The 2024 debate is about Bitcoin’s self-governance and growing ossification, and is based on the premise that the current ossified Bitcoin protocol is imperfect, but its sound monetary properties alone are enough to change the world for the better, and any change would pose unacceptable risks. In this article, we explain why in practice do not have Bitcoin Scaling Also The same financial characteristics are subject to direct risk.
To give a neutral overview, the arguments in favor of change are about increasing transaction throughput in a way that doesn’t burden nodes (unlike increasing block size). There are various proposals for tactical extensions to Script, the toolkit that every wallet uses to lock up Bitcoin so that only its owner can spend it. These extensions are new building blocks that can be used to share UTXOs without trusting a third party. If a UTXO could have multiple owners, each of whom could claim a portion of its value but could not steal from others and could be redeemed at any time without permission, Bitcoin sovereignty could support orders of magnitude more users, not only on-chain but also in Lightning and other yet-to-be-realized upper layers.
On the other hand, the ossification position is that the current protocols work as is, and changing anything could lead to potentially catastrophic unintended consequences. Digital, permissionless, sound currency is already revolutionary, and it would be better to meet the scaling needs through human institutions such as Bitcoin banks rather than accepting any risk at all. Most people are scared of personal liability, and even worse, self-management has technical overhead, so even today they prefer trusted third parties anyway. The belief is that market forces will organically curb these institutions, resembling the gold standard free banking era. Hal Finney envisioned this world in the very early days of Bitcoin.
Frankly, this is short-sighted and almost naive. Bitcoin has similar properties to gold, but it is not gold. Needless to say, free banking failed. It was captured, suppressed, chained behind bars, and finally shot for years. The incentives, actors, and forces are the same regardless of what valuable assets the banking system stores, so the same outcome should be expected. In the extreme, the ability to achieve final settlement in 10 minutes is completely unrelated to the strong incentives of nation states to control banks and profit without recourse. Worse, that era began when gold was in existence. Today, sound currency is the exception, and multiple generations have grown up using government paper money as currency, unaware of the inflationary nature, or even worse, unaware of the problem.
Bitcoin is not gold. The monetary properties of gold are determined by the laws of physics and no one can change them. If you own a coin and you verify that it is really made of gold atoms, that’s it. Bitcoin is not that simple. secret This means: ability To spend UTXO, if Is there anything at your address? and Spending transactions can be mined. Your preferences Chain. The last point is important: the ability to choose which chain to transact on. The only one Protecting Bitcoin’s monetary properties for youThe only thing that gives your Bitcoin market value then is the fact that other people value the same properties, and we expect their numbers to increase over time, causing the price to trend upwards.
Gold is being usurped by paper gold, and Bitcoin is being threatened by paper bitcoin as well. As with gold, depreciation is one risk. Lack of sovereignty, i.e. the basic “withdrawal request rejected” scenario, is another. But much more pernicious is the choice of chain. I’m not talking about Bitcoin vs. altcoins chains here, but the integrity of consensus rules such as the 21 million supply. Even if you have your own keys, if someone else is deciding on which chain you verify your balance and broadcast your transactions, you don’t know which currency properties you subscribe to. So if the vast majority of users only use L2 and above for practical reasons, don’t touch the chain themselves, use untrusted solutions, and think they’re not just using custodians, almost no one is aware of the rules they’re really subscribed to.
For Bitcoin to be successful, it needs to be widely used by sovereign nations, not just as an egalitarian dream or to aid commerce. In mutual defenseAll users who follow the administrator will not have any meaningful impact on the integrity of financial assets. However, all users will at least Monitoring The chain will be completely independent, making economic decisions for its own benefit and based on its own findings, acting as another guardian of the monetary properties that benefit everyone. Once this is established, any attempt to subvert the system will be untenable. There is a famous line by a Japanese admiral that goes, “You can’t invade the US mainland. There’s bound to be a gun behind every blade of grass,” and while this is probably fiction, the sentiment is undeniable and makes especially sense with Bitcoin.
To make this easier to understand, consider an analogy with gold. You knew that paper gold was at risk of serious depreciation, so you decided to trade only in gold with physical certification. You traded with coins and buried the bars in your yard. You had an expert chemically analyze them to make sure they were pure. If you buried them for safekeeping, it might be years before they were audited again. You didn’t realize that during the analysis, the expert scraped off 1% of them, replaced the missing weight with tungsten, and kept the scraps for himself. To make matters worse, the certifiers would play the same scam in front of you, reserving the “good” units for customers they knew would audit them most thoroughly. This is not their own choice, but may be forced by the state.
Now, understand that if most gold owners don’t personally verify because it’s complicated and expensive, there is an incentive for all attesters to do so, because each person benefits individually and a shared fraud benefits everyone. Even if someone breaks the rules and reports honestly, that person’s business grows based on that proof of authenticity, and over time, that person is even more in a position to exploit it for profit. You are dependent on the moral integrity of someone who directly benefits from deceiving you, who knows you probably won’t notice, and who is powerless to do anything even if they did notice. Notably, this applies to world politics as well.
Even if all rational Even if we go through the steps and only use hallmarked gold and reputable paper gold issuers, we’re not actually verifying that the gold is real. Even worse, the average person only uses paper money, not gold. What about the quality of banks’ gold reserves? Do they even have gold in the first place? How many people even care? Without direct access to valuable assets and selfish verification, the market becomes dependent on third parties with their own incentives, and individuals are left to their own devices. I do not understand What do they hold, what rules do they really adhere to? The market will naturally become disconnected from the base layer that provides value.
Imagine if you could buy a magic wallet that instantly validated the molecules of gold you put inside it. Every time a transaction was made, it would check its validity and if something was amiss, it would respond immediately. This tool is completely passive, works only for your benefit, and is entirely under your control. Wallet manufacturers have no incentive to lie to you, because they have nothing to gain by doing so. Their personal profit comes only from providing the best possible tools to protect their customers’ interests.
Bitcoin nodes are magic wallets. Paper gold users, like those who entrust their Bitcoin to a custodian, should understand the risks. Having a node or not is irrelevant, as paper IOUs cannot be verified by nodes. Hallmarked gold traders without magic wallets think they are protecting themselves, but they are being duped all the same: Bitcoin users who have their own keys but do not have their own nodes. What appeared to be independent parties that should be held in check by the market are actually rallying together in an “us vs. them” alliance driven by incentives, resulting in a completely predictable and nightmarish scenario of coordinated abuse.
Stretching the analogy to its limits, what if validating equipment becomes too expensive for any individual? In this case, we consider the case where block space becomes prohibitively expensive, rather than the nodes themselves. We already know that outsourcing the entire validation would only encourage organized exploitation. Without trust, the only solution is cooperation: multiple parties pool their resources to buy validation as a group. In Bitcoin, this is scaling through UTXO sharing: you relieve some of the burden, but you maintain sovereign control of your funds and take an active interest in maintaining the consensus rules, thereby contributing. Protect them for everyone.
If we work to make technology very accessible, and interest Enforcing sovereignty, via keys and nodes, solidifies widely distributed opposing interests and makes it impossible to subvert monetary properties. If the technology cannot provide a highly distributed direct stake in what happens on L1, then most people will inevitably lose access to those monetary properties, just as they did with gold. Scaling is not about increasing capacity to support commerce, it is about actually increasing capacity. defense.
This is a guest post by Owen Kemeys. The opinions expressed here are entirely Kemeys’ own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
