A friend and contributor to this site, Poncho V. Schmidt, texted me the other day about the bitcoin vs Bitcoin Cash debate. We ended up having a mini-debate about the issues of scaling bitcoin.
I did some slight editing to the conversation for improved readability.
Poncho: What do you think is going on with the Bitcoin price plummeting?
Rollo: It’s shaking the weak hands out. Might be people cashing out for Christmas. Regardless, here’s my view…HODL.
Poncho: I sold some just to reduce my exposure. Trying to not be too scared to sell more. That video is great though.
Rollo: This dump should have been expected. It was only a few thousand a few months ago.
Poncho: The difference seemed to be that many people seem to be rather unhappy this time with all the slow transactions and high fees. I know a good deal of people are exiting to Bitcoin Cash (BCH).
Rollo: Yeah, scaling is definitely an issue. The price and usage jumped up before the software was ready for that volume. But I think Bitcoin Cash is the wrong solution to the scaling problem. It’s very high time preference.
Poncho: I listened to the Tom Woods debate on it. I’m starting to agree with Ver. I’m looking at it from my “having worked at a startup” lenses. The “correct” solution is useless if no one uses it. My worry is that enough consumers will have that high time preference and bitcoin will lose out. And I’m just not convinced the higher cost of running a full node is a real issue.
Rollo: This tweet from Jameson Lopp shows the problem with the higher cost of running a node. If the Lightning Network is useful, it should alleviate the scaling problem without centralizing the network. It is my opinion that bitcoin (and any cryptocurrency) fails to serve as a means to actually own your own money if the network becomes centralized. So I’m willing to take the risk of your concern to keep the network decentralized. The benefit of usability disappears if the network is not secure and gets exploited.
Poncho: That tweet is interesting, but I’m not sure it’s the most sound argument for centralization. After all tech is always getting cheaper. Isn’t it feasible to think within a few years the cost of a full BCH node will drop enough to run as an individual?
Rollo: But then the blocks will also probably be full again. Bitcoin Cash didn’t create that much more space and people are pretty careless about the size of the transactions they use because it’s currently so cheap. If Bitcoin Cash does get huge increases in volume due to everyone switching, they’ll be faced with the same scaling problem. They could again increase the block size, but that centralizes the network further.
Poncho: Correct, but like Ver has said, Lightning Network will work just as well on BCH right?
Rollo: He said that. I have no way of disputing that and Lopp didn’t dispute it, so I can assume it’s true. But what if that happens before Lightning is put in place? And more importantly, what if the huge miners in the Bitcoin Cash network decide not to implement it? There’s a greater incentive for them to increase the block size so they can continue to grow their control of the network.
Poncho: Well I don’t know what to think. You’ve at least convinced me not to sell any more bitcoin. Someday I’ll probably kick myself for selling when I did.
Rollo: Nice. I think this stuff is fascinating. I think it’s important to know what your philosophy for bitcoin is. That will help you make decisions. Who knows, maybe Bitcoin Cash is a success and overtakes bitcoin. I’ve never been convinced that bitcoin will necessarily be the cryptocurrency that comes out as the standard when the dust settles.
Poncho: My philosophy is absolutely in line with you and bitcoin. It’s the practical/risk averse side of me that is doubtful.
You’re welcome for this discussion without it becoming a flame war. There’s a lot of anger and emotion regarding this topic. I have strong feelings about keeping bitcoin true to its purpose as a decentralized peer-to-peer cryptocurrency, but while I disagree with some of the decisions for scaling of Bitcoin Cash, I’m not anti-Bitcoin Cash. If people want to use it, then it’s their prerogative. Choice is important for markets and the ability to fork is a hugely valuable tool to achieve that end.
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