BitTorrent Creator Criticizes Increased Block Size Proposals

Bitcoin Magazine
BitTorrent Creator Criticizes Increased Block Size Proposals

In May, Bitcoin Magazine reported that lead Bitcoin developer Gavin Andresen is persuaded that the best solution to the limited Bitcoin transactions rate – the Bitcoin network can currently process only a few transactions per second — is to increase the maximum block size.

Andresen argued that if the proposed solution is not urgently implemented the Bitcoin network will become oversaturated, and developed code for a proposed Bitcoin hard fork that would allow any block with a timestamp on or after March 1, 2016 to be up to 20 megabytes.

However, not everyone agrees that Andresen’s proposal is the best path forward. The MIT Technology Review published a review, titled “Leaderless Bitcoin Struggles to Make Its Most Crucial Decision,” of the pros and cons of the proposed hard fork.

Recently several of the larger mining pools, amounting to around 60 percent of the total mining capacity, have agreed to a compromise: The maximum block size would be increased to 8 megabytes instead of 20. NewsBTC reported that, even though the 8 megabyte block size is smaller than the initially 20 megabyte block size proposed, Andresen is happy about the proposal and there seems to be a consensus.

Now BitTorrent creator Bram Cohen has weighed in on the debate. In a Medium post titled “Bitcoin’s Ironic Crisis,” Cohen criticizes the proposals to increase the block size and warns, in very blunt terms, that Bitcoin is heading toward an unexpected crisis “of being undermined by a developer who’s gone rogue, using his political influence to convince vendors that an upcoming minor problem will be a major crisis, getting them to accept his own extraordinarily bad pet solution to that problem, and as a result hurtling the whole ecosystem towards potential disaster.”

The rogue developer is, according to Cohen, Gavin Andresen.

“Gavin didn’t invent Bitcoin,” says Cohen. ”He isn’t even a Bitcoin developer anymore. He resigned his position as lead developer a year ago, and has been largely inactive since. Using a voting process, or even a system of rough consensus among core developers would cause his proposal to be quickly rejected. It’s only the exertion of outside political force which has forced it to be taken seriously.”

The political influence that Cohen is denouncing could be the MIT Digital Currency Initiative, which Andresen and other Bitcoin developers joined as soon as it was launched and is positioning itself as a de-facto governance body for Bitcoin technical development.

Cohen thinks that proposed extensions to Bitcoin should go through a sort of voting process where miners indicate that they’re willing to accept them. Concerning the specific case of the block size limit, he thinks there are no problems, let alone urgent problems, that must be solved. The only thing that would happen when the block size limit – which is a limit on the bitcoin transactions rate – is reached is that the transaction fees would go up.

That, according to Cohen, is not a bad thing. On the contrary, he thinks that high transaction fees would be the first clear evidence of Bitcoin providing real value instead of just being a vehicle for speculation, and it would also lead to miners directly earning more money.

Cohen’s article will certainly put even more steam in the Bitcoin block size debate. Cohen may have been too blunt in his criticism of Anderson, but the opinion of the creator of BitTorrent, the first building block of the developing P2P Internet and a Bitcoin precursor, certainly deserves full consideration.


Photo Abstract blocks / Photopin

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Abra Wants to be the Uber of Digital Cash, Says Founder Bill Barhydt at Exponential Finance 2015

Sponsored by CNBC and the prestigious Singularity University, the Exponential Finance 2015 took place in New York City on June 2 and 3.

The Singularity University is an educational center dedicated to high-impact, world-changing applications of disruptive, exponentially accelerating technologies. Exponential Finance 2015 examined how rapidly accelerating technologies such as artificial intelligence, quantum computing, crowdfunding, digital currencies, and robotics are rapidly disrupting businesses throughout the financial industry.

The Singularity University’s news portal Singularity Hub published a conference wrap-up titled “Exponential Finance: Who Will Be the Instagram or Uber of Finance?” Instagram and Uber are examples of what Peter Diamandis, co-founder and executive chairman of Singularity University, calls the disruptive potential of digital technology.

“Instagram was acquired for a billion dollars the same year Kodak went bankrupt,” writes Jason Dorrier. “Uber is a five-year-old transportation company worth $40 billion, and they don’t own a single car or bus.”

According to Diamandis, the blockchain will spark similarly disruptive innovations.

“At its core, bitcoin is a smart currency, designed by very forward-thinking engineers,” said Diamandis. “It eliminates the need for banks, gets rid of credit card fees, currency exchange fees, money transfer fees, and reduces the need for lawyers in transitions … all good things. Most importantly, it is an ‘exponential currency’ that will change the way we think about money.”

In his talk at Exponential Finance, Diamandis added that simple and ubiquitous apps based on blockchain technology will change the banking industry and the insurance industry.

It’s difficult to predict which companies will become the Instagram and Uber of exponential digital finance. Some of the established big players in the financial industry will probably continue to play an important role.

Using again the analogy with digital photography, while Kodak went bankrupt because it didn’t adapt fast enough, Canon transitioned to become a major player in the digital camera market. But the biggest and most disruptive innovations could come from applications and business models that few anticipate today, CNBC’s Bob Pisani pointed out.

Just a few imagined the iPhone in the ’60s, “Reality has surpassed science fiction,” said Pisani.

Abra, a blockchain company that wants to take a slice of the $550 billion global remittance market, is showing what can happen when several digital technologies converge in one product. Combining an Uber-like peer-to-peer network with smartphone technology and the blockchain, Abra permits sending cash as easy as sending a text message.

At Exponential Finance, Abra’s founder Bill Barhydt estimated that we’re three years away from modern smartphones becoming ubiquitous in the developing world. At that point, it’s possible many of the world’s unbanked billions in developing countries will skip traditional finance, a little like how they leapfrogged landlines for cell phones.

Barhydt stated that Abra aims to be the Uber of digital cash. Abra, which allows people to send and receive money without a bank account, is building a global network of “human ATM machines,” empowered end-users who don’t even have to understand Bitcoin to use the underlying blockchain technology embedded in the Abra app.

Barhydt described Abra as “the world’s first digital cash-based peer-to-peer mobile money transfer network.” The Abra app allows anyone with a smartphone to send money to any other smartphone anywhere on the planet any time of day. The goal of Abra is to be as “private as traditional cash, but without introducing any financial intermediary.”

“Traditional banking is really good at serving the global 5 percent to 10 percent of consumers who reach a certain income level,” Barhydt told CNN Money. “The reality is, the majority of the planet is a cash-based economy, and banking doesn’t work for those people.”

CNN Money’s take is that Abra makes banking more accessible while completely cutting out the actual bank – and bank accounts may be the next thing to go obsolete.

Blythe Masters, the former J.P. Morgan star who now leads Digital Asset Holdings, a technology company that uses distributed digital ledgers to address operational challenges and settlement latency in both digital and mainstream financial assets, said that financial blockchain applications will be measured in the trillions.

Augur, a fully-decentralized, open-source prediction market platform based on blockchain technology intended to revolutionize forecasting, decision-making and the manner in which information consensus is collected and aggregated, was selected as one of the five finalists in the “Breakthrough” category at the XCS Challenge at Exponential Finance 2015.

A short video on the conference website shows the enthusiastic reactions of many attendees after the conference.

“I feel we’re on the cusp of a step function in technology,” says Catheryne Nicholson, founder and CEO of blockchain API provider BlockCypher.

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Leading Silicon Valley VC Firm Sets Its Sights On Bitcoin

Kleiner Perkins Caufield and Byers (KPCB), a Silicon Valley venture capital firm best known for its investments in Google, AOL, Twitter, Uber and Amazon, has introduced a fund called the Edge Seed Fund, which is set to focus on helping early stage Bitcoin- and blockchain-based startups.

The Edge fund, led by Kleiner Perkins partners Mike Abbott and Anjney Midha, plans to offer investments of $250,000 to support selected startups in developing and programming platforms, products and services. The $4 million fund will be operated by former Google product manager Ruby Lee, and the founder of bitcoin and dogecoin transaction service Backlash, Roneil Rumberg.

To help early-stage startups from losing equity in its first few funding rounds, the firm is set to take a different approach for its investments. Instead of taking equity from its startups, the startups will issue a debt-like account called uncapped convertible notes to the VC firm, which can be reclaimed by the startup at any time.

Midha explained that such an approach will assert less pressure on the startups for another funding round, as it will not provide a startup with a specific valuation. Additionally, the startups can choose to reclaim the convertible notes and convert it to stocks completing their next funding round.

As of now, the firm has decided to take a more proactive approach and has begun to reach out for possible candidates, TechCrunch reported, “Midha will spend around a half hour to 45 minutes meeting with companies and then say they will give a final verdict on an investment in around 72 hours. The goal is to be as ‘founder friendly’ as possible — though, in theory, most firms would say they would be shooting for that goal.”

The establishment of the Edge fund follows the recent announcement of a popular startup accelerator, Boost VC’s announcement to end its focus on Bitcoin startups.

As Bitcoin Magazine reported on June 8, Boost VC stated that the firm will diversify its investments toward virtual reality technology, while still continuing to fund Bitcoin startups. Last year, Boost VC promised that the firm will accelerate and fund 100 Bitcoin companies by 2017. So far, Boost VC has successfully funded more than 50 startups and is set to fund more in its new startup program called Tribe 6.

As KPCB shifts its focus on hot startups in the Bitcoin and drone industry, the firm may possibly work with Boost VC to find potential candidates for its investments. Currently, the possible candidates are said to be BlockCypher and OneName, both of which have been part of the firm’s podcast series and were funded by Boost VC.


Photo Doc Searls / Flickr

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