Bitcoin

Tragedy and Farce

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Obi Nwosu is the CEO and co-founder of Coinfloor, the UK's longest-running Bitcoin exchange. He has over 20 years’ experience building online marketplaces and bringing virtual currencies to tens of millions of people. Obi writes The Road to Bitcoin Hegemony, a weekly recap of some of the most impactful developments in Bitcoin.


Historians have always wanted us to read more history. Few surprises there, perhaps. But we shouldn’t make the mistake of thinking they’re just trying to shift more of their books. Because history isn’t just the sterile occupation of telling tales of the past: they are warnings about the future.

So when I saw the old argument about scaling Bitcoin without the need for additional technology layers, I sighed and recalled Santayana’s dictum that those who cannot remember the past are condemned to repeat it.

Because we’ve fought this civil war before. Several times, in fact. The battle between Bitcoin and Bitcoin Cash was only the first and most prominent scaling-motivated fork in Bitcoin’s road to hegemony. Sure, Bitcoin won; but this myth is proving hard to kill. Like the Hydra of myth, every time we cut off a head — whether XT, Unlimited, Classic or Bitcoin2X — another seems to grow in its place.

Having to make the same arguments again and again is troublesome and tiring; it’s especially irritating when those promoting a single-layer future are so influential — and when they really should know better.

So, forgive me if you’ve heard this one before. It may not be news to you, but it clearly needs repeating.

Bitcoin's core purpose is to be the world's best store of value. It does this by maintaining an incorruptible record of ownership of bitcoins and satoshis, which act like packets of user-owned value. Or, to use an analogy that should be well-understood by any tech entrepreneur, it's like a hard drive that stores value instead of data. Hard drives are the base layer of the internet and computing — without them there would be no computers, smartphones, or the world wide web — all that information on the superhighway needs to be stored somewhere after all. So hard drives are an incredibly important building block, but they are not omnipotent: many hard drives are needed to store all the world’s data, and other technologies need to be in unison, such as computer processors, memory, and networks, to fully realize the internet revolution. Of course, one could imagine that very early on in the internet’s growth, some could have thought that a really big hard drive with all the world’s internet users connected by very long cables would be the best way to scale — it would certainly have been conceptually simpler than how the internet actually evolved — but nowadays it is hopefully self-evident that this would have been unworkable.

In this sense, scaling Bitcoin is no different. Conceptually, the naive approach of building an ever bigger value hard drive which everyone connects to directly is easy to understand and would work initially. But eventually you will hit challenges that could only be fixed by a completely different approach.  Like if I wanted to travel faster, I'd learn to walk, then run, then run really fast.  Ultimately however, I’ll have to go back to the drawing board and invent a bicycle, then car, plane, and eventually a rocket in my quest to scale my ability to move rapidly.

In the case of Bitcoin,  infrastructure developments like Lightning Network, side chains, and RGB that run on top or alongside Bitcoin are known as “layers” and allow Bitcoin to scale in a future-proofed manner. These layers enable us to provide a dizzying range of new services ranging from fast financial transactions to smart contracts, without taking up limited Bitcoin blockchain resources. 

Proponents of single-layer-at-scale often appear to think that layering infrastructure like Lightning is a temporary workaround, when in fact this approach is central to maintaining Bitcoin’s ethos of decentralization. Lose that, and we lose Bitcoin’s killer app: it’s ability to remain truly independent of any entity that may seek to control it and the value bitcoin holders have entrusted to it. By following a layered approach, the Bitcoin base layer continues to act as the world’s only inviolable store of value, with additional layers providing any missing scale and functionality without risking the core.

This might not be quite Bitcoin 101, but it’s not far off it. And, as I say, we’ve been here many times before. As someone snarked in response to the original tweet proposing a single layer at scale: “Dude, 2017 called, it wants its takes back.”

Karl Marx said that history repeats itself, first as tragedy and then as farce. And while tragedy might be too strong a word for what is, after all, a technical debate, it’s farcical that we keep having this debate when it has been so decisively won, and so often in the past. 

Why do we keep having this conversation? I’d like to suggest two reasons. First, there is often a “Year Zero” mentality held by some new entrants to the Bitcoin community. Being at the forefront of the most momentous monetary revolution in millenia makes a few people feel they don’t have to pay any attention to the past — including the recent history of Bitcoin itself.

But more importantly, there’s the desire to report on, and to follow, celebrity influencers who do all their thinking out loud and in the most public way possible. 

The lesson from all this? It’s the same as it’s always been, not just in Bitcoin but all through history: don’t take things on trust, be responsible for your own education — and don’t ignore the past. 

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CEO

Coinfloor
Obi Nwosu is the CEO and co-founder of Coinfloor, the UK's longest-running Bitcoin exchange. He has over 20 years’ experience building online marketplaces and bringing virtual currencies to tens of millions of people. Obi’s mission and focus is on making it easy for anyone to learn about, invest in, and own Bitcoin, the world's best savings technology.