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To understand the Lightning Network, it’s important to get an overview of what precipitated the Lightning Network’s creation.
Let’s start with Mike Hearn.
For those that are unfamiliar with that name — Mike Hearn was a developer on Bitcoin that leapt on board circa 2011. Mike Hearn was no different than many of the other developers that had jumped on the Bitcoin bandwagon in the early days. He heard about the idea through the cryptography circuits and was fascinated with the potential development of a digital-based currency that would give individuals the ability to usurp banks and financial ‘middlemen’ entirely.
So, when Mike Hearn released this public letter to the world from his personal forums denouncing Bitcoin and notifying everyone that he had divested entirely of the coin, it came as a surprise to quite a few and received some substantial media attention.
So What Was Mike Hearn’s Beef With Bitcoin?
This single word has been the crux of the entire Bitcoin community since its inception and is the one issue/topic for which there has consistently failed to be any consensus on in terms of viable solutions.
What Do You Mean By Scaling?
If you’ve observed some of the criticisms of Bitcoin, you’ll notice that the most prevalent ones are regarding the fees and unconfirmed transactions.
This was an issue that was shelled out by Satoshi Nakamoto (the pseudonym for the founder of Bitcoin) and others on bitcointalk forums in 2010. See below:
[Comment on this article if you can’t see these pictures and I’ll upload them to an image hosting website where they can be seen in much greater clarity]
There are a few names that you should pay attention to in this conversation here. They are:
Jeff Garzik (We’ll get to him later)
Theymos (Google him)
Satoshi (for obvious reasons)
(Here’s a pretty solid list of contributors — https://en.bitcoin.it/wiki/People)
The topic that was being discussed in those screenshots above in the forums in 2010 was whether the size of the blocks should be increased.
Block size has been at the crux of the scaling debate for a few reasons, which I’ll cover briefly below:
· Each transaction that you make on the blockchain (i.e., sending Bitcoin from one wallet or person to another wallet/person) — represents data.
· Each “block” that gets mined contains a bunch of these transactions. When they are successfully ‘mined’ by other people, the transactions are then confirmed.
· However, each block on Bitcoin only possesses 1 MB each (SegWit expanded this somewhat but we’ll get to that later).
· Therefore, only a certain amount of transactions can ever be included in one block.
· The code for Bitcoin is such that makes it so that only one block can be published to the network every 10 minutes (give or take a few minutes).
Based on the above bullet points, you can see the problem, right? Basically, if a LOT of people are using Bitcoin, then there will be a LOT of transactions. Since blocks were restricted to 1 MB of data, only so many transactions can be stored in each block.
What Happens to the Rest?
They have to wait until they get mined and since it takes 10 minutes per block, certain transactions could take a long time before they get mined if there’s enough congestion on the network.
How Do Miners Decide Which Transactions They Pick First?
This is where fees come in. Satoshi implemented a fee system with Bitcoin that allows people to essentially ‘pay’ the miners to include their transaction in the block so that they can ‘jump ahead’ of other people sending transactions on the network. Thus, during November and December of 2017 when the market was most congested, the average fee soared through the roof.
So, What Was That Forum Conversation About?
Almost got off track there. So, back in 2010, this was far from a concern. In fact, this was before the world really ever heard of Bitcoin. At that time, there were so few people that actually used Bitcoin that the 1 MB block size was more than sufficient.
However, there were people in the forums that anticipated that there may come a day where Bitcoin became so popular that this 1 MB limit would prove itself restrictive. Keep in mind, 1 MB is a small amount of space.
So Why Didn’t They Just Increase the Size?
This is a good question, but there are a few good answers to this question. Pay attention closely to this next part because these answers will represent the foundation of the Core Team’s (group of developers that work on Bitcoin) and others’ argument against block size increases.
1.) Security/Functionality. The block size was originally much larger — standing at 32 MB per block. However, Satoshi had decided to place a limit on the block size that reduced it down to 1 MB. He also didn’t tell anyone at the time that he was doing it. Thus, one can only speculate the reasons for why Satoshi had decided to lower the limit so significantly. Remember that name Theymos that was posted above? There’s a reason why I told you to remember him. He’s important to this story too. He provides one of the most commonly accepted reasons for why Satoshi implemented this limit in a Reddit Post.
Basically, one of Satoshi’s biggest worries was that attackers would try to compromise the network by spamming it with a bunch of .00000001 BTC transactions. This would effectively mimic a classic Denial of Service attack and render the coin useless as a form of payment because there would be too much ‘spam’ in the network for any ‘legitimate’ transaction to be mined. This is also one of the reasons why he imposed a fee structure on Bitcoin as well. The purpose of this fee structure, was to add in another feature of Bitcoin that would make it financially illogical to try to hack the network. (Read: https://cointelegraph.com/news/satoshis-best-kept-secret-why-is-there-a-1-mb-limit-to-bitcoin-block-size )
It’s important to keep in mind that Bitcoin was worth mere pennies at this time, if that. So, even .001 ($8.86 at the time of writing) was considered to be virtually worthless.
2.) Compatibility Issues. However, there were people that anticipated that these restrictions may impose unnecessary strain on the network and, instead of protecting it, actually hinder its growth. This is what prompted the conversation of block size to be initiated in those 2010 forum posts. Satoshi seemed to agree with the individuals there and made it known that a block size implementation could be hard coded into Bitcoin in a way that wouldn’t compromise the network by structuring it in a way where the upgrade would be necessary and anticipated.
3.) Centralization. This argument was a little more implicit and didn’t really get a strong voice until years later around 2014–2015. For those who don’t understand Bitcoin, the principle of decentralization is of the utmost importance above anything else (supposedly).
In order to maintain that decentralization, Satoshi’s primary focus in creating Bitcoin was to establish a trustless system that required no arbiter or third-party to intervene to ensure that everything was fair. One of the methods that Satoshi devised in order to preserve this idea was the implementation of distributed ledger technology. Basically, by having Bitcoin function with a distributed ledger, the users of the coin itself would also be the ‘enforcers’, so to speak.
So, if you are running a node, and you had the Bitcoin client, then you have a copy of all the transactions that are being made on the network. Bitcoins are not fungible, so every coin is treated as its own unique, digital asset. So, if Sally gives Coin A to Bob, then Sally no longer is in possession of Coin A. Thus, if Sally then tries to give Coin A to Charlie after she gave Coin A to Bob, the transaction will be denied because the nodes on the network will see that Sally has already given Coin A to Bob.
Transactions get ‘confirmed’ on the network when all the nodes on the network come to a ‘consensus’ (more than 50%) on what’s going on.
There is no formal club one must join to become an ‘official’ node. Anyone, anywhere can become a ‘node’.
The only barriers are your access to technology. Here is a link displaying what is necessary to become a node.
At the time, circa 2010, this was probably just about what the average person could reasonably muster. However, as you increase block size, you inherently increase the technological barrier to entry for becoming a node on the Bitcoin network. Thus, the line of reasoning that has been presented in the community is that increasing the block size would inherently limit node creation to only the ‘wealthiest’ people who could afford such luxurious access. This, people argued, would effectively centralize Bitcoin, a fate that many felt to be antithetical to the foundational principles of Bitcoin itself.
Satoshi did anticipate that technology would continue to accelerate as it has done over the last century or so, and eventually individuals would have no problem running such a node. Thus, an increase in the block size may not have the centralizing impact that individuals are afraid that it would have.
Here are a few facts about technology capacity in 2018:
· 2G of RAM is less than what you’d find in your typical iPhone these days and there are plenty of models that exceed the 145G free memory requirement as well: https://www.apple.com/iphone-x/specs/
· Even earlier models (iPhone 6 or iPhone 7) exceed these requirements.
· The internet connection speeds that the nodes mandate require levels that are more akin to what good dial-up/DSL was capable of providing.
o For those who need a frame of reference, the nodes suggest you have a connection that can reliably yield at least 500 KB/S in download speed. In 2018, a local McDonald’s in a shitty, run-down part of one of the worst areas of Detroit, Michigan is probably good for at least 5 MB/s.
Don’t worry about banging your head against the wall trying to figure out what all that technical stuff means right now. Basically, what the SPV system is, is just another way of allowing people to verify transactions on the ledger without having to download every single block. This helps to save on space/resources for nodes. This setup is typically supported by lightweight Bitcoin clients.
Okay, So How Did We End Up With A Scaling Debate?
What, in my humble opinion, hurt Bitcoin the most was the sudden disappearance of Satoshi Nakomoto in 2012. For nearly the entire time that Bitcoin had existed before his disappearance, Satoshi was the de facto leader of Bitcoin. Theories abound, but no one really knows what the hell prompted it. Maybe he died. Perhaps aliens abducted him. Or was it the CIA? Or is he the CIA? Maybe he just got bored with Bitcoin. Perhaps he philosophically felt that his presence as a ‘leader’ would always represent a form of cognitive dissonance between fulfilling his role as project/community head and creating a decentralized (leaderless) currency, and he felt the only resolution was to remove himself entirely.
The answer to the question of why he disappeared depends on who you ask.
Shortly after Satoshi’s abrupt departure from the Bitcoin community, the Bitcoin Foundationwas established as well with Gavin Andresen at its head. It was through this foundation that much of the funding for Bitcoin took place. It was also used as a vehicle for Gavin to use to recruit other talented individuals to become part of the Bitcoin development team, which later would be referred to as the Core team.
Why is Any of This Important?
Because the block size debate is what essentially split the Core Team, and subsequently, the community — resulting in numerous hard forks, information wars, DDoS attacks, real threats, the Mike Hearn letter, stagnation in development, Lightning Network, SegWit, Bitcoin Cash, and most of the inner turmoil that you see within the community today.