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Bitcoin Exchanges “Seriously Considering” Funding a Competitor – Gavin Andresen

Last Updated March 4, 2021 4:48 PM
Andrew Quentson
Last Updated March 4, 2021 4:48 PM

Gavin Andresen, Chief Scientist at the Bitcoin Foundation and Lead Developer of Bitcoin until 2014, held an extensive Q&A session with the Chinese bitcoin community yesterday.

Answering a range of questions from a diverse array of topics, the session focused on the most pressing issue in bitcoin, transaction capacity. Acknowledging the Beijing meeting between miners and industry in a number of answers, Andresen’s response to what seems to be the biggest worry, the co-existence of two-chains, was:

“BIP109 does not hard fork at 75%, it hard forks 28 days after 75% has been reached– so when the hard fork happens, there should be almost zero hash power on the minority chain. So there will not be a minority chain.

If I am wrong and blocks are created on the minority chain, people plan to get enough hash power to replace those blocks with empty blocks, so it is impossible to make any transactions on the minority chain.”

It is not clear how the mechanism of creating zero blocks would work. However, if such replacement is indeed possible, then one of the biggest worry in regards to a hardfork, suggestions that money can be double spent in extremely unlikely situations, seems to have been addressed at the Beijing meeting.

Bitcoin Exchanges to Fund a Competitor?

In more striking revelations, which perhaps may hint at what happened in Beijing, Andresen states:

“I am much less worried about mining centralization than most of the other developers, because Satoshi designed Bitcoin so miners make the most profit when they do what is best for Bitcoin. I have also seen how quickly mining pools come and go; people were worried that the DeepBit mining pool would become too big, then it was GHash.io…

And if a centralized mining pool does become too big and does something bad, the simplest solution is for businesses or people to get together and create or fund a competitor. Some of the big Bitcoin exchanges have been seriously considering doing exactly that to support raising the block size limit, and that is exactly the way the system is supposed to work– if you don’t like what the miners are doing, then compete with them!

I think changing the mining algorithm is a complicated solution to a simple problem, and is not necessary.”

It is not clear how exchanges would compete with miners. One method, however, may be collaboration. In our research we came across an interesting old post by Peter Todd  who on the 8th of September 2014 stated:

“It’s notable that Austin Hill [CEO of Blockstream] has been trying to setup deals with large pools and other controllers of hashing power to merge-mine systems using Blockstream’s technology as well as get the necessary changes to the Bitcoin protocol adopted by a majority of hashing power.”

The Beijing meeting was attended by some of the richest bitcoin companies with a market cap of hundreds of millions if not a billion dollars. Andresen states that some of these companies are “getting frustrated by the limit”, citing Kraken which has begun supporting alternative currencies.

“[I]f there is no on-chain scaling solution accepted by the network, I think we will see more companies “hedging their bets” by supporting other currencies that have a simpler road map for supporting more transactions.” – says Andresen.

Segwit and Lightning

Indicating support for segwit and lightning, Andresen states that segwit “will not help quickly enough”:

“If everything goes perfectly, we might see a significant number of SegWit transactions in three months. I would guess it will take six months for the miners to adopt segwit and then wallets to start producing segwit transactions, but it could take a year.

Unfortunately, transaction volume was growing more quickly than that, so even if Segwit helps, it will not help quickly enough.”

In his more striking claim Andresen states that Lightning is unlikely to assist for another two years:

“I think Lightning will take longer than people estimate.  Seven months ago Adam Back said that the lightning network might be ready “as soon as six months from now” … but I would be surprised if there was a robust, ready-for-everybody-to-use lightning-capable wallet before 2018.”

Blockstream and Relations with Developers

A number of questions were asked in regards to Blockstream, the Montreal based company co-founded by some bitcoin developers which attracted major investment from AXA Strategic Ventures and announced a partnership with PricewaterhouseCoopers. They have led an intense political campaign over the last year advocating what some consider a highly conservative approach towards transaction capacity culminating in a signed agreement between Adam Back, President of Blockstream, some bitcoin developers, and the majority of miners on February 20th 2016. Coinbase, the Silicon Valley, YCombinator incubated, bitcoin exchange, alongside Blockchain.info, Xapo, Bitgo, and many others, have been an effective counterweight in the Great Scalability Debate, advocating for relief from the current cap on transactions.

Andresen states:

“I think everybody at Blockstream wants Bitcoin to succeed, and I respect and appreciate great work being done for Bitcoin by people at Blockstream.

We strongly disagree on priorities and timing; I think the risks of increasing the block size limit right away are very small. I see evidence of people and businesses getting frustrated by the limit and choosing to use something else (like Ethereum or a private blockchain); it is impossible to know for certain how dangerous that is for Bitcoin, but I believe it is more danger than the very small risk of simply increasing or eliminating the block size limit.”

He further states that Gregory Maxwell, one of the co-founders of Blockstream, “honestly believes that a solution like lightning is better technically” and “[h]e may be right, but I think it would be better if he considered that he might also be wrong, and allowed other solutions to be tried at the same time.”

Answering suggestions that there might be some big conspiracy, Andresen states:

“I don’t think it is a conspiracy, I think it is an honest difference of opinion on what is most important to do first, and a difference in opinion on risks and benefits of doing different things.”

While some still suggest that bankers, insurance companies, governments, regulators, corporations, VCs,  extremists or communists, are coming to get us, most at this point recognize that there is a rational, fact based, difference of opinion with both sides raising reasonable points which explains the length of time the issue is taking to resolve. Indeed, Andresen, echoing Antonopoulos’ statement and others, suggests that all solutions should be adopted:

“The best way to be successful is to let people try lots of different things. Many of them won’t be successful, but that is not a problem as long as some of them are successful.”

A Father of Two Who Does Not Want to Lead

Andresen states that he will be 50 at the end of the year. A father of two, a boy and a girl, both teenagers, he states that he likes to keep a work-life balance and does not want to be the Linus Torvalds of Bitcoin.

Highlighting the need for competition, citing the benefit of Xthin blocks and other improvements now seemingly being adopted by Bitcoin Core, Andresen states:

“Moving from there being just one implementation of the protocol to multiple competing implementations is necessary, but difficult. I wish developers did not see that transition as being some sort of personal attack.”

He says he will contribute to all bitcoin clients, including core, but does not wish to be lead developer of any bitcoin client.

Ethereum, Doge, Beijing and the Rest

While Andresen states that he likes innovative alternatives like Ethereum more than others, he is of the opinion that ethereum’s innovations are best incorporated in bitcoin:

“I think most of the interesting things you can do with Ethereum you can also do with multi-signature Bitcoin transactions. I haven’t seen a really great use of Ethereum yet, and I think there will be a big problem with Ethereum smart contracts that are designed to steal people’s money, because very few people will have the skill necessary to tell if a complicated smart contract is correct.

I’m watching the rootstock.io project, which brings Ethereum contracts to Bitcoin.”

Asked about doge, Andresen states:

“I like the 21-million bitcoin limit. I think it makes sense for there to be a limited, predictable supply of money.

So I don’t like altcoins that create even more money; you can think of it as a sneaky way of increasing the 21-million coin limit. If Dogecoin was just a sidechain, without its own currency, then I would like it more.”

He of course thinks that “Bitcoin absolutely has a future” and that he plans “on working on Bitcoin related projects for at least another few years. Eventually it will become boring or I will decide I need to take a couple of years of and think about what I want to do next.”

Describing Beijing, Andresen states that it reminds him of London “with an interesting mix of the very old with the very new.” He further takes us back to those early days, as if to remind us where it all began as well as highlighting what seems to be a difference of opinion between what can be grouped as those who spoke with Satoshi and those who didn’t. In sharing his first email to Satoshi, but not the reply which would have been equally interesting, Andresen states:

“Hey Satoshi:

I want to help make Bitcoin a success.  I’ve started by creating freebitcoins.appspot.com, and plan on doing a couple of other small projects like it…

Bitcoin is a brilliant idea, and I want to help.  What do you need?”

Featured image from Shutterstock.