The Bitcoin Industry 2023
The Bitcoin Potlatch Principle Through the Lens of Rho-Calculus and the Innovation Bank
The Qualities of Bitcoin
Rather than talking about what’s ‘real’ and what’s ‘fake’ in the blockchain industry with respect to Bitcoin, it is much more useful and insightful to talk about quality according to the incentives laid out in the Bitcoin White Paper and the formal expression, or lack thereof, of what constitutes the names and processes, according to best available understanding, with respect to those incentives which always have been fundamentally adversarial in nature.
The Bitcoin White Paper described a set of incentives for a network to abide by, but it wasn’t known at the time of release which incentives would overpower others and which concerns might be mutually exclusive given resource limitations as the network grew.
Due to the three different versions of Bitcoin under three different modes of management and operation, no one community appears to be entirely satisfied with the properties of each, despite many strongly worded statements to the effect of ‘ours is the best’. Networks require that everyone participating in the network to be following the same set of rules as everyone else, the simpler the set of rules in the beginning, the more easily the network grows, the more complex the set of rules in the beginning, the higher the barrier to entry for participants, the slower the network grows. Because the Bitcoin White Paper sets out a variety of rules to establish network adoption and security, not all rules are going to align with the qualities desired by network participants all of the time, thus sharding, or forking, absent formally, correct by construction, expressive process calculus descriptions of these incentives, is to be expected.
Bitcoin Core BTC
Maximum simplicity of Bitcoin Script.
Maximum simplicity of network architecture.
Nash Equilibrium of incentives makes it largely immutable, following the basic incentives of Sections 4 and 11 of the Bitcoin White Paper, thus it forms organically as a result of network growth and adoption.
Idiot-proof and maximally trust-less, rather than ‘Marxist’ as Dr Craig Wright describes it.
What’s bad about it is therefore also what’s good about it, it can be trusted to be what it is according to its own rules which emerged from the rules encoded in the Bitcoin White Paper.
Broadly resembles digital gold because of the game theory of social analytics, network architecture of the incentives set out in the Bitcoin White Paper.
Sats can be carved off and made unique, like gold with respect to ornaments or jewelry, with which interesting things can be done.
There is strong demand for a digital gold-like asset, and Bitcoin Core benefits from being the first to market in this respect.
The advent of Bitcoin hashing ASICs chips gave greater weight to hashing and the random walk calculation in section 11 of the Bitcoin White Paper as the primary way to secure the network.
Bitcoin Core attracts by far the most ASICS hash power for block creation due to its very high price relative to other shards of the Bitcoin protocol, this makes it immune to race condition attacks (termed Empty Block attacks) from hashing external to the network.
Price must rise in order to incentivize miners as block rewards decrease every 210 000 blocks as transaction fee rewards are strictly limited, introducing an existential risk of block creation stalling in future.
This means that ‘tail emission’ block rewards, as already exist on the Monero network, for example, are already being discussed as a solution. Eventually BTC could be wrapped into BSV as a STAS token or something similar, as hashers switch to big block architecture in order to capture more transaction fee income.
Bitcoin Cash BCH
Builds in extra network architecture constraints on top of the Nash Equilibrium solution, Bitcoin Core, in order to fulfill the vision of a Peer to Peer Electronic Cash System and support 1000+ transactions per second in the network.
Bigger blocks reduce the risk of block creation stalling in future.
Because of its lower hash rate it is at risk of race condition attacks from ASICS hashers outside the network, i.e. BTC hashers.
High miner concentration increases the risk of double spend attacks.
BitcoinSV, BSV
Re-instates the original Bitcoin Script Op-Codes, which re-instates the Forth-like 2 Stack PDA Turing Complete computation on Bitcoin, allowing for what are commonly termed as ‘Smart Contracts’ on Bitcoin.
Switches to a ‘Big Block Small World Network’ of mining nodes, thus eliminating the risk of stalling block creation on the network and radically increases transaction volume.
Re-instates Bitcoin White Paper Incentives to the best of its capability, reframing the Bitcoin White Paper as a public notice of digital commodity issuance under the terms and conditions of the issuer, Satoshi Nakamoto, which they claim to be Dr Craig S. Wright.
Is developing a new Bitcoin network architecture termed ‘Teranode’ to radically increase the scaling of BitcoinSV transactions to potentially ‘unbounded scale’.
Because of its lower hash rate it is at risk of race condition attacks from ASICS hashers outside the network i.e BTC hashers.
High miner concentration increases the risk of double spend attacks.
Rho-Calculus Pre-Amble
The Rho-Calculus, published in 2005, and its associated programming language Rholang are designed to explicitly model asynchronous computation at scale, and therefore provide a valuable lens through which to understand blockchain technology. There are no variables in Rholang, instead there are processes and names being sent and received on channels, where parallel computation is explicitly represented. The reasons for Bitcoin’s sharding behavior can be formally described in terms of the best available understanding of asynchronous networked computation, the Rho-Calculus, at the time which the Bitcoin White Paper was published. Dr Craig S. Wright argues that the development of Bitcoin was sabotaged by Marxists and special interests. This is because he is willfully ignorant, and quite frankly viciously rude and dismissive, of anyone who tries to present a more descriptive version of the development of Bitcoin beyond his own narcissistic hot takes on the motivations of others and his own largely baseless and ideologically fundamentalist conspiracy theories. The Rho-Calculus, by contrast, is an a-priori formal computational logical framework that can be used to formally express the behavior of all blockchains in terms of names, channels and processes.
This way of thinking about scaling of asynchronous computational architecture, like blockchains, allows for a better articulation and understanding of resource constraints and how overburdened channels or differing demands upon resources give rise to sharding: which is another way of saying ‘parallel processing’ or ‘division of labor’. These events can be explained broadly in terms of Race Conditions’ which can be explicitly encoded and defined in terms of the Rho-Calculus and the Rholang programming language, and can therefore be explicitly audited and checked in those terms, whereas this is not so with Bitcoin’s computational model.
This sort of parallel processing exists in day to day life in large organisations. There is typically an organisational structure whereby people in accounting will operate separately and in parallel with those in engineering, with intermittent meetings between management to ensure that high level business goals are aligned. A typical corporate hierarchy is a sharded structure, for example, such that information processing and labor concerns are separate, and hierarchy is a good way to think about sharding.
The problem with hierarchy, however, is that it can give way to moral hazard absent strong checks and balances, as describes by Daniel Robles PE. The same principle can apply to blockchain technology in terms of the hardware and software of blockchain sharding. RChain CoOperative, governed by Greg Meredith, itself collapsed after devoting too much cash to business development and marketing, while devoting not enough cash to blockchain development and engineering recruitment and retention.
Greg Meredith’s concept of sharding in relation to groups of names related to processes and their particular resources concerns, garnered from the Rho-Calculus, is still an incredibly insightful and useful lens through which to look at all sorts of networks and how they form, grow, operate and so forth. Sharding, or hierarchy, is where competition, for the resources, meets information asymmetry regarding those resources and how best to deploy them, meet. This sharding behavior and the reasons for it are able to be expressed directly in the Rho-Calculus in terms of processes, channels and names, not only does this make the Rho-Calculus particularly suited to describing blockchains and distributed applications, but also how blockchain networks behave in general. Any blockchain network whose resource requirements and processes were all encoded in the Rho-Calculus and Rholang would be able to clearly define events that result in failure modes or sharding in terms of those names, processes and channels, making the Rho-Calculus particularly suited to engineering networks and applications, where explain-ability, material information flow, and network analysis pertaining to material benefit and material risk are primary concerns.
Bitcoin’s fundamental weakness is that none of its computational encoding expressly defines the concept of process calculus outside the definition of the Satoshi, the unit of account, itself. Therefore material benefits, risks and events, such as sharding, such as network security, such as scale-ability, network growth and adoption, are weakly instantiated and therefore weakly explained. This leads to disagreements spilling out onto social media and courtrooms, which is both a waste of time and resources and symptomatic of bad engineering and bad management.
Proof of Work and Bitcoin Script: Parallel Sharded Computation
In order to grow the Bitcoin network, Satoshi Nakamoto et al had to consider four separate ‘groups of names’, in Rholang terms, of engineering considerations:
Governance and Network Adoption
Building and Maintaining Network Architecture
Proof of Work Consensus Computation
Bitcoin Script Computation
Within these groups of names pertaining to the incentives set out in the Bitcoin White Paper there are a set of game theoretic constraints that limit what can be achieved, which create Race Conditions, and therefore the sharding behavior of the Bitcoin network.
Simpler rules make for easier adoption, harder rules make for harder adoption
Lower infrastructure burdens make for easier adoption, higher burdens for lower adoption
The more connected the mining nodes are relative to data serving/CDN nodes relative to Lite Client/SPV nodes, the more efficient and scale-able the network is and vice versa
The more miner profit drives Proof of Work Consensus, the more secure the network is from empty block/race condition attack and vice versa
The larger the blocks or computational CDN services, the greater the network’s ability to process transactions and reduce the risk of stalling block creation, but also the greater the burden upon node operators to build, operate and maintain infrastructure.
August 2017, Bitcoin Cash created
16.5 million Bitcoins created
78.6% of total
~80 million adopters
0.21 Bitcoin / user
Average concentration: 0.098% / 100k users
November 2017, Bitcoin Satoshi Vision created
16.7 million Bitcoins created
80.0% of total
~90 million adopters
0.19 Bitcoin/user
Average concentration: 0.089% / 100k users
The ‘Potlatch Principle’ identified by Ian Grigg and discussed previously, has meant that Bitcoin has had to shard into three separate architectures according to the fundamentals of the Bitcoin White Paper, in order to accommodate the competing resource concerns described within:
Bitcoin Core, BTC, underpinned by:
Section 4 (Proof of Work)
Section 11 (Calculation)
Bitcoin Cash, BCH, underpinned by:
The title of the Bitcoin White Paper (A Peer to Peer Electronic Cash System)
Section 2 (Transactions/the UTXO model)
Section 8 (Simplified Payment Verification)
BitcoinSV, BSV Blockchain, underpinned by:
Treating the Bitcoin Whitepaper as a Public Notice with respect to issuance criteria of a Digital Commodity
Employing the Common Law rule set of that with respect to a civil legal obligation in Section 5 (Network) in order to enforce maximum transaction volume and computational completeness amongst Bitcoin node operators.
Radically increasing the technical complexity and infrastructure requirements necessary to participate in the Bitcoin network, which only became an investestable proposition after 80% of Bitcoins had been mined and 90 million adopters had been onboarded
In order to understand Bitcoin it is necessary to understand that each section of the Bitcoin Whitepaper describes a different set of computational concerns, which, together, create a unit of digital account. These sections are covered in the previous Bitcoin Industry post.
In order to achieve nChain and Dr Craig S. Wright’s operational aims, and according to Ian Grigg’s original criticism, Bitcoin is currently sharded according to competing and mutually exclusive economic and engineering constraints. These constraints currently have possible formal computational descriptions according to the Rho Calculus.
Craig Wright talks a lot about what’s insufficient about Bitcoin Core and a lot about how Bitcoin Core sabotaged his efforts, what he doesn’t talk about however are the material benefits that he accrued while the Bitcoin network grew organically according to the incentive framework laid out in the Bitcoin White Paper, that have still yet to be formally computationally expressed:
The material benefit of the Bitcoin that he claims to own and is allegedly able to sign the transactions for.
The material benefit of the ~90 million adopters of BitcoinSV obtained at the time of the fork.
The material benefit of being able to accumulate BitcoinSV at the lower differential price relative to the Bitcoin Core tokens that he claims to be in possession of, thus drive the transaction types he most approves of, which then pertains to how Teranode Overlay Nodes are serviced by the BSV Blockchain Association.
The material benefit of Bitcoin having already been established as a brand and a network with strong adoption.
The material benefit of being able to express the under-utilised aspects of the Bitcoin White Paper that he is now able to express with very large investment, given the other material benefits accrued by him from the growth and adoption of Bitcoin Core.
BTC’s architecture and computational range, as digital gold, requires the least amount of centralized organisation. BTC represents a game theoretic Nash Equilibrium solution to the Bitcoin White Paper that merely relies upon the raw power of pooled ASICS hashing to maintain the longest chain of blocks, according to section 11 in order to prove work according to section 4. This has much more to do with the nature of the incentives contained within the Bitcoin Whitepaper and the chosen proof of work consensus algorithm of all shards of the Bitcoin network than it does Marxism or conspiracy theories. Until this is formally encoded according to best available understanding, it’s useless and futile to argue over.
BTC vs BSV
It’s not about Block Size, it’s about Computational Scalability
Ostensibly the BTC vs BCH vs BSV disagreement that resulted in BitcoinSV started as a block size and ‘return to White Paper’ narrative, what it really is about is a separation of concerns with respect to what the viable solutions to the Satoshi White Paper actually are. BTC’s organic growth provided both BCH and BSV with material benefit, because the Bitcoin network it would have been unlikely to grow as it did under the strict criteria set out by Dr Craig S. Wright or Roger Ver had it done so from the outset.
In order to break the deathly embrace of competing concerns, new shards of the protocol were created.
Satoshi Nakamoto, Teranode & CBDCs
Teranode is a fundamentally different architecture for Bitcoin and a new separation of concerns whereby transactions within blocks are constructed and queried between Merkle Nodes and Overlay nodes. The Small World Network of mining nodes at the center acts as a validation mechanism and block discovery mechanism only. BSV Blockchain’s SV-Node architecture is substantively different from its proposed future architecture for ‘unbounded scaling’.
Mining separated from data, same as Lightning, essentially a L2 and L3 solution.
Overlay nodes are sharded types of computations, the base case is CBDCs
‘Unbounded scaling’ but at a cost of bounded expressiveness of computation on overlay nodes, due to the lack of formally instantiated process calculus in Bitcoin, which then tend towards CBDC implementation, unlike the Rho-Calculus and Rholang, which allow for full expressiveness at all scales. In Bitcoin transactions must be sharded on the Layer 2 CDN network into types of computations, with the Rho-Calculus they are grouped into names associated with computation, which is fundamentally different and the best to match resource requirements in terms of economic infrastructure.
Nowhere did Adam Smith advocate for the division of labor based upon the constraints set out in the Bitcoin Whitepaper. The Rho-Calculus, the best available computational framework for blockchain technology, is not subject to those constraints, only Bitcoin itself is.
The typing system on Bitcoin Teranode infrastructure confuses what should be a naming system in a formally correct by construction model of process calculus with a transaction typing system.
Introduces a moral hazard into the network, in contravention of the moral foundations of the Bitcoin Genesis Block.
Until the BSV Blockchain Association, and quite frankly all forks of the Bitcoin protocol, can formally explain the nature of their network in terms of the Rho-Calculus and material risks, in line with best available understanding, at least 80% of BSV and Bitcoin Cash token should be viewed as a pre-mine, at best, and a material liability pertaining to organised crime at worst. Bitcoin Core itself should be viewed as a failed experiment in the Bitcoin White Paper.
BSV Blockchain Association: The CBDC Backdoor
Identity is a difficult problem to solve if names aren't expressly defined from the ground up, as they are in the Rho-Calculus and the Rholang programming language. Teranode is a Bitcoin backdoor, in addition to The Bank of International Settlements and Blackrock. The BSV Blockchain Association are currently confabulating transaction types with names, when according to the Rho-Calculus and Rholang sharding behavior, shards are instantiated not according to transaction type, but according to the names associated with the demands on the resources. Thus, according to the Rho-Calculus, central banks are central banks, the BIS is the BIS, Blackrock is Blackrock and their resource demands are not obfuscated by the types of transactions which they happen to use the most, and behind Dr Craig S. Wright’s psychobabble and ex-post facto logic, as they are on the Layer 2 Teranode solution for Bitcoin.
Formal description of the Bitcoin network and its sharding behavior in terms of the Rho-Calculus is material asymmetric information. This makes Bitcoin itself unsuitable as a basis of financial and engineering infrastructure until this material information is revealed and made public. It is eminently possible that this information has already been collected as is being utilized by both market makers and surveillance capital interests, which would give them what amounts to a back door and an exploit both spot prices and the direction of network and infrastructure development.
Real Intrinsic Value
As usual, never mistake virtue signalling for genuine virtue.
And always remember that whenever anyone talks ‘infrastructure’, it’s not just a matter of money, it’s a matter of life and death.
Until next time, TTFN.