Bitcoin Cash

Nick Szabo Says Bitcoin Cash is Centralized

Nick Szabo Says Bitcoin Cash is Centralized

Nick Szabo is considered only the next to Satoshi Nakamoto and is a pioneer in Bitcoin development. He has described Bitcoin Cash as a “Centralized Sock Puppetry.” Let’s see the reason for him to call Bitcoin Cash  a centralized cryptocurrency.

Alibaba Hosting Half of Bitcoin Cash Nodes

It has been found out by researcher Sondre Bjellas that 54% of all the Bitcoin Cash’s nodes are operating in the Alibaba data center. There are around 1242 nodes, and among them, 543 contain the name “Alibaba” in them. Of those 422 run in China, 39 in Hong Kong, 35 in Singapore, 45 in the USA, 1 in Japan and 1 in Germany. Bjellas’ research came after BitGo developer Jameson Loop noticing that half of its nodes were Alibaba servers in China. When we compare this with Bitcoin, only 2% of the nodes are operated by Alibaba servers.

This can pose a high risk due to this centralization,  since if the server fails, then the network will come down. Bitcoin Cash is running the risk of one point failure and may go down if the servers fail. It is not decentralized and also verification of transactions is not possible due to non-availability of public nodes. There is also a high risk of double spending happening with Bitcoin Cash.

Nick Szabo Comments on Bitcoin Cash

Nick Szabo commented on this finding by saying that decentralization cannot be marketed well and is not the selling point, but “Cheap payments” are good catchy words for marketing, however, a centralized network is doomed to fail. Nick Szabo also mentioned that in the past there were so many projects like Bitcoin Cash. All of them worked similarly like Bitcoin using cryptography and internet, but they all failed due to the centralization of their network.  Below is his quote

[T]here were many precursors to bitcoin which worked similarly – insofar that they used the internet and cryptography to function – but they were all doomed to fail for one reason: they were centralized

Double Signing of Transactions

Bitcoin Cash is at the risk of double spending. This is because sender or receiver cannot verify the transactions and they cannot prevent the double signing of transactions. Due to centralization, the payee is not aware of all transactions. This is due to centralization and also due to larger blocks. The larger the block gets, the more incapable it becomes for all payees to be aware of every transaction. This will lead to double spending and confusion on its network.

Bitcoin Cash should focus on solving these issues and make the network more decentralized rather than focusing on marketing and getting it listed in exchanges. Let’s hope these issues are resolved for better decentralized and secure network.

 

 

1 Comment

  1. I really respect Nick Szabo’s opinion but I think it’s misrepresented here. There are also a few additional misunderstandings in this article. So I think we need to tread carefully.

    To begin, if we look at mining centralisation, perhaps both the most easily verifiable and most important metric for centralisation, it’s clear that Bitcoin is currently even more centralised than Bitcoin Cash. Cobra-Bitcoin, admin of bitcoin.org, recently made this very observation: https://twitter.com/CobraBitcoin/status/1009878174954610689. Moreover, we can confirm it for ourselves on https://coin.dance/blocks.

    But there are some further issues with the analysis in this article too. Let’s start by accepting as true the claim that 54% of all Bitcoin Cash nodes are virtual, and see where it leads us.

    Even if 54% of BCH nodes are virtual, it’s still not at all clear that this presents a “high risk … since if the server fails, then the network will come down”. It’s also unclear what exactly is meant here by the network “com[ing] down”. Nearly all non-mining full nodes could disappear tomorrow and the mining network would be unaffected. Indeed, this is a crucial feature of the Bitcoin security model. The network is secured by miners expending work to construct the blockchain. So, unless the whole mining network collapses too, the blockchain would continue to grow and transactions would continue to be processed.

    As I see it, the article makes two further significant claims. First, that:

    “…verification of transactions is not possible due to non-availability of public nodes. There is also a high risk of double spending happening with Bitcoin Cash. … Bitcoin Cash is at the risk of double spending. This is because sender or receiver cannot verify the transactions and they cannot prevent the double signing of transactions.”

    The claim is that Bitcoin Cash is vulnerable to double-spending attacks because transacting parties cannot verify their transactions, due to a current or potential lack of public full-nodes. However, this is simply not true. Section 8 of the whitepaper explains how Simplified Payment Verification (SPV) works. This is the form of cryptographic proof used by light clients (like mobile wallets) to personally verify the inclusion of transactions within the blockchain, without having to trust any other network nodes. SPV nodes simply have to query the network for the longest proof-of-work chain, keep a copy of the blockchain’s block headers (a measly 80 bytes each), and request the specific merkle tree hashes, in order to verify for themselves whether or not a specific transaction has been included in the blockchain. In fact, this cryptographic proof is crucial to Bitcoin and Bitcoin Cash’s capacity to function at scale.

    So, onto the last significant claim:

    “The larger the block gets, the more incapable it becomes for all payees to be aware of every transaction. This will lead to double spending and confusion on its network.”

    This is almost correct, but there’s a crucial misunderstanding here too. Corrected, it should read: the larger blocks get, the higher becomes the demands on full nodes to validate and store the blockchain. However, this does not mean that payers and payees are affected, or that large blocks will enable double spending attacks. As I mentioned above, the cryptographic proofs made by SPV light wallets already prevent these attacks. Moreover, the block headers, which SPV wallets must store, do not change size with larger blocks. Their size is 80 bytes each, or 4.2 MB per year, capping the demands on standard users.

    Now, there is something that we could worry about with large blocks. Namely, that large blocks may lead to fewer non-mining full nodes on the network. And with fewer non-mining full nodes, we might wonder if we can still trust the miners. What’s to stop them changing consensus rules so as to smuggle in larger block rewards etc.? This is an interesting and difficult question, and if anything, it is the one we should be debating in articles like this. Personally, I’m sceptical — and that’s a topic for another day. But it would be a far more productive discussion than the rather weak arguments presented against Bitcoin Cash and large blocks thus far.

    Cheers!

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