep-calm-and-bitcoin-on‎)