Jihan Wu Post on Hard Fork Stirs Pot

Blockchain, News | March 22, 2017 By:

Bitcoin evangelist and BITMAIN CEO Jihan Wu posted a long op-ed to his Weibo account in the last few days. He later clarified via Twitter that he was merely reposting the message and did not author it. But he did not immediately disavow its sentiments.

ORIGINAL SOURCE: http://8btc.com/forum.php?mod=viewthread&tid=49137&extra=page%3D1

R/BITCOIN ON REDDIT POST: https://www.reddit.com/r/Bitcoin/comments/60mb9e/complete_high_quality_translation_of_jihans/

Recently the BU and hard fork topic has become heavily obfuscated. Both sides are sticking to their guns and the arguing has become unbearable. Everyone claims that their own ideas are line with Satoshi’s vision of decentralization, and everyone believes that the other side’s plan will lead to the perils of centralization. On the surface, it appears that all arguments are founded in idealism. But are they really? In actuality, the conflicts at hand are ultimately the result of profit seeking. The tail is wagging the dog. This fellow (referring to himself) is now going to make a couple of observations about the community’s diverging interests and analyze what the significance of those differences is.

In regards to the fork issue, the heart of the conflict lies with the distribution of the fees for a given transaction and whether they should be handled by the miners exclusively or if they should be spread out (to a second layer). Up until now every transaction on the Bitcoin network has been handled by the miners, and all fees have been given to miners. From the standpoint of rational self-interest, it is only natural and obvious that the mining community is satisfied with this arrangement. However, this situation is likely to be disrupted by Bitcoin developers building lightning network and side chain layer two protocols. If a second layer comes to fruition, many Bitcoin transactions will be facilitated through it, thus bypassing miners, and ultimately resulting in them receiving less fees. It is obvious that the mining community wouldn’t be happy with this type of change.

If this is to be the general state of affairs, with the developers producing functions that only serve the users, then users will exercise these functionalities, and the miners will have no way of stopping it. However, the current circumstances in bitcoin are subtle. God (or perhaps Satoshi) has given the miners a blocking instrument. This ‘blocking instrument’ is the malleability loophole. This bug has inadvertently become developers’ largest obstacle in producing new functionality. By not removing this bug, developers’ second layer protocols will be hard to implement. The fix to this bug is segwit, but implementing this type of plan requires the mining community’s support.

In other words, transaction malleability has become the mining community’s first line of defense, a passage ((of a mountain range)) that can be guarded. Holding this point alone will strangle the development of layer 2 protocols, preventing transaction fee revenue being spread to outside of the mining community.

Rational self interest is human nature. Moreover, in order to win customer support, many layer two protocols such as the lightning network are exaggerating the functionality and benefits, and saying nothing of the limitations and shortcomings. This further exacerbates the miners’ fears. Therefore, the miners coming together to boycott segwit implementation to guard transaction malleability is the first line of defense.

Blocking the fixing of a bug, on an emotional level as well as a logical one, is not appropriate. These miners know this in their hearts. That is why they do not bring the issue to attention and are not willing to clearly articulate their position. From their perspective, a relatively compromising strategy is to delay segwit and promote on-chain scaling.

Why would they promote on-chain scaling you ask? Because if the on-chain fees are kept to within a reasonable scope, the user’s attraction to second layer protocols wouldn’t be as great.

We can draw an example from the global oil trade. OPEC enjoyed a monopoly over global crude oil supply and was able to raise prices above 100 usd per barrel. However, this lead to the development of shale oil, breaking OPEC’s monopoly. If OPEC had kept oil prices at a marginally lower level, say 50 USD per barrel, shale oil development would not have been as attractive. Now, shale oil production has become entrenched. Even if OPEC dropped prices to 30 USD per barrel, they would still be unable to destroy shale production. This has created an unfavorable situation for oil producing countries. Miners are afraid of exactly this type of phenomenon.

In summary. The hard fork is not an issue spawned from differing ideological points of view. Rather, it is a simple conflict of interest. The conflict cannot be resolved via slogans, propaganda, arguments of ideological correctness, fears of centralization, or fanning the flames of war amongst users. These are not paths to the solution.

If we want to solve the problem, we have to talk sincerely about distribution of interests (profits), and reach a compromise in the pursuit of those interests (profits). Miners shouldn’t try to strangle the developers in their development of new functionality, and the developers, in designing those new functionalities, must promote defending the interests of the miners. It is the only way bitcoin can achieve its goal of reaching the moon.