Sunday, January 17, 2016

The Stunning Collapse of Faith in Bitcoin

I have already reported on the news that Mike Hearn, former Bitcoin engineer at Google, has declared Bitcoin dead.

Now, NYT provides some of the backstory:
[A] nasty fight has torn apart the small brotherhood of Bitcoin developers and raised questions about the survival of the virtual currency...

The divide has led over the last six months to death threats against Bitcoin developers and hacking attacks that have taken down Internet providers. The sense of betrayal is strong on both sides. One of Mr. Hearn’s primary antagonists, a bearded California-based programmer named Gregory Maxwell, also appears to have pulled back from his work on Bitcoin after receiving anonymous death threats...

The current dispute, though, is a reminder that the Bitcoin software — like all computer code — is an evolving product of the human mind, and its deployment is vulnerable to human frailties and divergent ideals.

There may yet be a middle ground on the question that began the fight, but for the moment the sides are deadlocked, and that has left the Bitcoin software — and the virtual currency itself — in a state of limbo. Mr. Hearn is convinced that the stalemate will soon make it hard to complete even simple transactions and will eventually drive away users and lead to a price collapse. Mr. Hearn’s concerns about this impasse have been echoed, often in less strident tones, by a growing number of other developers, as well as by start-ups that buy, sell and hold Bitcoins....

Mr. Hearn is convinced it is already too late. During nighttime walks in the woods near his apartment in Zurich, he has been trying to figure out where Bitcoin went wrong and what it means for the idealistic beliefs that led him to the project in the first place.

“It never occurred to me that the thing could just fall apart because of people getting crazy and having fundamental political disagreements over the goals of the project,” Mr. Hearn said in a Skype interview from his apartment. “It’s really shaken my faith in humanity.”...

The bonhomie began to fall apart last year because of what appeared to be a positive development: the continuing growth in the number of Bitcoin users and transactions.

The problem was that, early on,[Bitcoin creator Satoshi Nakamoto] set a limit on the number of transactions that could be processed by the network every 10 minutes. The cap was meant to ensure that the computers supporting the network, and processing the transactions, would not be overwhelmed by an enormous quantity of data. But Satoshi had suggested that the limit should be temporary, and as the number of transactions coursing through the network inched closer to the cap, delays started to occur and transactions were not going through.

When Mr. Hearn began pushing for changes to the core Bitcoin software to allow for larger blocks of transaction data, he faced immediate resistance. Gregory Maxwell, a largely self-taught programmer who had worked on Wikipedia and the Mozilla web browser, both open-source projects, said that larger blocks of transaction data would be harder for ordinary computers to process. The result, Mr. Maxwell warned, would be to hand control over the network to big companies that could afford powerful computers.

For Mr. Maxwell, slower transactions seemed to be a secondary issue to protecting Bitcoin from centralized sources of authority.

“It’s far from clear to me that the world will get a second shot at this in the next several decades if Bitcoin lapses into the same-old, same-old,” he wrote to other developers...

The fight took on a new dimension when a powerful hacker distributed Bitkiller, malicious software that sought out computers that downloaded the Bitcoin XT software and overwhelmed them with traffic. One Internet provider on Long Island said the Bitkiller attacks brought down service for part of southern Long Island for several hours. The biggest American Bitcoin company, Coinbase, was taken entirely off-line for brief periods after declaring support for XT. Not surprisingly, this scared away many Bitcoin users from downloading the new software or even declaring support for it.

The hacker responsible for the attack, who appeared to be based in Russia, told Mr. Hearn in an online exchange that someone “payed me for killing XT” — though he declined to say who was responsible...

Mr. Hearn says he thinks that getting the opposing camps together will now be very difficult. He believes that the dangers of the current impasse have not been reflected in the price of Bitcoin because the full debate has been censored in many of the online forums where Bitcoin is discussed.



  1. Shocker. The New York Times gloats over Bitcoin's troubles, condemning and decrying a free currency. Who would have suspected.

    The NYT - suggesting that a free anarchic, money doesn't and can't work because its path isn't as smooth, sanitized, and hiccup-free as an authoritarian, command-and-controlled currency.

    As we know, freedom and anarchy tolerate dissension and conflicting views. The resulting pains we now witness constitute exactly the necessary impetus to drive people acting as peers to negotiate compromise or failing that for some to rise up to provide superior alternative cryptocurrency solutions.

    Fortunately as an anarchist RW understands that and would never agree with this NYT article trashing Bitcoin as if its troubles were proof positive for the necessity of using the state-provided solution, the dollar.

  2. Gold works too. At least when the person you want to pay is standing in front of you.

  3. yes go back to the bartering system,screw the feds!!