ECBSJCrypto Valuations…An exercise for shilling or an exercise towards futility?
Originally written on October 30, 2020 for PANONY/PANews: https://www.panewslab.com/en/articledetails/N8672127.html INTRODUCTION The one underlying theme that we have seen in the myriad valuation attempts of cryptocurrencies is the all too common, proverbial “we are still too early”. Valuations, which is referring to the exercise of running financial models in excel based on numerous factors that are subject to other subjective exercises of 拍脑袋 (a Chinese way of saying pulling numbers out of ...
ECBSJMemoirs from working at a crypto wallet startup in Shanghai
For those unfamiliar with me, I worked at a crypto wallet startup called Ballet for 3 years. Ballet designed & produced user friendly self-custody hardware wallets. Kind of like Ledger, but not really. I’d be a millionaire by now if I was given a dollar for everytime I had to explain this difference. Ballet had two main offices: one based in Shanghai and the other based in Las Vegas. I was based in the Shanghai office, which was where most of the personnel of the company were located. I was f...
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ECBSJCrypto Valuations…An exercise for shilling or an exercise towards futility?
Originally written on October 30, 2020 for PANONY/PANews: https://www.panewslab.com/en/articledetails/N8672127.html INTRODUCTION The one underlying theme that we have seen in the myriad valuation attempts of cryptocurrencies is the all too common, proverbial “we are still too early”. Valuations, which is referring to the exercise of running financial models in excel based on numerous factors that are subject to other subjective exercises of 拍脑袋 (a Chinese way of saying pulling numbers out of ...
ECBSJMemoirs from working at a crypto wallet startup in Shanghai
For those unfamiliar with me, I worked at a crypto wallet startup called Ballet for 3 years. Ballet designed & produced user friendly self-custody hardware wallets. Kind of like Ledger, but not really. I’d be a millionaire by now if I was given a dollar for everytime I had to explain this difference. Ballet had two main offices: one based in Shanghai and the other based in Las Vegas. I was based in the Shanghai office, which was where most of the personnel of the company were located. I was f...
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Originally written on January 4th, 2021 at: https://bitcoinmagazine.com/articles/not-your-node-not-your-validation
PART 1: THE REDUNDANT REMINDER OF NODE REDUNDANCY
“It won’t succeed unless the user experience is simply better than trusted third parties, but we need to start the education process with the very basic fundamental: trusting a third-party with full access to your Bitcoin is just replacing one centralized banking system with another.” — Eric Martindale
For those in the crypto space and are relatively versed in bitcoin language, we’ve all heard the proverbial, “Run your own node” preached throughout bitcoin literature many times. It’s synonymous with “not your keys, not your crypto” or “hodl”.
Regardless if they are adhered to by the crypto community, they hold their own merit and ways of conjuring up regret at the worst moments. Human nature tends to make the same mistakes again; Mt.Gox, QuadrigaCX, OKEx, etc.
Why do we continue to keep falling into the same mistakes time after time?
Because of ease. It’s very easy to open an account with a centralized exchange and keep your bitcoins on their platform. It’s extremely also easy to buy high and sell low when the concomitant FUD infiltrates our decisions.
One area of the bitcoin ecosystem that really hasn’t captured enough retail attention, let alone usage amongst users, is running your own bitcoin node. It’s one of the few areas of bitcoin that has not been “institutionalized” or “monetized”. For good reason though as it’s not supposed to generate monetary incentives, rather it consumes costs that are somewhat linear to blocks mined. It was designed to be grown in a grassroots manner rather than the other financially motivated areas; mining, trading, and custody.
When one runs his/her own node, they don’t have to rely on a third party to broadcast, propagate, validate, and confirm their transactions. They are completely self-sovereign in this manner.
Therefore, to take the earlier mentioned “not your keys, not your crypto”, the same idiom can be applied as, “not your node, not your validation”.
As the crypto community embraces the seemingly near start of the third bitcoin bull run, the inevitable next generation of bitcoin believers will venture down the rabbit hole. This will undoubtedly put more demand, and possibly strain, on third party services that are already in place ranging from wallet providers, exchanges, and even on the mining network. Subsequently this will also naturally demand an increase in the amount of nodes running. But by whom?
“Members of the bitcoin community seem to be losing interest in hosting full nodes. And it’s something to pay attention to, because over time it might mean that the major companies in the industry may have to pick up the slack.” — Daniel Cawrey
The bitcoin community can be divisive at times between the amount of redundancy of having a certain amount of nodes in the network. Does it help the network or does it help the individual?
It’s isomorphic.
But the key word here is redundancy, as in the same ecosystemic redundancy witnessed in nature. Parrotfish are a type of species that feed on the small algae of bio rich corals under sea. This act alone is essential for the survival of corals to flourish on a seabed full of rivals. In a scenario when the parrotfish species die out, a collection of other similar functioning species, such as the surgeon fish and rabbitfish are there to pick up the void. This redundancy in terms of our natural ecosystem provides a gradation of resilience to the system as a unit.
Another example that supports this redundancy in biodiversity is seed dispersion, done by a range of different sized species, which is pervasive in any forest throughout the planet. If one subset of species goes extinct, another subset can fill that void without any downtime. But there is a more precarious caveat in which the extinction of the larger species in size have been researched to inhibit a larger disturbance to the local ecosystem versus its similar functioning small species.
“…larger species in size have been researched to inhibit a larger disturbance…”
In short, redundancy manifests the proverbial “don’t put all your eggs in one basket”. And its this redundancy, which can also be conflated with diversity and/or resiliency (we’ll use these terms interchangeably in this piece to make a general point), is essential to the systems of nature, society, machines, governments, and etc. When the first string quarterback goes down with an ACL tear, the second string man comes up and might even perform better. When a subset of bitcoin nodes suffers some internet outage, the rest of the nodes can easily pick up the slack of validating transactions. It’s a form of risk insurance on network threats. It’s fault tolerant. And this gets cheaper as more and more smaller individuals run nodes rather than placing them in the hands of bigger players prone to centralized attacks.
The sentiment has been preached throughout the corners of the crypto world and it is crystal clear: Everyone should run their own node. But it will take some more education, easy to use tools, and god forbid another type of accidental chain fork to wake the masses. By providing users an all-in-one node setup (more at the end), the ease and importance of running a node will be galvanized.
The ubiquity of nodes is not yet present. But the rush of a seemingly hazardous government interest can be the cataclysm the network needs to even further push out the network beyond their physical reach. This could also be characterized as that diversity, or network resiliency, mentioned earlier. On that note, attempts at placing nodes in space is still a work in progress (although Blockstream’s satellites can be considered “close enough” at the moment).
We’ve always been functioned to strive for maximum efficiencies, but the value of redundancy and diversity is higher albeit sacrificing costs.
“The resource requirements of a full node are moving beyond the capabilities of casual users. This isn’t inherently a problem — after all most people don’t grow their own food, tailor their own clothes, or keep blacksmith tools handy in to forge their own horseshoes either.” — Justus Ranvier
To circle back to the beginning, ease has subsequently led to reliance. Reliance can be misconstrued as laziness or even lack of knowledge. These characteristics are prime meat for entities in taking care of things for you, in more ways than one. But running nodes is one area of the Bitcoin ecosystem we DON’T want institutions to start pouring in. Hypothetically, if that ever happens, then THEY dictate your transaction validations. And in the context of ecosystemic redundancy, Marten Scheffer of Wageningen University states, “While redundancy may be the rule in smaller creatures, the functional uniqueness of larger ones could imply that they are often the Achilles heel for ecological functioning”.
PART 2: WHAT IS THE NODE ECOSYSTEM LIKE NOW?
Currently and historically, capturing an accurate number of bitcoin full nodes up and running has been a less than perfect science. According to bitnodes.io, which is a community developed platform still in beta, there are close to 11,000 nodes running a full node client. This number is what they deem as “reachable” or as others would more accurately say, “listening nodes”. Other sources, including Luke Dashjr, state the number of nodes is much larger in the area between 50k and 100k, maybe more, which includes private nodes.
In the chart seen on coin.dance, the number of nodes more than doubled after the 2017 bull run from around 5,000 to a current reading of over 10,000. Although there is no perfect linear relationship between the amount of transactions and number of nodes, the trend is clear.
Running a full node can be complex and daunting for users. And unlike miners, node operators don’t receive transaction fees or rewards. There are some costs attached to running a node, although its miniscule, which include having extra disk space and internet bandwidth. Like mentioned just before, miniscule, but could increase as the bitcoin transaction history increases.
Besides going the direct raw route and downloading the Bitcoin Core software with some complexity and limited features, there have been a host of providers out there providing Bitcoin full node products that not only allow you to sync the whole transaction history of blocks, but their software stack provides a plethora of features such as multisig, Tor, user friendly UI, Lightning Network Full Node, the necessary hardware, and more. The most notable providers are Casa Node, Nodl One, Lux Node, BitBoxBase, myNode, Umbrel, and even including the HTC Exodus 1 mobile solution.
These different providers are the redundancy we need that also can exhibit small beneficial nuances related to diversity in form, speed, and resilience to disturbances in the network.
SOURCES
Originally written on January 4th, 2021 at: https://bitcoinmagazine.com/articles/not-your-node-not-your-validation
PART 1: THE REDUNDANT REMINDER OF NODE REDUNDANCY
“It won’t succeed unless the user experience is simply better than trusted third parties, but we need to start the education process with the very basic fundamental: trusting a third-party with full access to your Bitcoin is just replacing one centralized banking system with another.” — Eric Martindale
For those in the crypto space and are relatively versed in bitcoin language, we’ve all heard the proverbial, “Run your own node” preached throughout bitcoin literature many times. It’s synonymous with “not your keys, not your crypto” or “hodl”.
Regardless if they are adhered to by the crypto community, they hold their own merit and ways of conjuring up regret at the worst moments. Human nature tends to make the same mistakes again; Mt.Gox, QuadrigaCX, OKEx, etc.
Why do we continue to keep falling into the same mistakes time after time?
Because of ease. It’s very easy to open an account with a centralized exchange and keep your bitcoins on their platform. It’s extremely also easy to buy high and sell low when the concomitant FUD infiltrates our decisions.
One area of the bitcoin ecosystem that really hasn’t captured enough retail attention, let alone usage amongst users, is running your own bitcoin node. It’s one of the few areas of bitcoin that has not been “institutionalized” or “monetized”. For good reason though as it’s not supposed to generate monetary incentives, rather it consumes costs that are somewhat linear to blocks mined. It was designed to be grown in a grassroots manner rather than the other financially motivated areas; mining, trading, and custody.
When one runs his/her own node, they don’t have to rely on a third party to broadcast, propagate, validate, and confirm their transactions. They are completely self-sovereign in this manner.
Therefore, to take the earlier mentioned “not your keys, not your crypto”, the same idiom can be applied as, “not your node, not your validation”.
As the crypto community embraces the seemingly near start of the third bitcoin bull run, the inevitable next generation of bitcoin believers will venture down the rabbit hole. This will undoubtedly put more demand, and possibly strain, on third party services that are already in place ranging from wallet providers, exchanges, and even on the mining network. Subsequently this will also naturally demand an increase in the amount of nodes running. But by whom?
“Members of the bitcoin community seem to be losing interest in hosting full nodes. And it’s something to pay attention to, because over time it might mean that the major companies in the industry may have to pick up the slack.” — Daniel Cawrey
The bitcoin community can be divisive at times between the amount of redundancy of having a certain amount of nodes in the network. Does it help the network or does it help the individual?
It’s isomorphic.
But the key word here is redundancy, as in the same ecosystemic redundancy witnessed in nature. Parrotfish are a type of species that feed on the small algae of bio rich corals under sea. This act alone is essential for the survival of corals to flourish on a seabed full of rivals. In a scenario when the parrotfish species die out, a collection of other similar functioning species, such as the surgeon fish and rabbitfish are there to pick up the void. This redundancy in terms of our natural ecosystem provides a gradation of resilience to the system as a unit.
Another example that supports this redundancy in biodiversity is seed dispersion, done by a range of different sized species, which is pervasive in any forest throughout the planet. If one subset of species goes extinct, another subset can fill that void without any downtime. But there is a more precarious caveat in which the extinction of the larger species in size have been researched to inhibit a larger disturbance to the local ecosystem versus its similar functioning small species.
“…larger species in size have been researched to inhibit a larger disturbance…”
In short, redundancy manifests the proverbial “don’t put all your eggs in one basket”. And its this redundancy, which can also be conflated with diversity and/or resiliency (we’ll use these terms interchangeably in this piece to make a general point), is essential to the systems of nature, society, machines, governments, and etc. When the first string quarterback goes down with an ACL tear, the second string man comes up and might even perform better. When a subset of bitcoin nodes suffers some internet outage, the rest of the nodes can easily pick up the slack of validating transactions. It’s a form of risk insurance on network threats. It’s fault tolerant. And this gets cheaper as more and more smaller individuals run nodes rather than placing them in the hands of bigger players prone to centralized attacks.
The sentiment has been preached throughout the corners of the crypto world and it is crystal clear: Everyone should run their own node. But it will take some more education, easy to use tools, and god forbid another type of accidental chain fork to wake the masses. By providing users an all-in-one node setup (more at the end), the ease and importance of running a node will be galvanized.
The ubiquity of nodes is not yet present. But the rush of a seemingly hazardous government interest can be the cataclysm the network needs to even further push out the network beyond their physical reach. This could also be characterized as that diversity, or network resiliency, mentioned earlier. On that note, attempts at placing nodes in space is still a work in progress (although Blockstream’s satellites can be considered “close enough” at the moment).
We’ve always been functioned to strive for maximum efficiencies, but the value of redundancy and diversity is higher albeit sacrificing costs.
“The resource requirements of a full node are moving beyond the capabilities of casual users. This isn’t inherently a problem — after all most people don’t grow their own food, tailor their own clothes, or keep blacksmith tools handy in to forge their own horseshoes either.” — Justus Ranvier
To circle back to the beginning, ease has subsequently led to reliance. Reliance can be misconstrued as laziness or even lack of knowledge. These characteristics are prime meat for entities in taking care of things for you, in more ways than one. But running nodes is one area of the Bitcoin ecosystem we DON’T want institutions to start pouring in. Hypothetically, if that ever happens, then THEY dictate your transaction validations. And in the context of ecosystemic redundancy, Marten Scheffer of Wageningen University states, “While redundancy may be the rule in smaller creatures, the functional uniqueness of larger ones could imply that they are often the Achilles heel for ecological functioning”.
PART 2: WHAT IS THE NODE ECOSYSTEM LIKE NOW?
Currently and historically, capturing an accurate number of bitcoin full nodes up and running has been a less than perfect science. According to bitnodes.io, which is a community developed platform still in beta, there are close to 11,000 nodes running a full node client. This number is what they deem as “reachable” or as others would more accurately say, “listening nodes”. Other sources, including Luke Dashjr, state the number of nodes is much larger in the area between 50k and 100k, maybe more, which includes private nodes.
In the chart seen on coin.dance, the number of nodes more than doubled after the 2017 bull run from around 5,000 to a current reading of over 10,000. Although there is no perfect linear relationship between the amount of transactions and number of nodes, the trend is clear.
Running a full node can be complex and daunting for users. And unlike miners, node operators don’t receive transaction fees or rewards. There are some costs attached to running a node, although its miniscule, which include having extra disk space and internet bandwidth. Like mentioned just before, miniscule, but could increase as the bitcoin transaction history increases.
Besides going the direct raw route and downloading the Bitcoin Core software with some complexity and limited features, there have been a host of providers out there providing Bitcoin full node products that not only allow you to sync the whole transaction history of blocks, but their software stack provides a plethora of features such as multisig, Tor, user friendly UI, Lightning Network Full Node, the necessary hardware, and more. The most notable providers are Casa Node, Nodl One, Lux Node, BitBoxBase, myNode, Umbrel, and even including the HTC Exodus 1 mobile solution.
These different providers are the redundancy we need that also can exhibit small beneficial nuances related to diversity in form, speed, and resilience to disturbances in the network.
SOURCES
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