Slides for Blockchain Hub seminar

1. Decentralization Myth
DO WE NEED DECENTRALIZATION? IS IT WORTH PAYING FOR?

2. What is decentralization
Noses not nodes
1 CPU 1 vote, Hashpower %
Hash power centralization
Security from censorship and corruption is the goal, decentralization is the ONE method
Interesting to note that Satoshi never explicitly listed decentralization as a goal

3. What is the Goal?
Censorship resistance
Stable store of value
Useful medium of exchange

4. How can we achieve this?
Decentralized nodes and validators (miners)
Increase the Cost of Corruption
◦ the maximum censorship resistance is obtained when we maximize the CoC
◦ https://drive.google.com/a/bittoku.co.jp/file/d/0Bz9zu4c7U6CScGk1NUVqN1dlYlk/view?usp=sharing

5. Block size debate
SIZE DOES MATTER

6. Why does small block size matter?
Perceived decentralization effects
Big miners will be able to price out small ones
Cost of running full nodes increases
◦ storage space
◦ bandwidth
Block chain space should be treated like a scarce resource!
◦ because fees need to take over the subsidy eventually

7. Why block size does not matter
Orphan rates – Natural limit to block size
Validation-less mining (1-txn blocks)
Parallel block sync solutions removes bandwidth from the picture (IBLTs, xThinblocks)
Scaling users means scaling the market, means more fees
Like ASICs more use will push technology to accommodate
Bitcoin is ANTI-fragile. Nobody can stop it.

8. On-chain vs Off-chain Scaling
Sidechains
◦ 2-way pegs
Lightning
◦ P2P routing network like Ripple, through payment hubs.
◦ Routing is a hard problem, no decentralized solution as yet.
Altchains
We should focus on scaling ON-chain, before OFF chain, if at all possible. Simply because OFF-
chain is a whole new network, and growing users ON-chain is more valuable than OFF-chain at
this stage of adoption

9. Crypto Governance
FREEDOM OF CHOICE, DECENTRALIZED CONTROL

10. Network fork
Break away a new coin, allowing existing users to choose to move, or stick with the status quo
Miner vote determines new fork activation
Miners need to respect economic majority
Economic majority – Exchanges, Wallets, businesses
Differenced between Hard Forks and Soft Forks
Will Bitcoin break?
Is Bitcoin a magic unicorn? What makes Bitcoin work?
◦ Why not Ethereum? Dash? Lite? Monero?

11. Bitcoin Ecosystem 5 Constituents
Exchanges
Merchants
WalletsUsers
Miners

12. Emergent Crypto-Governance
Longest difficulty chain is the valid chain?
Longest valid chain is the valid chain?
Who defines valid? Do we need to get consensus about what is valid?
Voters
◦ Mining Pools
◦ Hashers
◦ Economic companies
◦ Full Nodes

13. Hard Forks and Soft Forks
Hard forks are network forks, backward compatible (removing restriction)
Soft forks are forward compatible (adding restriction)
Hard Forks
◦ If you don’t upgrade, you may be on a parallel fork and get re-org’d
◦ Non-upgraded nodes *may* be able to affect upgraded chain *IF it becomes longer*
◦ Sacrifice chance of fork re-org for continued function on both forks (75% to ensure fork race win)
Soft Forks
◦ If you don’t upgrade, then you will be blocked from being able to use the network and not know
◦ Non-upgraded nodes do not affect the function of upgraded nodes
◦ Sacrifice security of the network (requires high activation ratio 95%)
Are Hard forks dangerous? Theoretically maybe. Practically no.
Soft Forks dangerous? Theoretically yes. (all miners move back to old version breaks consensus)

14. Fork Types
Old rejects
New
New rejects
Old
Fork Type
TXN Relay Yes No Hard
No Yes Soft
Yes Yes Hard
Block Relay Yes No Hard
No Yes Soft
Yes Yes Hard
Soft forks: Loss of functionality for non-upgraded nodes
Hard forks: Re-org possibility for non-upgraded nodes, double spend chance unless minority 25% upgrades

15. Hard Fork – Judas Block

16. Worst Case Study
Soft Fork Hard Fork
Maj. Miners switch back post-fork Network consensus is
permanantly broken
after re-org, consensus re-
established
Signaling Error (Validation-less
mining)
Invalid chain lost mining rewards

17. Hard Fork Activation 75/28
Speed of fork
convergence
Why 75%? Why
not 50%, 95% or
100%?
Corruption,
Extortion risk

18. Hard Fork Activation 95/252
Way too long delay
Way too high Cost of Corruption, (minoritarianism)
Hashpower distribution can change
Network Node distribution can change
Elect a president, but have him take office after 1 year, good idea?

19. Hard Fork - Can’t we have both forks?
What if we could have both forks simultaneously?
Coin splitting with coinbase (or Coinbase!)
Preventing double spends at merchants
Coin value independent and floating vs each other
Free market solution!

20. Forks and Moral Hazard
Contentious Hard Forks – Rule of the Majority
Evil Soft Forks – Rule Minority
Bitcoin has always been subject to the rule of the majority, or has it?
◦ it depends on whether or not the change is ethical that’s what makes hard forks hard!
The poor people of Equalandia
◦ Hard fork to steal all money from rich and give to the poor
◦ Hard forks are noticed by the old nodes, soft forks are not.
◦ The evil valet. With SF old nodes cannot verify, with HF you know
How to protect your money?
◦ POW change
◦ AuxPow

21. Miner Pool Voting
Individual miners (hashers) can vote to show support to a given client)
Different voting systems maybe differentiators between pools (besides fees and size)
Close to true 1 CPU 1 Vote. Becomes 1 IP, vote weighted by hash/s
Node/Pool Voting vs RoundTable meetings, Letters of Agreement, Lip-service
Slush, Antpool, F2Pool coming on board
We are witnessing an evolution in the industry, in freedom of choice!
◦ Internet freed our knowledge
◦ Bitcoin freed our money, and redefined democracy to be decentralized governance!

22. Evolution – Revolution
Bio diversity is good
Mutate fast, ensure long term survival
The system that stagnates dies – Adaptability is strength
Network effect above all
◦ Intrinsic value of Gold vs Cryptocurrencies (Ethereum vs Bitcoin)
◦ Money is just a collective delusion
Choices
◦ Bitcoin Classic, Bitcoin Unlimited, Bitcoin Core…

23. Questions?
@digitsu
jerry@bitcoinclassic.com
Blog: http://WallStreetTechnologist.com