Bitcoin Is Dead, Long Live Bitcoin

I’ve been writing about the Bitcoin blocksize debate here at AVC (the only place I write and I’m hard core about that) for the past year. It’s a big deal. At the core of the debate is whether the Bitcoin blockchain should be a settlement layer that supports a number of new blockchains that can be scaled to achieve various goals or whether the Bitcoin blockchain itself should evolve in a way that it can scale to achieve those various goals.

In my simple mind I liken it to this. Should Bitcoin be Gold or should Bitcoin be Visa. If it is Gold, it’s a store of wealth and something to peg value to. If it is Visa, then its a transactional network that can move wealth around the globe in a nanosecond.

Mike Hearn, one of the early members of the Bitcoin core developer team, published a blog post yesterday stating that “Bitcoin Has Failed” in which he explains that the block size stalemate plus a few other big issues have led him to believe that Bitcoin is now a failed experiment.

When one of the most important people in Bitcoin states something like that you have to listen. I read his entire post a couple times. And I generally agree with his description of what has happened and, more importantly, what has not happened. I’m not ready to declare that Bitcoin has failed. But I’ve always viewed Bitcoin as an experiment that could fail and I still do. I personally own a material amount of Bitcoin, but in our personal asset allocation it is at the very bottom, below our wine collection. And I’m not a wine collector.

In every Bitcoin investment we’ve made at USV, and we’ve made four with multiple rounds in one, we have identified the failure of Bitcoin as a core risk element. We haven’t stopped including that in our risk factors. So we have our eyes wide open about the fragility of Bitcoin. But we also have our eyes wide open about the potential and the importance of this technology.

I personally believe we will see a fork accepted by the mining community at some point this year. And that will come with a new set of core developers and some governance about how decisions are made among that core developer team. But it could well take a massive collapse in the price of Bitcoin, breakdowns in the Bitcoin network, or worse to get there. And all of that could cause the whole house of cards to come crashing down. Anything is possible. Even the return of Satoshi to fix things as an AVC regular suggested to me in an email this morning.

The Bitcoin experiment is six years old. There has been a significant amount of venture capital investment in the Bitcoin ecosystem. There are a number of well funded companies competing to build valuable businesses on top of this technology. We are invested in at least one of them. And the competition between these various companies and their visions has played a part in the stalemate. These companies have a lot to gain or lose if Bitcoin survives or fails. So I expect that there will be some rationality, brought on by capitalist behavior, that will emerge or maybe is already emerging.

Sometimes it takes a crisis to get everyone in a room. That’s how the federal budget has been settled for many years now. And that may be how the blocksize debate gets settled to. So if we are going to have a crisis, let’s get on with it. No better time than the present.

#blockchain#hacking finance

Comments (Archived):

  1. LIAD

    Thought I had a relatively sophisticated knowledge of bitcoin ecosystem and state of play.Turns out had little idea of some of the most divisive and structurally dangerous challenges currently being faced.China facets. Wow.With so many actors with completely diverging incentives. Resolution on the core issues seem distant.(Un)surprisingly mike got slammed in the bitcoin forums for his expose.Tweeted same sentiment as Fred first thing this morning.

    1. fredwilson

      I suspect many see things this way

    2. JaredMermey

      Re: your actors comments — can a store of value only be supplied by a government with an executive, an army, and defined protocols for conflict resolution?

      1. LIAD

        That’s the eternal question about this entire decentralisation movement.Jury still out

      2. JLM

        .Well, since the beginning of recorded history, that’s pretty much been the truth. Not likely to change.Indoor plumbing, OTOH, survived a similar bias and it turned out to be well received in the end.JLMwww.themusingsofthebigredca…

    3. LE

      As a strategy what he did makes a great deal of sense. Hail Mary. He took a totally polarizing point of view and is now getting attention. So it’s possible that the discussion that follows [1] will create some type of positive change. After all if he wasn’t so strong in his headline (and what he wrote) and was equivocal or circumspect not as many important people would pay attention. The writing clarity could have been way better [2] of course but this was driven out of frustration and I guess it was hard for him to tame that emotion.[1] At least if what Fred says is true I don’t know enough to know I’d be curious what William thinks about this.[2] It should have been proofed by a normal who knew little about what he was talking about which would have ended up with a more easily readable bit of writing.

      1. Ellie Kesselman

        At this point, after all these posts from Fred about Bitcoin, I don’t understand why you are grousing over Mike Hearn’s post’s accessibility. It was very clear to me. I am not an Internet business mogul like you. I don’t have a computer science or electrical engineering degree. Mike Hearn’s post was lengthy but entirely comprehensible. This sort of thing is a huge red flag:

        1. LE

          My guess is that you have worked in academic settings or at least in places where reading somewhat complex or poorly written documents is the norm. Noting also that Fred had to “read his entire post a couple times”. You think this was “well written” and clear? If you are trying to convince a large group of people you need to write to the level of the NY Times or WSJ as an example. Not in a way that turns off people and, importantly, makes them have to think to much.

  2. kidmercury

    There is a lot more to the transaction vs wealth debate than block size, and thus a size decision won’t resolve it. Bitcoin needs to satisfy both value and transaction requirements, and only a private, centralized, regulated, controlled coin/chain can achieve that.

    1. JLM

      .There is a reason why monarchies and despots rule well until they go bad. If a guy named Attila were in charge, different outcome. Too much democracy can create analysis paralysis and death by bloat.JLMwww.themusingsofthebigredca…

      1. SubstrateUndertow

        And there you have it, the razor’s edge between centralized control/stability/corruption and distributive democracy/adaptivity/chaos.Same old tipping-point balancing-act mechanism-complexity dilemma ?

        1. JLM

          .Meet the new boss? Same as the old boss?Sometimes that’s how it works, no?You can want some other stuff but sometimes you just have to eat what momma makes for ya.JLMwww.themusingsofthebigredca…

  3. JLM

    .I saw this and sent it to my favorite Bitcoin zealot, Wm Mougayar, just a minute ago. I was going to write a similar post this morning. Great minds and all.I was a “skeptic” from the start for a number of reasons. This article makes a much better and more exhaustive case for the crack in the foundation and is worth a read. The guy is a freakin’ authority.The blockchain is not dead but it, too, is suspect given the failure of the accumulated wisdom of the folks whose fingernails have been clipped on the pure bitcoin side of the house.I admire folks who can be dispassionate and thoughtful while watching their baby come in sixth in the IM (individual medley). It is hard to say, “My baby is ugly.”Respect to all who fall into that camp. It is called being truthful. And it is an insight into the soul and integrity of such folks.Respect.JLMwww.themusingsofthebigredca…

  4. Sebastien Latapie

    The promise of bitcoin is too enticing to disappear. If bitcoin dies, something else more robust will emerge to take its place *fingers crossed*

    1. JLM

      .Agreeing with you more than you agree with yourself.One of the most interesting stories is how the radio-telephone spawned the idea for the cell phone.JLMwww.themusingsofthebigredca…

      1. Michael Elling

        Greater irony in your comment than you know. The wired monopoly knew both the virtues of and dangers to its natural monopoly. Wireless was already more competitive to wireline over 20 miles in the early teens. That’s why there was a 50 mile exclusion rule for interconnection in the 1913 Kingsbury commitment. Complying with that rule using wires was very expensive and a non-starter for CLEC business models, and therefore only long-distance interconnection worked. Later, the biggest resistance to cellphones in the 1960s and 1970s was AT&T, only relenting to the technology in the 1980s. And as a result their technology arm was late to the game and now is owned, 30 years later, by the Finns.If there is a good idea, it will ultimately win out, regardless of institutional forces.A side note, the break-up of Ma-Bell resulted from wireless bypass by MCI (aka Microwave Communications Incorporated), when the technology improved (because of 2 WWs) and reliable links worked over 50 miles.

        1. JLM

          .Thank you for ironing out the irony. I love it when someone knows what they are talking about. Such a rarity, no?There is a lot of interesting stuff in the ATT story.Great phone service? Let’s whack it into pieces.ATT has bought its way back into the game. Last week I was looking at cars and was surprised to find that a car could come hotwired as a WiFi hotspot.Huh?ATT will charge you $10/month on your existing wireless account to add your new SUV.There are a few other car companies out there trying an “app” approach such as Audi. I don’t want to learn a new system.I’m starting to think this Internet, cell phone thing can be big. Who really knows?JLMwww.themusingsofthebigredca…

          1. LE

            Car as wifi hotspot.What is the grand use case for that outside of if you have kids and need some kind of convenience of not doing it another easy way? If you have a laptop you can already and easily have an access point on your cell phone if you want (and I did that iirc way back in 2009 with a mifi [1]). Having this info on the dashboard is a big distraction and not a good thing. Let’s see who wants to argue otherwise. If usage of that was widespread would kill enough people to make a President cry.[1]

          2. JLM

            .My son, the investment banker, just bought a big Dentist’s Office On Wheels and it has everything. He did not get the massage chair.I think the use case is video for the chilluns, laptop access for the adults, tablets for everyone and automatic charging. To charge, you just put your device on a pad and it does it without wires.Supposedly, it sucks the signal out of the sky because it has a much more quick witted and sensitive antenna.JLMwww.themusingsofthebigredca…

          3. LE

            I call this type of “innovation” “like a jacuzzi”. That’s what I use (or as we would say in Philly “youse”) to refer to anything that people will say “wow isn’t that great!!!!”. Jacuzzis are like that. People think they are great but in truth they are quite disappointing compared to what they should be. But they help to sell houses and rent hotel rooms. Just like a room with a good view. Did you ever own a property with a kick ass view? (I have and I bought it on the cheap to boot when the market was at the bottom). Every single person who visited it couldn’t stop talking about how great the view is. But to me after the first year or two I got used to the view and while it was “good” it stopped being “great”. Of course the value to sell the property (or in my case rent it) is still there. To this day I say “you will get tired of the view”. (There is a reason why Playboy featured different models each month, eh?)My point is while there are uses for this I see it more as a marketing ploy rather than adding value in a big way.

          4. LE

            Locally we used to call those “Jew Canoes” and they referred to the big ass Caddies.

          5. ZekeV

            I had a standard-issue rotary phone until 1995. I did all my computing on a 8087 CPU with 4.77 MhZ clock speed and 20MB of HARD DRIVE until 1994. My experience of using telephones and computers has not improved one bit in that time, and if anything has been degraded. The capability of these machines’ successors is many orders of magnitude better, but unfortunately their human programmers haven’t been able to get their act together.

        2. ShanaC

          How do you know said story? (This is fascinating)

          1. Michael Elling

            Tim Wu, who coined the term net neutrality, used an example of AT&T’s wireless telephone from 1916 at the beginning of his book The Master Switch, but failed to understand the connection to the 50 mile exclusion zone as his knowledge of networks and service provider models is incomplete.BTW, the development of data networks over the past 25 years eerily resembles that of voice networks in the 1890s-1910. Our own Kingsbury commitment is IP and settlement free peering. We’ve replaced one monopoly with several other (near) monopolies. Growth in the overall system has slowed dramatically and there is no way for uniform and rapid advancement, which is what investors require when obsolescence is measured in hours and days.If you go to my blog and click on “history” there are numerous articles about what has happened over the past 100+ years.

          2. ShanaC


    2. ZekeV

      That is certainly true, the cat’s out of the bag!

    3. Pete Griffiths

      Totally agree. Distributed trust is a powerful idea.

      1. JamesHRH

        So is cold fusion. 🙂

        1. Pete Griffiths

          Indeed. But let’s bear in mind that the technology underlying distributed trust provably works whereas cold fusion is at best controversial.(Ironically, whilst it has long been professional suicide, it does seem there may be something in it. If there is, it will eventually break through despite the massive suspicion. But you’d better be an investigator which an established career to work on it. 🙂

        2. Rob Larson

          Some day we’ll have fusion reactors as well, probably sooner than you’d think!

          1. JamesHRH

            Well, cold fusion definitely has large scale market demand, so when it works it will be huge.I am sticking to my argument that Bitcoin eliminates the trusted broker, which is a value proposition that has wid remand.If you believe Einstein, in that all things should be as simple as possible but no simpler, while also believing that the simplest answer to all questions is a 3 part answer, Bitcoin will never happen.Cold fusion however, will.

          2. Rob Larson

            Agreed on cold fusuon.But why would the simplest answer always be a 3 part answer?

    4. William Mougayar

      Bitcoin is not going to die. They will agree on something. There are proposals:

      1. Ellie Kesselman

        Yes, you’re right. They can and should agree on something. That doesn’t mean they will though. As long as the short-term self-interest of the few in power blinds them to the destruction they are causing, they won’t. (This isn’t Clay Christiansen’s “creative destruction”!)

      2. awaldstein

        Love your optimism towards this.And I think you are right as well.

    5. ShanaC

      Once an idea is out there you can’t put it back in its bottle. As food for thought, Instacart isn’t the first iteration of its idea. (Ignore the pun)The better questions are what is bitcoin, what makes it special, what can it do better than many other things in the world. There may be multiple answers to these questions: we may see a plethora of bitcoin related things that aren’t bitcoin but are more specialized and are better than Bitcoin at one answer than Bitcoin was, if Bitcoin fails (and even if it doesn’t! Bitcoin could survive and still create descendants)So this may be the time to ponder rather than react

    6. rodomonte11

      Actually Bitcoin can’t die, it’s not something physical, human miners can die, ASICs can “die”, but Bitcoin is an idea, it can only improve it’s practical implementation.

  5. Yinka!

    Good post and thanks for citing Hearn’s post – that was eye opening! Talk about affirming the adage that fish rots from the head down! 95% of hashing power controlled by less than 10 people, 2 of whom control more than 50%? Controlling factions acting to prevent growth of the blockchain (in complete opposition to the founding ethos of decentralization) and banishing the biggest related startup (Coinbase  wallet) for daring to potentially fork differently? In light of all this, it’s not surprising he stepped back and sold all his coins.Given all this, plus artificially volatile trading and the slower uptake of bitcoin in other markets, I think the best chance for survival is as a settlement layer that supports new blockchains, each ideally with localized yet decentralized levers that enable them to thrive in different contexts. Otherwise, an interesting experiment while it lasted and we’ll look out for the inevitable movie (“Wild Wild West 2: The Lost Kingdom of Bitcoin”).

  6. Tom Labus

    Could be a wake up call to get things moving and make some decisions or this will happen. Lots of cash tossed around in the financial sector.

  7. Mario Cantin

    Satoshi coming back would certainly revive a level of confidence.I wonder what would be the best way to get his attention…in a way that he’d care to come back and finish the job. He’s obviously not motivated by personal greed.Could he have been very ill prior to ‘passing the torch’ and now dead? That’s one theory.

  8. LE

    But I’ve always viewed Bitcoin as an experiment that could fail and I still do.I would think that that is how you look at any many of your venture investments.

  9. riemannzeta

    I note that despite the title of your post, the relevant tag for it is “blockchain” and not “bitcoin” — and that, I believe is a good indication of where we can expect things to go.

  10. LE

    One of the things that stood out when I read that post (after seeing it on HN last night) was this:The resulting civil war has seen Coinbase — the largest and best known Bitcoin startup in the USA — be erased from the official Bitcoin website for picking the “wrong” side and banned from the community forums. When parts of the community are viciously turning on the people that have introduced millions of users to the currency, you know things have got really crazy.Much of that post was a bit to propeller head for someone who only has a cursory knowledge of bitcoin to understand. That was something that was easily understandable.

  11. LE

    Sometimes it takes a crisis to get everyone in a room.Nah. That is what Obama thought and he was wrong about that one. Just get everyone together to talk.The problem is this sounds more like the Palestinian/Israeli conflict (or gun rights) than it does a bunch of rational people who just happen to have opposing interests. In negotiation the crazies are the ones that make life difficult because they will go to the mat over stupid deal points and stand their ground way past the point of the average person’s rationality. They only understand getting hit over the head unfortunately.

    1. JLM

      .Getting EVERYONE in the room at the same time is often the worst possible thing to do. You have to get the similar thinkers together to fashion a plan and only then let the other team out on the ice.While the Rahm quote about never letting a crisis go to waste sounds clever and Machiavellian, it is nonsense as measured by what this administration has done with theirs and the jug fuck Rahm has created in Chicago.There is an old combat engineer formula: “Dirt plus water equals mud. Mud plus more dirt equals more mud.”This is said at times like when an artillery unit has shot their guns into the mud so deep they can’t extricate them. They call the combat engineers to pull them out and invariably when you arrive they have tried to extricate them by throwing seemingly dry dirt into the mud.The combat engineers throw rock into the mud and jerk the guns up on top of the rock and pull them to safety.Mud plus rock, lots of freakin’ rock = a road. A road to safety.You have to start solving some of these crisis situations, build a road to safety, and gain the confidence that you CAN solve problems. Right now, all that can be said is that this administration throws more dirt into the mud and solves …………………. nothing.But, hey, it could just be me.JLMwww.themusingsofthebigredca…

      1. LE

        Maybe like divorce (ever been through one?) shuttle diplomacy works best.…It is 99% (always exceptions) true that in negotiation you don’t want principles dealing directly with each other. In fact in many negotiations I know of some people (not naming names) that invent intermediaries that don’t exist in order to give flexibility to the process. I guess it’s a cousin in a way of the “a lawyer who handles his own case has a fool as a client” flipped around.

        1. JLM

          .Diplomacy works if you have competent, realistic, tough people. Competent. And a President who knows how to lean forward in the American saddle.At the end of the 1973 Yom Kippur War, Henry Kissinger stole Egypt from the grasp of the Russians. They had been a client for decades.Kissinger’s entreaty was simple — Why not try a relationship with the winning team?This resulted in decades of peace between Egypt and Israel. Remember also that Syria never really made peace with Israel. This turned out to be very significant later on and today.This peace lasted until the Obama administration threw Mubarak off the Egyptian throne and put in the Muslim Brotherhood, same bunch who contributed two infantry divisions to Hitler on the Russian front in WWII.The White House was supposedly surprised to learn that this little nugget of history actually happened. How is that possible?What happened thereafter in Gaza, with Hamas, with Egypt itself, with the Middle East (the Russians returning to Syria and getting re-involved in the region) has been a disaster of Biblical proportions.Who let the dogs out? Woof, woof?This Egypt nonsense let the dogs out and the dogs were branded Muslim Brotherhood.At its core, it was a diplomatic failure because we were in the midst of amateur hour. Kissinger saw it coming and wrote a brilliant op-ed in the NYT with George P Schultz. These were likely two of the best Sec of State ever. Ever.JLMwww.themusingsofthebigredca…

          1. LE

            until the Obama administration threw Mubarak off the Egyptian throneObama apparently doesn’t understand a basic concept and missed it in life and was absent the day it was discussed at Harvard: “The evil you know is better than the evil you don’t”. There are human rights violations in many countries that we deal with. In many cases it’s a necessary evil and not something that is in our best interest to take the time to fix.

          2. JLM

            .This utterance is so truthful as to be worthy of a tattoo for everyone on a President’s national security team. First day thing. Henna tat for the ladies.I would never live in France if I were Jewish. It is a historically anti-Semitic country for 300 years. The French were worse than the Germans in WWII in turning in their Jewish brethren to be exterminated in the concentration camps.And, yet, we sleep together with them when it serves our purpose.[Of course, the French and their fleet is why Cornwallis gave up the ghost at Yorktown but that was a long time ago. We repaid that in WWI and WWII.]JLMwww.themusingsofthebigredca…

          3. Adam Sher

            As a tourist in France for two weeks two summers ago, my wife and I had this historical and current antisemitism at the forefront of our minds. On top of that, her father (Master’s thesis on how much the US knew about what was happening to the Jews during WWII) was less than ecstatic about our choice of destination. As part of our trip we went to Holocaust museums, the Jewish quarter, and… lo and behold, in Nice, Yitzhak Rabin square – a beautiful public park. Amazingly, our trip and experiences during our short time there went against the historical tide that we expected to face. More recent events proved our exceptional experience to be just that, an exception to the general rule.

          4. JLM

            .The guys who build the biggest museums are the guys with the biggest guilty consciences.Go see the National Museum of the American Indian in DC and NYC and out west. We must have a really guilty conscience.Then go to the Dakotas and research how the Indians get treated by the Dept of the Interior as it relates to their oil royalties. We are still screwing them. Every party. Every administration.BTW, the gun control program with the American Indian is worthy of a study cause that had some very definitive results.The Jews who were lead to the ovens by the Germans were men with violins in their hands — speaking metaphorically here.Israel is the surviving Jews with guns in their hands.The longevity of the Jews with guns in their hands is much better than the musicians. And, still, they can put down their guns and take up their bows and saw the violin when they want to.This was told to me by a woman who had lost her husband at Auschwitz. She had a number tattooed on her left forearm and was married to an officer in the Haganah/IDF.She wanted her daughter to marry a Jew with a gun in his hand.The world is a cruel place but you can learn what you need to know if we all just pay attention and are skeptical about everything.Sorry.JLMwww.themusingsofthebigredca…

          5. Adam Sher

            My grandfather (RIP) once gave an interview about his experiences during WWII (he fled Poland, joined and fought for the Russian army) and the interviewer asked what is one thing every young person should know? He responded, ‘how to use a gun.’

          6. JLM

            .I could write for the next half hour about this.About a year ago, I was walking in the parking lot of PF Chang’s in downtown Austin. It was one am-ish. A guy walked up behind me, uncomfortably alarming close, and I turned and confronted him.My size. I’m 6’4″. Young guy and seemingly fit.I remember it in part because I had had 5 beers. I was thirsty and a little tight.I cursed at him and raised my hands as if to fight. I cursed him pretty damn good. “What the fuck are you doing walking up on my blindside, asshole?”My wife, who had gone to get the valet parked car while I tipped the valet parker, said I was a little extreme. She heard my bad language. I was. On purpose.I had learned in hand to hand combat training in the Army, at Ranger School, and with the units that I served in that the first element of successful hand to hand combat is attitude.Project a fierce attitude and make the other guy recoil and in that recoil stick him, or shoot him, or put your thumb in his eye. If that guy had stepped toward me, I was going to stick my right thumb in his left eye. Hard.A week later, I’m reading about an assault in the PF Chang’s parking lot where a tall guy walked up on a guy at 1:00 AM and bopped him over the head and took his wallet. Cracked the victim’s head open and the victim was hurt bad.I think we all need to take hand to hand combat at some time in our lives. Also, get a CHL (concealed handgun license) and know how to shoot. I do not intend to go without a fight.JLMwww.themusingsofthebigredca…

          7. JoeK

            I don’t know whether the Obama administration initiated Mubarak’s overthrow – they say no, but it would not surprise me either way. What I don’t understand, is what your grand master plan would be. Hosni Mubarak ruled for more than 3 decades and is currently 87. He was leaving power soon – coup, election, heart attack, who knows, but soon. Then what?

          8. JLM

            .Since 1954, Egypt has been run by a General. It cuts down on military coups d’etat to just let the Generals put their handpicked boy in place.Mubarak, a former General and a very stable ruler in a despotic sort of way, wanted to put his son in power. The Obama administration should have said, “Hosni, baby, let the Generals pick your successor. That’s the way it works.”Remember, we are giving them almost $2B annually in military aid.Who is lining their pockets with that? Right you are, the Generals.Who’s calling the shots? Right again, we are.Instead, the President lets Hosni Mubarak get tripped up by some silly human rights bullshit in Tarir Square — where there has been protest and rioting since the time of the Sphinx.Make no mistake, the Obama administration put their imprimatur on the Muslim Brotherhood. The MB had been illegal in Egypt for decades. It is again illegal. These are the guys who sent two infantry divisions to Hitler and the Obama admin said, “Wow, we didn’t know THAT.”Remember that Obama made his first trip and foreign speech in Cairo and told them, wink wink: “I’ve got this cause I was raised in a Muslim country.”The Muslim Brotherhood rode him like a rented mule and to prove his long lost, new found Muslimness, he let them get back into the mix. Muhammed Morsi could have been Yassir Arafat for God’s sake.What happened next?The western border with Israel went ape shit. Gaza went ugly on an ape. The MB let the Iranians ship rockets into Gaza. The Iranians support Hamas like a burger and fries.Then the shit hit the fan.The shit got sprayed onto everyone. Out goes Morsi. Back come the Generals.Now, Egypt is being run by a General just like it has been since 1954. Of course, in the interim a lot of people got killed, Gaza got fucked up, the Israelis unsheathed their daggers, the Middle East has turned to shit, and the Russians are back in Syria.Yeah, that worked out well. All because someone forgot to do their history homework.JLMwww.themusingsofthebigredca…

          9. JoeK

            I don’t question your description of the complex situation there. All I am saying is, the man is 87. He was done either way. What next then?

          10. JLM

            .Of course he was done. It was HIS doing to arrange for a successor and he was greedily trying to create a family dynasty. The Generals opposed him immediately.The Generals knew what needed to be done but he had been the leader for 30+ years. They were institutionally calcified.They should have had an understudy for him ten years ago.No despots ever give up power until they are forced to or they are dead.The Castro brothers in Cuba are the poster child for this. They really don’t have a successor though they are trying to bash a daughter/niece to fit. Good luck with that.The second Fidel dies and Raul dies — Cuba will be a democratic country by accident.I will move to Havana, buy old buildings, renovate them, and swim in their sea. Maybe by then the electricity system will work.JLMwww.themusingsofthebigredca…

          11. Lawrence Brass

            Firearms and all and you could become a Texan Hemingway, you may miss the tacos though. I picture you tying knots at the beach with proper texan beach boots and a straw hat.I had the pleasure to work with cubans for a few months in 2004 during a software development project. The most joyful, happy and nice people I have ever work with.

      2. LE

        While the Rahm quote about never letting a crisis go to waste sounds cleverNot sure I agree. A crisis means that people are emotional and not rational. As such they can in some cases be more easily manipulated to do something they would not have previously agreed to. I speak from personal experience here (and this dates back to when I was a child actually..)

        1. JLM

          .It has been a shit stupid approach on gun control, as an example. It has only stiffened, organized, galvanized the resistance.Riddle me this — who with a brain wants to champion gun control, energize the NRA, kick sand into the overwhelming number of people who own guns, drive even more gun purchases ON THE EVE OF A NATIONAL ELECTION?Half of America is rural and even the Democrats there love their guns. We have 330MM people of which about 260MM are old enough to vote and we have 305MM guns.Somebody needs to tell the President this is not going to draw voters to the Democrats.There is gun violence. The President sheds some alligator tears. Everybody goes back to their firesides and nothing constructive gets done.The President embarrassed himself with his lack of actual knowledge.1. The ATF is under the DOJ not the FBI.2. The ATF has NOTHING to do with background checks.3. The FBI does all background checks using the NICS. It is their baby and they won’t let the Pope use it.4. You cannot buy a gun directly on the Internet. It has to be delivered to an FFL (Federal firearms licensee) in your home state and that FFL has to order up the background check.He got all these things wrong at both his teary eyed White House production and his CNN Town Hall.Who is advising this guy?http://themusingsofthebigre…He was shooting into the wrong basketball goal.JLMwww.themusingsofthebigredca…

          1. LE

            All true. [1] But let me point out a difference (and give you a yiddish word) to boot. Gun control is a “far shlepta crenk” (literally “long standing illness”). As such it’s not the same as invoking the strategy on an “emergent” or newly apparent “illness”. The difference is subtle but important. As always details matter. (Because there could be case of long standing illnesses that you can take advantage of just like there are emergent illnesses that you shouldn’t try to take advantage of).[1] Because at this point it’s totally the boy that cried wolf in his rhetoric.

          2. JLM

            .You are, of course, right. This is, however, the first President who has cried about it during a presser. Nice bit of theater really. Big pussy nonetheless. Makes me want to lock the mens’ rooms in the White House — cause there are apparently no men living there anyway.This is the boy who sang soprano while the wolf ate his sister.Gun control and coal may deliver Pennsylvania to the Republicans. You can count on Ohio already.JLMwww.themusingsofthebigredca…

          3. LE

            It’s a great deal of time and energy spent on something that not only will not fix the problem but I would argue isn’t really a large problem in a country of 320 million people. It’s a “bubba minesah” (literally grandmother story).…(I have no way of knowing if the above statistics are correct!)As always I will point out I am not a gun owner and have no plans to be one so I don’t have a particular bias here.

      3. LE

        While the Rahm quote about never letting a crisis go to wasteBusiness example of this is being able to get businesses or consumers to spend money that they would never have spent if they didn’t have pain or uncertainty or doubt. It’s a true cash register ring (even if it’s a beep now and not a ring..)

  12. William Mougayar

    If this is not a Bitcoin crisis, I’m not sure what is. Some people think everything is fine and they keep pushing the boat in the wrong direction.Decentralized democracy and crowdsourced open innovation is good, but not when it leads to anarchy and a vacuum. There are no checks and balances on the current core developers, and they have lost touch with the market needs. If this was a company, I think they’d be fired by now.As you implied, it might still get even worse before it gets better.

    1. LE

      There are no checks and balances on the current core developers, and they have lost touch with the market needs.As an investor (and same goes for Fred) was this type of breakdown on your radar when you evaluated the sector?

      1. William Mougayar

        Well, for me, the first crackling tipping point was when Gavin Andresen gave-up his lead role several months ago; but then you keep hoping things will still work out.But Bitcoin is resilient nonetheless. Despite the current turmoil, it will self-adjust and re-equilibrate itself even if there’s a fork or two.

        1. Will Madden

          Well put:”But Bitcoin is resilient nonetheless. Despite the current turmoil, it will self-adjust and re-equilibrate itself even if there’s a fork or two.”I’m admittedly a bit of a kool-aid drinking optimist when it comes to bitcoin, but my sense is that Mike Hearn’s post may end up as an inflection point pointing towards progress around the block size. I am sure that this will make him happy, even if it means he was wrong.Bitcoin classic is supported by Jonathan Toomim, Gavin Andresen, and Jeff Garzik. The key this time is that miners are now in support of classic, and this change is rapid and sudden.Not just some miners, greater than 50% of the network represented by their hash power. This list includes Antpool, BitFury, BW.COM,, Genesis mining, and KnCMiner. Mike’s post and the media echo of his thoughts have accelerated this trend, with KNCMiner sending an open letter today.I bet (and hope) that the community (including miners) will rally behind classic, the blocksize will move to 2MB, and dynamic scaling acceptable to miners inside the great firewall will follow afterwards. A leadership team with Gavin, Jeff (if he can do it), and Toomim represents users, developers and miners. Toomim had the forethought to actually go speak to the mining community about their concerns, which is how 2MB was chosen as a starting point.I’m as optimistic as ever. The long game is too exciting and network effect to powerful for these speed bumps to matter.

        2. thomasguide2

          How? With 2 Chinese guys holding 50 percent of all bitcoins.

          1. William Mougayar

            who are these 2 guys?

          2. Ellie Kesselman

            Read Mike Hearn’s post, all of it, and you will see who these guys are. I don’t know if it is accurate to say 2 Chinese guys hold 50% of all bitcoins. It IS accurate to say that the block chain is controlled by Chinese miners, just two of whom control more than 50% of the hash power and that over 95% of hashing power is controlled by a handful of guys sitting on a single stage. This is who these guys are:

          3. William Mougayar

            There was some grains of salt in that statement.

          4. Will Madden

            I think you mean miners, now owners of bitcoin? The miners (now over 70%) are moving over to a new version of bitcoin with Gavin Andresen at the helm called “classic”. Most of this support happened in the last two days.This means that the community turned on and fired their development team, and decided to put a new one in power.Bitcoin just went from “dead” back to “long live bitcoin” faster than people could find their torches and pitchforks.

    2. Larry Salibra

      > leads to anarchy and a vacuum. Lots of people in Bitcoin are in it for the anarchy. They see anarchy as good, not bad.> There are no checks and balances on the current core developersThe checks and balances on current “Bitcoin Core” developers are that anyone can create their own fork and try to win mindshare…as Bitcoin XT, Bitcoin Unlimited and now Bitcoin Classic have tried or are trying to do.Bitcoin is just going through a process of figuring out who the stakeholders are, what power they have, how it can be used, to influence. and make decisions. I think all things considered, it’s doing very well.

      1. William Mougayar

        “who the stakeholders are” is a contentious issue. As it stands, it’s just the core developers and the miners who have a voice, and to a much less degree the business community. The stakeholders circle needs to expand to include more market reality participants in it. I wrote about this whole issue in August actually. “Bitcoin is undergoing a governance crisis, not a block size dilemma” and I was right then, despite being criticized by that statement. http://startupmanagement.or

        1. jason wright

          price is the voice that the miners must listen to. in July the reward halves.

        2. Walt French

          Surely, the stakeholders will, sooner or later, (re-)build the system THEY want while other would-be stakeholders find a higher wall around bitcoin to the extent that their needs are different.AFAICT, the original bitcoin stakeholders’ needs were WAAAAY different from 99.999% of the planet’s needs. The brittleness—the absence of a natural system for compromising, embrace-and-extend or ordinary competition, has been a big problem for the system, even though it was probably necessary to get off the ground.Such an interesting experiment in unnatural evolution. But I think that the problems, as spelled out at…, will take it down.

          1. ZekeV

            I agree with your first two paragraphs! However, I don’t agree that bitcoin will fail, for any reasonable definition. I will admit I’m wrong when and if people stop running nodes or mining bitcoin, or if the USD value of bitcoin returns to its 2009-2010 levels. It’s a lot harder to kill a distributed network than it is a company, which can run out of money, or be sued out of existence, or lose all its employees in a plane crash.

          2. xcsler

            >AFAICT, the original bitcoin stakeholders’ needs were WAAAAY different from 99.999% of the planet’s needs.I think the original stakeholders wanted to create a form of money which is not centrally controlled; a digital gold as an alternative to fiat currencies. I think this need is exactly what would benefit 99.999% of the planet even if they don’t realize it.

        3. ZekeV

          You can’t really say that “the consensus” needs to be anything, unless you define what the consensus is first. Otherwise this is a circular problem. So when you say this, I hear in my head “Wm Moygayar needs / wants the consensus to be x…” Obviously, other people may have interests in bitcoin that differ from yours, or from mine. And those people might not frequent the AVC comments section.I just don’t see the blocksize debate, or voting debates, or any of the other technical discussions around bitcoin as a crisis –for me–. Perhaps they are a crisis for you, and to the extent that short-term value of bitcoin is affected by publicity then perhaps the rancor is harmful to those who hold large wallet balances.But I suspect that the only people really hurt deeply by the governance crisis in bitcoin, are those whose business projects assume a certain model of bitcoin use and adoption that is not reality. To pick on Coinbase, I think their focus on bitcoin as the sole digital asset, and their plan to monetize consumer payments on the bitcoin network, is not going to succeed without a pivot. However, Coinbase has a lot of other opportunities to do interesting things and to make money. There are other companies which do not have the technical abilities of Coinbase’s founders, nor their personal integrity, and some of those other projects will start to fail in dramatic fashion.

      2. xcsler

        I think he meant ‘anarchy’ in the lawless/Molotov cocktail sense not the Anarcho-capitalism/Voluntarist one. Cypherpunks belong to the latter group not the former.

    3. Why?

      I’m a complete outsider to this whole discussion, but I wonder if you can explain why “anarchy” is automatically bad or what you even mean by the term “anarchy”. To me, it seems like there’s not a democracy (or anarchy) if a handful of people have so much power/influence. That’s usually called an oligarchy.

      1. William Mougayar

        There is divisiveness in interpreting Satoshi’s original model and how it evolves. So this is creating several groups of thoughts that are not all congruent yet. It’s almost like fiefdoms that are pulling at each other.

    4. ZekeV

      It is not a crisis, and I prefer anarchy or at least a feudal manor to a democracy in which Mike Hearn and the AVC comment section can decide what protocol I run on my computer and call “bitcoin”. I wouldn’t have any objection if the Core developers want to publish an implementation of BitcoinXT and call it “bitcoin”. I’m just not going to run it unless doing so is in my interests.A more fundamental critique: Hearn says that bitcoin has failed, and the evidence for this is that the network is full to capacity and transaction fees are increasing. If you are an investor in a startup, and you hear that it can barely handle the volume of new users, and that its fees are going up, is that a sign of failure or of SUCCESS?!If people stop running bitcoin nodes, mining bitcoin, or using it for new applications, then it will be a failure. But bitcoin becoming non-economic to use for consumer payments does NOT equal a failure of bitcoin. It equals a failure of the model envisioned by people like Hearn, or Armstrong, who think it should be used for that purpose.I differ from a lot of other bitcoin originalists in that I also think it is foolish to argue that there should not be altcoins or alternative decentralized protocols. Essentially Hearn is trying to force a false dichotomy where either bitcoin = his preferred specification of a decentralized protocol, or else it has failed. When in reality, he is free to publish an alternative and call it whatever he wants. As he has already done. To argue that we all must run bitcoin, and that bitcoin must be a certain way, is a wrong-headed argument made on both sides of this debate. It is based on a fundamental misunderstanding of human nature.

      1. William Mougayar

        The thing is there are various ways to solve the problem, and if you leave it to engineers, they will think of several methods but they may not agree on which one is the best one to start with. Therefore, it creates a deadlock or an infinite loop of introspection with heads in the sands.

        1. ZekeV

          I don’t agree that the limited blocksize is currently a problem. If it is a problem, then what is it preventing you from doing that you would like to do? If you think that everyone should stop running bitcoin, and instead run “bitcoin” so that it is better for your proposed function, how are you going to make it worth our while? And, why should we listen to you?Furthermore, why should you listen to us? Go run BitcoinXT on a hard-forked blockchain, and use it to fund your Starbucks gift card, or to transfer value to your Coinbase account. Nothin wrong with that, just not something that appears to be of concern for a plurality of gen-u-ine bitcoin users who run nodes, significant mining operations, or who hold large wallet balances (aside from a very few people who were already rich before bitcoin, and may have bought up bitcoin to use for quasi-bitcoin-related startup projects).

          1. Beautyon

            You have nailed it on the head here. If people want to run XT or Bitcoin Classic, there is nothing preventing them from starting from scratch and building their network from the ground up. What both of those camps want however, is to co opt the existing network and all the software that has been built on it, and essentially steal it as the horsepower for their own project. Everyone can see through this and will not go along with it.Mike Hearn is not Bitcoin. All the people who believe that he is do not understnd how software development works. Mike Hearn is not Satoshi either. The people who swirl around bitcoin, making mosaics and doing other non software things, including day trading on exchanges do not fundamentally understand what Bitcoin is and why it was written. Even Mike Hearn who is a developer does not agree with the reasons why Bitcoin was developed; he believes in government and government controlled money, and shuns the idea of authority that comes from anywhere other than the State.Anyone who knows the history of software knows that this idea is not going away. The peer to peer file sharing softwares that ended in BitTorrent (Napster, OpenNap, Gnutella, BitTorrent) were all developed because people wanted to share files. Now a tool has emerged for people to send money to each other without a third party. The incentive to make Bitcoin work just the way it should, without a central authority is huge; many orders of magnitude greater than the desire to share files freely.Bitcoin is going to be improved and after the current market uncertainty is over, as non software people begin to understand that indeed, Mike Hearn was not there on the lever personally making Bitcoin run day to day, the price will go up again, and this time, it will be harder for the opinions of a disgruntled developer to disrupt perception and the market.Even in the unlikely event that this version of the Bitcoin idea goes away, the idea itself is forever. It is no longer a wish that a non government email like money can exist; if this Bitcoin goes away, the next one will be orders of magnitude stronger; indeed, as Bitcoin is improved it becomes stronger and stronger just by running.There is nothing that anyone can do about this. No amount of talks at Brookings, OpEds, hatchet jobs at the New York Times, or startups without a single idea like R3 can stop Bitcoin. It may take years for people to understand it, and that is a good thing, because as the bad guys sit around talking about Bitcoin, it grows, gets stronger and more entrenched in the internet, minds and global economy, until, like the net itself, killing Bitcoin means killing the market. No one in their right mind would dare suggest shutting down the internet, despite it being used for terrible things. The same situation is going to happen with Bitcoin; it will be tolerated because removing it is unthinkable, so embedded and interwoven it is in everyone’s lives.

          2. xcsler

            Good post as usual Beautyon. I often feel as we are one of the few sane people in Crazytown. On other days however I do question my own sanity. 🙂

          3. Ellie Kesselman

            What is preventing people from running BitcoinXT, you ask? Massive DDoS attacks on XT users!!! Read Mike Hearn’s post. This is what happened when people tried to run BitcoinXT:Within a few days of launching Bitcoin XT around 15% of all network nodes were running it, and at least one mining pool had started offering BIP101 voting to miners. That’s when the denial of service attacks started. The attacks were so large that they disconnected entire regions from the internet:“I was DDos’d. It was a massive DDoS that took down my entire (rural) ISP. Everyone in five towns lost their internet service for several hours last summer because of these criminals. It definitely discouraged me from hosting nodes.”In other cases, entire datacenters were disconnected from the internet until the single XT node inside them was stopped. About a third of the nodes were attacked and removed from the internet in this way. Worse, the mining pool that had been offering BIP101 was also attacked and forced to stop. The message was clear: anyone who supported bigger blocks, or even allowed other people to vote for them, would be assaulted. The attackers are still out there. When Coinbase, months after the launch, announced they had finally lost patience with Core and would run XT, they too were forced offline for a while.This is not an inherent problem with bitcoin, but rather, with authoritarians within the bitcoin community whose self-interest and power are vast. It is the very opposite of a liquid, fungible and trusted medium of financial exchange.

          4. ZekeV

            Nevertheless, the XT network is still viable despite these attacks. Have you tried running an XT wallet and sending some tx? Bitcoin also was hit with various forms of ddos, so I think it more accurate to say that multiple groups are attempting to influence the bitcoin spec that will be considered canonical. If hearn wasn’t trying to force people to stop running bitcoin in favor of his altcoin, there would be no motivation to attack. BIP101 from a certain viewpoint is a hostile attempt to subvert the bitcoin project.

    5. tuneyards

      Cryptocurrency *is* anarchy. There is no one in charge. The winning cryptocurrency will emerge from the desires of the economic majority – the stakeholders, it won’t be dictated to them. The stakeholders are miners, developers, businesses and various user types (consumers, traders, holders). there is a symbiotic relationship between the stakeholders, they are inter-dependent. Ultimately the user stakeholders have the most influence, they are the hardest to replace.I say cryptocurrency and not bitcoin, because bitcoin cannot dictate the terms to its users. The users can easily migrate to a cryptocurrency that better fits their needs at any time, there is no lock-in. This is healthy and necessary, it keeps bitcoin honest. bitcoin is the leading cryptocurrency, but only as long as its stakeholders keep the users happy.

      1. William Mougayar

        The Bitcoin stakeholders ecosystem is currently biased towards core developers and miners as key influencing forces. That’s the issue today.

    6. ShanaC

      Well some people are anarchists. Bitcoin at the start would appeal because it’s beyond the reach of the nation-state.Money as an idea is interesting this way-it’s as much a representation of our values as anything else because of the way it is defined.

      1. Ellie Kesselman

        ShanaC, did you read all of Mike Hearn’s post, that Fred linked to? What is going on with Bitcoin and XT is not anarchy. Rather, it is totally authoritarian. There is collusion by a very few people, we don’t know who exactly, although the concentration of hashing power in the hands of 5 people from China and an additional 5 other people as mentioned by Mike Hearn is highly suggestive.Indeed yes, they ARE beyond the reach of the nation-state. They are exerting their control and intimidating anyone who supported bigger blocks, or even allowed other people to vote for them by DDoS assault. This is no joke: Entire rural ISPs in the US were taken offline by these DDoS assaults! Furthermore, there is intense censorship stifling discussion of the block size debate. It is exerted by the few that are in power. It is brutal, and we would be in deep trouble if this ruthless sort of control were exerted over all financial mediums of exchange.

        1. ShanaC

          Yes. It’s not a comment on the development team,it’s a comment about the user base

  13. pointsnfigures

    Competition is good. Your post brings up a lot of questions I cannot answer.With finance, there are always ways to arb between markets to make them rational or eficient. If one segment of the community wants to go small, and one group wants to go big-is there a way for an intermediary to create a liquid market between the competing standards? Of course, they would earn a fee since they are assuming risk. Are the two competing standards large enough to create a liquid market between them? (For example, all fiat currencies have an arb market between them)I have seen closed blockchains work exceedingly well. They make things unbelievably transparent, and efficient. Futures exchange clearinghouses are a de facto blockchain using fiat currency as their medium of transfer. All products are one size fits all, and all transactions are centralized, with counter party risk eliminated.The lightly regulated private derivatives market is more like the decentralized Bitcoin network. Parties assume counter party risk, and it’s highly customized.Is this a standardization debate similar to Betamax vs VHS where there has to be one clear winner for it to scale? Does bitcoin/blockchain need a one gauge fits all railroad track? In that case, the level and complexity of competition changes.

    1. JLM

      .Financial arbitrage — such as shorting AAPL — makes money but it doesn’t really solve any other problem than pointing out the irrational exuberance of markets.Sell AAPL short, round trip it, count your money — does nothing to make AAPL a better company. It is a “casino” derivative bet not a pragmatic problem solver.Nothing wrong with that but it has nothing to do with solving problems other than pricing problems. And, then, it is temporary. As soon as everyone gets it, the price is adjusted.JLMwww.themusingsofthebigredca…

      1. pointsnfigures

        We disagree, financial arbitrage is not shorting Apple. It’s making a two sided market between the US dollar and Swiss franc, or between the 2, 5, 10 , 30 year notes. It’s finding a small inefficiency in the market, and making it efficient. In liquid markets, the opportunities open up and close very quickly. In less liquid markets, they persist-risk is higher in less liquid markets.You might say VC is arbitraging information; successful results in exit, unsuccessful results in failure. For example Mr/Ms VC makes an investment that you consider stupid. Maybe they have more information than the market. Maybe they are framing the opportunity completely differently.

        1. JLM

          .I defer to your trader wisdom but I must insist that making a simultaneous market in both sides of a financial instrument (to mine an inefficiency in the pricing), the classic definition of arbitrage, is not really all that different than one being a seller today with the only way of clearing the sale being to become a buyer at some later date.It is just timing.JLMwww.themusingsofthebigredca…

    2. Adam Sher

      Can you have a standardized and decentralized platform? Is Linux a better example of what happens when a community of open-source users comes together? Then the different distros reflect sub-groups of different views on use? Furthering this example, you can run virtual systems with Linux (and other OSs) that allow you to communicate between your OS framework and others.

  14. peacemaker20

    this is a fallacious arguement – as is most discussions on Bitcoin. Why? Bitcoin is not just one thing. It is at least two. One. it is an investment vehicle. As such it is and will continue to be a failure . This is what I see as the observation in the article. BUT Bitcoin also represents a process. The process is not dead. It is necessary. and those that look to participate in this aspect of Bitcoin will win the day. IMHO Monetas is one company looking to do just that. It is beginning o apply new language and jargon to the process. “blockchain” is one new term – and it may be old already in terms of Bitcoin development. many big companies are betting against the block chain / I think the Apple /American Express alignment is one suh attempt to block the bitcoin movement for money exchange. But even Apple and American Express with all their might will not stop the blockchain movement – in fact they must be using it themselves.

    1. Adam Sher

      Mark Hearn’s Medium article clearly articulates the failures of the Bitcoin as a process. And the process as he described it is dying. So to Fred’s point, and Mark’s comments, will something like Bitcoin XT or Bitcoin Unlimited be allowed to flourish? Under the current regime, that is not happening.

      1. peacemaker20

        if that is your opinion lets agree to disagree. we understand the word process differently.

  15. Tommy

    Bitcoin and VISA have SO much in common – been writing about this a bit. Spent the most time on this one, I think it’s worth a peak:

  16. howardlindzon

    interesting…i still dont understand it to be honest.

    1. Rohan

      Completely with you.I understand the Blockchain technology and what it enables thanks to Albert’s wonderful post on it –…But, this whole Bitcoin debate has been hard to follow.

  17. Rivet Popper

    Litecoin will take its place. No fork necessary.

    1. kentague

      keep dreaming, a wonderful dream, but still a dream! bitcoin is already out there.

  18. David C. Baker

    I owned the largest BMW Motorcycle discussion board in the world for six years. It was mentioned in the WSJ and we did a lot of good. Started “techdayz” where we’d get together, build a strong group of moderators, and I personally met 600 people in person as we enjoyed out hobby together. Behind the scenes, though, it was the wild west. The moderation of members–figuring how how to do it well, not get my feelings hurt, allow discourse without meanness–was beyond me. I wasn’t built for it, and as I read the wild west that is the Bitcoin developer community I see the same thing. (I gave the board away.) There’s something about how people interact as keyboard heroes, doing it across ether instead of across a table, that spawns polarization. I sold my Bitcoin holdings already and I’ll get back into it when the knuckleheads allow reasonable, thoughtful perspectives to service again. The people side of things is always more important than the tech side.

  19. Nathan Guo

    It seems that Bitcoin’s previous descriptor of not having a state or nation behind it is no longer true to a large extent

  20. jason wright

    at the moment mining is a Chinese gig, but that will change. 21 points the way forward on that front. the 51% issue will fade away and China will not continue to dominate the bitcoin ecosystem. i look forward to buying a phone with an embedded mining chip. peer to peer decentralised mining is on its way.Yesterday’s post was on tenacity. Did you read it Mike? You ought to.My advice to anyone holding bitcoin is to sell just one and buy a 21 Computer, plug it in, and let it mine away.

  21. Adam Meister

    Thanks for dropping the price by $50 and allowing me to purchase discounted BTC! Those who are around for the long term and are not the types to panic are loving this short-sighted inspired hysteria.

  22. Alex B.

    The “crisis” you speak of is manufactured. It is being entertained by the likes of your colleagues and “entrepreneurs” who refuse to see beyond their own selfish interest for the greater good of the ecosystem.Listen to the voices of reason, this piece might be old but it’s just as relevant today:

    1. Alex B.

      This article is also a must read that shines light on the real issues facing Bitcoin

  23. Dan McArdle

    I agree with most of the issues Mike raised, and the community has been debating this stuff for about 3 years. I feel like we *finally* turned a corner in the past few weeks, though. With Bitcoin Unlimited gaining traction, and now Bitcoin Classic (with Gavin Andresen and Jeff Garzik on board) gaining significant miner endorsement, it seems clear that we *will* get a hard-fork to raise the blocksize this year, and a consequence of this will be significantly reduced importance of the current “core dev” team.Both of those are very good things. It will show that Bitcoin can continue to be what its *users* demand, and that it will evolve when it needs to. When the first >1MB block shows up in the blockchain, it will be a great moment for Bitcoin, and I’m increasingly confident that it’ll happen sooner rather than later.

    1. Alex B.

      Demonstrating that Bitcoin folds to populist attempts at its rules against all caution advised by the very person most familiar with the dynamics of the system is the worst thing that could happen.What is the next step for Bitcoin to “evolve”? Remove the 21,000,000 limit? Implement redlisting to “protect us from criminals & terrorists”?The alternative implementations you speak of are patently empty of the necessary mindshare and qualifications to maintain the protocol. Gavin has been out of his leagues for more than a few years. Jeff is a competent coder but has never been one to spearhead the development of innovative, high level aspects of the protocol.

      1. Dan McArdle

        Effectively by definition bitcoin will be what its *economic majority* wants it to be. You call it populist, I call it free-market.And by virtue of being the largest set of hodlers, in a properly functioning free-market, that’ll net out to action which maximizes Bitcoin’s value.

        1. Alex B.

          The hodlers right now are tanking the price because they understand what a hard fork means for Bitcoin.There is significant enough opposition against the hard fork to make appropriately asisine the proposition that any significant majority is behind it. Bitcoin is being co-opted by corporations who’ve centralized miners into thinking they hold all decisionary power.

  24. hazenyc

    Nice response. I, completely incidentally and at the same time, wrote a post with exactly the same title (and I have since linked to this from it also) but I have a bit of a different take on it..

  25. jason wright

    i see you made the Techmeme headlines. it’s a feeding frenzy.

  26. Pete Griffiths

    This has been inevitable for some time. I think I wrote about this on here some while ago. Despite the crisis that may well have serious consequences for this iteration the underlying idea of distributed trust is too powerful to be lost. ‘Bitcoin’ was only ever an experiment that escaped into the wild and ‘succeeded’ beyond anyone’s wildest dreams.

  27. tb1981

    I would say Bitcoin resembles gold more than Visa. Either way, I will be holding on to my stash.Despite the negativity towards XRP, the Interledger Protocol is going to be a game changer. The need to connect private and public networks is huge and it looks like XRP will be the vehicle currency with no counterparty risk.

    1. kentague

      i agree, bitcoin is more like gold. i will keep mine as long as possible.

  28. Sierra Choi

    Mike Hearn’s end of Bitcoin goodbye letter would make Jamie Dimon very happy. However, I don’t think that Bitcoin is going anywhere. If anything, there is room for new startups to prevent fraud in blockchain technology. In the end, Bitcoin is as stable as our financial institutions.

    1. Lawrence Brass

      You are right, a trillion or so dollar bailout would make Bitcoin really stable. 🙂

    2. jason wright

      i’ve always wondered what it would be like to work as Jamie’s glove puppet.

  29. Non-techie Talk

    If Bitcoin is Napster, who will be the Apple that makes iTunes?

    1. Schmidt

      I think it will be Ripple/XRP. They’ve found the right balance between innovation & compliance. Our world is too reliant on the financial industry/system. I doubt there will be a financial network in the future that does not require KYC procedures. But that’s exactly what most bitcoiners (for whatever reason) are looking for…

  30. Eric Nathaniel Jung

    “Should Bitcoin be Gold or should Bitcoin be Visa.” In my mind, this is the biggest issue with the Bitcoin debate as it exists today. All currencies around the world are tied to something of perceived value, whether it is backed by a government’s perceived strength (US) or something tangible, like gold. Bitcoin is essentially attempting to be fiat currency with no government, nor tangible asset, to provide the value. The blockchain alone will never appear to be stable enough for the general masses to trust. If the Bitcoin industry can figure out how to “be Visa” while being tied to something of value that people can understand, such as Gold, then you have a real currency that the average person in any country can easily get behind. Until then, I think it will remain an interesting experiment.

    1. Alex B.

      There is no such thing as backing for a currency except the trust behind it.Fiat derives its value from sovereign countries behind it.Bitcoin derives its value from the sovereign economy of the internet.

      1. thomasguide2

        Read my comment above.

        1. Eric Nathaniel Jung

          Re: your comment about “somehow stabilized,” totally agree. I’ve always wondered if Alt currency could be pegged to an ETF or benchmark that is a pool of gold, silver, etc. Or even tie it to the pool of currencies that the IMF uses for their SDR’s… something like this would help the volatility as well as make it a more globally accepted currency.

          1. thomasguide2

            The problem is who is going to do that? Governments or banks? That defeats the purpose. The people writing code for it? How?

          2. Eric Nathaniel Jung

            All good questions! Maybe this is where the real issue lies in the Bitcoin market? By pegging it to something of more perceived tangible value, it would eliminate miners from experiencing gain from the blockchain. It would require other forms of monetizing the currency, which is probably what is necessary (and doable), but not desired by those currently a part of the mining system. Hence, the underlying foundation of how the alt market is built is what is keeping it from achieving the stability of value needed to make it widely used?

      2. thomasguide2

        He already said that ” something of perceived value, whether it is backed by a government’s perceived strength (US) or something tangible, like gold”Do people read anymore?

      3. xcsler

        I think more accurately fiat currency derives its value from the actions of the sovereign countries behind it. If the countries resort to constantly paying off their debts through the printing press rather than through taxation it matters not who stands behind the currency. Faith will be lost and people will look for alternatives.

    2. xcsler

      Bitcoin is not attempting to be fiat currency but rather digital gold which is what Satoshi modeled it after. Bitcoin’s underlying digital properties mirror those of gold and is the reason it has achieved both value and gained the trust of hundreds of thousands (maybe millions) of people over the past 9 years. As the Bitcoin ecosystem grows, 99.9% of people will understand it about as well as they understand today’s monetary system; that is to say not at all. People will use Bitcoin (either directly or indirectly (off-chain)) not because they understand it but rather because it is simply a better form of money. Its current volatility is related to its small size but should reduce as it grows.

  31. thomasguide2

    As long as bitcoin is pegged to the dollar and volatile it will never be anything more than a hobby. Today 1 bitcoin is worth $400 and tomorrow it could be $1,000 or $100. How can any business or anyone use that as a currency? The only way it could ever work is if it was somehow stabilized or if all other forms of money was abolished.

  32. Michael Elling

    Mike’s description of the DDoS attacks against only a few of the XT nodes and the inability for anyone to prevent such from happening should concern those who believe so strongly in decentralization.

    1. Ellie Kesselman

      The DDoS attacks are shameful, and destroy trust in use of Bitcoin or any BIP-type use of consensus in digital currency.

  33. Muneeb Ali

    “I personally believe we will see a fork accepted by the mining community at some point this year. And that will come with a new set of core developers and some governance about how decisions are made among that core developer team.”I really don’t see this happening.People underestimate the amount of technical expertise and time required to be a Bitcoin core-developer. You need to dig deep and get your hands dirty. One year is not even close to being enough for fresh people to get to depths where they can take over.

  34. William Mougayar

    To make things clear on my position, I don’t believe that Bitcoin has failed, especially not as characterized by Mike’s long post. That post was a recount of Mike’s involvement with it, and he has failed to get XT going. Now he is with R3 which has nothing to do with Bitcoin, and more about the blockchain in financial services. It was surprising that he didn’t make that disclosure in the post.There was too much drama and a few exaggerations in that post, despite having some good points on governance issues that are facing it. As it turns out, it appears that Mike has outed himself from the Bitcoin community and this may have been his swan song.Nonetheless, I wished we could take the personalities out of the equation, and discuss the issues instead.

  35. Josh Jackson

    We should label it as sunk cost – Highlight, Cmd + A and delete – if bitcoin is dead. Or, we could find some lesson(s) from this experiment and shift our frame of reference.

  36. Amir Salihefendic

    If we look at other popular open-source projects, such as Python, Perl, Ruby or Linux we will see they have a strong leader that gives direction and makes very tough decisions.For example, Linus Trovalds and Guido van Rossum have led the Linux and Python teams for the last 25 years. Larry Wall has led Perl for the last 29 years.What Bitcoin needs is a Linus, a Guido or a Larry:Somebody that can give direction, is an inspiration and make the tough decisions.Satoshi could be a great candidate for this position.

    1. Lawrence Brass

      Very much in line with your idea.I would like to add Ubuntu’s Mark Shuttleworth to your list.I think that to consider ‘finding Satoshi’ as part of the solution actually makes the problem worse. In a dramatic turn of events, imagine something like Satoshi ending up being Edward Snowden.

    2. Beautyon

      Unfortunately, all the people who might be selected to be a benevolent dictator will come up short because Bitcoin is political in effect an not just a matter of usability and stability.Linux is better than windows because it is more secure, and ethical. It can and does run everywhere, and everyone benefits from this, unambiguously.With Bitcoin, there are people, like Mike Hearn, who think that Anarchism is “jive”, and there are others who think Anarchism is beneficial and desirable. The latter will be against centralizing Bitcoin, which will lead to control by the State; they want Bitcoin to be beyond the power of anyone to stop, just like BitTorrent is.The former will see nothing wrong with centralizing Bitcoin as a compromise to increase its capacity. This is the core of the block size debate, that Mike Hearn lost; centralize Bitcoin for greater speed, or keep Bitcoin decentralized with slower speed and improve it incrementally by consensus of everyone who uses it.The only way a Linus Torvalds or some other genius could be acceptable in the dictator role is if all the improvements he brought to the software made it faster without change its nature as a distributed network. Other improvements would need to be real improvements, and not anything that reduces Bitcoin’s cash-ness.For example, some unethical developers suggested introducing blacklists to Bitcoin, so that addresses involved in “illegal commerce” could not be serviced by the network. Pressure to bake in features like this would be strong, and would take a Linus level personality to resist adding them. Linus already said, “No” to the NSA, so on that front he is sound, but who knows what any single man is like, what his opinions are when it comes to the legitimacy of democracy, the central banking systems of the globe and the nature of money?Satoshi understood all of this, and his correct understanding is why Bitcoin is designed the way it is designed; a limited supply money system that is out of reach of the State. Finding another Satoshi, who is unambiguously an Anarchist (or at the very least anti Federal Reserve and fiat currency; we know this for a fact) is going to be very difficult. You may be able to find someone who has the software development skills, but finding someone with the software development skills AND the correct political position needed to understand why Bitcoin must remain decentralized is a very difficult task.

  37. Philip Raymond

    Excellent analysis, Fred.I found your post, because another Bitcoin blogger, Adam Hayes, posted his opinion with the same title. He ended with this Postscript:> It has been brought to my attention that an article with the same> title was posted without my knowing, at pretty much the same time.> Great minds must think alike! But he has a different take than I do.Adam linked to your article. His analysis is here:…Actually, I feel that you both see it much the same… You both feel that Bitcoin will weather the storm and Hearn’s criticism. You even cite the same reasons—among these the fact that many startups, miners and individuals have big stakes on resolving the current problems.I agree with you, Fred, and FWIW, my team at CRYPSA is optimistic (more than cautiously optimistic). Personally, I see it as a buying opportunity. I have just added 33% to my Bitcoin portfolio just now (It has pulled back to the low 360s as I write this. I am sure that I won’t catch the low, but it will certainly feel good when Bitcoin surpasses $500 and higher, later this year).Even if Mike Hearn is right—that is “if the experiment has failed”—I suspect that the distributed ownership stake as documented in the blockchain will be transferred to whatever comes next. Of this, I am confident.If the market finds it necessary or beneficial to gravitate toward another coin (perhaps due to political in-fighting or a massive breech), it is likely that the legacy-vestment documented by the blockchain will be preserved, honored and folded into the new coin. Although we are still in the early era of cryptocurrency, any effort to wipe out the mined corpus and Satoshi’s original defined capital would be met with war chants. More importantly, it would offend critical early early adopters and frighten off prospective users.Bitcoin still represents the original, permissionless blockchain for value exchange—and very likely as the stored value itself. It is free from ulterior motive (motives that which goes beyond the Satoshi principles). The only way that a successor coin could make this claim (a fact that is critical to adoption) is to remain fully p2p, fully permissionless, and to fold in the current wallet owners at their current fraction of the eventual, fully-diluted (but capped) pie.Philip Raymond, Co-chairCryptocurrency Standards Association

  38. ShanaC

    Why visa vs gold? Why not my signature, or a bank of shana, or any other way to view Bitcoin as part of money and trust systems

  39. Lawrence Brass

    Two things: – Oversized actors always break the balance and mess things up in any ecosystem. – Software developers usually suck at politics and governance, save notorious exceptions.

  40. davidnotik

    “how the blocksize debate gets settled [*too]”

  41. Chris Jagers

    The world has a lot to gain or lose if Bitcoin survives or fails. Your point about governance is the key (not the blocksize). Hopefully this conflict will result in a body akin to the www consortium … however imperfect, some structure is needed.

  42. Admin

    Thank you idiot!

  43. jason wright

    the exchanges must be really cranking up their bot trade software today to keep the price from tumbling any lower. i wonder how many of the total number of transactions are external and how many are internal bots?i would guestimate that the real price is no more than $300 at best.

  44. xcsler

    A digital distributed trust-minimized settlement layer is a big deal. A digital Visa; not so much.

  45. Sean Hull

    “should bitcoin be gold or should bitcoin be visa”.I think I understand something now that I wasn’t groking before.Thank you Fred.

  46. dr_sn0w

    This page has absolutely no author. Thus, your credibility is 0 (null) “—-“.

  47. Kent Liu

    So to increase the blocksize means Bitcoin wants to be Visa. In that case, it needs to scale 1000x+, not 2x. Do we need such a crisis again when we start filling up 2MB?

  48. george

    After reading the blog post, it really sounds like diverging views crippled Bitcoin, stalling progress and perhaps it’s software revolution. Creation and collaboration needs conscious alignment, otherwise progress doesn’t become tangible. If Satoshi reemerges, you get hope, optimism and a better shot for an economic upturn.

  49. ET3D

    Bitcoin is the oldest cryptocurrency and therefore naturally one with the most problems. It really should die. That doesn’t mean that cryptocurrency in general must die, just that something flawed shouldn’t be continued just because it’s more well known than others.

  50. Qué es Bitcoin

    Long live Bitcoin! It is to good to disappear 100% agree!

  51. jason wright

    “blue horseshoe loves R3”

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  54. Javier Hernandez

    How can bitcoin die?? Is design in a way that doesn’t need investors, because all the development is self finance by the tokens (Bitcoins) actually bitcoin is design to eliminate 3rd parties… investors and “bitcoin companies” are a new thing, bitcoin has it’s natural organic growthp2p for humanity

  55. Mark

    IMO the biggest obstacle is the centralization of mining power in China. I have spent a lot of time in China and half of my family is Chinese. The fact that Chinese miners have a short-term economic incentive to keep small blocks, coupled with a reticence to abandon the Core Dev team may prove disastrous.Ethereum has already run txn rates that exceed the capacity of bitcoin. If I was Brian Armstrong, I would get ETH trading on the Coinbase exchange. It is very likely that ETH will grow as a cryptocurrency. It would also plant the seeds for a plan B for CB, which relies upon VISA scale. Finally, it would be a shot across the bow to the small block advocates, which might precipitate a resolution sooner than later.At any rate, with the bitcoin reward halving and ethereum moving to PoS, it is going to be a very interesting year for blockchains.

  56. Stuart Graham

    Bitcoins can be created at any time by the Miners who are owners of the company Bitcoin – so that is an unfair advantage to a select few that can issue themselves Bitcoins when the Bitcoin becomes very valuable. Also you get the feeling that somebody could always pull the plug on the value of a Bitcoin. I prefer the good old US Dollar.

  57. Ironbunny IonBunny

    it had its chance… anyone who owns absurd amount of bitcoins right now are waiting for more people to bite so they can offload it for cash… they cant do it now cause it would devalue bitcoin to its true cost which is 0. Its not a level playing field when someones been mining since the start vs who started a day ago. besides its mostly used for illegal purchases so it has to go away and something far better has to be put in its place. Idea is sound… execution not really.

  58. fredwilson

    I agree Charlie

  59. ShanaC

    Norm develop in markets based on who participatesThis may be a problem of changing norms and changing participants