Bitcoin & Crypto & NFT News
Back when Gavin and Garzik were using the "Fidelity Effect" as a (rather valid) argument in my opinion to raise the blocksize, I was a big blocker. Totally supported both of them, posted on here about it, the full monty.
I always thought it was a great point. It was simple and succinct in that it argued that Bitcoin was being held back because businesses could not utilize the blockchain for its business activity because of bitcoins limited capacity.
Which is why we had a 20MB blocksize increase BIP.
The Fidelity Effect is real. If there is no capacity to use bitcoin, bitcoin wont be used. If there is capacity, it will be used. "Build it and they will come".
But it is impossible for bitcoin to scale for industrial global usage on L0. Dont believe me, just read Nick Szabo discuss the issue. So we must accept that there are tradeoff's involved. If we want to scale on-chain, then we must sacrifice security. There is academic research showing that even small (2MB) increases to the blocksize results in drastic node dropoff counts due to the non-linear increase of RAM needed. If it were just storage that was the bottleneck, we would be fine. But its not, so lets not pretend it is.
If we sacrifice the amount of security needed to onboard global industrial business, then we will have lost 90+% of nodes. No one could argue that bitcoin is decentralized or anti-fragile at that point. Its most valuable asset, immutability, and censorship-resistance would be nullified.
So the solution that was engineered was Lightning-Network. Its a decentralized network that piggybacks off bitcoin to allow near-free transactions that have 0-conf spending capabilities.
What bitcoiner doesn't want near-free transactions with 0-conf? Its like our wet dream!
More specifically, what businesses could utilize near-free 0-conf transactions? Well, the list is endless. There is no shortage of businesses that could leverage a global instant nearly-free payment network. If you think about the increase of productivity added to the global market alone with this feature, without even considering its effect on bitcoin….that alone is worth getting these networks off the ground.
This is a very common misconception among people. Lightning does not reduce the fees that the miners may collect, it increases their reach into transactions that they could not otherwise serve.
Right now miners (Jihan) are arguing that enabling LN would take away their fee's. They have a simple-minded viewpoint that since LN is a transaction network, that it competes with bitcoin's network. This is a typical false dichotomy, because it ignores all of the context and evidence contrary to that thought.
LN does not compete, it increases bitcoin's utility and usability, making it open itself to new markets that currently cannot participate on the bitcoin blockchain. It is like the right arm of bitcoin, doing all the hard work while the left hand sits around doing nothing. And lets be honest with ourselves. Even if these businesses were able to utilize the blockchain for their activity 4+ years ago before blocks were full, it was going to be a very short lived business plan because you cannot scale on-chain, at least not without sacrificing security to the point of bitcoin becoming paypal. We have the most brilliant minds working on on-chain scaling solutions like Schnorr and MAST so that we can better efficiently scale on-chain. But engineering these improvements takes years.
Right now all of this business activity is taking place off-chain. Businesses like Coinbase are the "trusted custodians" handling all of the business activity that does not make sense on-chain. How much of that revenue are miners getting? Yea, 0. LN takes all of that activity, and it puts it back on the blockchain in a trustless decentralized model. Would you rather have slice of a pie, or would you rather have 100% of 0 pies? Thats what the reality of LN is. Taking a slice of the pie that currently doesn't exist on-chain.
Miners who follow Jihan's Gospel are ignoring that in order to utilize LN, you must open and close payment channels. The more competition in the second layer market, the higher the fee's become. What impact do you think that Networks like Thunder will have on fee competition? When you have a free market fully competing for blockspsace, especially when those payment channels might be able to account for several orders of magnitude more business activity, you have participants that are willing to pay much more for a opening of a channel.
If you run a business and you want to open up a 1000BTC channel for the business activity of your hub for the next 6 months…..how much money are you going to be willing to spend to open that channel? I would imagine its going to be a lot more than the current 50 cents.
Now imagine a global industry where businesses all around the world are doing this? Now imagine these businesses paying miners even extra revenue to monitor their channels, and to act as escrow mediators in the case of fraudulent activity?
Miners need to be honest, decentralized and just do their work without getting involved in politics. Because right now they are demonstrating that they are the greatest threat to bitcoin. By colluding with each other to politicize issues against the best interest of the community, they are showing that they cannot be trusted to honestly mediate payment channels.
The amount of money sitting on the table waiting for LN to launch is incredible.
You cannot argue that the Fidelity Effect exists, and at the same time try to argue that it wont have a positive impact upon revenue.
We have now seen with crystal clarity what the agenda is. Its about money. There is a clear mis-conception that is being weaponized by Jihan and spread as propaganda. He is not just hurting his own self-interests by fighting against that which will make him richer, but he is fighting against the entire networks progress forward. He has spread propaganda that has outright stated that they are blocking SW because it "fixes a bug (malleability)" which would "allow for Lightning Network to exist".
You cannot get a more clear threat than that. The centralized miner faction out of China has outright stated they are stonewalling progress on developers fixing serious bugs because they think it will hurt their revenue.
Bitcoin works so long as economic interests align. But when you use pseudo-science and ideologically driven rationalizations for your actions, you can be convinced to vote against your best interests.
We were always worried about a 51% attack. Well folks, you are now seeing it in action. This is miner centralization following the gospel of one single guy who produces 75% of the ASICs on this planet. You cannot get more dangerous than this.
And he has proven, through his own propaganda, that he does not have bitcoins best interests at heart.
The Fidelity Effect is real and waiting for LN. You can continue to stonewall bitcoins progress with politics, or you can contribute to its progress. You cannot argue "People are moving business activity to Alts" and then on the other side of your mouth try to argue that LN wont increase business activity. These are examples of current forms of Cognitive Dissonance being exhibited daily here.
You either need to accept that there is a mountain load of business activity waiting to be unleashed on a limber 0-conf near-free decentralized transaction network built on top of bitcoin….or you need to stop saying that businesses are being held back by higher fee's, or that people are moving their businesses to alts.