 So up next, we've got Artic Mind. He's going to be talking about scaling and economic implications of the adaptive block size in Monero. I just read that from there, but basically he's going to be talking about Monero's adaptive block size. What does that mean? What does that mean for the economies of scale, all that different type of stuff? He's a smart guy. This is a Monero core team member. You're in the presence of a literal God. So I'm just kidding. So that's everyone give a big snap to Artic Mind. Well, thank you for the excellent interaction. First of all, my own background. I got involved in Monero in 2014. I have to be involved with the Bitcoin since 2011. I originally started as an investor and also as a miner when you combine Bitcoin with GPUs. That was the day. I saw the crash of, just after the crash of in 2011 where Bitcoin went from $32 to $2. That was the days. I got involved with Bitcoin through 2012 and 2013. And one of the things that I did is I asked the question, how can it fail? I asked the question where are the particular problems? So I spend a lot of time studying the scaling issue and the block size debate in Bitcoin. It is in this process, in early 2014, when I actually came across a post in Bitcoin talk, I talked about Monero. It did not mention scaling at all but it actually got me interested in Monero. And the first thing I did is I spent three weeks analyzing how Monero scales and how is it different from Bitcoin. I started getting more involved and interested in Monero and learning about Monero and in particular spending a lot of time looking at scaling in Monero. In early 2016, I was given the honor of being part of the core team of Monero, which I accepted. And what was originally research that I did primarily as due diligence as an investor has become now a significant part of my contribution to the Monero project. So what I'm going to be talking about is scaling. I'm going to break my talk into two parts, two aspects of scaling. Now, when people talk about scaling in a cryptocurrency, these are totally commonly conflated. So they talk about these two aspects of scaling as one issue. They're fundamentally different. The first part is technological support for scaling. And the question there is, can the technology actually support scaling today and in the near future? The second question is, how does the social covenant and or business model and or protocol support for long-term scaling? So what is a social covenant, business model and protocol, long-term support for scaling? And that is fundamentally different from the first question. Can we transmit the blockchain through the internet, for example, with current technology? So the question is, first question one asks is, is it possible with our current and future technology to provide the necessary computing power, bandwidth and digital storage needed to support blockchain growth? And we're talking over decades. So the question is, can we really continue to scale and what is going to happen with technology? This is a technological side of scaling. The second question is, what are the lessons from history that we're going to learn when it comes to scaling? And I will present my next slide. In my next slide, it's actually quite dramatic. Most people are familiar with scaling from the point of view of say, if you're a decade. I'm talking here going all the way back to the 1850s. This, by the way, is a shot from the cost of a million standardized operations per second. So one can think of a standard set of computer operations and then you price it as a function of time. And in particular, what looks at it, this is of course a log scale, what looks at the changes and trains that have occurred in basically the last 160 years. And these have profound implications of how we do finance, to how we do banking, to how we keep track of our money, and to a lot of technologies we use today in centralized ledgers. And it's quite significant in very ways. I mean, if you look before about 1940, I do in the Second World War, basically it was a flat history. We were talking about the early tabulating machines, and they came on the 1890s by B.M. Some ideas in the United Kingdom, British Empire at the time, of the Babbage engines, various engines that were created. This area here is primarily tabulating, tabulating machines that were improved by the Hollywood Company, which later became IBM. And going to the 1930s, and again we saw this application of tabulating machines. With the Second World War, of course there was a major demand for computing technology, primarily on the side of the allies, in the sense of how do we crack the German enigma. And this led to a fair amount of research in the United Kingdom. They used telephone relays, large numbers of telephone relays, and built some of the most primitive computers, the early computers. We then get into things such as vacuum tube computers in this range here. Then you move to transistors, and then we start looking at integrated circuits all the way, the growth of integrated circuits. Moore's Law is primarily this range down here. And here, of course, we're talking about huge big centralized computers, we think of mainframes, that would be owned by major governments or major corporations. It was, at this point in time, banking was primarily, and this is not done through centralized ledgers of any kind, it was no ledger. It was simply too expensive to keep track of transactions. If you have to manually enter every transaction, if you then have to transmit them through telegraph lines where it could cost you today's dollars, fifty, even a hundred dollars a word, think of an email where you spend a hundred dollars a word or fifty dollars a word to send it, or a text message, this is prohibitively expensive. So, we were dealing with a cash society and with a bare instrument society, securities, for example, were gilded pieces of paper, which were then stored, and whoever hold the instrument owned that security or owned that funds. So, this is kind of the history. In 1950s, we started seeing the first credit cards come out, and then we started seeing the evolution of the centralized ledgers, starting primarily with the strength of the mainframe computer in the 1970s and 1980s to today. Credit cards, for example, were originally conceived in the 1950s, but really then it started to take up to about the 1970s. Debit is more technology in the 1990s. So, this is kind of important to sort of understand the history. What's significant is that between 1940 and 2000, which is the chart here, we see a fact of ten to the thirteen in the drop of price of computing. And when we start here for a minute and ask questions, it's ten to the thirteen, it's like ten trillion. And by comparison, you need to ask the question, if we move from a centralized ledger to a decentralized ledger, for example, Bitcoin and Monero, and let's say you have a hundred thousand nodes, what you're actually doing is you're making a hundred thousand copies of that information and then synchronizing them all. So, you may impose a cost of ten to the five, or maybe even ten to the six, but it's still, when you look at the history, it becomes extremely affordable. And the indication would be that in history of of human, of the world, the, we've gone from bearings from it to be a short period of time of centralized ledgers, and then we'll be actually moving to decentralized ledgers. So, my next slide, I'm going to show a simulation more recent, but we're talking about, again, the bandwidth. And this is bandwidth at high end in the United States, but it's a good indicator. Again, from 1983, we're talking about a large scale to 2018, and we see about an increase in internet connectivity 1.5 million times in the amount of bandwidth. Even more interestingly, in the last eight years alone, we see an increase in conductivity of approximately 26 times. And we don't think about this, only we get an upgrade on our internet service. It is actually more pronounced if we look at developing countries, where they may actually just jump to three technologies when they put in fiber and they don't even bother with things such as copper. So, what we're seeing is trends in technology that show this trend of the price dropping and what is very expensive in the past becomes incredibly affordable. So, a couple of questions. Is it possible? Well, given time, yes it is. We only need a continuation of these trends even at a slower rate, and then we would see decentralized ledgers essentially being competitive in the future with today's cost of a centralized ledger. So then, any kind of decentralized ledger we would be taking place. The cost differential is roughly about 20 to 30 years. So, the cost of, say, today having a decentralized ledger could be comparable to the cost of centralized ledger, say, a generation ago. That's a rough indication. There's a whole bunch of things in the pipeline. 3D ships. If you have NAND, if you have in your phones or in your tablets or on an SSD, those are 3D ships, the SSDs. That means instead of laying one layer, you lay multiple layers on top of each other. Carbon nanotubes has been considered as a potential semiconductor. 5G, that's coming down the pipeline on the, and we're talking about gigabit lens. Even within copper, we're seeing DOSUS 3.X, which is going to be capable of gigabit over even existing cable networks. Fiber to the home. I mean, both in Vancouver, they're laying the fiber to the home right now. Sure, initially, they're going to say 150 megabits symmetrical, but that has capabilities in the gigabits. So, we're looking at a growth in technology, and then we need to ask the question, so it is possible, let's see what we've learned from history. Well, I'm going to deal with a couple of cases, and the first case is very interesting, is what we're going to learn from the credit card industry. Now, the credit card industry will love to criticize the banks, but sometimes we're going to learn from them. We're going to learn from their mistakes. In 1950, the Dynast Club was introduced with 7% merchant fee. Now, why would you create and design a payment card with 7% merchant fee? Well, because it costs a lot of money, the technology of the day, to keep track of the transactions. So, you develop a business model around that, and the business model basically, as you say, okay, you're a merchant, we're going to provide this service, and we're going to incentivize the sale. We're going to make it attractive for a customer to come to the establishment. I sure give us 7%, but we'll get you a sale. And that makes a lot of sense if the merchant has maybe a 50% margin on the product. It does not make sense for low margin merchants. But here's the interesting thing. I'm a Canadian, I live in Canada, and I would have purchased gas with the Canadian credit card here in the United States. My cost would be roughly 7% today. Why? Because I would pay 3% of the gas station, every gas station basically charges a 3% surcharge for using a credit card, and then an additional 4% on this property in the Canadian U.S. dollars that is just charged by the bank and the credit card companies. So, my effective cost in 2018 is the same as the one in the effective cost back for Dinos Club in 1950. So, what's in here is really significant. It's the cost of technology can fall by a factor of 10 to 13, 10 to the 14. Somebody not going to arrange. But the business model that was developed in 1950 based on the technologies of the 1950s and the cost associated with those technologies is still in use today and it's starting to fail. Another example right in this community, you take a taxi for a short ride. So, $3 surcharge for using a credit card. Well, it works out about 38%. If you have a $7, actually right. Maybe you spend $100 or 3%. But it's still quite high and does not reflect in any way the cost of the technology. My second example is from the cryptocurrency and we're talking about Bitcoin. Now, Bitcoin initially when it was released in 2009 and conceived in 2008 did not have a minimum one, a maximum one megabyte block size limit. This was added in 2010 approximately eight years ago. Shortly thereafter, there was a post on Bitcoin talk with a proposal to actually get rid of this so we could scale like paper. That was the birth of the Bitcoin one megabyte block size debate. Eight years ago. The debate is still going on today, to this day. But in the meantime, technology is not lying still. The cost of transmitting those blocks over the internet and the speed is a factor of 26. Anybody who's familiar with the current Monero block sizes, it's basically the difference between the current Monero block size and a typical Monero transaction, sorry, and a typical Bitcoin transaction. We're talking about the existing block not bulletproof. This 26% decline in the cost is no factor in the debate at all. We're still stuck in the existing business model and we're going to basically say that we are going to keep debating this. Of course, the technology does not stand change. It doesn't wait. So what is really the solution? Well, the real issue in both of these cases is that the protocol, the business model, the social covenant does not support radical changes in technology. And this is the key element. In the case of the credit cards, the technology, the protocol was designed for the technology of the 1950s. It becomes totally irrelevant today and they have bigger and bigger problems, litigation, regulation in the European Union, and of course, these fees. In the case of Bitcoin, again, the protocol didn't support the scaling technology and we're still stuck in the old protocol. The technology changes. So the question is what is needed? And so we need to have a social covenant that actually can take advantage of future improvements in technology, even though future improvements in technology are as dramatic as the ones in the past. And at this point in time is when we take a look at Monero. So what makes Monero support the scaling? So what we have in Monero is the crypto node penalty function. Now, if we look at various incarnations of it, essentially what it says is you have a penalty. This is the block reward. So everything is proportional to the block reward. This would be the median transaction block size over the last 100 blocks or 300,000 bytes, whichever is greater. And this is the proposed block size that you're going to mine. And essentially you put an imposter penalty on the miner that then has to be made up with by transaction fees. And this is basic definitions. The couple key elements about this are interesting. The first thing is that the transaction block size, if there's a maximum of two, of twice. So you can only make it twice as big. And it's only applied when the proposed block size is greater than this effective median. So those are the key elements in it in the penalty, the basics. Now, in order to really understand this better, I'm going to redefine the crypto penalty. And I'm going to introduce this term called B, which is basically the percentage increase in the block size. So if you have a 300,000 block size and you have a 30,000 by block size and you add 30,000 bytes, that's a 10% increase. Because in terms of this, we can then understand kind of how the whole system behaves. So basically the penalty can then be reduced to the block reward times this percentage increase squared. This is the basic reduced crypto penalty formula. There's a really interesting point about this. If B is less than zero, i.e. if you don't, there's no refund. Now, anyone care to guess why this is a burning of Monero? Any stabs at this? Why not refunding the penalty? Yes, that's true. But it actually does something else. It actually creates a burning of Monero. And the reason is because it delays the tail emission. So at any point in time in the future, there's going to be a smaller amount of Monero in the economy once the penalty is applied. And so as a site note about that. Okay. So then we simply have the new reward. This is very interesting. If you look at the rate of change of the penalty with how far the curve you are, I mean how big of a scale you do, then you get this 2R base times B. So depending on the point of B is essentially linear. And that's what you would expect for quadratic penalty. So now we ask the next question. What happens if we add a transaction T with the size of MT? So now we get one point in the penalty formula and we're going to add an additional transaction. And this is the question the minor faces. Because the minor has to decide does this transaction generate the fee to justify its inclusion in the block? So then you basically add the term. You take out the 2B, the B squared term because it's the 16 penalty and you're left with these two terms. Depending on the relative size of B and BT, BT being the additional space of the transaction, you have two cases if B is much greater than BT, you can basically eliminate the B squared term. And then you get essentially the infinitesimal transaction model. Or in a case where B is significant, then it becomes dominant and you get a case where we have a linear penalty. We can then calculate the fee per byte in bytes. And again our base is calculated by dividing by the effective median block size. Now here's the key element. As that block size goes down, the price of a legitimate transaction in Monero falls in terms of Monero. Sorry, as it increases. So basically if you go from say 300,000 bytes to 3 million bytes, your fee per byte has fallen by a factor of 10. At the same time the spammer wanting to spam a certain percentage has to pay the same amount of money in terms of Monero. So that's a very interesting element. So the ham or the legitimate transaction falls in price because the transaction size stays constant. So there's more transactions sharing the same amount of penalty. So this allows us to then define two types of transactions. So we define a reference transaction. Where a reference transaction is, is a typical Monero transaction that is applied at the minimum 300,000 byte penalty level. So what we're saying is we've got a 300,000 byte block size. We're going to add a typical transaction and from that we can calculate what the fee has to be. And basically that is the default fee per byte that you pay in Monero. Because the idea is we pay enough of a fee in that transaction so that transaction alone can support that scaling of itself. Otherwise the miner wouldn't mind it and the block size wouldn't scale. That's how the default fee is set. And the voices issue of it being stuck like what can happen is nobody would create it and so you have a massive growth in the TX pool but nobody's actually using the the scaling of it because they're not paying enough of a fee. That's how the default fee in Monero is set. It is determined by the ratio of a typical transaction to the minimum effective block size. This minimum amount of 300,000 bytes. The low and the high fees are then a simple multiple of the normal fee. So that that that's where the penalty effectively determines the fee per byte and effectively determines the fee that you pay. At the other end we have the opposite situation. In the opposite situation what we have is we have a transaction of infinitesimal size where we're pushing the penalty to the maximum. So right at the maximum. In this case basically your fee per byte is twice the block reward divided by again the effective the average the median effective block size. And in this scenario the miner would actually make four times the block reward in fees if someone were to push the penalty to the maximum. Now in all these analysis we're assuming a rational miner that mines to their best economic interest and therefore orders transactions in the block for their own perspective. So basically what the miner does is she would include in the block transactions the highest paying first until you get the lowest paying transaction that actually pays the penalty. So there's always a lowest paying transaction that pays the penalty. So this is kind of the the basic lm of how fees are set. Okay this is all great but here's what gets interesting. What happens if the base reward goes to zero? Anyone get a guess? What happens to the fees? The fees go to zero. So if there's no base reward there are no fees. So it is impossible in this model to replace the base reward with a fee market. You can have a fee market but a fee market for something entirely different. If your base reward is zero you have no fees and you have an insecure coin. This is precisely a situation with kryptonite reference by Kono Monero V. Monero V is a classic example. You say okay we're gonna stop the tail emission at some point in the future. Okay how do you how do you actually incentivize the miners? You don't have any incentive because basically there's no penalty. You just increase the block the block size at infinitum and you get no money for fees. So the coin becomes insecure. Same thing with bike coin. Bike coin right now is below Monero's tail emission in fees. So this is really a problem. The question concept of a fee market that was proposed by Satoshi is in fact putting a serious question in this case. I'm gonna cover another example here and this is the issue of orphan blocks and peter reasons paper. This has been presented by some in some circles as a replacement or a fee market. Yes it's a fee market but it's a fee market addressing the problem of orphan blocks created by pushing the technology too soon. It's a it's a penalty that's also present in Monero and again if you check everyone looks at reference the result is proportional to the block reward. In the absence of the block reward the reason penalty fails. It is a very valuable research very important research but it does not provide an answer to replacing the block reward with fees and this is actually a very sort of difficult question. One of the conclusions that one can make is that if you have another cryptocurrency and they impose a penalty in terms of the block reward that is weaker than that in Monero then it's going to run in the same problem. So one can understand for example the position taken by Bitcoin call they said well we have we may have a problem here we can't take the risk we won't allow the block size to increase effectively imposing an infinite penalty and that's a reasonable cause of action it's better to have a small coin than an insecure coin. The other interesting thing is this issue is present in all major proof of currencies with very few exceptions and the exceptions as Monero, Ion, Dodgecoin, known familiar with that does have a permanent emission it doesn't have an adaptive block size limit and the really old but not well known Freikoin. Now Freikoin does have a maximum number of coins but what they've done is they've created Demerge and basically in that situation the Demerge generates the block reward so the coin can stay secure. Yes it's worth about 300,000 in total market cap sitting right at the bottom of the coin market cap but it does address this question in a different way so those are the exceptions. If it has a yes I think there are some that were folk from Monero that keep the tail emission so they will be fine. Yeah so if they've got a tail emission they would work if for example they have Demerge they're also could also be made to work but if you have a fixed amount of coins and you don't have Demerge I have some real concerns and that would be my answer to that including some very high valuation cryptocurrencies. Okay so the next question here and this is another bit of an aside is Monero is of course planning to put bullet proofs in. Now bullet proofs have a very interesting characteristic and that is that it has a verification time that scales with a total number of outputs and by outputs I'm also including the padded outputs that will be put in and then the size of the bullet proof scales as the locked base two of the number of outputs. Well because fairly obvious that if you allow this thing to if you allow very large bullet proofs with large numbers of outputs then what happens is one has a potential attack vector which was quite a bit of a concern and so we have to deal with that attack vector and how the solution to deal with it is to replace the block size and all those penalty calculations I showed before with a block weight and the block weight takes into account the verification time and this is was an idea that was actually initially proposed by Andy Toshi and and Smooth also discussed it I kind of refined it and we came up with the following and basically what we do is you look at the bullet proof and there is a you take if it's got one or two outputs you leave it as is and if you've got more than two outputs you say okay if I had a bullet proof with two outputs and then multiply that by the number of outputs I get a size I take the difference between that size and the size that you actually get and I claw it back and by clawing it back I'm saying you're not really getting on it I'm only going to give you about 20% so this creates this term which is linear and k I can show you which is BP base times times k down here and that effectively deals with this attack vector the other element of it of course is that the maximum number of outputs in a bullet proof is limited to 16 so you can really prevent any kind of attack from this angle um so this is kind of a tweak but it's kind of shows the kind of things that it is I mean the purpose of fees in a cryptocurrency is to deter spam attacks this is why Satoshi put the one megabyte limit in Bitcoin in the first place and in this case again we have to be careful if we're going to change the um privacy uh ring confidential transaction uh technique we are faced with having to tweak the whole weight system to give us a weight that actually takes into account the verification cost so in future we will hear about block weights rather than block size that really only makes a difference if you are more than two outputs in a transaction but that's the reason why we will see that okay I'm going to now briefly talk about something else and this is called the equation of exchange in economics now the equation of exchange in economics is actually a sort of a tautology and basically what you have is you have the money supply which in a cryptocurrency is actually set by protocol v is the velocity now people familiar with the velocity of money is it essentially is how many how fast the same piece of money circulates so you get say uh in the US dollar example you receive say a salary and then say 90% is spent within the 90 day period that then how long before that same dollar comes back to you that is actually the velocity of money b is the actual price of goods and services in in terms of the currency and that is can be thought of as if b is high that means you have a lot of inflation b is low we have deflation in this model here q has been shown in a simplified manner and and by that I mean that typically in an economy you have a very large distribution of goods and services so if we have for example cups of coffee a million dollar watches in the same distribution you're going to have different cues and so you look at the total distribution of the goods and services so here's a really interesting question that comes in the first interesting point that comes out of this is in a proof of work cryptocurrency if we assume the economy doesn't change we have the same types of goods and services but we simply make it bigger then q is actually proportional to the block weight or site so this is basically saying it has some real implications in the case of Monero that if we double the transactional activity we have to double effectively the price of the currency because m doesn't change is set by protocol v hasn't changed because you haven't changed the nature of the economy used to make the economy larger and in fact this actually from a theoretical point of view if you're looking at from the perspective of a speculator or an investor you ask the question okay I want to buy this because I expect this future increase in q in the future and therefore a decrease in p the other implication is if we come back to the actual how fees are calculated we notice that fees are now calculated we're dividing by the block size well that has a real implication because now what happens is if the economy doesn't change fees actually should remain constant once we hit tail emission in terms of actual purchasing power because if you double the size of the economy thereby doubling the price the fees in terms of Monero fall by half so you have we have a very elegant excuse me solution where the fees and Monero will stay constant in real terms now there's a lot of kbs for this the first kb yet of course is and this asset has recently happened in bitcoin it's what happens if you change the velocity so for example you you decide we're no longer a transactional currency we're not going to be calm as to our wealth and people are not going to move these things around and therefore your velocity goes drastically down that goes to speed or go down that's one possibility the other possibility is to change the nature of the goods and services so for example instead of buying cups of coffee we're buying million dollar watches well then in that example then of course you get a similar situation but it is an indicator that Monero really is very much in in harmony with basic laws of economics and how the fees are set because essentially we're saying in Monero we have a block size economy asset and a set fee that basically can be it's a set it and forget it approach so we've in the sense of our fees work and it isn't very much in harmony with the what's called the the equation of exchange and economics okay now most people are familiar with Monero as a fungibility privacy and anonymity going and I spend virtually no time on this subject I guess one of the the messages is that there's lot more to Monero than fungibility privacy and anonymity in fact Monero has the most successful support at the social covenant level for scaling of any major cryptocurrency and I do not say that lightly largely this is due to the combination of the adaptive block size limit the crypto policy with the minimum tail emission which gives you the security and the minimum tail emission is absolutely critical to maintain proof of work security of course the chains Monero fundamentally different for the proof of work preferences including bitcoin well again what happens in bitcoin is that people compete against each other for fees and in a fixed block size and no matter where the fees go up you're going to increase the days of competing each other what happens in Monero is you're actually competing against the penalty so we're pushing against this penalty which is actually what you're competing against the next question and I really I know this is a difficult question for a lot of people especially if you're holding a lot of currencies that have this issue they're really fundamental unresolved questions with respect to the viability fee market as a means of replacing fees and if there's a message I think some real hard questions need to be asked about this it's a phrase in the original bitcoin white paper unlike the rest of the work which literally is a work of genius this phrase is provided with no justification whatsoever and nobody afterwards has tried to provide any kind of justification there is however a significant amount of literature already and questions being asked about its viability even in the presence of a fixed block size so that is a question that in my opinion needs to be really looked at much more seriously unfortunately virtually every other major proof of work of currency has copied bitcoin in the sense and I'm talking about litecoin bitcoin cash things such as ccash they've all done the same thing and dash in fact in that case you have to support not just the miners but also the masternodes and the community and the community development so none of this is a question it's pushing Monero quite aside from privacy fungibility and anonymity has control over most of the competition it is not a well-known aspect of Monero it is one that I hold very dear to my own heart because that's what I work on but it's it enables the kind of ideals that have been discussed here like we want to help people in the developing world we want to send money to poor countries in small amounts because that currency is plunging in value this is the example of things of Venezuela that I heard well you know the thing is crashing so fast that you want to send like we small amounts or so the thing actually um you can't hold the money that currency so these kind of things so this type of social impact on a cryptocurrency can only really happen if you have scalability the next question what about secondary solutions lightning network great technology but that lightning network technology depends on being able to scale the underlying chain you have to close the channels and if the underlying chain cannot support closing the channels you cannot have an effective lightning network in fact my understanding is already work has been done by globally to actually put this kind of technology on the Monero blockchain well what work um so that's a real risk of a lightning network so again the real question is that because if you can't close the channels what do you do if you read the lightning network paper they're talking about a hundred and sixty six megabyte blocks in bitcoin by the way as a minimum so it illustrates the problem this is great technology it doesn't solve the problem just as the example of reasons work great work excellent paper but it does not address the issue of this um creating this fee market uh it's a tough thing to say um I personally do not hold any bitcoin that's I will say that publicly um and one of the main reasons is because of this but I should just mention this there needs to be a conversation on this subject given the amount of money involved at this point in time I will now thank you and if there's any questions okay basically what I mentioned about offering rates and this is basically the work of Peter recent's papers I would recommend you read that because that's why the analysis was done but essentially it is this if you increase the offer rate the miner will now see a lower war because they've got to mine all these blocks are going away so effectively in order to increase the block size or the block weight the miner has to charge more money to compensate for the loss of the offer rates that essentially the argument in um Peter recent's paper basically it's an exponential function um so it's a fairly stiff penalty but again proportional to the block road that actually kicks in so it would basically be a check in balance I guess against a currency like Monero for example getting ahead of the technological or the technology so puts a barrier in that it's a natural barrier it's very hard for a blockchain to actually measure um this type of problem and that's one of the few ways it can like going from say two minutes to say four minutes there's been some discussion of that um that I mean one point is one minute was just too low the yes wait a lot and in fact it's probably the most extreme example that I'm familiar with this ethereum and they're about 15 seconds well the problem with that is that you're you're basically hitting um the speed of light um it's not as much a scalability issue as a latency issue latency doesn't change so if we are sending a telegraph signal in 1850 across the atlantic you have basically the same latency on that signal the switching is very much slower but then you have today not the latency the bandwidth okay a big difference if you increase demand on bandwidth then that is essentially the issue of often blocks um do you improve that by increasing the the the the time it's possible I mean it's an interesting discussion uh but I think that there may be an issue there is latency as opposed to bandwidth in that particular because it's a very serious problem if you start going below a minute any further questions I mean I mean it comes back to the fundamental question of how fees are calculated in Monero if you if you go back to um if you look at the fee formula the total fees for a block are proportional to a block reward so the question then becomes this do you do you have two choices you either create a really stiff penalty which is what bitcoin has done that may work um but what happens in that point the the the shank on scale so you basically have limited the growth of the blockchain period or growth of the economy no matter what happens to bandwidth to cpu power to any other stuff you can have another 10 to the 13 drop in these costs you still have the same problem well it is being misrepresented because yes yes I with respect I mean Peter residents paper has been presented as a fee market that's how it's presented but the conclusions are not a fee market to replace the Satoshi model it is a fee market to address open blocks in the presence of a block reward that is the conclusions that it does so yes it's a fee market but it deals with something else so Peter residents paper does not solve the Satoshi model at all it is just as president Monero as it is in in in bitcoin and bitcoin cash or dash or or litecoin that doesn't change it solves a very important problem and addresses it but not the one that we're trying to solve but yeah I mean it comes down to the fees going to zero because there's no competition and people might say well what about if I create a protocol of minimum fees well that's going to be out of band payments and so that will basically cause it to collapse anyway any further questions yes for yes absolutely because basically what happens if you're a minor you're putting all this energy into into into mining often blocks so you're not getting the blocks but it but there's still a cost to mine the fail the failed open rock and that's the cost of the minor has to seek compensation from and and presumably it's don't suffice question sorry okay that's a latency issue I mean that that's an example of a strong latency issue it's not a bandwidth issue it is a latency issue because essentially what you have and it's no different in many respects only bigger than me mining a block in Prince George British Columbia that was mine on top of their mine that that Ricardo made in in the western Cape of South Africa if you increase a latency then obviously either you really increase the block type which is all you're going to have to split the chain because of the time it takes light to get from earth to Mars and back that's a speed of light problem and that's fundamentally a latency problem and again I would argue a nice scenario that bandwidth can be increased but not latency unless someone finds a way around special in general relativity any further questions um interestingly a combination of the yes and no sorry pardon me okay so if we actually what happened with Monero is there was secret asics there was a fork which basically absolutely did the asics and it was done by tweaking the proof of work enough so the asic couldn't actually efficiently mine it that led to the creation of a coin called xm o xmc which is gone nowhere but a lot of money has been thrown at it um I would say is there's a limited asic resistance in the combination of the response from the community this the the fork received a very high degree of support combined with development work in progress and a perfect example is what Howard was talking about combined with the basic principle that the threat is more effective than its execution if you're going to try and pull that off and you wonder well this community is just going to focus and leave us high and dry that's a deterrent effect so there's a whole bunch of factors uh that create a degree of asic resistance in Monero over but strictly speaking I mean it's been demonstrated that at this point in time if you don't dynamically change it or change the proof of work to address it there isn't that strong and asic resistance it's more the behavior of the community the response of the community and the threat of being left high and dry and these tweaks that's why the asic resistance in Monero is coming from right now uh true absolutely I mean but but it's will it matter it's a question that I ask I mean does it really matter today when you send an email that you might just decide to put that information it's into a word document or or an open office document and and attach that multiply the size of the email it's not because the cost isn't there and I suspect that in the future that's what's going to happen the difference in cost is not going to be significant if you're paying a hundred dollars a word to send an email you're going to change your pros and in fact if one goes online there's such a thing called a telegram style people wrote pros in such a way as to minimize these costs we wouldn't do that anymore so I would argue that yes there there could be a disadvantage but in the case of pretty well every coin the only kind that could potentially compete with Monero at this point would be the dodge coin because bitcoin doesn't allow the thing to scale anyway so we we already had it and it seems to all the major ones and dodge coin has not implemented an adaptive block size limit could you create a Monero clone without privacy and make the transactions uh a fifth of the size yeah is it going to be a huge competition I'm not so sure mm-hmm well it's not to be in terms of what's going to happen is that we're going to have uh bulletproofs come in that's going to drop the price in the very short term by a factor of five then on top of that you have the fact that the transactions are smaller so in a very short term you actually see a drop in fees by a factor of 25 um so that's the answer the short to medium term I'm I'm more of a long term by other persons I tend to focus I really believe you take care of the long term the short medium term take care of itself you pay your patiently waiting personally I have a lot of concerns of proof of stake and the reason I do is because even without looking at things like the not a stake problem and all those sort of traditional things there's a very basic attack on proof of stake and what that is is you borrow the thing proof of stake is based on the concept that the owner of of the coin is also the beneficial owner of the coin well that's not the case the minute that you have a third party that is holding the coins in trust for somebody else and maybe spend some of them and we've had great examples in mongox even early in bitcoin with pirated 40 look them up and well what happens in these situations is the person who actually controls the coin therefore controls the stake may have an interest in crashing the coin rather than supporting it because they're not the beneficial owner they're essentially a creditor where they own that currency so I really have a real concern objectively and I think this lessons from fiat in this a lot of the problems that were caused in the 2008 crash were driven by the fact that your people lending money that was in their own they were setting the the lender and the borrower up to fail and then they walk away with some fee it's the same problem so fundamentally I really don't believe that proof of stake proof of stake actually is sound without even getting into the technical details so I'll be my sort of feeling and I I don't see it yes okay my argument is that the fundamental problem with the social covenant in bitcoin is that it's simply it's fundamental flaw in the scaling algorithm so you have a flaw in a critical element of bitcoin that leads to the conflict and then leads to the breakdown that you're mentioning and it's very real the the the key the biggest strength of Monero has is that we have a social covenant that can support long-term technological change yes you have the social issues but if you don't have a fundamental flaw to deal with which I believe is the case in bitcoin then I don't think the comparison is is is really that apt because basically the reason bitcoin is having this breakdown is because you have two very legitimate points of view one of them says it's a security issue we cannot increase the block size the other says what about the businesses what about the second layer TS I mean you'd have a company like globally they're in Monero they're going to build a structure on top of Monero well you try to do that in bitcoin so you have a group of two legitimate points of view and in that situation it's very easy to trash the other side that they come with a constructive argument because you simply prove the other side is wrong and that says essentially a stage for the conflict absolutely absolutely but I mean definitely mitigate the breakdown risk absolutely are there any more questions for we are there any more questions or comments any more questions comments absolutely excellent comment that's all I can say I mean it's essentially the 166 megabyte block to support it's the same issue yeah absolutely one more question well in the United States that question was resolved actually to the large degree by a ruling from FinCEN in 2013 and it identified what is called a decentralized and centralized cryptocurrency interestingly enough Monero is one of the lowest risk ones because we don't have a premind we don't have an ICO we don't have a post mine we don't have a fund this reward all of which sets up the stage in this country I think we're in very strong grounds there's some some concerns of moves in the in the European Union I think primarily they they're too fixated on blockchain analytics so that could be a concern in that respect so let's get on my my sort of feeling on that one I think the United States is probably going to be one of the safest places for cryptocurrency how are we doing for time one minute well I would argue that in this particular example I would actually argue that United States is going to be a bastion on the world cash in supporting cash and all you have to do is take a taxi ride in the city and ask the question how many people are going to pay three dollars on an eight dollar taxi ride because basically that is a fundamental battle in the world cash anyway I think we're running out of time so I will thank you