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Crypto Veteran Explains Bitcoin’s “Software Update” And Recent Price Moves

Courtesy of ZeroHedge. View original post here.

By Valentin Schmid of The Epoch Times

After a spectacular run up to $3,000, Bitcoin prices have been choppy, falling as low as $1,830. However, they reversed and rallied more than $1.000 in just a few days after a software upgrade called Segregated Witness (SegWit) was confirmed, which will allow Bitcoin to perform more transactions and develop different functionalities.

Epoch Times spoke to Bitcoin expert Trace Mayer about SegWit, the problem with the Bitcoin miners, other crypto coins, and expectations of price movement going forward.

Epoch Times: It looks like Bitcoin is getting a major upgrade with Segregated Witness. Can you explain?

Trace Mayer: It lays the platform for Bitcoin to scale and it also lays a big platform for extensibility. We’re going to be able to do all types of things because it is also a fix for something called transaction malleability. By fixing a lot of these things with Segregated Witness, Bitcoin is just going to be so much more. It’s a really, really big upgrade.

There are some vested interests, whether in the Bitcoin community or outside of the Bitcoin community, that have not wanted to see Segregated Witness activated. So, it’s been a long, protracted fight. But it looks like it’s going to get activated and Bitcoin will be on its way.

Epoch Times: Why did it take so long?

Mr. Mayer: It’s been two years in the making. If we had something like a Facebook, or a Google, and let’s say that that you only needed five percent of the voting shares in order to completely stop any future growth or development of the company, well, guess what?

So in the board rooms, you fight all the time. But with proxy voting you can have control of some of these very large corporations and get stuff done with inactive votes or people abstaining. But with Bitcoin, when you want to change something, you have to actively get a very large chunk of votes.

You have to gets votes from users who are using the wallet software, that performs network consensus. You have to get votes from the miners who are processing transactions in blocks. You have to have a super majority from everybody in order to maintain distributive consensus, or you’ll have what’s called “a fork” or a split of the blockchain. So anybody with even a very small percentage can exercise a veto. So Bitcoin has a whole different type of governance than a normal company.

And so, if you want to move upgrades forward, you have to have super majority consensus from millions of people and that’s a hard thing to achieve. So with Segregated Witness finally looking like it’s going to activate, Bitcoin’s rising up to a whole new level, because it’s being upgraded in terms of scale and extensibility.

And I think that’s being reflected in the price, because it’s going to have so many more use cases in the future. So investors who are buying and holding it today are looking at this saying: “The uncertainty about the path of Bitcoin going forward is getting cleared up, therefore we’ll buy and hold it because it’ll be so much more useful in the future.”

Veteran Bitcoin expert Trace Mayer has been involved in Bitcoin since 2011 and is also a major investor in many related start ups 

Epoch Times: But you say this is not a done deal yet.

Mr. Mayer: Right. We’re not out of the woods yet. We’ve only locked in what’s called BIP 91. We have another, couple hundred Bitcoin blocks before we start enforcing BIP 91, and miners will be the ones enforcing that.

And then even after that gets enforced, we need two weeks in order for BIP 141 to be activated. And then we have another two weeks before we actually start enforcing that. So the earliest time SegWit could be active and functioning on the network is mid-August.

Miners could be liars. They’ve proven that in the past when they have signaled falsely. So you get all types of Machiavellian games. But it does appear that we’ve gotten consensus.

People are starting to signal they are going for SegWit and people are relying on that. It’s really not in the miners’ best interest to disrupt this process any more than they already have. They stand to lose the most amount of money because they’re the only ones who have to actively choose which fork to follow, and that has the economic consequences.

Everybody else can just sit and hold and see how it plays out but doesn’t have to make an economic choice.

Epoch Times: Aren’t the miners just service providers for the users?

Mr. Mayer: The work they do has value because individuals and users of Bitcoin place value on that work. If miners do work that users do not value, then miners will lose a lot of money in the process. And then they won’t be miners anymore because they’ll go bankrupt.

Miners can’t fire anybody. The people who hire and fire are the people who hold Bitcoin and who use Bitcoin. The way they determine who they’re going to hire or fire is based on what software they run. And 99.1 percent of the people who interact with the Bitcoin network are using the Bitcoin core software because it’s the safest, the most reliable, the most secure.

But these miners think they can top-down authoritarian control Bitcoin because the work they do provides value either way. What they’ve found is that the more they try to squeeze their grip on the Bitcoin community, the more they’re just grasping at air.

Users and consumers should presume as a fundamental premise that miners are hostile and malicious to Bitcoin users and consumers. They’re not to be trusted. They’re a rattlesnake to be on your highest guard against.

Bitcoin’s been very much an open source community project where there’s been a lot of good will. People have presumed that other people are acting with good intentions, that they have Bitcoin’s best interest at heart. It’s been very collegial.

But this two-year-long debate around SegWit revealed that these miners are not to be trusted. This sets up a whole different type of game theory in the way that you interact with other people in the ecosystem. The Miners burned their bridges with a lot of people in the Bitcoin community.

At the end of the day, it has been very good because it helps Bitcoin become even stronger and more censorship resistant. You can think of it like the body getting a nasty cold or flu. It’s not any fun while you have it but if it doesn’t kill you, it makes you stronger because you increase your immune system and your ability to respond.

Epoch Times: What’s your opinion on some of the other coins in the space?

Mr. Mayer: None of them really have like a good, decentralized, peer-to-peer, censorship resistance, scalable, liquid, secure, way of protecting and storing value. And that’s why Bitcoin is king of the mountain.

That’s not to say that there isn’t a lot of fun going on and that you can’t make a lot of money with these altcoins. We have a lot of really cool projects going on and a lot of fun tech, but don’t pretend that you’ve got the security, the liquidity, and the scalability that Bitcoin has. Nobody is even close.

Epoch Times: What do you think the price is going to do in the near future?

Mr. Mayer: I think if we’re going to continue having turbulence. I think between now and probably the end of the year, after the November decision on 2x the issues get definitively resolved.

Then I think the price is going to be significantly higher. You never know, of course Bitcoin’s always wild and crazy, but the thing is, it just might actually turn into something, so perhaps, you should acquire a little bit of it.

And that’s really what people have to do, they have to develop their own human capital to learn how to buy Bitcoin, sell Bitcoin, secure Bitcoin. And even if you’re doing this with just a $50 or $100 bucks, you’re getting the technical literacy.

So if you wanted to move larger amounts in, you could confidently do it without losing your money. And so all of that takes time and diligence and hard work for people to do, which is why we see these waves of adoption and usage happening. Which means that there’s going to be lots of upside potential with Bitcoin for many, many years to come.

* * *

Finally, here courtesy of CoinDesk, is a quick timeline of BitCoin Cash following its imminent August 1 launch:

We're less than 24 hours away from the launch of Bitcoin Cash.

Whether you're worried, interested or excited, you can't deny that the event – which will likely see a new cryptocurrency created from the existing bitcoin blockchain – will have ramifications on the larger ecosystem.

In this article, I'm going to go over the different things you can expect in the next few days.

July 31

As you may have seen on social media, exchanges and merchants are currently scrambling to prepare for the fork.

At a minimum, these custodians of customer bitcoins will want to record customer balances right before the hard fork so they can untangle who's entitled to what later. (Or risk facing accounting challenges).

More adventurous exchanges are preparing to list Bitcoin Cash as a separate asset, though this presents its own problems.

For one, listing a cryptocurrency that hasn't launched could prove difficult. Also, once markets are live, trading is likely to be choppy. (Part of what caused crazy volatility during the Zcash launch was that so few exchanges supported it during the first few days.)

This probably won't be the case as many exchanges have already committed to supporting the trade of Bitcoin Cash, but it bears watching.

We can expect many exchanges to freeze withdrawals in preparation of the above.

August 1, 00:00 UTC

This is the expected time of the BIP 148 UASF launch.

Because the bitcoin network is already enforcing BIP 91, this should be a non-event. That is, BIP 148 won't split the network and bitcoin will continue as a single chain.

August 1, 12:20 UTC

Bitcoin Cash will launch.

At this point, miners that are mining Bitcoin Cash will create a transaction block greater than 1 MB in size and fork the bitcoin network.

There are a few scenarios here that depend on the percentage of hash power that the new blockchain attracts:

  • If less than 16% of bitcoin's current hash power transitions to Bitcoin Cash, the first block will likely take over an hour. This won't affect the bitcoin blockchain that much, though on average, blocks should take a little longer than 10 minutes.
  • If 17-50% of hash power moves to mining Bitcoin Cash, the first block will likely take between 20 minutes to an hour. This will slow down the bitcoin blockchain somewhat. Blocks on bitcoin will take between 12-20 minutes.
  • If more than 50% of hash power is mining Bitcoin Cash, the first block will likely take less than 20 minutes. This will slow down the bitcoin blockchain significantly. Blocks on bitcoin will take longer than 20 minutes on average.

During this time, users will likely begin sending Bitcoin Cash to exchanges that both list the cryptocurrency and that have vowed to continue operations through the fork.

We can expect that the exchanges that accept Bitcoin Cash deposits first will have a lot of activity, and that initial trading will likely cause some significant price volatility due to reduced liquidity.

As for transaction approvals, even with low hashing power, we can expect the Bitcoin Cash mempool to be relatively empty since the network's blocks will be relatively big.

At 12.5% hash power, the mempool on Bitcoin Cash will clear at about the same rate as bitcoin. That said, confirmations will be much slower for the coin with less hash power until difficulty adjusts.

August 3–7

If Bitcoin Cash has relatively low hashing power, we can expect some difficulty adjustments at this time. Most scenarios result in something close to 10-minute block times provided the hash power stays constant.

This is probably not a safe assumption as miners will likely be switching between Bitcoin and Bitcoin Cash depending on which one is more profitable.

Bitcoin Cash will be much easier to mine after the difficulty adjustments, and we may get some relatively fast blocks (2.5 minutes or less) until we hit block 479,808.

August 8–14

SegWit should lock in on bitcoin around this time.

Depending on how much mining power moves over to Bitcoin Cash, and how much new mining power shows up, lock-in on block 479,808 on bitcoin may take longer than expected.

Once lock in is achieved, the code will be activated later this month, effectively upgrading the main bitcoin blockchain to support larger-capacity transactions.


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