A few thoughts - Wednesday, July 2, 2014
Posted: Wed Jul 02, 2014 9:20 pm
A few thoughts for dinner tonight:
Disappointed at winner of bounty
I was extremely disappointed by the announcement at http://www.reddit.com/r/Bitcoin/comment ... ouncement/ of the winner in the recent $100,000 Bitcoin Foundation replacement challenge. The winner was announced to be /u/mike_hearn, who I criticized in depth on Monday for what will be an ineffective plan designed to produce high-quality updates to the bitcoin codebase. You can read Monday's comments for the reasons why I believe his proposal is flawed.
Both of the entrants who were congratulated in that announcement were significantly flawed and I don't believe either one will address the problem in any meaningful fashion. Hearn's proposal ignores the economics of software development and naively assumes that piecemeal development is going to produce quality work, or that the best developers are going to quit jobs for what amounts to temp work with no benefits.
The "Eris" proposal is better, but fails on the fundamental flaw that it was built on the Ethereum network. The Ethereum developers have interests that are not aligned with the bitcoin developers' interests, and Ethereum is a premined currency where almost a quarter is held by a small group. The Eris proposal introduces an unnecessary dependency that, if Ethereum fails, would bring significant harm to bitcoins. Everything that Ethereum does can be done with bitcoin, and there are already some services sprouting up to build on top of the existing bitcoin protocol. A truly innovative solution would have developed a way to run a system like Eris on top of bitcoin.
This is what happens when you offer bounties. Instead of getting exceptional results, you have to choose between suboptimal, rushed choices. Not only that, but the money is essentially wasted; Hearn, who is backed by VCs and is rich himself, does not need to win $100,000. While $100,000 is not enough money to produce great software, it could have been a nice payment for a proof-of-concept by a group with a workable idea that was vetted before development began.
Russia softens stance on bitcoin
One of the best pieces of news to come out recently is that Russia has "softened its stance" on the use of bitcoins. Given that the Chinese and Russians share many common interests in the world and are both dictatorial regimes, some of the Chinese bankers must be particularly perturbed by this decision.
I wouldn't expect this news to have any impact at all on the markets or even on the adoption of bitcoins in Russia. Even if bitcoins were made 100% legal tomorrow, it would still take Russian businessmen many years to produce services like those already present in the West.
GHash.io returns
Just when the previous two days could not have possibly had more good news for cryptocurrencies, GHash.io again threatens by raising its market share to 43%. As I've stated before, I'm not significantly concerned that GHash.io is going to take over the network in any way. The major concern is whether news articles start appearing from people who claim that bitcoins are going to be done because of this event.
I was involved in a conversation with some people last week and we were trying to puzzle out their business model. I, at least, was unable to do so. For our pool, we are going to spend about $4k in hardware plus $219.99/month in bandwidth. These costs are incurred not even on day one, but on day -30, well before we can even launch. This stuff isn't cheap and GHash.io has to buy computers like this to support their operations.
You can't run a 0% mining pool without some source of revenue. Doing this out of the goodness of your heart to support the network requires 1% just to break even. GHash.io, therefore, is losing money to offer their service. What could a business possibly want with a product that not only loses money, but never has any potential to earn money? It's not as if you're selling propane at a loss in the summer becuase you know its value will be higher to people in the winter. Here, GHash.io just gives away stuff for nothing at their own expense without ever expecting anything in return.
The key to figuring stuff out is always to follow the money. Where is the money to be made here? One way to make money is to control the flow of transactions in some way, but since anyone can take transaction fees, it doesn't make sense for someone to pay more for "priority" service to them. They could be trying to reduce variance for their in-house mining operation, but if their in-house operation mines as many blocks as people say it does, why does variance matter if you control 25% of the network versus 50%? Another thought is that they simply have no business plan, and they are like the startups in '99 that VCs were pouring millions into. The plan during the dot-com bubble was simply to get more users, and once there are lots of users, some company will be foolish enough to buy the unprofitable company out.
More prognosticators trying to "forget" predictions
Right on the hands of CryptoCoinsNews ignoring that they predicted bitcoins would fall to $120 in May, we have this guy (http://newsbtc.com/2014/07/01/prof-mark ... in-remain/) saying "My concerns about bitcoin remain."
It seems to be commonplace that people who make incorrect predictions never attempt to even analyze what could have caused them to be incorrect. I would have thought that a tenured professor would be of a higher ethical caliber than the CryptoCoinsNews authors, but I guess degrees have little to do with apologizing for being wrong.
Two types of people
After some of the commentary about yesterday's scenario of damage by a roommate, I realized that there are two types of people in the world, which I will call "parasitic" and "growth" people.
"Parasitic" people are those who you believe are friends and who you get along with well, until some point where underlying negative behavior is exposed. These people are willing to take advantage of you, whether they begin the friendship/acquaintence/relationship with that in mind or not. One example is yesterday's story. Another is a case where I signed a contract to do video of a wedding a few years ago as a free gift, only to find out when I arrived that I was asked to pay for my lodging. Even if the lodging had not been included in the contract (which it was), a reasonable person would have recognized that the right thing to do is to provide cheap accomodations when a $2000 video was being provided for nothing. In another instance, I offered to make DVD copies back when DVD-R's were expensive, about $5 each. Some people took the copies and later never mentioned paying for the materials. Another example is when you go to a restuarant and order cranberry juice, and the other people order five wines each. Parasitic people assume that it's acceptable to split the bill.
A counterexample to those people are "growth" people, who are genuinely interested in helping others. One time, I called someone who owned a house in a vacation area and inquired what hotels were the best places to stay in the area. She offered her house, which was worth $1000/wk, and not only that, she showed up at the house to cook meals and provide transportation and tours, taking nothing in return. She refused my offer of a visit to our house, and offered to host us again later.
The problem is that "parasitic" people make up about 90% of the population, and "growth" people make up only about 10%. My theory is that many people set too low a bar for their associations, and therefore get taken advantage of by such people. I think that what one needs to do is to immediately sever ties with people when they start to inordinately rely on your money, your kindness, or your time.
Many people, however, correctly recognize that the growth people are rare, and "settle" for friendships with the parasitic people. The key is recognizing that it's better to have no friends at all than to have parasitic people in your life. When you try to retain contact with the parasitic types, you end up losing valuable resources (like money, time, and energy) that could be better spent towards meeting people of a higher caliber. Therefore, while I was initially shocked at the condemnation of the roommate in most of the replies, I'm of agreement with the commenters in the previous thread that it's important to continually watch out for this sort of behavior and get those people out of your life before they drag you down.
Other
Disappointed at winner of bounty
I was extremely disappointed by the announcement at http://www.reddit.com/r/Bitcoin/comment ... ouncement/ of the winner in the recent $100,000 Bitcoin Foundation replacement challenge. The winner was announced to be /u/mike_hearn, who I criticized in depth on Monday for what will be an ineffective plan designed to produce high-quality updates to the bitcoin codebase. You can read Monday's comments for the reasons why I believe his proposal is flawed.
Both of the entrants who were congratulated in that announcement were significantly flawed and I don't believe either one will address the problem in any meaningful fashion. Hearn's proposal ignores the economics of software development and naively assumes that piecemeal development is going to produce quality work, or that the best developers are going to quit jobs for what amounts to temp work with no benefits.
The "Eris" proposal is better, but fails on the fundamental flaw that it was built on the Ethereum network. The Ethereum developers have interests that are not aligned with the bitcoin developers' interests, and Ethereum is a premined currency where almost a quarter is held by a small group. The Eris proposal introduces an unnecessary dependency that, if Ethereum fails, would bring significant harm to bitcoins. Everything that Ethereum does can be done with bitcoin, and there are already some services sprouting up to build on top of the existing bitcoin protocol. A truly innovative solution would have developed a way to run a system like Eris on top of bitcoin.
This is what happens when you offer bounties. Instead of getting exceptional results, you have to choose between suboptimal, rushed choices. Not only that, but the money is essentially wasted; Hearn, who is backed by VCs and is rich himself, does not need to win $100,000. While $100,000 is not enough money to produce great software, it could have been a nice payment for a proof-of-concept by a group with a workable idea that was vetted before development began.
Russia softens stance on bitcoin
One of the best pieces of news to come out recently is that Russia has "softened its stance" on the use of bitcoins. Given that the Chinese and Russians share many common interests in the world and are both dictatorial regimes, some of the Chinese bankers must be particularly perturbed by this decision.
I wouldn't expect this news to have any impact at all on the markets or even on the adoption of bitcoins in Russia. Even if bitcoins were made 100% legal tomorrow, it would still take Russian businessmen many years to produce services like those already present in the West.
GHash.io returns
Just when the previous two days could not have possibly had more good news for cryptocurrencies, GHash.io again threatens by raising its market share to 43%. As I've stated before, I'm not significantly concerned that GHash.io is going to take over the network in any way. The major concern is whether news articles start appearing from people who claim that bitcoins are going to be done because of this event.
I was involved in a conversation with some people last week and we were trying to puzzle out their business model. I, at least, was unable to do so. For our pool, we are going to spend about $4k in hardware plus $219.99/month in bandwidth. These costs are incurred not even on day one, but on day -30, well before we can even launch. This stuff isn't cheap and GHash.io has to buy computers like this to support their operations.
You can't run a 0% mining pool without some source of revenue. Doing this out of the goodness of your heart to support the network requires 1% just to break even. GHash.io, therefore, is losing money to offer their service. What could a business possibly want with a product that not only loses money, but never has any potential to earn money? It's not as if you're selling propane at a loss in the summer becuase you know its value will be higher to people in the winter. Here, GHash.io just gives away stuff for nothing at their own expense without ever expecting anything in return.
The key to figuring stuff out is always to follow the money. Where is the money to be made here? One way to make money is to control the flow of transactions in some way, but since anyone can take transaction fees, it doesn't make sense for someone to pay more for "priority" service to them. They could be trying to reduce variance for their in-house mining operation, but if their in-house operation mines as many blocks as people say it does, why does variance matter if you control 25% of the network versus 50%? Another thought is that they simply have no business plan, and they are like the startups in '99 that VCs were pouring millions into. The plan during the dot-com bubble was simply to get more users, and once there are lots of users, some company will be foolish enough to buy the unprofitable company out.
More prognosticators trying to "forget" predictions
Right on the hands of CryptoCoinsNews ignoring that they predicted bitcoins would fall to $120 in May, we have this guy (http://newsbtc.com/2014/07/01/prof-mark ... in-remain/) saying "My concerns about bitcoin remain."
It seems to be commonplace that people who make incorrect predictions never attempt to even analyze what could have caused them to be incorrect. I would have thought that a tenured professor would be of a higher ethical caliber than the CryptoCoinsNews authors, but I guess degrees have little to do with apologizing for being wrong.
Two types of people
After some of the commentary about yesterday's scenario of damage by a roommate, I realized that there are two types of people in the world, which I will call "parasitic" and "growth" people.
"Parasitic" people are those who you believe are friends and who you get along with well, until some point where underlying negative behavior is exposed. These people are willing to take advantage of you, whether they begin the friendship/acquaintence/relationship with that in mind or not. One example is yesterday's story. Another is a case where I signed a contract to do video of a wedding a few years ago as a free gift, only to find out when I arrived that I was asked to pay for my lodging. Even if the lodging had not been included in the contract (which it was), a reasonable person would have recognized that the right thing to do is to provide cheap accomodations when a $2000 video was being provided for nothing. In another instance, I offered to make DVD copies back when DVD-R's were expensive, about $5 each. Some people took the copies and later never mentioned paying for the materials. Another example is when you go to a restuarant and order cranberry juice, and the other people order five wines each. Parasitic people assume that it's acceptable to split the bill.
A counterexample to those people are "growth" people, who are genuinely interested in helping others. One time, I called someone who owned a house in a vacation area and inquired what hotels were the best places to stay in the area. She offered her house, which was worth $1000/wk, and not only that, she showed up at the house to cook meals and provide transportation and tours, taking nothing in return. She refused my offer of a visit to our house, and offered to host us again later.
The problem is that "parasitic" people make up about 90% of the population, and "growth" people make up only about 10%. My theory is that many people set too low a bar for their associations, and therefore get taken advantage of by such people. I think that what one needs to do is to immediately sever ties with people when they start to inordinately rely on your money, your kindness, or your time.
Many people, however, correctly recognize that the growth people are rare, and "settle" for friendships with the parasitic people. The key is recognizing that it's better to have no friends at all than to have parasitic people in your life. When you try to retain contact with the parasitic types, you end up losing valuable resources (like money, time, and energy) that could be better spent towards meeting people of a higher caliber. Therefore, while I was initially shocked at the condemnation of the roommate in most of the replies, I'm of agreement with the commenters in the previous thread that it's important to continually watch out for this sort of behavior and get those people out of your life before they drag you down.
Other
- I will be in Philly this Saturday and Sunday for the holidays. Also, every other Thursday a Toastmasters day, so I'll post on Friday and resume Monday, with short or no posts the other days. Hopefully, /u/bitcoin_charlie or /u/two_bit_misfit will fill the gap so people don't get bored.
- Days until July 24: 22