Scams, SegWit2X, BCH, transaction costs, UTXO wallpapers
One year is coming to an end …..
By Jörg Molt written December 25, 2017
Thoughts to Christmas and New Year’s Eve
The year for BitCoin was turbulent and after some adjustments, the price has settled between 13 and 14 thousand dollars.
We have had a rollercoaster behind us, based on the fact that ignorant AltCoin enthusiasts and eager investors and companies have tried to weaken BitCoin as a whole.
This is not because BitCoin couldn´t withstand it, but rather because of the psyche of man. Trading is psychology and depends very much on which messages are perceived as genuine and which as false.
In the investment world, the real market value of BitCoin is of no importance, because many do not understand this component. It was a year in which I tried to enforce this awareness, and I succeeded in several conferences.
In this summary, I would like to reiterate why BCash is not the 2nd BitCoin, but only an AltCoin. Here I´ll explain again why no other Coin can replace BitCoin. And why the SegWit2X Coin has, in consequence, not happened.
Another point I´d like to make here, is to respond to the allegedly high transaction fees
Past history: Roger Ver has long complained that the miners in the BTC network have no decision-making power and only the nodes have it. And that is exactly how it is, and it will remain so.
The separation of the powers has the advantage that one can set limits to capitalism, without having to consider the capital-driven miners.
Roger Ver has therefore sponsored the BCU – BitCoin Unlimited Team. On the Core Developer Team. There have always been differences between the views of Roger Ver and the Core Dev team, on how to make the network faster and other developments. The Core Dev team evidently word too slow for him. This is not reprehensible, I myself know that too, if I think I have a solution and I think I am only surrounded by slowcoaches. You can not blame him for that.
However, a decision in the BitCoin Blockchain has complex implications. Let’s say we want to make the node structure faster with a few InOP commands, etc. then it all has an impact on wallets and its interaction with the Mempool. To date, the relationships are not fundamentally clarified.
While the beginnings of today’s core were still relatively clear, Satoshi Nakamoto has further complicated the protocol with Garvi Andresen for security, and with each further development, more referential dependencies have been created. One of Blockchain’s most respected programmers, Andreas Antonopoulos, said that only 65% of BitCoin Blockchain has been researched and we are still far from saying that we have understood it.
Roger Ver then stated that his BCU team thinks more advanced and modern, and should break through old ways of thinking. Furthermore, his view is only a step forward when you do not delay developments by skepticism. And that is also my opinion, but then you really musst know what you are doing.
The BCU simply decided to work with larger blocks, which then caused a collision in live operations and disrupted almost the entire network.
Of course, the mistake could be fixed later, but that was amateurism at a high level.
Due to these circumstance, allegations were thrown around and it led to a final division of the parties. Because of this, Roger Ver wanted to do a hard fork for his BCU coin (still listed today). But failed because there was no majority.
Since then it has been very quiet in this area.
Asicboost scandal and the BCash coin – in the turmoil of SegWit and SegWit2x
There is a group of developers, such as the BCU, who pushed early to make the BTC chain faster with big blocks. But the need was not there, and so the Core Dev team justifiably said they had enough time to work on solutions. And even today – believe it or not – the speeds are perfectly adequate, were it not for the miners, who do as they are told.
It results in a very simple equation. The number of users holding BitCoins, rather than sending, is outnumbered by 70 percent to those who spend their BitCoins or send them elsewhere. So taking an average transaction rate of 13 transactions per second as the basis (SegWit now does this through more transactions in a block), these 30 percent are completely covered.
Back then and today, the statistics are referenced. As it says „numbers and facts are not dependent on opinions!“. Yes, that is actually the case when you hide certain things for presentation.
One fact that is hidden, is the fact that in both periods a large number of miners did not completely fill their blocks. Most people are unaware that miners have no obligation to populate the blocks completely, with up to 8400 (previously 4200) transactions.
On the contrary! Each miner can determine how many transactions he packs in a block.
These circumstances have led to the impression, just as it is today, that the network is too slow. As a result, people are forced to spend more on transactions rather than waiting longer. The problem here is that there are people who can afford it, and so the principle of equality is broken, and you sometimes pay more for comfort than with conventional banks.
Now you might think that this leads to people moving from BitCoin to AltCoins. But we know that this assumption on the numbers is wrong. Because people know that the price increase brings in the fees again. That does not mean that you have to settle for it.
SegWit and SegWit2x
The DevTeam sought peace in the discussion of speed and realized that a solution had to be made. But not at any price. At the Milan conference it was decided, after not agreeing to activate SegWit that and 6 months later a HardFork on 2 MB blocks (ie 8400 TX per block without the SegWit generating them) would happen. The whole thing was called BIP 141. BIP means Blockchain Improval Purposal. It is a kind of declaration of intent with a White Paper which has to be approved by 51% of the nodes.
And this is where the first misunderstanding happened. Due to the value of this intrusion into the system, it was decided voluntarily, without GDP, to involve the miners in the vote.
What happened then was that people forgot that, due to their systemic nature, the Nodes are still in charge. They just wanted to reach the highest possible consensus. Therefore, initially 95 percent had to agree to the activation of SegWit. However, this did not happen, because Roger Ver could withstand 26 percent and thus none of the parties could reach the majority. What we experienced was that the agreement was unilaterally terminated and it came to a renewed dispute. As the price plummeted, the big players sat down at a table in New York to find a new consensus.
Now only 82 percent had to agree, and 6 months later we had the HardFork.
To consolidate the whole thing, GDP 141 and GDP91, which was supposed to prevent GDP 148 (SegWit2x), were called together with GDP 141. If approval had not been given for SegWit, the way would have been cleared to carry out a so-called User Activated Soft Fork for SegWit, and immediately thereafter, without any waiting period, a User Activated Hard Fork. The miners could have just started, regardless of a vote.
It then came to the so-called SegWit Lock In, which prevented the GDP 148. Incidentally, the New York Agreement stipulated that in the case of a HardFork, no new coin would be generated, so the public would not have access.
333 blocks had time to be approved; which also happened. The remaining time of 1683 blocks should have served to upgrade the nodes and all others. (So in total 2016 blocks (about 14 days), which corresponds to the time when the difficulty in the network is adjusted).
That also happened, and as a result Segway was activated on 01.08.2017.
The HardFork should have taken place in November and the time was calculated around November 15th, 2017.
As we know, that did not happen. That was because the majority of the nodes belonging to the CoreDeV, cancelled the agreement. They no longer adhered to the voluntary commitment, because the network allows (which many forgot) without GDP, only votes from the Nodes. With that SegWit2x was tilted.
Logically, this led to frustration amongst supporters. From an investor’s point of view, the hope for a SegWit2x Coin, never really existed. Many bought SetEit2x tokens and raised their BitCoin amount due to the false expectation of double coins.
Most of these were apparently Coinsbank users. What happened next (during this turmoil BCH came onto the market – but more to this later) was one of the largest battles between miners and Nodes, which was again falsely referred to by the press as decision makers.
Of course, Coinsbank knew that only the Nodes decide. They then brought out a new node called the BC1 Node. Of course, this name causes confusion, one could believe that it is called the BitCoin1 Node.
Coinsbank (which, incidentally, reports to investor Barry Silbert) issued the following statement:
„If you want to take advantage of the new SegWit2x Coin, which definately will be coming, you need to upgrade your software to BC1. That was the biggest lie to enforce interests that ever existed.
In fact, this was a new Core, which prefers larger blocks without SegWit, and where the decision is with the miners.
It was believed that if enough people changed to BC1 and the corrected BC2 Node, the SegWit2x Coin could become the new chain with the most hashing power.
But this did not happen. The other nodes remained in the majority. The New York Agreement was implemented and I was right. I wrote several times that there will never be a SegWit2x Coin. However, thanks to the press, no one understood the principle and nobody wanted to deal with it.
I wrote an article which also appeared in The New York Times. The only medium that really understood it. As a result, the price went up briefly, but through the turmoil with the BC1 node the perception tipped again.
Finally, the group cancelled on SegWit2x itself. Everyone knows that you can´t endanger BitCoin, because the market cap is so high and everyone keeps BitCoins. You also shouldn´t forget that Roger Ver is involved since 2010.
Nobody wants to destroy the value. And thats it.
Let’s talk about Roger Ver and BitMain with BCash – BCH
BitMain, as the biggest miner, was shaken in the confusion around SegWit from the so-called Asicboost scandal.
What’s it about? The AsicBoost
By overclocking some devices, Asic has managed to get 20 percent more power. This only maked sense, as long as SegWit was not activated.
SegWit is able to double the transactions in a block, by removing the signatures, which are not necessary for proof of work.
A miner however, lives from having the most power in the so-called hash process, and tries to gain advantages in the issuing of BitCoins. This is a random principle in the guessing process, so the probability of generating more results, with more guesswork, is obvious.
However, this 20 percent advantage will be neutralized by SegWit, since the upcoming Lightning network, which requires SegWit (because it only transports the signatures and no transactions), is unnecessary. Lightning can process up to 1 million transactions per second, on a signature basis.
So, if people are going through the Lightning network, because it only costs 20ct, they will have less transaction fees on their network, and the miner who finds the block, will get a total of 12.5 BTC. Thus, the cost is not covered.
These miners, with 20% more power, cost of course much more.
The scandal occurred because a newspaper revealed that these miners were only working with a certain group of people and were denied to the general public. Which led to a further imbalance in the network.
Due to the fact that Bitmain investors and major investors were disappointed, and threatened to leave Bitmain, there was only one option.
You make a new coin and bring it out with a token sale.
Roger Ver felt very fortunate to be able to revive the old BCU philosophy. And with the largest pool behind him, it was easy to get the majority for a HardFork.
The result we saw then in the formation of BCH. Now you need some trumpet politics to bring a coin out that is worthless, to a certain status.
So the true BitCoin was without SegWit and with original 8MB blocks. Roger Ver then moved his coins onto an exchange, which also fueled the illusion that he could turn his BitCoins into BCash.
What came next was another dilettante masterpiece. They forgot to set the Difficulty and so BCH had a block time of 10 hours at the beginning and it took a very long time to get it fixed. Investors lost a lot of value and BCH shot down in value.
Today what´s left is a stubborn community and development team. However, 55 percent of the hash power is in one group and they hold central control of the network.
Also, BCH can not be used as a means of payment – ergo a Blockchain with 8MB blocks in a central hand with no external effect. Pathetic for something which calls itsel the „true BitCoin“.
Luckily, it does not change the attitude of Roger Ver in favour of BitCoin or BCash, Fintec and old Moneysystems, and so in reality, he´s working on the dream of a free crypto society.
After the wildest rumours of hashing power and dumping on low transaction fees circulated on the internet, and the propaganda on Roger’s BitCoin.com blog, BCash currently has an overrated price bubble that can burst at anytime.
AltCoins and the future
You can see with the two coins SegWit2x and BCash, that AltCoins and FakeCoins only have a limited life span, as long as you keep the story going. But sooner or later, the story is no longer enough and investors start looking for something else, a new blockchain and a new coin that they can push. Ultimately, all the hype is for people to trade with Altcoins to buy more BitCoins, or making people pay for Fake Coins with BTC, so enabling the Fake Coin issuers to get their hands on more Bitcoin.
The price increase from January 2016 to the end of 2017 has caused enormous greed and an increase in scam companies.
SCAMS WHICH HAVE DIED AND ARE ABOUT TO DIE
Those I predicted would die:
Pura Vida Coin
Cryptrade Capital (which happened faster than expected)
…and many more.
Those about to die:
Xin and Infinity
Ultimately, even real AltCoins have only one purpose.
They are for a closed user community and will therefore not be able to overtake BitCoin, which massively increases it´s real market value.
Transaction costs of the future
After the accusations that BitCoin transactions are costly, you will see that the of the invisibility and speed will be restored in the coming year.
So, let’s take a look at the costs.
The BitCoin network has 2 cost factors:
Wallet operator costs (Miner) Network fees (UTXO)
Each miner can charge as much fees as he likes through his offered wallet.
What does that mean ?
Logically, only the miners have high fees that artificially limit the transactions in their blocks. This includes Xapo, BitPanda, CoinBase, Blockchain.info and a few others. One of the highest transaction fees, has bitgo.com. This wallet operator makes you pay for its security and should be used by long-term investors. Strangely though, those wallet operators who have the highest fees, also don´t give you your private keys.
As a result, you should use lesser-known wallets that, for example, do not belong to the Barry Silbert Group or Roger Ver Group.
These include Airbitz, Samourai Wallet, Hidden Wallet, Dark Wallet, Bisq, Electrum, and more.
UTXO (Unspend Transaction Output)
This is a special form of fee. In simple terms, it can be called small change. These are provided in the protocol and firmly anchored at 15-30ct, but can vary according to one of the last GDP depending on the network load, but still do not make up the lion’s share, that still goes to the wallet operators. Similar to fuel prices and tax.
The system is so designed that everything which is sent to be checked, becomes changed, and it´s used for the Mempool directory.
So when a transaction takes place, inputs in the mempool are destroyed and new outputs are generated for future transactions.
Each UTXO has a signature associated with the owner.
In the BitCoin network, this signature must be available during a transaction for the transaction to be considered secure.
The UTXO used in the BitCoin network corresponds to the value of the transaction, which is transferred to a BitCoin address, along with the signature, so you can release the output sum of the transaction, and the sum is held until it is credited to the recipient.
This fee for the resulting change between output and input is therefore charged as an additional fee.
Therefore, there are two prices. You can see that on bitwala.com you make a bank transfer there, once Bitwala´s 0.5 percent fee is collected, additional UTXO fees may apply.
So SegWit will clean up the whole thing in which it records Lightning. The Lightning developer have announced the reducation of fees to 20ct. This forces the old network to significantly reduce their wallet fees.
Thus, the argument for donations will be given more importance again.
Furthermore, next year’s GDP will cancel the function that miners can de facto create empty blocks on their own. It was once thought that yes, a miner would make a loss by working off less TX. Today however, it no longer works because people are willing to pay higher fees.
Therefore, the system must be changed here, which is a difficult task. But a solution is already available.
With this in mind,
Good luck to you and BitCoin, and to an exciting new year
Best Regards, JP Molt