On Thursday, the World Bank held a conference on Virtual Currencies and invited Gavin Andresen, Lead Developer for Bitcoin, and Patrick Murck, General Counsel for the Bitcoin Foundation, to speak at a panel. The Wednesday before the panel they joined the DC Bitcoin Meetup to hold an open forum, where they fielded questions from the 50 member audience for two hours. The following are Gavin’s (GA) and Patrick’s (PM) paraphrased responses.
Editor’s Note: TGB does not necessarily support any of the following opinions. They are published here to illustrate the viewpoints of two of the more influential people in the bitcoin community.
What major changes do you think will happen in next 6-12 months – both from a protocol and from a regulatory perspective?
(GA) Wallet security is one of our primary concerns. The advent of hardware wallets will be hugely beneficial, but it’s still unclear how soon these will be released. Within the protocol, we are looking to implement multi-signature transactions which require more than one device to be signed. This will significantly reduce the effects if a computer gets compromised, considering this has been one of the biggest vulnerabilities over the last few years.
(PM) In the next 6-12 months I expect there to be more clarity in what registration is necessary for each business model. I really want to take four different models to the regulators and let them pick their favorite. We can then have confidence in it going forward in what the most legitimate business models are going forward.
What is your opinion on the block size limit? Blocks are currently restricted to 1 MB in size. Given bitcoins current adoption pace, it appears we will start bumping against this capacity soon.
(GA) Blocks have to get bigger. The real question is how quickly and how fast? I estimate that we have 1 year before start hitting the 1MB hard limit. That gives us some room before we really need to have a plan in place. The vision from the very beginning was to increase the block size limit. Editor’s note: the limit was initially created to prevent someone from spamming the network when bitcoin was young, making the chain too large to download
The question is whether we should use a simple rule, such as: change the limit to 10mb, then add 20% per year as networks and storage get better? Or is there a way to create miner incentives that will limit block size, but penalize blocks that only contain a few transactions?
Is there any concern about mining collusion? If the top 3-4 pools teamed up, they could choose to only build on each other’s block chain and effectively ignore the rest of the network.
(GA) The block chain fork in March showed miners were less evil than I expected – many miners gave up the longer chain and their mined blocks in exchange for the longer term health of the network. I anticipate that this will continue to be the case going forward; miners will choose what’s best for the network, since it will affect the long term value of the currency.
(PM) Many lawyers would jump on the opportunity for antitrust lawsuits if this collusion occurred. From my perspective this would clearly be an offence worth litigating.
How hard is it to get registered as an MSB?
(PM) There are two significant barriers: money and time. The minimum I’ve seen 50 state licenses done is for $2M in fees and surety bonds, and takes about 1.5 years to go through the licensing process. During the 1.5 years you’re not allowed to operate at all, even under a provisional license. This obviously causes concern for investors, because there is a signfiicant amount of money tied up for a long period of time, and no way to prove the business model before hand. An alternative is to work as an agent under another company’s MSB license, but you still have to make sure you comply with Anti-Money Laundering (AML), etc.
What is your opinion of libbitcoin, and are there plans to create a formal spec for Bitcoin?
(GA) I don’t foresee us formally creating a spec within the next year … actually really at all. There are so many things to work on, I would rather spend time actually developing the code than creating a spec.
(PM) I’ve worked on tech startups in the past, and from a business development perspective, if its not written down it doesn’t exist. It is hard to communicate to customers capabilities that are not formally documented.
Given the FinCEN guidance in March, are all miners considered Money Service Businesses (MSBs)?
(PM) ALL miners are considered MSBs, since they are enabling transactions for a profit. The guidance is completely backwards – at a local bitcoin exchange the exchange itself is unregulated, however the people there are required to be registered as MSBs. The proper action for FinCEN to have taken is to clarify their guidance, especially related to product as technical as bitcoin, is to solicit public opinion to fully understand the matter. This step was ignored, and MSB regulation from the 90s had a virtual currency clause tacked onto it. Both the public exchange and miner issues should have been clarified in a public forum.