RE: Seg-Wit Is A Trojan Horse - Bitcoin Scaling Debate Explained
In order to increase the block size you must hard-fork and that is quite a risk on a multi billion dollar production network, but even if that was risk-free it causes centralization.
Why? If every transaction is about 250 bytes and you have 4000 transactions in a 1mb block, that means that in order to statisfy 7 billion on-chain transactions per day (1 per person) that will be confirmed every 10 minutes (144blocks per day) you will need a 12gb block size and on each block around 50million transactions.
In a day you will have the blockchain increase by 1.7TB, do you know many people that can afford such a full node? That means that no user will be able to validate his own transactions by running a full node and will have to trust 3rd party services. That is a huge violation of Satoshi's white paper.
Bitcoin is a premium ledger, there is no reason to keep a coffee payment on an immutable premium ledger. Your home ownership might be a good idea to keep on the blockchain, but not your VOD subscription.
In addition, segwit is a malleability fix. Currently, you can create two identical valid transactions (using the same input and output) and have a different transaction hash since the witness is part of the transaction hash. As result, you can't create safe payment channels.
I realize that you want everything to be done on the blockchain, but how's that going to work, for example, for a pay-per-view service? You will have to pay upfront an hour before starting the service and then hope that no one will cheat you out of your subscription. Using a payment channel you will be able to safely pay per second of viewing the video and know that the other side can't just steal all your money.
Payment channels are extremely safe and so is the Lightning Network.
In addition, currently you trust your money with exchanges like Coinbase. Do you think that when you buy bitcoins from someone on Coinbase they do a blockchain transaction? They simply change values on a Sqlite DB. That is done because the blockchain is slow and expensive to use. Give them a safer and cheaper opportunity and both users and exchanges will be safer.
Peace and Love to all :)
You'll want to use the bitcoin-abc client (https://www.bitcoinabc.org/) which rejects Segwit blocks and will mine bigger blocks.
"In addition, currently you trust your money with exchanges like Coinbase. "
Incidentally, I trust Coinbase less than I trust LN.
I think your example of wanting a transaction per day for 7 billion people is a pretty high barometer, given I'd say less than 1% of people I know in the US even know what Bitcoin is.
"Bitcoin is a premium ledger, there is no reason to keep a coffee payment on an immutable premium ledger."
Exactly, these people shouldn't even own bitcoin, they should use Litecoin or something else.
"That means that no user will be able to validate his own transactions by running a full node and will have to trust 3rd party services. That is a huge violation of Satoshi's white paper."
(Virtually) Nobody is doing that now. Mining centralization just is, we can't stop it from what I see, unless we switch to PoS. The virtuous loop built in which keeps it in the miner's interest for Bitcoin not failing seems like the best we can do. Could you cite the part of the white paper in violation, so I can reread it?
Also, how is the SW alternative not a third party situation? I don't really see trusting the Nakamoto consensus of hashing power at present as "trusting a third party", plus it is all on ledger. SW is not.
I believe Bitcoin is for everybody. I understand your view of Bitcoin as digital gold but I think Bitcoin should be used for any payment and to store anything of value.
Even with Segwit you will be able to perform all transactions just like before, it will make no difference for people that wish to use the public ledger (only fees will be about 75% cheaper). But, it will add the possibility to create safe payment channels that will enable some people to use Bitcoin for small incremental payments like subscriptions. It will widen the adoption and will increase Bitcoin's technological value.
I think that increasing the block size will increase centralization and thus violate Satoshi's intent. Running a node is easily possible these days (without doing any mining just verifying transactions and blocks). If only miners run nodes no one will be able to make sure they are honest. In addition, very few miners will be able to handle the bandwidth, HD space and memory capacity that a large block size demands.
Segwit is just a malleability fix, it is still fully recorded on the blockchain. It enables payment channels that only create two transactions on the blockchain (funding and closing transactions) which you call 3rd party solution.
In addition, Segwit encourages lower fees for transactions that lower the UTXO set (more inputs than outputs) in order to ease the memory consumption on nodes. Currently, having more outputs than inputs is cheaper and that creates stress on nodes.
I suggest reading more about payment channels here:
https://github.com/bitcoinbook/bitcoinbook/blob/develop/ch12.asciidoc
"I think that increasing the block size will increase centralization and thus violate Satoshi's intent."
Then why did he specifically suggest that we do so?
"Segwit is just a malleability fix, it is still fully recorded on the blockchain. "
This is not true. SegWit itself claims that it enables "off-chain transactions". Those violate the definition of Bitcoin. SegWit is not compatible with Bitcoin by definition.
He limited the block size to 1mb in 2010 and knew fully well that a hard-fork will be needed to change it.
It enables it. You don't have to use it and can continue doing all your transactions on the blockchain.
Note Satoshi's quote about it being fine to switch to client-only mode and have the nodes "on a server farm". The real Satoshi made exactly the same argument that Craig Wright made last weekend. Hmmm...