I know almost everything about the technical side of Bitcoin protocol & economical side of it, but probably still don't understand it enough to give exact answer on the economical/technical effects if the default fork in case of the Internet segmentation would be inevitable.
Imagine for example that something terrible happened to our ocean fiber optic lines all at once (maybe some vulcanos opened everywhere, or some weird nature events, or bad will of some countries who wish to destroy the connection between the whole American and Eurasian/Europe continents).
Let's imagine that Bitcoin already got mainstream and accepted in every country of the world. And then some disaster like terrorist country invasion, and then boom, no Internet connection to the outer world.
Imagine that such thing is happened to the Australian continent as an example, or maybe to the whole U.S. continent.
1) Imagine that such thing happened. I'm curious what's gonna happen to the main bitcoin's public ledger, if the connection with the whole continent will be absent for 3 MONTHS let's say. After those 3 months of 1 country having only its own internal Internet, how blocks will be generated, and once we have let's say Australian fork which is back with its own Bitcoins, then what's economically gonna happen to Australians?
2) Is there such worst-case scenario's are potentially possible: I mean exactly what can destroy Internet's global nature, and also what's gonna happen if the whole continent's government decides to isolate the whole country from the Internet by the physical ways (by emergent cut of fiber optics communication lines)? The same thing can happen when government decides to close physical access to the Internet for outer, so the whole country can access only to internal Internet resources.
Let's say such thing happened to U.S. which was disconnected from Europe for 3 months since right now.
If were a leader from Bitcoin Foundation, a person who needs to makes choice about what recommendations to give for the users of Bitcoin protocol - what would you recommend for the community? Here's few choices:
1) The problem is that in this case we will have 2 forks - A) American Bitcoin Fork; B) European Bitcoin Fork. The same thing is gonna happen to the American Litecoin Fork & European Litecoin Fork. We will have the duplicate forks for every continent. What if World Wide Segmentation occured, and the Internet is divided on 5 segments? That doesn't sounds funny anymore - it is like having 5 bitcoin forks, 5 litecoin forks, and most importantly - 5 dogecoin forks (and 1000 of other cryptocurrencies will have their own copies of fork). And if event lasts for more than 3 months, then even if all of the Internet segments will get back together, we still gonna have separate forks.
Imagine that before segmentation (separation of networks) you've had 1000 BTC (around $600,000 or half of million dollars) and you live in the United States. After segmentation you will be able to spend your $600,000 in U.S., and since the networks are separated, then you can go to Europe and spend the same amount of money 2nd time. You can buy 2 wonderful houses for such money in two different parts of the world!
But what kind of economical effect will follow such events? If there's 2 Internet segments, or 2 Accepted Bitcoin Blockchains in 2 different countries, then it will mean that those who have their savings in Bitcoin - will be happy about that, because both forks are functional, but how about overall Bitcoin economy? Since the currency is deflationary - it will be just okay to have a copy of the savings accepted to the public.
By the way my question is - since right now - what's stopping me and my team of developers from creation a 2nd Bitcoin fork which represents the whole copy of the current Bitcoin?
Since there's too much people already who's owning millions of dollars in Bitcoin, if 2nd copy of fork will be accepted somewhere, it will means that all of those people will run to that country in order to withdraw their coins into the other assets like gold, real estate, etc - because they in this case won't be sure if 2nd blockchain will be the same acceptable as it is right now.
Part #2
2) The Internet segmentation itself will mean not a very good time for economy. That's why it should happen, and we at least should have some backup fiber optic centers all around the world dedicated as the backup lines for Bitcoin Blockchain. These fiber optics in the peaceful time should be of course be loaded with the external worldwide traffic too (so that the investment could at least have ROI on itself), but that also means that the lines must be kept in secret from general public / government / anyone else.
3) Let's say that two continents were divided by Internet segmentation described above. Europe and U.S. But we still will have a backup line for a blockchain with capability of transferring the whole blockchain within 2 days back and forth. Does such help gonna count for the whole Bitcoin network to not divide? How does it technically will sound for Bitcoin?
Okay concerning this issue - there's still a lots of non-fiber-optic ways to transfer data between the continents - like wireless (through satellites), or even physical file delivery (like Airplane flying from Europe to U.S. and back, periodically delivering the main blockchain file).
Decentralization. In case of delayed blockchain delivery first question arises - is there someone who can benefit / cheat, in case if he has an access to control the delivery procedure? Yes - those person who delivers that file - gonna be able to build something like mining rig, then he can start mining Bitcoins, while the whole network is waiting for the updated blockchain, and he can potentially have few blocks mined ahead of the whole network right? The whole paragraph sounds complicated and very unlikely.
Intercontinental Synchronization. Let's say that Blockchain is always get delivered between 2 networks, every 2 days. But what again stops me from double-spending in this case? See, the network separation is very severe consequence - in order to accomplish successful mining, you should have an access to permanent communication line - for comparing the mining results of 2 continents. But is it possible to provide the steady connection with enough bandwidth the way two continents will be able to mine in the same mode as before Internet segmentation?
What happens, when mining pool claims to find a solution for a difficult problem? Right, it offers the next block of the transactions to be included into the next block of transactions. Two things happen once miner found a block:
1) Miner checks whether all of the transactions included are unspent.
2) Miner includes the transactions into the next block, after he checked the validity of each transaction.
Obviously, the bigger one will win and only the transactions of the bigger one will be valid.
Not necessarily. We have the other choice. We can choice the path of re-engineering the 2 blockchains in such a disastrous moments. Why? Because the situation is too complicated, and during the disaster nobody will refuse from using mainstream Bitcoin anyways - Europe users will keep using their Bitcoin wallets the same way as U.S. will do.
Then we have the weeks of waiting. There's no Internet connection, but economy doesn't sleeps - transactions must be done. So Europe will be apologetic about their blockchain acceptance, and U.S. will be apologetic about their blockchain - it is endless debate over who's more mighty, who has more rich people, who has more merchants, who has more hashing power.
Moreover you might be talking about 2014 where nobody cares about such events as Internet segmentation for a week, while I mean full-size 2020 Bitcoin Economy, where 2 huge world continents are totally depends from Bitcoin, and the whole infrastructure built through usage of the Bitcoin.
Of course first task is not allowing this thing to happen, but when it comes for emergency - sometimes nobody's prepared even in such a huge world. If it happens, then we will end-up with our nightmare - having 42 million coins instead of 21, and that is possible reality.
Blockchain reengineering will mean pruning 2 blockchains. Pruning process is finding out the balances of each openkey (each wallet), then you combine. E.g. if Alice has balance 5 BTC in one blockchain, then in the other blockchain she transacted the 5 BTC to Bob, then it means that we gonna rely on that. But if Alice has been transacted her 5 BTC to Bob in one blockchain, then she transacted her 5 BTC to Mary in the other blockchain, then in the new blockchain both Bob & Mary should get their transactions by increasing the quantity of coins in the protocol. It is convenient - because on the one hand Mary's & Bob's transactions won't be invalidated, on the other hand economy won't find out about it - the same thing is gonna happen, which happens every day with FED.
In case if you're pruning 2 created blockchains due to usage of both, you're having a problem with trust of those members of community, who's already 2 times spent their coins (e.g. brothers Winklevosses might fly to Europe at such time in order to spend their 100000 BTC, and Satoshi could fly to America to spend his 1 million BTC even though I believe he wouldn't do that, because he's a God).
We can of course validate both double-spent transaction even though it is unfair, but this thing can happen only once. Let's say Satoshi transfered 1 million of his Bitcoins to his other wallet on the 2nd blockchain, and on the 1st blockchain he put his 1 million to the other wallet - then he got richer on 1 million, but he can't do it twice, because of such hierarchy of 2 blockchains. So during such pruning everyone who had significant amount of Bitcoins already gonna win.
Its a good thing just the private individuals wins, but the problem is that this might be easily done by a corporation, who's planned such event, and who's invaded the Bitcoin Foundation and other huge Bitcoin clients too. Such combination would be deadly to Bitcoin and will enrich those corporations, but the key here is that it will be done only once.
In the news we will see it this way: "During the 3rd world Internet segmentation, the Bitcoin Economy suffered the most due to its architecture - we had 1 month of isolation of two continents, and after restoring the world after those disastrous effects done by the authorities of both unions, we've came to conclusion that we have to prune both blockchains. After premature analysis of both blockchain after all those events we've found out double-spent transactions on the amount of 12,000,000 bitcoins. We can't just simply cut of this amount of transactions, they're already done, coins are already in circulation in both jurisdictions, we've done all measures which we could by isolating targeted users from sending transactions internationally on the 2nd blockchain before pruning, but there was too many rich people who knew and was prepared to benefit on a disasters occurred. So Bitcoin Foundation come up with the proposal of including those 12,000,000 double-spent bitcoins into main blockchain, by increasing already set limit for 21,000,000 thus setting new limit of 33,000,000 bitcoins. New pruned fork is available for downloading since today, on bitcoin.org, MultiBit.org and the other major bitcoin client web-sites"
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