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Scalability

Transcript By: Bryan Bishop

There we go. Yeah. Looks good. Thank you.

So I wanted to talk about scalability and I wanted to give two opposing views of it. The first is really, scaling Bitcoin up is really really easy. The underlying architecture of Bitcoin is designed in a way that makes it easy to scale. You have your blockchain, and you have your blocks at the top which are 80 bytes data structures. They form a massive long chain all the way back to the genesis block when Bitcoin was created. For each block, those blocks commit to transactions in a structure called a merkle tree. Some data is pointing to another data structure by hash.

In practice, suppose that I have my Android client, it doesn’t have that much RAM on it or that much storage. I want it to have proof that a transaction is real. That when you pay me, you have really given me bitcoin. From the point of view of a client, we need a path of one transaction up to the blockheader, and the blockheaders are small, and with that small amount of data, you can scale up Bitcoin indefinitely.

Suppose there were 2^64 transactions. One block for every grain of sand on the planet, every ten minutes. So in this respect, it scales up as much as we want. So the next question is how are we going to get these proofs of inclusion to the SPV clients. We can go make it web scale with sharding.

We can very easily distribute this data across multiple shards. We don’t have to play with altcoins. Bitcoin could be implemented in really sucky Python code that is interpreted and it would still work fast enough. There are some changes we would have to do to make this feasible.

Right now a block does not commit to its contents in a way that is indexable. If I have an address starting with 1A3, I want a way for miners to go down a path in a tree or follow the A’s and the B’s and so on, you will end up at the part of the block that contains payments to you that you care about. This is called utxo commitments, txo indexes, and so on. Long story short, we know how to do this. We can implement this pretty easily. This will scale up Bitcoin great. All the clients will work fine.

The problem is, it’s not that simple. Bitcoin is not something where we have a centralized database. This is not a web2.0 application where we have someone who we already trust. We don’t just query them for data. “Be your own bank” means that we want to have a system where everyone can participate fully. When we say fully we mean not just in making a transaction but also in terms of being a part of consensus and validation and the decentralization. After all, if you define “fully” as “able to make a transaction” then technically Paypal is a system where everyone can participate. A paypal transaction costs 1% or 5% of the value of the transaction. That’s “fully participating” I guess.

Miners are a trusted third party. That trusted third party as a whole signs blocks. Blockstream calls this a dynamic membership multi-party signature. Matt used this term earlier today. It’s kind of this way of thinking about consensus algorithms in the context of how people talk about consensus. Paxos and other algorithms have a notion of a set of people in the consensus. But in Bitcoin the contribution is that the set can change. That’s not to say that Bitcoin is not a trusted system… miners can censor transactions, they can change the rules. Your only way of protecting against that is your ability to audit what they are doing and participate.

Bitcoin has economic incentives to build along these chains, touching along what Matt Corallo was talking about. Those incentives do not mean anything if nobody has incentives to be a part of that. When the number of participants is quite small, then incentives are hard to align and make work properly.

What happens when those mechanisms break down? As an example, suppose I was a miner, and there was a small number of me. Maybe we scaled up to the point where only there was a small number of miners. What happens when a miner decides to mint a block that creates BTC out of thin air? From the point of view of a SPV client, it can’t tell if that transaction exists. It’s view of the blockchain is only from the other side. It wont know that the block is invalid. It will just assume it is valid.

We have some possibilities here. The proof that the miner created an invalid transaction is relatively short. We could package it up as a fraud proof. We could show that this part of the consensus algorithm was broken, the miner committed to an invalid transaction, and then we pass the fraud proof around.

How do you know that you are going to get fraud proofs? How do you know you will find them? We don’t have any good answers to this question. We have no good way of ensuring that when a miner might create something that is invalid that someone is actually going to check it. For starters, you cannot assume that the Bitcoin network is composed of honest nodes. The Bitcoin network could very cheaply be replaced by someone running 3k Amazon ec2 instances with 3k different IP addresses. You just don’t know. Someone who has the resources to do mining can also have the resources to easily do those Sybil attacks.

Another issue is double spends. If Alice pays Bob and Charlie with the same money, on both sides of the blockchain it looks valid. How do you detect that? People have proposals like “ring blockchains”, where you have a ring of blockchains where payers of chains get checked by each other, or you move money between chains. This is very much an open research question. It is not clear how to enforce this kind of thing. And even worse, with this sort of detection of double spends and fraud proofs, you have to wonder what happens in reality when fraud isn’t detected until 3 days later? Do we roll back the blockchain? Do we just accept it that someone created some Bitcoin out of thin air? Do we just accept this? We don’t know. As long as miners are a trusted third party, which may be inevitable, we just have to rely on the incentives working and the checks and balances working.

Now, how do you scale up? I think we have a lot of small scale solutions. I like to call them micro-optimizing bubble sort. Bubble sort has O(n^2) scaling. You can take bubble sort and rewrite it in assembly. You can get a 10x improvement. But what you can’t do is get a factor of 100 improvement. That n^2 figure will eventually bite us. We will end up in a security situation where it is not easy to run a full node or check everything.

Maye this means we can increase the block size to 20 megabytes or 40 megabytes. Maybe. I don’t know.

This is not a technical debate either. In an environment where Bitcoin does not scale up upwards indefinitely, ultimately what we’re doing is talking politics. We are saying that some people in the Bitcoin space will lose out over others. I think technical people are not used to this. They expect this to be about facts and figures. They expect performance benchmarks and conclusions. But in Bitcoin, we have regulatory issues. We may have some users of Bitcoin who follows laws that other people don’t. Some other people may think those laws are unjust. If I am a Bitcoin user in a country like Russia, I want to ensure that I can continue to participate in Bitcoin. But if I can’t, because my government is restricting my access, and at 1 megabyte I can evade those restrictions whereas 20 megabytes I have not, that’s a political situation. In our efforts to scale up for some people, we may cause other problems for other people.

This problem has technical aspects. Who benefits or who doesn’t benefit is not a technical question. I don’t have answers.

If we want to scale up without getting into this political stuff, we can certainly do lots of stuff. Changetip is scaling up Bitcoin without transactions. Every time I tip someone with Changetip, I am transacting without a transaction on the blockchain. Well, sending money on twitter, you already have trusted entities there anyway. In reality we have found that this is acceptable to some people.

There are payment channels and hub-and-spoke models. Where I can send money to Bob and I can essentially lock some money up and then adjust how much I give to him. I can send money instantly and in very small increments to a third party. They can send that money to someone else, and if I want to send money to Alice, I could send Bob a few pennies and Bob could send Alice a few pennies until finally I have given Alice the money I want to give her. Again, this is a tradeoff. We have decided to involve a third party. They don’t have trust; but Changetip does. But they are a central point of failure. I am going to have to go pick a point of failure that I, and the people I am transacting with, agree on. There may be some privacy issues, and maybe we will use Chaum tokens or something, but it’s not clear if people will accept this.

On the bright side, these solutions do not need consensus. They do not need Bitcoin transactions. We can pick them based on what different communities need. Look at Silk Road. They had an off-chain transaction system. It never hit the blockchain. There were a lot of advantages in terms of privacy there. And the community of people that were involved were specific to that purpose. They didn’t need to care about regulations in other countries. They could pick and choose because they were building on top of the decentralized network.

It’s much harder to build something on top of a centralized system that meets the needs of those communities.

There are many ideas out there about sharding the blockchain. I have a proposal myself called treechains. I know ethereum is looking at similar proposals like this. They work by saying, let’s split up the blockchain in a way so that multiple parties can participate in mining, so that we are collaboratively creating this data structure that meets the needs of anti-double-spend protection and validation and so forth. This is not easy. Let’s be honest. It’s much easier to just use Bitcoin as it is, to make the assumption that we have a trusted third party and hope for the best.

Again I think this goes back to the politics of the situation. We don’t necessarily know what the threats are. The Bitcoin community does not tend to look at this problem. Here’s a threat model, we will evaluate our solution against that threat model. It’s usually an engineering point of view, of tweaking knobs to reach some goal. I can’t give a lot of good insight into where this is going to go. It would require consensus changes in some cases. It would require people to come to agreement that there is a problem, and that we would all agree to change the architecture of Bitcoin. I don’t know what will happen. Maybe it’s a sidechain that implements completely new consensus. Maybe it will be an altchain. Maybe Bitcoin gets killed off first due to a poor scalability aspect.

I don’t know what’s going to happen. So thank you.

Q: As you mentioned, Bitcoin has these trusted third parties who are the miners, and we are still paying the price as if it was trustless. Blocks are slow, costs per transaction are high. What do you think the risk is that there was a trusted third party, setting up 10 trusted node, and running 10 million transactions per second?

A: Well, if you assume that for the Bitcoin network to succeed that it needs transaction fees, then that’s a big risk. When I was first working on off-chain transaction systems, I was talking with gmaxwell and I said that if we do too good of a job we kill Bitcoin on that basis alone. Eventually the block reward keeps decreasing and that may eventually reach the point where it is not enough security. I don’t know what happens then. Maybe Bitcoin gets attacked. Maybe we decide to fork and keep printing 50 BTC forever. Maybe something else gets developed. Maybe so many purposes and so many systems are using Bitcoin that need proof of some kind, not necessarily monetarily, that collectively as a hold, all of these use cases provide enough security. My treechains idea kind of makes that assumption where you create a system that doesn’t necessarily have money attached to it, you just assume hopefully you get enough use cases that adds to the security enough. I think we will have to find out the hard way.

Q: Sybil attacks?

A: Sybil attacks are easy. I have done this before as a trial. I was surprised with how cheap and easy it was. It doesn’t take much, you know. Android SPV clients are very vulnerable to this because, especially in bitcoinj. When I turn this on, it connects to a very small number of nodes from the DNS seeds. It does not remember nodes it used to connect to. So you just find those small number of nodes, you run enough to outcompete with them, then you DOS attack the ones that are not yours. You can pull this off with a few hundred bucks. I looked at this on testnet, I spent this amount of money, testnet is this big, well that just means mainnet- well it’s a small amount of money. Ultimately it’s way cheaper than money.

Q: Thank you for the talk. I appreciate your contributions. Something that seems to come up when discussing Bitcoin Core. The advantage that Satoshi had was that he was an okay computer programmer, but he was an excellent economist. I think this is not an attribute shared by all of the Bitcoin Core developers necessarily. My question around scalability is, how could we possibly figure out what the optimal block size is to find a balance between scalability and making sure there is a sufficient volume for transactions for whatever number is ideal for taking place on the transactions? That seems to fall under the von Mises calculation problem. Would it be better to leave blocksize up to the market through some new mechanism rather than trying to plan the blocksize?

A: The problem is that this is an externality problem. It’s like saying how do we find out what the optimal amount of coal pollution is and let’s the coal power plants decide that. We know that, if I am a miner with 30% of the hashing power, it is my incentive to prevent my … my incentives are not compatible with a whole lot of mechanisms with letting the market decide. The market is, coming to consensus is a process controlled by miners. So letting the market come to consensus on this because miners are the ones calling the shots. They are not the market as a whole. There is a way around this using voting, written about 1.5 years ago on bitcointalk by John Dillen. If miners choose not to mine larger blocks, there’s nothing we can do about that. But to increase the block size, we could go make this a one-sided vote. We could use voting with proof of stake to give miners permission. And that’s one of the few examples where you can have this vote that is guaranteed to take everyone into account, or give the potential for everyone to be taken into account. And the very notion of putting this up for vote is extremely controversial. When John Dillen put this up in the first place, people asked why are you taking a technical decision and putting it up for vote, you’ll get a terrible result? Well you don’t even have agreement that this is political and not a technical question. Leaving this up to miners is not a good idea, that’s a narrow point of the market.

Q: Thank you for talking about the adversarial approach. Who is going to provide the fraud proof? Is it going to be the other miners? Or are you already assuming a 51% attack?

A: I think the issue is that miners collectively can have very different interests than users as a whole. You get lots of cases where you may want to do something that may be seen as an attack but you don’t want it to be an attack. You could have a situation where your blocksizes have increased to the point where it is hard to be a miner, and then miners then decide yes the amount of inflation reward is too low, we want to go in and increase the inflation reward because it’s good for Bitcoin. This looks like an attack, but it also doesn’t look like an attack. Politically it is not easy to talk about this. They have created a block that would be rejected by the Satoshi code base. Maybe they say they want to change the reward; well maybe they go write some Sybil attacking nodes, and ensure that when the average person connects to the Bitcoin network he has no way of getting proof that this is actually happening. But again, dishonest is kind of a fuzzy concept here. What this is really saying is that we don’t have a mechanism where we can get into that majority, where it is currently very easy for someone to go get some mining power, some hashrate, connect to a pool, maybe they don’t like Luke-jr’s pool then maybe not connect to that pool. That happens frequently, but in the future it may not be the case.

Q: Between yesterday and today, I think I learned a lot in terms of Bitcoin technology and protocols. My only question was, what are the implications of the blockchain technology, like five years from now? If you think of one dollar as like a signal to the market between supply and demand, and driving all of that information, what would be like the implications of supply and demand using the blockchain technology?

A: I don’t like the term blockchain technology. I think it gets used when the term “cryptographic auditing” may make more sense. Satoshi’s design for the blockchain was not very good. It left many opportunities for indexes that need to be made. It left things on the table that a better design would have let you prove. Equally when people talk about blockchain technology, they might overestimate how important it is to have mining. Once you have a blockchain being mined, you can leverage that against the will of the Bitcoin community to secure your own chains in an interesting way. Well where do people go with that? Do they just talk about a blockchain technology? That’s the wrong way to think about it, I think. We will see many interesting uses of this stuff in the future.

Q: In your mind, what does the sort of, the current technology, what is the theoretical sort of limit the confirmation cycle? So from the point that the transaction is made, it is embedded into a block and it is verified by the miners and essentially proof of truth comes back, at the current algorithm, what is the minimal time required?

A: This is easy to answer. We can take blockchain technology. We can say here’s a set of trusted miners. We know that this is how Visa, Mastercard and Paypal works. But it’s based on trust. But what about decentralization? Maybe Bitcoin has already gone too far in terms of something that can’t be decentralized. We are just going to have to find out.

Q: What strikes me is that one of the key points for actually the acceleration of the adoption of Bitcoin throughout the real economy and the financial economy is actually the fact that the system is too slow, right? And it’s not competitive with Paypal?

A: You want something like a fast confirmation? Look up green address, payment channels, etc. We can definitely get fast confirmations with no changes right now. I hope this answers your question, I have zero minutes. Thank you.