An interesting discussion on the 1MB transaction limit
At https://bitcointalk.org/index.php?topic=673415.0, /u/gavinandresen has some interesting comments about a proposal to increase the block frequency of bitcoins. In the thread, it is proposed that, instead of increaqsing the block size, the developers should instead change the difficulty so that blocks are generated more frequently. If the difficulty is reduced by a factor of 20, then blocks appear every 30 seconds instead of every 10 minutes. That also means that 20MB of transactions can occur every 10 minutes, with transaction confirmations being less binary than they are now.
Currently, if five minutes has passed and you don't have your transaction in a block, then you are no better off than you were five minutes ago. The odds of finding a block in the next time interval are no higher than they were five minutes ago. With a shorter time interval, you might have 3 confirmations of lower strength already. For midsize transactions, this is beneficial because the possibility of your transaction being double-spent lies somewhere between 0 and 1, rather than remaining at exactly 1.
However, this runs into problems that are prevalent in many altcoins. Netcoins are an example of an altcoin that has extremely fast block confirmation times. Their difficulty fluctuates wildly. Mining netcoins can produce 20 blocks in ten seconds. We had to disable netcoin mining because even though they are theoretically the most profitable coin, 75% of the blocks were orphaned. Reducing the block time to several blocks per minute turns coins into a free-for-all, where a "confirmation" doesn't mean anything anymore.
I disagree with the assertions in that thread that it would be possible to reduce the block confirmation time down to 5 seconds and that everything would be fine. Such frequent confirmations would result in the mining turning into a race like the stock market is now, where you build dedicated fiber lines from you to the stock exchange to shave off 1ms from your ping time. If people think that centralized mining is a problem now, wait until 5-second blocks appear. The only possible way to compete in a 5-second block environment is to have a large pool with gigabit upload bandwidth and a very low ping time, something that costs $10k/month.
A non-fork solution to the limit
An extremely interesting suggestion that Andresen brings up, and which is the first actually viable idea I've heard to resolve the 1MB transaction limit, is to build a "new P2P" pool. The pool would find "share-blocks" every few seconds. When one of the "new P2P" pool's shares exceeds the difficulty of the original 10-minute network, then it is published to the original blockchain. As the "new P2P" pool grows in size and eventually gains 51% of the hashrate, it essentally becomes the new bitcoin network, even though this blockchain is operating on top of the original chain. Eventually, the pool and the original blockchain both become integrated into the same client, so that it appears that there is only one blockchain, when the actual implementation is a convoluted way behind the scenes.
As he states, "we can do this without a hard fork." However, Andresen misses that even if the "new P2P" pool is a wild success, each of the 5-second blocks can only be 10KB or so in size. Otherwise, the original blockchain would exceed 1MB every 10 minutes. To address this issue, a missing link of consolidating transactions needs to be developed that can make transactions in the original blockchain become pointers to the pool's blockchain.
The way I see the 1MB limit nowadays is as just another engineering problem that needs to be solved. It may be human-created, but it's just as much an impediment to progress at this point as are the laws of physics. Resolving the problem will require the same development process as solving other intractable problems does. You can't change how cancer behaves, so you accept it as a fact of life and then set about figuring out a cure. Similarly, there can't be any hard forks anymore, so the mistakes in the original bitcoin protocol are now as much a problem as the lack of the protocol once was, and it will take innovative ideas to develop something on top of them to solve the problem.
The "new P2P" pool idea is a promising solution to the 1MB transaction limit. There are a few engineering challenges that need to be addressed, but any idea that doesn't require a hard fork is one that can keep bitcoin viable for the long-term.
Time running out?
While there is still time left for the bubble cycle to hold, time seems to be running out. If this bubble doesn't peak within one (or two, but that is probably stretching it) weeks of three Thursdays from now, then the predictions of many will have been inaccurate.
After a brief rise after the auction, the price is again starting to slide down towards the lower boundary, which should now be rising above $550. A break of the lower boundary, as you may recall, would likely signal the end of the cycle, because that has not happened in the past five years.
"Bitcoins are too difficult" is an excuse
There are still people who believe that bitcoins are too difficult for the average person to hold and spend. I disagree with that viewpoint.
As I stated elsewhere, cold storage is pretty easy and the risk, while not 100%, is very low with reasonable precautions. Printing out a wallet at bitaddress.org and putting the paper in a safe deposit box is only vulnerable to theft in the case that some screen-grabbing virus happens to be taking pictures of the screen exactly at the time the wallet is created, sending the images to some server across the Internet, and (most importantly) the hacker knows what he has. Stealing passwords at phishing sites is easy; doing image processing across videos from a botnet is impossible. As to people who say they would not want to print to a printer, are there any bitcoin-stealing printer firmware viruses that even exist? Given that all routers come with default firewalls and (unlike Windows) there is no single printer architecture, how would anyone even go about targeting your printer? There's a difference between theoretical attacks that could happen to someone, someday, and stuff that is actually happening now.
As to spending bitcoins, everyone has a cell phone and anyone can understand how to point a camera at a QR code.
I propose that the idea that bitcoins are insecure is a product of a few people who post the same story to many forums claiming that they lost hundreds of bitcoins due to some virus, when in reality there are millions of people using bitcoins and about 10 people have ever lost their life savings due to a virus. Some of the stories aren't true, so the number of people who lost bitcoins is even smaller.
People figure out elaborate scams and kickbacks and accounting tricks all the time to rip each other off. Most of these scams are so convoluted and pull in so little money that it is more profitable to simply get a job. It is nonsense to suggest that if people could make a significant amount of money by spending bitcoins rather than credit cards, people wouldn't go to great lengths to save cash.
The reality is that if retailers started offering discounts to pay in bitcoins, then people would be motivated to figure out how to use bitcoins, even if it was actually difficult to create a wallet. Why doesn't Overstock give a 3% discount instead of donating 3% to foundations - as the 3% discount would both benefit them and do more to further bitcoins than anything else would? When you add credit card fees and losses due to chargeback fraud, most retailers could give a 5% discount without any problem. When Coinbase and Bitpay start convincing merchants to offer such bonuses, then the excuse that "it's too difficult" will go away.
Toastmasters
I was asked on Wednesday to write about Toastmasters, an organization dedicated to improving public speaking skills. I attend Toastmaters meetings every other Thursday, which is why I usually do not contribute on Thursdays.
Toastmasters is a great organization that is geared towards people who know little about speaking. My belief is that people who know a little more about public speaking can still learn a lot, but the "competent communicator" manuals that Toastmasters provides focus a great deal on fear of public speaking. People who enjoy public speaking, like myself, or at least people who have no fear of it, may find themselves disappointed by how much emphasis Toastmasters places on eliminating fear of speaking.
One way that Toastmasters addresses fear of speaking is to provide evaluations. But I am always frustrated at evaluation speeches, because the Toastmasters manuals specify that 90% of evaluation speeches should be focused on positive comments. If I performed poorly, I want to know about it; I'm not worried about hurt feelings. In Toastmasters-sponsored speech contests, they do not announce anyone except the winners, which has made me less likely to participate because I can't gain anything from contests where I don't know who I was better than.
Despite these shortcomings, I would still recommend Toastmasters to anyone interested in improving their speaking as there are few alternatives. If anyone knows of a group where feelings and emotions are viewed as less important, please let know as I think there is a need for people who have no fear but could still improve their skills.
Other
- Days until July 24: 20