Last week, CoinDesk caught up with bitcoin core developer Jeff Garzik about his perspective on Satoshi Nakamoto and the future of Bitcoin. This week, we reveal Garzik’s thoughts on alternative digital currencies, ASIC miners, and getting everyday users on board for bitcoin.
On altcoins
Some people do like the idea of including more features in the native protocol. Projects like Zerocoin have been looking for altcurrencies to adopt their technology for making a cryptocurrency truly anonymous, and when it comes to math-based currencies, Garzik is all for diversity. He’s happy to see the proliferation of other coins.
“It’s a fantastically good thing,” he says. “Experimentation is wonderful. It’s been disappointing that the overwhelming majority of altcoins have been pump and dumps or premine-type schemes.” He calls that the first generation of coins, but thinks that the landscape for altcoins is maturing.
The second generation is far more interesting, with fewer “lazy clones” and more experimentation, he argues, singling out PPCoin for its work with proof of stake, and Freicoin for its exploration of demurrage.
But, apparently, all of this has its place – and it’s underneath bitcoin. “I don’t think it’s likely that the second generation will produce any useful, viable long-term cryptocurrency, but I do think that all this experimentation will absolutely inform the Bitcoin ecosystem, and any features or really novel developments can likely just be incorporated into Bitcoin itself.” That may not sit well with the creators of other currencies, some of whom hope to establish a greater foothold in the area.
He welcomes diversity within the bitcoin community, though, pointing to other bitcoin clients such as Bitcoinj. “I wrote two – one in python, called pynode, and one in the C language, called picocoin. Gavin and I think that from that perspective it’s healthy. We’re trying to avoid a software monoculture where everyone is running the same version of the software.”
There’s a caveat to that, however. He calls Bitcoin the first protocol to solve the distributed consensus problem, and every alternative client must follow the Bitcoin protocol rules, he says, including any bugs that may have been in the Satoshi reference implementation. “If you don’t, you introduce fork risk. So it’s a real balance of engineering benefits and costs.”
Why ASICs will rule the world – and that’s no bad thing
All of the bitcoin clients that mine have to run on something, and many are starting to use ASICs.
“It’s fascinating to watch the progression of mining technology,” says Garzik, who was among the first to take delivery of an Avalon ASIC miner, and now runs it at home. He says his mining activity is more for interest, and to participate in the day-to-day operation of the network, than for profit.
Some believe that the evolution of ASICs makes the market less democratic, because it makes GPU miners less effective, and increases the cost of basic mining power. He disagrees.
“During the GPU era of mining, it was one company, ATI, which was primarily the supplier of all the mining hardware. If there was an ATI supply disruption, or a pricing problem, then that directly affected GPU mining profits,” he says. “With ASICs there are more companies selling chips, and the barrier to entry of making these chips are very low.”
That’s all relative, of course. KnCMiner has told CoinDesk that it expects its Non-Recurring Engineering (NRE) costs to be at least $3.5m. But for many large firms, that is indeed a low entry point to begin making the equivalent of a printing press for digital currency.
The point is that SHA-256 is easy to do. “Any graduate student could do it, and you have any number of companies that are competing to provide mining chips,” he maintains, adding that we’ll see more upstarts selling ASICs as the market fills out.
The more ASIC mining power the network gets, the better off it will be, Garzik adds. “You have a lot of mining power that’s being spread around many miners across the entire world,” he says, arguing that it decentralizes the mining process. “More mining power makes it more difficult to reverse bitcoin transactions. The more widely spread that is, the more difficult it is to shut down bitcoin itself.”
So no, the development of an ASIC-enabled elite isn’t an existential threat to the bitcoin network, says Garzik – quite the opposite, in fact. What does worry him is cultural inertia. People understand and trust conventional fiat currency, he points out. Part of the bitcoin community’s job is to teach them about the alternative, and why they should consider using it.
Getting everyday users on board
“Bitcoin activists and evangelists like me have a bunch of answers. It’s borderless, it’s irreversible, and there’s low risk of fraud,” he says. “Nonetheless, it’s difficult to get on the radar of your average person.”
Usability is a key issue here. Bitcoin addresses, for example, work very well technically, but can be confusing to users and also have some security vulnerabilities. There is, however, There’s a payment protocol in the works to make the whole thing easier.
“The payment protocol that Gavin [Andresen] and others have been working on uses public key cryptography,” he says. Users will use digital certificates to exchange bitcoins, in a similar way to how websites validate websites.”
Similarly, some enterprising hardware engineers are putting together physical hardware solutions to help with the distribution of bitcoin, Garzik points out. “That’s going to do a lot to bridge that usability hurdle. Bitcoin wallets on the smartphone are almost already there in terms of being a killer app.” BitPay employees pay each other back when someone makes a food run, by pointing their phones at each other and scanning QR codes.
It’s unsurprising that Garzik’s vision for Bitcoin is a grandiose one. He wants it to be a first-class, mainstream currency in its own right. The comparisons he draws speak for themselves.
“It took the nations of the Eurozone ten years or so to deploy the Euro, and that was introducing an entirely new currency,” he says. “We’re trying to do the same thing with bitcoin. We’re trying to roll out a currency from scratch. And as the experience with the Euro showed, it takes an incredible amount of time to change over POS systems and cash registers, to train end of line merchant workers with this new payment system.”
The currency came from small beginnings, but Garzik believes that this is just the start. If his vision comes true, then maybe bitcoin could be as big as the Euro. Only, you know, without centralized banking and dysfunctional national economies gumming up the works.