Bitcoin Is Having An Election

Brian Armstrong, CEO of our portfolio company Coinbase, published this deck on Friday.

In the deck, Brian argues that the current debate over Bitcoin scaling is an “election” not a “split.”

There is certainly a raging debate in the bitcoin community about how to scale Bitcoin and the value of decentralization versus scalability. That debate has been going on for quite a while and may continue to go on for much longer. But one way or another, Bitcoin will eventually figure out how to scale. The process may be messy, but so is the process of electing a President. That’s one of the main points Brian makes in his deck.

Another important point Brian makes is the need for competition in core development. Since the beginning of Bitcoin, the development of Bitcoin’s core software has been done by a small group of developers who have come to be known as Bitcoin Core. That has led to a dependence that is not entirely healthy. Brian makes the comparison to web browsers where there are four competing browsers, all with more than 10% market share and none with more than 50% market share. Each browser development team competes to bring new technologies to market, some of which eventually get adopted by all of them. And consumers have the choice of which ones to use. That is a much healthier market architecture for sure.

For me, this scaling debate is not really about Core vs Classic or XT or any other version of the core protocol. I suspect in ten years none of them will be used. Much like nobody uses the Netscape browser anymore. This debate is about whether we want a truly diverse and distributed developer ecosystem building, innovating, and maintaining the software at the core of Bitcoin. And I think the answer to that question has to be yes. It’s just a question of how we get there.

#blockchain#hacking finance

Comments (Archived):

  1. JLM

    . Bit coin and the debate surrounding it resemble a Presidential election which is not a comforting thought.JLMwww.themusingsofthebigredca…

    1. LE

      Presidential elections have deadlines.

      1. JLM

        .Damn good point. Thank goodness.JLMwww.themusingsofthebigredca…

        1. LE

          One of the keys to dealmaking and negotiating, and you obviously certainly know this, is not making open ended offers. Without a deadline it’s quite difficult to get people off a fence. That’s one of the reasons car dealers don’t have fixed pricing and why those that do haven’t done that well except in outlier cases (Mini Cooper is one of them). “The deal is only good today” is a strong motivator.One of the things I give Obama credit for, is how he shoved that fucking healthcare deal down our throats and didn’t give people time to think enough to effectively de-rail it. Under the doctrine of “time kills all deals”) it’s often necessary to not give people a chance to think and counter your assault. He did a great job with that (and now we are all paying for it..). When I saw the way he was acting at the start (with such urgency) I knew that was the game that he was playing.

          1. JLM

            .As to the ruthless manner in which the legislation was driven — you may keep your health insurance, doctor while you enjoy $2500 reductions in premiums — it is difficult not to admire his willingness to do or say ANYTHING.A performance that had Goebbels clapping, no doubt.As to the legislation itself, its passage and operation has proved that you cannot make chicken salad out of chicken excrement. Even its hidden authors mark it a POS.It will be difficult to find another piece of more ill-fated legislation in history. It will be gold standard for ruthlessness in the passage of flawed legislation for the rest of time.It was also Obama’s finest hour as a leader unfortunately he was leading us off a cliff.JLMwww.themusingsofthebigredca…

          2. LE

            Making things long and difficult is a good maneuver. When I sold my first business, and the buyers and their accountant came to take inventory, I gave them a dot matrix computer printout that was something like 200 pages long of all of the inventory we had that was somewhat difficult to comprehend. They gave up several hours later and signed off. Realizing the job would take several days which they didn’t have. They key was giving them a great deal of information overload. They simply didn’t bring the manpower to process that. (We had spent all week putting even open used cans of ink on inventory list as well as every scrap of used paper we could legitimately find.) This was all a strategy that I cooked up. Anyway to the point lawyers are really good at this type of thing, make something long and incomprehensible and wear down the other side.

  2. Chris Mack

    TrumpCoin. You know he’s going to.

  3. JimHirshfield

    “There’s too much bitcoin in politics”

    1. Girish Mehta

      “Its not a Bug, its a Feature”.

    2. William Mougayar

      the other way around is more true, “too much politics in bitcoin”.

      1. jason wright

        the politics of economic vested interest. i may be wrong, but i sense that the uptick in bitcoin’s price in the last twenty four hours has been in direct response to Ether’s price rise over the last several days. have the bitcoin whales been entering the market to support bitcoin’s price to counter Ether’s momentum?

  4. William Mougayar

    Well done, and shows good leadership from Coinbase/Brian on this issue. Anything that keeps Bitcoin moving is a good thing, and better than the stalemate and bickering that plagued this situation in the past few months.Move on, adapt, and get going!

    1. Beautyon

      When you say “moving” you are not specifying what direction, and that is important. Bitcoin moving in the direction of centralization is not a good thing; simply to want Bitcoin to be moving for the sake of appearance is not rational.Secondly, Bitcoin moving means transactions. Transactions are being processed and confirmed as normal, and there is no chance of a stalemate preventing this. The bickering is just noise, and has nothing to do with the operation of the network.Showing good leadership is a point of view; to some, unilaterally deciding to launch what they consider to be a hostile client is not leadership, but aggressive, impatient and short term in thinking. Even in this post, the author believes that none of the software running today will be running in the long term. This rush to co-opt the network on the pretext of a non existent crisis is not ethical.

      1. William Mougayar

        But you seem to be arguing for not doing anything and continuing to study the situation, which is hurting Bitcoin in the short term. Have you seen the outpouring of support Ethereum is getting in light of the Bitcoin’s foggy future on scalability?We can debate the decentralization aspect, because we’re talking about “degrees” of decentralization which are amply compensated by the network getting larger and an eventual re-equilibration which is part of the internal operations of a decentralized network anyways.There has been ample time and room for discussions, and this is a result of moving away from a status quo situation that could not be solved by pure discussions.

        1. Beautyon

          I don’t seem to be arguing that at all. I am saying plainly that moving for its own sake is irrational. Bitcoin will change and improve like any other software does; saying that I want to continue to study the situation is a Straw Man. I am not saying that at all.Bitcoin’s future is not foggy on scalability. That is your personal impression, and doesn’t stand up in light of the massive investment in software and money going into solving this problem. Etherium’s growth has nothing to do with Bitcoin. It is growing because it is providing something for its users.The debate about decentralization is about the direction of travel. The people who want a decentralized network want the direction of travel to be away from centralization. Big block proponents want a direction of travel to centralization, which is the inevitable outcome of large block sizes. Its possible to explain this in plain English by the way.You say there has been ample time. By whose measure? There is no emergency or rush to scale Bitcoin, and the safety of the network should come first. Recklessly launching an aggressive takeover bid with a non complaint client that will allow automated attacks (as you are about to see) is not pro-Bitcoin, its pro drama and pro Soap Opera.You are coincidentally right that this will not be solved by pure discussion, but only because this is a matter of software. Either way, its fascinating, and it exposes the thinking and ethics of people chiming in on it.

    2. Richard

      There is a lot more that can separate processing protocols. How these issues get resolved is any ones guess. Most folks don’t realize that every credit card transaction is classified according the type of merchant. Bitcoin et al. needs to step up its game as to how they will handle these types of issues going forward.

      1. Beautyon

        Bitcoin will not and should not classify transactions according to the type of merchant. It is designed specifically to de-fund the system that requires collection and storage of that sort of worthless information. If you run a service that wants to record that information, of course, you are free to build one and store it, just as you are free to build whatever service you like with the internet protocols available to you; but they do not and should know what you are doing; they are neutral building blocks for you to build with.Bitcoin is designed to be a fundamental protocol for money, and nothing else. The opinions and political positions of the people who use it are not relevant to it, just as they are not relevant to TCP/IP. This is the most important part of Bitcoin; making money into a basic, unchanging protocol that is out of the control of the State. This idea cannot now be killed, and it will succeed eventually, guaranteed.

        1. Richard

          The problem is that this information is anything but worthless. It is inevitable that it will be monetized at some point.

  5. Amir Salihefendic

    The browser analogy isn’t great. This situation is like having multiple versions of the Internet that aren’t compatible with each other — it’s a much more severe issue than having different browsers access the same Internet.

    1. LE

      This situation is like having multiple versions of the Internet that aren’t compatible with each otherI was wondering about that as well, but don’t know enough about bitcoin to have said that. I hope someone (William?) addresses what you have said because that is the way (with my limited knowledge) I looked at it.

    2. Beautyon

      You are absolutely right. In the end, there can be only one internet, running on a set of standard protocols. You are free to run whatever you like on your own hardware, but if you want to be a peer on the internet, you have to use compliant software, or your packets will not be relayed.Its better for everyone to work on a single Bitcoin that is highly resistant to centralization and pollution of the protocol. The people who want to change this ultimately want to gain control of the protocol and add features to it so that it can automatically do Blacklisting, KYC/AML and other things. All of these have been explicitly suggested as protocol “upgrades” and they are more likely to happen under a US controlled standard client.Whatever happens, there is no way that the entire world is going to simply sit back and accept US domination of Bitcoin. It is to no one’s ultimate advantage, and as it was in the internet, its to everyone’s advantage to settle on a single protocol, and then build services on that.It means patience, very hard work and inspiration, and it will happen eventually. No one, after having tasted true Bitcoin is going to settle for a stunted, centralized, substandard Bitcoin.

  6. BillMcNeely

    @brockpierce of Blockchain Capital made some interest comments on Bitcoin in This Week In Startups with @jason http://thisweekinstartups.c

    1. jason wright

      i saw that. it was indeed interesting viewing.

  7. ZekeV

    Election is an imperfect metaphor. In bitcoin, each user chooses what software to run. That means any choice between implementations that involves a blockchain hardfork is like an election in which every citizen can choose to live in a country where his preferred candidate won.Unfortunately, in electoral politics, if Trump wins there is no alternate universe America where Bernie Sanders is President. In bitcoin, there certainly is an alternate universe where users will continue to run an implementation of the original bitcoin spec. And economically it seems likely to me that exchanges such as Coinbase would be compelled to honor pre-fork balances from the legacy blockchain, meaning that there is no incentive to switch for most users.

    1. pointsnfigures

      If Trump or Sanders win, it’s not good for the country…..

      1. LE

        I was disappointed with what I saw of Trump and some of the others in the debate last night (I couldn’t bear to watch the entire debate it was so painful).That said I think Trumps “goat is gotten” as a result of being a business person and consequently overreacting emotionally to the false attacks that all politicians lodge against each other. In business (other than, say, marketing which is somewhat controlled) there is a bit more discipline (for legal reasons) in attacks on competition. I think the frustration comes from being formerly in a power position where you can exercise a great deal of control with who you are dealing with (and choose to deal with) vs. a place where you can’t.That said the booing people obviously planted in the audience was very unfortunate. The negative claque in the theater can be not only a powerful manipulator but can have an impact on the “actors”. [1][1]

      2. LE

        If they can’t hold off Obama from naming a justice (and getting approval) and Sanders or Hillary wins that’s even worse for the country.

        1. Matt Zagaja

          In other words, you believe Sanders or Clinton would do a better job of picking a nominee than Obama?

          1. LE

            Not at all. I want a republican to win and name the next justice. Of course if I had to pick a Democrat it would be Hillary.Obama has to name a few justices even if he knows they won’t get approved.You know why?Because that way he can return some favors or create future favors. I mean in a legal career the next best thing to being a SCOTUS is being nominated to be a SCOTUS. It’s like any other “anointment” you know “academy award nominee” as only one example. A case where even being in the game has value.If I was a lame duck Potus I would work down the list of people that I wanted to enhance for one reason or another even if I knew they had no chance of ever getting approved. That’s a good short list to be on.

          2. Matt Zagaja

            Politics is like poker and I think the GOP delaying the nomination of the Supreme Court Justice is like raising before seeing the flop. They’re betting on the following:1. Delaying the nomination itself won’t hurt the GOP brand up and down the ballot in general (see also: the government shutdowns).2. Their nominee will beat the Democratic nominee3. That the Democratic nominee would not nominate someone who is less desirable than Obama would nominate.4. They retain enough Senate seats to be able to filibuster.On January 21st, 2017 President Bernie Sanders could nominate Hillary Clinton to the Supreme Court.

      3. ZekeV

        There’s no candidate in the race I could possibly agree with on a philosophical level. However, given the choice between a right-wing or left-wing totalitarian as president, somehow I feel less threatened by the left-winger. Maybe that is poor reasoning on my part, since the totalitarian machinery built by a progressive could just as easily be used by someone else in the next term.

      4. JLM

        .The extreme differences between their candidacies will be very good for the country to recognize and embrace/reject. To be forced to choose.Just for the record, you have picked the only two candidates who “inspire” the country in much the same that Obama inspired the country looking for “hope & change” thereby proving you can fool enough of the electorate to become President (that is a compliment).It will be good to find out whether we are a capitalist nation or a socialist country.I would be quick to point out that Bernie is not a socialist — a socialist redistributes the existing work of the makers to the takers — he is something entirely a step further.He does not only want to redistribute what exists, he wants to confiscate even more and redistribute that also. He wants to take more than ever taken before (in the face of current Federal revenues at all time freakin’ highs) and to redistribute it in manners never contemplated before.After 7 years of an ill-fated Democratic WH, Bernie is saying — “Hell, that’s note even close to enough. We need way more free shit.”He is saying that Barack Obama was not even close to being socialist enough. Not even close.The greatest misunderstanding of Trump in SC was on that debate stage last night — it’s the NASCAR mentality of SC and the South.People come for the wrecks and last night they were treated to one of gargantuan proportions.If Trump takes SC — 85% of the way there — he gets the nomination and the Presidency. Not saying I would personally support him but saying that’s the way the calculus works. Period.JLMwww.themusingsofthebigredca…

        1. LE

          Interesting thing I found out last night. Go know as they say. My wife’s nephew who is 19 and in college knocks up his girlfriend. Against all advice they decide to keep the baby (who was born premie to boot and require expensive pediatric hospital care). Now he is living in his wife’s parents basement and screwing up his future career (he wanted to be a Doctor he has good grades and as I’ve mentioned in the past is an Eagle Scout) because of this miscalculated night of fun.Anyway I ask my wife “when are they getting married”? She says they won’t be getting married anytime soon or maybe not ever. Why? If they are married they can’t get free healthcare for the baby. The government not only pays for all of the babies healthcare (because of the mother being a single mom and also income level) but pays for diapers, formula and a bunch of other things) as well. Consequently they won’t get married and will live off of government entitlements. Isn’t that great?

          1. JLM

            .A perfect example of the gov’t destroying the social fabric of families while trying to protect the social fabric of families.When I was in the Army, post-Viet Nam War, the Army was aghast at the number of young company grade, combat experienced officers leaving the Army.Why were they leaving?The largest single reason was to go to grad school on the GI Bill. The GI Bill was part of the spoils system of having served in the first place. They sowed their own destruction with the high quality of the benefit they conveyed.The Army started sending officers to grad school.The day I put in my resignation (to a Col who would one day be a 2-star in charge of all US Special Ops) I was notified the Army had selected me to go to grad school up and through a PhD.The problem with this was that I had to serve 2 years additional for every single year in grad school. Figure 4-5 years to get a PhD and I was looking at retirement.Worse, I would have to go teach at West Point for likely the balance of my career.I had 5 years already. 5 years in grad school. 10 years additional obligation. 20 years total. I could retire at 20.All I ever wanted to do was command troops.It did solve the resignation problem.JLMwww.themusingsofthebigredca…

          2. LE

            Worse, I would have to go teach at West Point for likely the balance of my career.Which means you would be spending your time in West Point NY, rather than Austin Texas!In other news I guess you know (and I just found out) that one of Scalia’s famous dissents involved VMI. [1][1]……

          3. JLM

            .I was on the VMI Foundation Board of Trustees the day we realized that Justice Thomas’ kid was a VMI Rat (freshman). Griffin Bell was our attorney. He had this splendid honey, tobacco Georgia accent. He had been Carter’s AG.I famously said, “Justice Thomas will have to recuse himself.”I was thinking, “We are well and soundly fucked here.”Bell, at a million dollars an hour, confirmed exactly that in a conference call with the Trustees.It cost us millions of dollars (mostly paid for by the foundation) to lose on a technicality — the recusal of Justice Thomas, a certain vote.It is worth noting that we had won at every appellate level and that our Superintendent Josiah Bunting was a brilliant advocate. He was also the only Rhodes Scholar who did not visit Clinton in the White House though he was invited many times.In retrospect, it was one of those things that I felt passionately about at the time, certain it would wreck traditions worth preserving at pain of death.I WAS SIMPLY AND UTTERLY WRONG.The inclusion of women at VMI has likely made it a superior institution and the women have shot to the top of every class.This falls under a favorite saying of mine, “A bad idea held by a majority is still a bad idea.”VMI did the best job imaginable incorporating women. Bunting covered himself with glory in the manner in which he handled the Federal court order forcing VMI’s hand.JLMwww.themusingsofthebigredca…

          4. PhilipSugar

            I can’t upvote this enough. This is what I hate about politics. People can’t say they were wrong.

    2. obarthelemy

      the writer is very invested in blockchains. He’s trying to make the secession process sound as benign as possible so as not to scare the money away.

      1. ZekeV

        Eh, it’s probably impossible to scare the money away at this point for more than a year or two. The incentives to invest in Bitcoin early are just too powerful. People will hold off if they are unsure which implementation will win, but eventually that pent-up demand will flow into the market.

        1. jason wright

          and while the people wait Ethereum will gather momentum.

          1. ZekeV

            Ethereum and possibly others as well. I like Eth as a technical proof-of-concept, but I stayed out of it b/c I was unhappy with the manner in which it was launched. I also think that general purpose blockchain computing will prove less popular than custom blockchains for particular apps. For example, if I can use Eth to power a settlement network, why wouldn’t I just clone it but with optimizations for my particular purpose, plus I own more of the tokens?

          2. jason wright

            isn’t that describing a silo?

          3. ZekeV

            I don’t understand your question. If an application represents a silo, then it would be a silo running on ethereum just as it would on a clone of ethereum. If not, then also not on eth or a similar network.

          4. jason wright

            perhaps i also misunderstood your point.the “plus i own more of the tokens” post script skewed my reading of your motivation for developing such a network.

    3. Elliot

      The election metaphor is indeed unfortunate. In an election, the winners can impose their will on the losers. In a Bitcoin hard fork, the larger group simply forms a new network and leaves the smaller group behind. The smaller group can choose to join the larger group or not, depending on whether they value being part of a larger network more than they value the properties of their smaller network.I’m not sure Coinbase would be compelled to recognize that users owned coins on both sides of the fork. It seems legally murky.Users will have an incentive to buy coins on the larger fork with higher security, because those coins will be more useful (assuming the larger fork isn’t significantly more prone to censorship or other undesirable things). Users who think that the smaller fork will fade away will have an incentive to sell their ‘small fork’ coins ASAP and get out while they can, which just makes the smaller fork fade away faster.Certainly some people will stick to the smaller fork, just like some people stick with Litecoin now even though it doesn’t have Bitcoin’s network advantage.

      1. ZekeV

        We may find that users don’t care so much about the perceived security benefits of higher hashpower — ignoring for the moment that this is not the only security feature of the bitcoin implementation, nor is it correct to say that bitcoin’s security is directly linked to the cost of acquiring >50% network has power. My guess is that users care more about immediate economic gain / loss, particularly in light of the risk that switching to a new protocol post-fork could cause them to lose all the value of their holdings. The muppets might go along with the path of greatest convenience. But I can guaranty that those with large wallet balances, or significant capital investments in bitcoin infrastructure, will be very cautious. And a minority could engage in opportunistic behavior if there’s a fork!Both blockchains, original and “Improved” (XT, classic, or Gavincoin, or whatever) will be identical pre-fork. Both original and Improved will begin with the existing blockchain record. Users who do not spend their bitcoins on either network will begin with a balance on both networks. Original clients would not honor balances created on Improved chain by spends that are made post-fork, and vice-versa.Coinbase would have to honor pre-fork balances as that’s the only way to get current bitcoin users to do business on Improved. So I could spend my pre-fork coins on the Improved blockchain, while holding them on the original blockchain post-fork. This is a quasi-double spending attack. Andresen said he thinks this is not a real concern, and maybe it’s not in practice. But ask yourself, what is the best strategy for the cautious user — probably to hold and not spend bitcoins, which is the opposite of what the Coinbases of the world want to see happen.

  8. pointsnfigures

    Agree with you. Competition is awesome and drives innovation. My one worry is that Bitcoin follows the track of the trading industry. Prior to electronic trading, there were thousands of independent traders (think a proliferation of miners). Post electronic trading, the centralized powers redistributed the edge, and technology consolidated the industry. In today’s financial industry, trading is done by fewer concentrated entities. That has spillover effects in markets. Post Bitcoin election, advocates acknowledge that the costs are going to go up and miners will have to close up shop. The cost/benefit is probably worth it. But, long term I would like to see healthy competition in the bitcoin coding community, and in the mining community.

    1. ZekeV

      We’re seeing the very beginning of markets for distributed digital assets. It’s possible there will be some centralization in the fiat exchange and hosted wallet category due to regulatory costs, etc. But I don’t see that happening within the crypto economy itself. Already there must be at least 1,000 different assets based on forked versions of bitcoin — Litecoin, Namecoin, Ethereum, Blakecoin, etc. — and only a small portion of these can be mined on the same equipment. A very small number of assets are merge-mined (meaning that the proof-of-work submitted for one can be used to earn tokens on others in the merged pool).My impression is that most VCs, as well as many bitcoin early-adopters, are counting on Bitcoin dominating the market for decentralized value tokens. Bitcoin’s security advantage, and network of viable fiat portals like Coinbase, are supposed to present a huge barrier to other digital assets gaining adoption. Personally I think this is going to prove false, that decentralized digital assets will develop as a market in a way that is different from Web 2.0.

      1. pointsnfigures

        Interesting. If you are right, there would need to be an arbitrage market between various cryptocurrencies to peg value.

        1. ZekeV

          I think it will be an extremely fragmented market with tons of arbitrage. Quants will have even more interesting problems to solve.

      2. jason wright

        what do you see happening to the mining sector when the block reward halves in July?

        1. ZekeV

          Mining any algorithmic PoW token is a capital-intensive business. Regardless of block reward, that will always be the case. Overall the limited total number of bitcoins that are created should serve to maximize the potential value of bitcoin, which drives everything that touches it. That the block reward is predictable means that we can all build that event into our expectations today, we don’t have to wait. However, I do not believe that any technical features like this are efficiently priced into the bitcoin/fiat exchange rate, or at least, to the extent they are there is also so much other noise that it is impossible to say how much of the price is based on the expectations for block reward.This is a long-winded way of saying, I think bitcoin will get more expensive eventually, mining will become increasingly capital-intensive, and I have no idea what if anything block reward halving will contribute to these trends in the short term.

          1. jason wright

            i read an academic study that predicts price volatility will leave the bitcoin market within six to seven view of the imminent halving of the reward (revenue) one would expect the vested interest to be supporting the market as July approaches. the price seems big to me at the moment in view of the multitude of issues Fred’s post touches on.i’m wondering what the burn rate is for the numerous bitchain startups out there and how many will fail before the installation and deployment phases are complete.

          2. ZekeV

            I haven’t read that study, but it sounds like utter BS to me. Could you predict the volatility of gold in 6-7 years? No, and that’s a highly liquid asset thanks to a highly liquid derivatives market, established ETFs, and plenty of consumer demand backed by thousands of years of human history.Bitcoin startups are entirely different animals from bitcoin itself. Bitcoin as a protocol is highly robust, and will survive as long as there is an incentive to run it. Bitcoin startups can go bankrupt, get shut down by regulators, run into competitors, lose their founders in a plane crash, or otherwise fall victim to all the things that happen to entrepreneurial ventures. We’ve already seen a number of early bitcoin “startups” die from being too early, or maybe just poorly conceived. That will surely continue to happen. Fred might be good at picking centralized businesses that happen to be in the bitcoin space. But I think there is a big opportunity for someone to fund an alternative approach to investing in protocols that does not involve (or does not rely on) investing in specific companies.

          3. jason wright

            the study was an extrapolation of the price trend.”Bitcoin startups can go bankrupt, get shut down by regulators, run into competitors, lose their founders in a plane crash, or otherwise fall victim to all the things that happen to entrepreneurial ventures.”- miners can go bankrupt, get shut down by regulators…et.c., which means the protocol may only be as robust as the miners.” alternative approach to investing in protocols that does not involve (or does not rely on) investing in specific companies.” – you have a thesis?

          4. ZekeV

            Did the study extrapolate based on linear regression? Highly flawed in pricing bitcoin, if so.Miners can fail, and do all the time. The odds of all miners failing and/or abandoning bitcoin are fairly low compared with the odds of an individual company failing.Yes, I do have some thoughts about how one could invest in protocols without relying on equity investments in particular companies for return. The basic idea is not novel or complicated. Let’s say you can raise a $10mm fund. Use half after fees to buy the assets (bitcoin, in the generic sense). Use the other half to sponsor open source work that benefits the protocols in which you have a stake.Fund management would be more difficult in some respects than traditional equity fund. If you’re holding OPM in crypto-currency, you have to invest in a lot of security and compliance — basically be a Coinbase. If that doesn’t make sense, then you have to make your investors hold their own bitcoins. That would also have its challenges, not the least of which being that you wouldn’t have carried interest! So there are some problems that need to be solved for this to work in mainstream VC.

  9. jason wright

    the bitcoin vested interest minority is getting the jitters.Brian believes in competition, and that’s a good thing. Is Coinbase supporting Ether trading may i ask?the browser analogy is interesting. Ethereum has a browser. Does bitcoin?I would very much like to hear opinions on what might happen when the bitcoin block reward (revenue) halves in July.

    1. fredwilson

      i believe they will support Ether when the volume and liquidity gets to a sufficient level. but that is my view, not theirs

  10. jason wright

    slide 28 of Brian’s pitch is interesting.If the banking industry does implement Ethereum for its backend systems will it really take ten to twenty years for SWIFT/ BIC and SEPA (Europe) to switch to it? really Brian?

  11. Dr Washington Y. Sanchez

    Sadly, I would liken closer to a war than an election.As with every election and political tussle, there is the ostensible cause of the war and the real politik cause of the war.The ostensible cause of the war is whether or not the Bitcoin protocol increases from a 1 MB to a 2 MB block size to increase transaction capacity. Both Bitcoin Core and Classic have their own roadmaps to scale Bitcoin, it is a choice of which roadmap to follow.The real politik cause of the war is something called the ‘fee market’.The Bitcoin block reward halves every 4 years, and in about 5 months it’s going to half again from 25 to 12.5 BTC for every block (ever 10 minutes). This means that miners will be rewarded a lot less in exchange for their work in securing the network and packaging transactions in blocks. While the exchange rate may go up in the future to offset the loss in reward, the eventual reality is that the block reward will not be sufficient to incentivize miners.Bitcoin Core believes that the only way to pay for the security of the network is for Bitcoin transaction fees to go higher… really high! Right now they’re about 8 cents per transaction. Some rough estimates I did (… show that Bitcoin transaction fees would need to go > $1.50 per transaction to cover the marginal cost of mining. This can only be achieved by have the supply of on-chain transactions be significantly lower than the demand for on-chain transactions. In simpler terms, the block size needs to be small enough so that users are bidding with fees for their transaction to make it into the blockchain. This is euphemistically called the ‘fee market’.This represents a major departure from Bitcoin’s economic properties today; aside from being a complete departure from Satoshi’s vision of Bitcoin.Bitcoin Classic believes that the ideal way to pay for the security of the network is by transaction volume, while maintaining or even reducing the fee for each transaction. This necessarily means raising the block size enough so that the supply exceeds market demand.Fundamentally, if Bitcoin transaction fees are allowed to increase by retarding Bitcoin’s transaction capacity via the block size, Bitcoin consumer adoption will decline in all likelihood. Already we (developer of OpenBazaar) are hearing from Vendors that if fees get any higher than what they are now, there is little incentive for them to support Bitcoin.Coupled with this is a frightening attitude by Bitcoin Core developers ridiculing the idea that Bitcoin can be used for consumer payments. They would rather see Bitcoin become the digital gold and a settlement network, with secondary layers managing consumer and business payments… which frankly hollows-out the purpose Bitcoin was built in the first place.Peripheral to this debate are the impacts on decentralization, which deserves another post in and of itself.

  12. jason wright

    this is an important topic for discussion, but it may have been better to publish it Monday to Friday, and also not on Valentine’s Day Sunday. there are fewer comments than i would have expected for such an issue and the important underlying technology (blockchain).

  13. Kevin Hill

    Elections sound nice, but this election has lots and lots of very fundamental problems.First, money (specifically hash power) is votes. As a long term solution this governance structure doesn’t sound any better than, say Mastercard or Visa.Second, traditional minor forks have been resolved because there is 0 switching cost involved, making convergence frictionless. With this new proposed fork there are large switching costs. Of critical importance will be the % of transactions that are confirmed in one branch that aren’t in another, which will eventual lead to double spending. If groups with large hash power (see first point) are on the loosing side of those double-spent transactions, the split will be permanent.Third, and probably most important, there is nothing special or revolutionary about the governance structure of bitcoin. Bitcoin falls victim to the same sort of inefficiencies and need for oversight and regulation that normal monetary systems do. Bitcoin being a digital currency wasn’t actually all that innovative, and we’ve had centralized digital money since the 80’s. Bitcoin’s unique value was that it was supposed to be decentralized and immune to things like elections.

  14. Dennis

    interesting read

  15. FollowTheChain

    The browser analogy is awful. We want many implementations of the same agreed protocol, not great uncertainty about the future of the protocol.If Core succeds in keeping control, Bitcoin as a whole is seen as not responsive enough, and will likely lose a lot of its users and economic activity to competing chains (Ethereum in particular). This might be already happening, and momentum for Classic doesn’t seem strong enough.On the other hand, if Classic gets close to 75%, this war will get really ugly. It’s far from certain Core supporters would just gracefully accept a Classic branch, and Core still has the nuclear option of changing the mining algorithm, which would result in the network splitting in two as a permanent situation.