Many people undoubtedly would like to hear Craig Wright’s stance on Bitcoin. Today, one of the earliest developers of Bitcoin, Gavin Andresen, stands by his belief that Craig Wright is Satoshi Nakamoto after personally witnessing cryptographic verification of messages signed with keys that only Satoshi possesses. Craig Wright did not offer the same proofs to the public. If there is a chance he might be then his words hold incredible weight. If not, his mere academic record should hold substantial value alone.
Despite immense criticism, particularly from Blockstream and Core, Craig Wright has a clean record. Coingeek and myself have verified his academic record, the degrees all exist, the papers and research exist, and he has no criminal record whatsoever.
But onto the Segwit narrative, Craig Wright did not hesitate in immediately expressing his distaste for what it is. He claims “it’s a boondoggle project by a group of developers with something to prove.”
Boondoggle – “an unnecessary, wasteful, or fraudulent project.” – thanks Google.
He explained that the real problem is that the Core developers have proven they don’t understand the fundamentals of Bitcoin.
He put forward four points concerning Core on Segwit:
- They failed to understand scarcity.
- They have no idea about economic constraints controls.
- They haven’t shown the least knowledge of how incentives function.
- They have missed the entirety of what makes Bitcoin what it is.
“The first aspect of Bitcoin that needs to remain, that adds more value than anything else, and that offers a path to global growth is scarcity. Not artificial restrictions on how many transactions are allowed, but rather the maximum amount of Bitcoin that can ever be owned. These are not the same things. Right now, the [1MB] cap is a constraint limiting the use of the system.”
“The only way that Bitcoin is going to survive is to scale massively. Not three, not five, not 10 transactions a second but rather 100,000, 200,000, 500,000 transactions a second. We can do this now. All we need to do is remove the cap. When Bitcoin was created it was set up with flood controls and no limit on the number of transactions. The problem with an economic flood control when something is not worth anything is the difficulty of value. At three cents a Bitcoin, there’s very little you can do with flood control. Where we are now, and over $1000 and having just breached $3000, flood control is very easy to implement. You make people pay for denial of service attacks.”
Dr Wright has explained to me on at least a few occasions now that it is economics which is the core of information security. He explains that at its core, it is the most fundamental aspect of risk that is available to us.
“When people start to understand this and move away from the idea that toys can save us we might actually create secure systems. This is why sites that cared about their security used to hire me. I understand the need for economics in security.”
“Segregated witness fundamentally changes the nature of Bitcoin. I completed my Master of laws degree from Newcastle University here in the UK in 2008. Looking at Internet intermediary liability and the functions of online contracting and digital signatures taught me just how precarious the law can be. This idea of code being law is insane. You cannot simply discard digital signatures and decide that the packet is still the same. The result is we have a double Merkel tree structure that is larger than the native Bitcoin Blockchain and takes up more space. Miners and exchanges won’t be able to prune information as it will be required under the laws of most countries.”
Information retention is an interesting topic. For example, s254 of the Crimes Act 1958 (Vic, Australia) creates an offence of the destruction of evidence which ‘is, or is reasonably likely to be, required in evidence in a legal proceeding’.
Interesting point to ponder no doubt.
Dr Wright stands firm on his position – “Segregated witness doesn’t scale.”
“There’s nothing more to say there. There is not a single use case or review that shows any scale. What they try and do is sell the idea of changing the block size into a concept called block weight. Basically, they have created a 4 MB block that gives between 1.2 and 1.4 times the amount of transaction size. Where we have the need to scale tens of times at least immediately they give us 140% for a 400% cost. That’s a piss poor deal anyway you look at it… If they simply increase the block size to 4 MB they would gain many times the number of transactions.”
“The truth of the matter however is a little bit different. What they are looking at doing is locking us into side chains and the lightning network. None of them ever liked scarcity.”
Craig Wright then recalls a conversation he once had with Adam Back (CEO of Blockstream). Adam had explained to him that the problems with Bitcoin and how it would never work because of scarcity. Adam Back was claiming that there needed to be a means of growing the amount of Bitcoin if needed.
“Well that’s what they seek to add… The concept of side chains is about infinite inflation” states Wright.
“Instead of scaling based on a scarce resource, they seek to return to the classic idea of Fiat money. Each side-chain becomes an infinitely scalable resource. If you need more money, print more with a side-chain.”
Indeed, it is no secret that Blockstream’s $76m funding over two investment rounds were on the basis that it expands its Bitcoin code for commercial use, and that it produces a host of off-chain solutions. I have personally written about this in the past.
“Bitcoin is not a cyberpunk wet dream. It is a system that allows for a Rothbardian idea of money. That is hard money. Money with no inflation. Value that is fixed. No monetary system that can be played with and manipulated” says Wright.
“This idea of a need for a side-chain network or the lightning network simply demonstrates the lack of understanding around the system. Both of these options destroy scarcity. Without scarcity Bitcoin isn’t a store of value and it isn’t a unit of trade and account, it may as well just be swift.”
Indeed, Bitcoin’s store of value is derived from its utility. That is, if its use has any value. This aspect of it is quickly dying. In fact, there is no question about it. Bitcoin fees have wiped out an entire eco-system of merchants operating on Bitcoin.
Wright then makes an interesting reference – “Coke doesn’t make a lot of money selling thousand dollar cans of Coke. It is one of the most profitable organisations on earth because it sells voluminous quantities of sugar water for low amounts of money. That’s how Bitcoin will be successful. Not because we can move transactions to side chains and steal revenue from the miners as we inflate the system, but because many people will use it and pay small fees. Billions of pennies a day comes to a very large amount of money.”
With Bitcoin in particular, it’s difficult to talk about scalability without venturing into a discussion of nodes – which is another discussion altogether. Whenever talk of increasing the blocksize pops up, a common defense used is to mention the nodes and their capacity to handle transactions beyond their bandwidth and hardware scope – somehow contributing to the centralization of Bitcoin. The error in this type of thinking is multifaceted, and this discussion requires another article (which I will soon publish).
I have stated this before – but usability and users are fundamental to a working system. To be more concerned with losing nodes than to be with losing users can only mean that Core’s priorities are the wrong way around.
More on the discussion concerning nodes in the next instalment.