Mike Hearn: “Bitcoin Has Failed”
On January 14th 2016 Bitcoin developer Mike Hearn wrote a post on Medium (which Theo Goodman refers to as “Tumbler for people who think they’re at a TEDx conference” in this informative Mad Bitcoins discussion), entitled The resolution of the Bitcoin experiment:
“But despite knowing that Bitcoin could fail all along, the now inescapable conclusion that it has failed still saddens me greatly. The fundamentals are broken and whatever happens to the price in the short term, the long term trend should probably be downwards. I will no longer be taking part in Bitcoin development and have sold all my coins.”
Moving on to state that “the network is on the brink of technical collapse”, he attempts to back up this claim as follows:
“Think about it. If you had never heard about Bitcoin before, would you care about a payments network that:
- Couldn’t move your existing money
- Had wildly unpredictable fees that were high and rising fast
- Allowed buyers to take back payments they’d made after walking out of shops, by simply pressing a button (if you aren’t aware of this “feature” that’s because Bitcoin was only just changed to allow it)
- Is suffering large backlogs and flaky payments
- … which is controlled by China
- … and in which the companies and people building it were in open civil war?”
So Bitcoin has failed, and we’re being presented with the final and inescapable flaws that seal its inevitable demise?
Let’s examine those one by one.
- “Couldn’t move your existing money”
I have been and still am perfectly able to move my existing coins, all my friends who use Bitcoin can safely state the same, and guess who else just told us that he moved all his coins? That’s right, Mike Hearn himself.
Furthermore, I haven’t seen any broader indications that there’s an unusual catastrophic crisis of any kind in the works here, as far as people complaining about coins not moving, aside from the occasional hiccups and low fee transactions that we’re all familiar with.
- “Had wildly unpredictable fees that were high and rising fast”
I continue to send non-urgent transactions at the recommended 0.1 mBTC fee per 1kb. If there’s any urgency or if I run into problems, I’ll up the fee as recommended by the wallet, but those are bearable “sacrifices” I’m willing to accept at this stage. Would it be better to have an efficient fee market? Probably. Would it be nice to have more competitive fees down the road? Maybe. Is the sky falling down? Not as far as I can tell…
- “Allowed buyers to take back payments they’d made after walking out of shops, by simply pressing a button”
What he’s referring to here is an old feature called ‘Transaction replacement’ that had been in place in the first Bitcoin release, but was suspended at one point, along with a note to revisit it at some point. For all nodes running the new Bitcoin Core 0.12, it will be re-enabled by default. However, the node operator has the option to turn it off. We’ve probably all seen posts from people whose low fee transactions got stuck for too long; this may make such scenarios easier to resolve. We’ll see which option operators prefer long term, but I don’t see how this would spell irrevocable and imminent disaster for Bitcoin as a whole. In my opinion, you should only accept zero confirmation payments in applicable scenarios where risks can be mitigated cheaply, with or without this feature enabled.
- “Is suffering large backlogs and flaky payments”
Again, no particular evidence is cited that those things are happening to a catastrophic extent. Yes, it has happened on a wide scale from time to time during severe stress tests and peak scenarios, and yes, there are discussions and proposals to directly or indirectly address such grievances. But I’m puzzled as to how this could pose an unsolvable challenge.
- “…which is controlled by China”
Sorry, who is that monolithic entity that he refers to as “China” if I may ask? There are lots of mining operations all over the world, and some of them are known to be in the territory of that country called China, but why does that automatically have to be a bad thing? It is true that probably a little over 60% of the Bitcoin hashrate is contributed by Chinese mining pools. But that doesn’t mean that all mining pool members are in China, or have to stay with that pool indefinitely. I would actually say that today’s hashrate distribution chart looks pretty balanced when compared to the days where Ghash.io’s share rose up to 50% at one point.
- “…and in which the companies and people building it were in open civil war?”
If by “civil war” he’s referring to people disagreeing and debating the direction of an open source project, and not automatically yielding to Mike Hearn’s preferred future direction, then my answer to this particular question would probably be “yes” actually.
Of course I’m not trying to say that there are no problems or issues that need to be addressed, just that the leap to declaring “failure” doesn’t have sufficient empirical backing by any means, as far as I can tell.
Mike Hearn recently joined a startup called R3CEV, a consortium of 42 banks and fintech experts exploring the benefits of distributed ledger technology for the banking industry.
On the same day as the Medium post I referenced above, the New York Times broke their version of the story entitled “A Bitcoin Believer’s Crisis of Faith“. They even had a photographer visit and take a picture of Mike on his couch, with a blanket, sitting in front of his MacBook, feverishly trying to save Bitcoin from certain doom I must assume.
Then, on top of that, on that same day, R3CEV’s managing director answered a question about whether or not Bitcoin and the blockchain are separable in the affirmative, stating that “Mike Hearn, who is one of the preeminent core developers in the Bitcoin community ,who works for R3, it’ll be in the New York Times any minute, has broken up with Bitcoin today. He has said it’s a failed experiment.” He then goes on to say that Mike believes that blockchain technology “needs to be divorced” from Bitcoin technology in order to be successful.
This has led to a lot of speculation as to whether or not this was all a staged effort to attack Bitcoin and make room for permissioned distributed ledger technologies to take its place over time. I don’t know that anyone has a final answer to that as yet. Mike has responded in “A small follow up“:
“Some people suggested that there is some sort of banker conspiracy, because after I privately concluded Bitcoin wasn’t working I took a job with a startup that’s looking at how to apply distributed ledger technology in the existing financial system (R3 CEV). […] I didn’t mention this in my post because R3 is not a Bitcoin company, or even a cryptocurrency company, and there is no “BankCoin” or “R3Coin”. So this is really nothing to do with them and conspiracy theories are just a waste of time when there are more serious issues to consider.”
It was, however, the R3 guy who brought up Bitcoin in the context of a supposed necessity to divorce blockchain technology from Bitcoin, and who then went on to cite Mike about Bitcoin being a “failed experiment”. So to now say that “this is really nothing to do with them” is not accurate. This is damn well to do with them; they themselves were the ones who brought it up!
Finally, towards the end of his Bitcoin obituary from January 14th (the 89th Bitcoin obituary by the way), Mike slipped in the following paragraph:
“Still, all is not yet lost. Despite everything that has happened, in the past few weeks more members of the community have started picking things up from where I am putting them down. Where making an alternative to Core was once seen as renegade, there are now two more forks vying for attention (Bitcoin Classic and Bitcoin Unlimited). So far they’ve hit the same problems as XT but it’s possible a fresh set of faces could find a way to make progress.”
So after declaring complete and total failure of the Bitcoin experiment, he suggests that “all is not yet lost”, if only people “pick up the pieces where” he’s “putting them down”. So where the project goes in Mike’s desired direction there is hope, where it doesn’t, it has apparently failed.
So which one is it now, Mike? Are people picking up the pieces embarking upon a fool’s quest or not? Has Bitcoin failed or not?
* Editor: the text above has been reviewed for readability, but not content. The opinion(s) reflected therein are those of the author, and not of the BeingLibertarian.com website or Being Libertarian LLC.
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