People will always work around the system

[Steve Sokolowski]

As I predicted last August before that first Republican nominating debate, Donald Trump was elected President. The presidential election turned out the way it did not because of Comey's lack of charges, or how Hillary conducted her campaign, but because the people in charge completely lost touch with what the average person on the street needed and believed. This isn't an American issue; we will see this again when Le Pen is elected president of France, and as Merkel loses support in Germany. It's not that the people in charge are intentionally ignoring public opinion as much as they simply have no idea what the ordinary person wants.

On the other hand, while Trump is likely to expand executive powers for himself, he will actually have little power to affect daily lives. The ability for people or governments to enforce their wills upon others has long been in decline.

Consider that, for most of human history, the vast distance between farms and cities made it difficult for rulers to keep people outside a local area of control in check. In the 1900s, advancements in technology caused the power of the state to become larger. It was now possible for militaries to fire missiles across the oceans and for citizens to drive across vast distances in days. The peak of government control was reached in the 1980s, when televisions had reached every home, but the transmission systems were unidirectional. It was easy for those in charge to transmit information and project authority, and too expensive for normal people to share their opinions as widely.

It wasn't an accident that the Soviet Union collapsed when the Internet was coming into its own. Now, technology provides people with a great deal of power to influence the world. Anyone can fire up a live video stream and create a huge protest against police brutality. People can skirt money laundering regulations by using cryptocurrencies to buy drugs or anything else they want. In five years, it will likely be possible for anyone to buy a CRISPR editing kit and design a virus deadlier than any that exists today. In fifteen, without action anyone will be able to kill large numbers of people with nanomachines launched from far away. The best that governments are going to be able to do is to create defenses against these things. Whether those defenses come into being or not, they will no longer have any greater ability than the average person to wage war.

Trump's supporters will expect him to deliver on his promises, but Trump has no control over the forces he promises to fight. The average person will continue to conduct their business the way they want, working around Trump's regulations if he actually implements any of them.

In Bitcoin, a similar dynamic is in play. The people in charge (the Core developers) are largely in favor of the status quo. Those who want to see some blocksize increase tend to support Segregated Witness, which is unlikely to solve the blocksize problem. Gregory Maxwell, Peter Todd, and theymos probably have deep convictions that what they are doing is best for everyone who uses bitcoin. Unfortunately, the Core developers simply don't understand how normal people use Bitcoin. Not only that, they don't understand for the same reason that politicians don't understand their constituents - they are caught in their own news bubbles courtesy of social media and partisan TV networks. They never take the time to view the news from the other side (or, in the case of Bitcoin, the other side is censored, so they can't see it at all).

Since our business intends to release support for Ethereum and X11 mining in February, we have begun purchasing computing equipment so that we can travel to the hosting site and set up additional servers when I have vacation time during the Thanksgiving and Christmas weeks. Most of our purchases, like those for a number of solid state disks at newegg, were made at retailers that accept bitcoins. We earn bitcoins as profit, so this business is the prototypical example of a "closed loop" system that so many bitcoin proponents advocated for. They believed that once people were getting their salaries paid in bitcoin, then the bitcoin economy would explode because there would be no reason to use dollars at all.

That closed-loop economy remains wishful thinking. When we examined our payouts, we discovered that it would cost almost 25 cents to send bitcoins from our wallet to newegg to make a purchase. Many of our purchases cost around $10. When Chris purchases solid state disks for a server, they cost about $50. Even for this relatively expensive solid state disk, the bitcoin transaction fees add 0.5% to the cost of the item. With margins of 3%, that means that 1/6 of our entire profit would be lost to bitcoin transaction fees if we used bitcoins to purchase business expenditures and personal items averaging $50, like the copy of Final Fantasy XV that Chris is tasked to pre-order this week.

To reduce losses due to fees, we enacted a policy of paying with dollars regardless of whether the site accepts bitcoins or not. We send large batches of money every periodically to the GDAX, unload 2 or 3 bitcoins at once at no cost, and then use dollars to buy everything we need. This procedure significantly reduces overhead and increases profit.

In fact, I calculated that we can further reduce costs for customers significantly by programming a complex route using Coinbase. Instead of paying customers with 100 outputs in a transaction, which often costs $2 nowadays, one of my scheduled tasks is to send money to Coinbase with one output, and then to issue 100 Coinbase sends using their API. Coinbase's policy is to pay the transaction fees, so all we are doing in this instance is shifting around who needs to pay. Nevertheless, since we can save our customers $1k/yr if fees continue to grow to $3, it is more profitable for me to spend a weekend doing this than to actually advance the field by adding new features.

These are examples of externalities that the Core's decisionmaking has brought upon cryptocurrency businesses. Just as people now largely work around the government, businesses now largely work around the Core. Some readers may notice that I now write more frequently about altcoin topics and have less frequent posts in general. That's because what the Core does doesn't matter. If they continue on this path, people like me will just route around them.

If the Bitcoin network goes back to having periods where transactions take 18 hours to confirm, we'll raise the payout threshold to $50 and change the software to start holding our reserve in Ethereum. On the other hand, if the block size increases, then I'll start saving all our profits in bitcoins instead of selling them and use them for payments. In the end, it doesn't matter; there's nothing the Core can do to enforce their changes on me or anyone else, so we're not going to personally suffer.

The same forces are at work in the real world and in bitcoin, and in both cases, the only people who will really be affected are those in charge. In the real world, people can vote to elect new leaders, which means that the out of touch people who were vested in the old system lose "power." In the cryptocurrency world, users don't have a vote - but the out-of-touch Core developers, miners, and people who invest in bitcoin are already seeing their profits diminished because of people like us who provide continuous sell pressure to get around the system's fees.

The end result is a game of musical chairs at the top where out-of-touch leaders fight for less and less influential positions. In both cases, the ordinary person will continue to work around the system, as he always has. High tariffs? We'll just start a business in a different field or exit the country altogether and set up shop where it's cheaper. High transaction fees? We'll just move a different coin or exit the system altogether and use dollars instead.

My guess is that businesses larger than ours have already implemented solutions to work around the limitations imposed by the Core's ineptitude in resolving the blocksize controversy. Slow progress and reduced investment in the field can probably be explained by the diversion of resources to implementing workarounds instead of improving the technology. More and more of these economic workarounds come online every day, and the cryptocurrency economy's users continue to reallocate resources, develop altcoins, use dollars, and figure out other ways to thrive despite the ignorance of the people up top.

[nukepower]

your so right now trump might destroy it all because of human error we think we know whats best for the next man when we don't and what we or thy need to do is talk to the common man more and then work things out i fear trump won't, there is already talk of bypassing the systems way of voting on issue, the one they have to vote on, is SS which I'm glad, hearth care they have a way around and the replica may use it . and then the US is without health care again if it happens few know the rich stopped heath care when BC was in office . we are the only county in the world with no real good health care and the most power full and a joke . new laws for bitcoins are in the works in the US we may see those new tax laws in 2017 it's only getting worse/ all because no one is realty listening any more and California has said they will fight trump over immigration even if they lose fed founding . then the hate directed at them for saying that . i agree we need to remove the illegals but give them the right to become a us citizen first and make it easier so they can if they don't want to they need to go .

honestly I don''t think Trump knows yet what he stepped in to this is not one of his business were he can do whatever suits him, hell have a lot to deal with and a lot of lives to worry about .he will have to give to get now, if he cares like he said . if he doesn't well were screwed . the US does kind of run the world but not directly etc we hold peace and still set a lot of standards some county still fear what we can do to them , we won't or i hope we won't . i can go on and on etc your one of the few that have said it wasn't what Hillary did etc it was more we lost touch with what is really needed . man you should see some of the hate statements directed at other races Hillary and even Obama wife had racist comment made about her on Facebook or tweeter i forget which so now they think it OK to go back to that time of disrespect and they think trump means it's OK to do .I'm white and don't agree with putting down another man because of skin color or race . Last thought the whole time Obama or still is in office it was a race thing and why they never worked with him or him with them they were both to blame and neither would face that , i don't care what others say ,