23 ms·

On the Instability of Bitcoin Without the Block Reward [pdf]

154 points by nayuki 6y ago

drdeca 6y ago
I may be misunderstanding because I largely skimmed, but it sounds like this is saying this is due to the variation in the transaction fee amounts. Assuming that that's the idea: What if only a fraction of the transaction fees go to the miner of the block including those transactions, and the remainder is "stored", and doled out gradually over the next n blocks, or something like that, resulting in it being a fairly steady rate of payout?
- infogulch 6y ago
  Say, the total payout of mining a block is half of the fees from the block you mined, a quarter of the fees from the block your parent mined, an eighth of the block before that, etc. The fee payout of mining a block becomes the sum of block_n_fees * 1/n^2 for the last n blocks (bounded by the minimum respresentable value, "1 Nakamoto" or whatever it's called).
  - anothernewdude 6y ago
    Satoshi
xiphias2 6y ago
This is the first interesting paper I see here on HN about Bitcoin. While many people think that Bitcoin's energy usage is too high, I honestly hope that it's high enough to deter a nation state sized attacker. Many Bitcoiners argue that miner rewards shouldn't decrease more, but at the same time it's too late to change the concensus on it.
- elcomet 6y ago
  > I honestly hope that it's high enough to deter a nation state sized attacker. What's the point though? Bitcoin has no real use case apart from speculation.
  - witweb 6y ago
    So people living in countries without a stable currency due to hyperinflation don't count as a real use case? It's sometimes the only way they can secure their capital. I think that we need to think outside of our elitist western bubble more often. Not all people live in a stable democracy with (semi-)stable currencies.
    - afiori 6y ago
      But for them there are better alternatives to BTC, one being BCH for example
      - orwin 6y ago
        And even if they do use BTC (they don't really, at least in Africa, i don't know about Venezuela), they do not trade using BTC but a second layer anyway.
        hfsp 6y ago
        This is either an uninformed or misleading take. It isn't necessarily "Africa" or "Americas". The heuristic is "is my local fiat shitcoin stealing my purchasing power". Counter to your claim and easily provable with a basic search Nigeria is one of, if not the leading in BTC adoption %. https://www.msn.com/en-us/money/news/nigeria-is-the-second-largest-bitcoin-market-after-the-us/ar-BB1c1U1C https://www.msn.com/en-us/money/news/nigeria-is-the-second-l... https://www.statista.com/statistics/1194735/bitcoin-online-search-interest-country/ https://www.statista.com/statistics/1194735/bitcoin-online-s...
        imtringued 6y ago
        Is it the shitcoin or is it the fact that the economy itself is gone and thus your currency isn't worth anything because nobody is selling things to you? Here is an interesting article: https://www.washingtonpost.com/world/the_americas/venezuelas-paradox-people-are-hungry-but-farmers-cant-feed-them/2017/05/21/ce460726-3987-11e7-a59b-26e0451a96fd_story.html https://www.washingtonpost.com/world/the_americas/venezuelas...
- steve_gh 6y ago
  Maybe we need a heavy Carbon Tax on Proof of Work cryptocurrencies. Using the energy consumption of Argentina to verify financial transactions does not fit with moving to a Net Zero economy.
  - lifty 6y ago
    We definitely need a heavy carbon tax on any energy production that has negative externalities. I don't care if its cryptocurrency, video gaming, datacenters or dryers, if it consumes a lot of electricity we need to incentivise people to use less of it or use energy from sources that have smaller carbon footprints. Same should be done for cars.
  - moralsupply 6y ago
    Gaming uses more energy than Bitcoin. Shall we place carbon taxes on gaming too? How about a carbon tax on Gold and Silver, and on the whole of the banking system, which also consume more energy than Bitcoin? In any case, feel free to contact the Bitcoin CEO and discuss your ideas on how to implement those taxes.
    - bronzeage 6y ago
      Except you're wrong and all those things consume far less power than bitcoin. That's the entire point.
      - moralsupply 6y ago
        No they don't. Gaming is the sole demand for all consoles and GPUs produced in the world. Those devices alone consume a lot more energy than Bitcoin miners (by about an order of magnitude). Gold and Silver are extremely expensive to mine energy-wise. The banking system is amazingly expensive to run. Not only it requires lots of buildings and transportation for millions of workers, it also requires a lot of computing resources to be run -- without even guaranteeing you can withdraw your money from banks, and with your money there being corroded due to inflation. Bitcoin, in comparison, is actually pretty "green" once you consider the value it provides: a distributed ledger with 10+ years of operation and no flaws/attacks detected, meaning it's the safest store of value known to mankind, while not being under any control of any organization or government. In any case, even if your point that Bitcoin is "evil" as it requires "too much energy to run" is true, what are you going to do about it? Feel free to short Bitcoin in a futures market, and leave all your wealth allocated in assets associated to fiat currencies.
- loceng 6y ago
  Someone made a comment the other day stating that a 50%+1 attack is more and more likely as it's becoming only a handful of people doing the mining.
  - xiphias2 6y ago
    I'm more worried about the concentration of miners in China than the miners themselves. For them it's not worth it to try the attack. But for China it may be worth to do it if too much Bitcoin is concentrated in American people's hands.
    - loceng 6y ago
      I'd rather you switch your language slightly to state that it'd be the CCP who could easily force the concentration of miners in China to do bad actions; afaik the CCP allows mining to occur in China but not for the Chinese to own Bitcoin?
  - jki275 6y ago
    That's technically true. But. A 50% attack has the problem that an attacker with enough hash power to do it has enough hash power to simply mine on chain legitimately and create blocks and get 50% of the block reward and make tons of money that way, while actually doing the attack decreases confidence in the chain and might end up with massive losses in price.
    - pjerem 6y ago
      Your point makes sense if your goal is making money. If what you want is more power over the global economy. As a government, you may have more interest, say, in stopping Tesla rise (if you consider that making BTC a 0.1$ asset would harm them) than making some "tons of money".
- zie 6y ago
  What would a nation state level attack look like? If they took over the network, it wouldn't really give them anything useful. If they took all the bitcoins, the value would plummet rapidly towards zero, unless they were willing to prop it up with their own currency. Easier to just tax the crap out of BTC. i.e. any BTC mining done in this country owes us 80% of their BTC mining rewards.. etc. If China did that, and they are currently doing some 60+% of the mining... it would change the incentives for mining BTC in China drastically, but China would make some sweet cash for a while, and eventually effectively ban BTC in China. Rinse repeat in other countries, if they decide to hate on BTC. Though really, I don't see any country wanting to do that right now. They are having too much fun watching who is transacting on BTC thinking they are hiding their transactions from the govt(which they aren't).
Proven 6y ago
> Perhaps this will give rise to coin-hopping, i.e., miners hopping to the cryptocurrency with the largest transaction fee pool. Similar thing happened during the time Bitcoin Cash used legacy difficulty adjustment mechanism - it was easy to tell when to switch to mine that coin, and when to BTC. But that was coin-hopping for rewards, not tx fees.
netcruiser 6y ago
Sounds like its based on a flawed assumption: "Now, immediately after a block is found, there will be no more transactions in the network to be claimed by a miner making the next block" The fact is there is usually a large backlog of transactions.
- Paul-E 6y ago
  This paper was published when there were big fights going on about whether the block size should be increased. Om camp argued for the status quo, which was causing high transaction fees and long backlogs. The other camp argued for a larger block size, which would reduce or eliminate the transaction backlog. Eliminating the backlog was generally considered a good thing, and the arguments were mostly around the block size, but this paper essentially came in and said "wait a minute, we might actually need the backlog once the block reward is 0."
  - cyphertruck 6y ago
    Not to disagree, but to emphasize that the idea that the only way to increase bitcoin capacity is increasing the block size is in error. You didn't push that idea but others do. Nearly every release of bitcoin over past 8 years has increased capacity or efficiency, often both.
    - troysk 6y ago
      Feels like natural progression as underlying technology (internet speeds and HDD space) improves. So more network traffic can now get synced across more nodes faster.
    - AaronFriel 6y ago
      How many kWh does one transaction consume? Is that higher or lower than 8 years ago?
      - drdeca 6y ago
        I don’t think individual transactions are meaningfully tied to an energy cost.
stblack 6y ago
Is there no date on this paper? It seems to be from 2016, or thereabouts.
- ddeck 6y ago
  Correct, October 2016. Suggest updating the title. https://dl.acm.org/doi/10.1145/2976749.2978408 https://dl.acm.org/doi/10.1145/2976749.2978408
dnprock 6y ago
I think demand for transactions is an issue. When it fluctuates, miners' earning becomes volatile. Some blockchains, like Grin and Dogecoin, have tail emission. But that's a pretty dumb solution. The reward/supply rate would approach 0. It's effectively the same as zero new supply unless dev teams decide to increase rewards. Changing reward defeats the purpose of decentralization. This problem is prevalent in any limited supply crypto. I've been involved with Bitflate, a crypto with 7% inflation. We propose running a parallel inflationary blockchain. Inflation discourages hoarding. People have incentives to spend. We can also "mix" the inflationary crypto with Bitcoin. This mixing allows us to create digital native crypto with any inflation rate. It also creates demand for transactions on the Bitcoin blockchain. More information about the project: https://bitflate.org/ https://bitflate.org/ Whitepaper: https://bitflate.org/bitflate.pdf https://bitflate.org/bitflate.pdf PS: Some bitcoiners think that fee volatility is not a big issue. There will always be demand for transactions. Miners just have to deal with volatility. But fee volatility will translate to price volatility. It contradicts with the claim that Bitcoin will become stable.
- generalizations 6y ago
  > Inflation discourages hoarding. People have incentives to spend. I'd rather we use a coin that people want more of (deflationary), rather than a coin people want less of (inflationary). There's no inherent reason we want there to be incentives to spend, unless you're some central planner trying to keep the populace invested in society.
  - coliveira 6y ago
    The whole economy depends on people spending. If everybody starts to hoard currency, economy will implode. That's why deflation is worse than (light) inflation, from an economic standpoint.
    - cyphertruck 6y ago
      The idea that when purchasing power increases people spend absolutely nothing is the basis if this rationalization for inflation, and it isn’t supported by logic or experience. They actually spend more and more productively, because instead of barely getting by they are able to accumulate capital and start businesses.
idlewords 6y ago
Everyone has by now grown used to having cryptocurrencies that can't be used to buy anything, but having a cryptocurrency that's not even worth mining will mark a new level of conceptual purity that will no doubt propel Bitcoin past the $100,000 mark.
- deleted 6y ago
  [deleted]
troysk 6y ago
Arvind and the Priceton team did some awesome research and lectures back when most of us didn't pay attention to Bitcoin. This paper goes into how markets and its participants and not just the algorithm plays an important part.
Paul-E 6y ago
One of the assumptions the authors make in this paper is that miners can turn their hardware on and off quickly, and that they will benefit financially for doing so. Mainly by paying lower electricity bills. It turns out the really big miners don't pay for electricity the same way you or I do. Big miners sign long term contracts for continuous consumption of energy, and don't save any money for turning mining hardware off for a short duration. I know one of the authors personally and can try to forward on questions for anyone interested, though they have moved on from academic work so may have limited interest or context.
- Closi 6y ago
  Commercial energy prices do vary throughout the day though, so if they are signing a single fixed price contract per kWh that would miss the opportunity to run older hardware more profitably during cheaper times. Besides, I doubt miners are keeping going during triad periods.
- troysk 6y ago
  They talk about miner turning off the system just after they have mined a coin as they probability of getting another soon is very low while the cost of running the system same.
  - deleted 6y ago
    [deleted]
  - retsibsi 6y ago
    I don't think the probability changes, does it? But the block will be less valuable if there are fewer transaction fees to claim.
    - deleted 6y ago
      [deleted]
  - bawolff 6y ago
    That sounds like gambler's fallacy.
chrisco255 6y ago
Why can't Bitcoin simply transition to proof of stake after mining dries up? Once there are few or no bitcoins left to mine then PoW is a lot of ceremony for very little security gain at that point (and perhaps opens up risks that this paper points out).
- xiphias2 6y ago
  It's because just because you write ,,simply'', it's not a simple thing. Just as an example Ethereum was trying hard to do it for many years now without any success. But the real reason is that there is no real solid formally written and proven ,,proof of stake'' algorithm so far.
  - chrisco255 6y ago
    ETH2 proof of stake beacon chain shipped in December. There's tens of thousands of ETH2 validators live today. Proof of work is still in place for base chain, so ETH is a hybrid currently. But they'll be off proof of work within a year to year and a half. For blockchains as big and old as Bitcoin and Ethereum I understand migrating to a new consensus algorithm is no easy task and comes with risks. But it is doable. And they could even prove it out on one of the many BTC forks or dupes such as BCH or Doge or Litecoin if need be. My question isn't about the technical feasibility, but I'm more interested in the game theory mechanics. The arguments against proof of stake from that point of view seem to dry up as mining rewards dry up, no?
    - 0x64 6y ago
      >There's tens of thousands of ETH2 validators live today. Over 100,000 as of a few days ago!
    - xiphias2 6y ago
      If ETH is hybrid now, how much it helped the energy usage? Did it go down significantly compared to a year ago (even if measured in ETH)? Bitcoin had a halving, which was very sifnificant energy usage decrease measured in BTC (which caused the significant price increase).
RichardHeart 6y ago
Just think how secure Bitcoin will be when we have to Dyson sphere the sun to do the "proof of waste". Uh I meant work. But if the work has value you could sell it for on the side, then it reduces costs of attack, so waste as a feature. I like "proof of wait" for inflation rewards better :). The good news is, we can have other socially enforced consensus networks. (As all blockchain consensus is actually social.) So there's hope for real efficiency, it's just not on version 1 of blockchains. Caveat: I'm biased.
deleted 6y ago
[deleted]
geraldbauer 6y ago
Reminder: Instability? Yes, bitcoin is a ponzi and will collapse. Learn how the investment fraud works. [1] [1]: https://github.com/openblockchains/bitcoin-ponzi https://github.com/openblockchains/bitcoin-ponzi
- gvv 6y ago
  Nocoiners said that at every single price and adoption milestone...
  - totalZero 6y ago
    You can make money in a Ponzi scheme, too. Just saying.
    - Applejinx 6y ago
      Until you can't. And that's the parallel right there: in practical terms, it's a scam for rewarding those that are insiders. Bottom line is there is no exit strategy for 'suckers' who are meant to be left holding the bag. When collapse is part of the curve and denial is part of the sales pitch, it might not literally be an exact Ponzi scheme, but you're meant to be one of the smart ones hyping and profiting off the dumb ones who chronologically come after you. That's the profit strategy.
      - behringer 6y ago
        Which suckers are meant to be holding the bag? At what point does bitcoin become useless altogether?
- gruez 6y ago
  "Needing new buyers for price to increase is not the definition of a Ponzi scheme" https://news.ycombinator.com/item?id=26203396 https://news.ycombinator.com/item?id=26203396
pharmakom 6y ago
given that most users have some kind of hosted wallet service these days, can't the wallet provider do massive "coin join" transactions to dramatically decrease transaction delays?
roenxi 6y ago
There is a slightly subtle contribution here (hidden deep in the 3rd line of the abstract). The stability of the blockchain and the equilibrium position amongst the miners might shift spectacularly when the chain shifts from new bitcoin to transaction fees. It doesn't matter if the paper's assumptions are good or bad after that - they showed there is a difference between the two states and that is interesting in itself.
CJefferson 6y ago
I've been interested in what will happen without the block reward. One (small) thing which really irritates me about bitcoin is how it is claimed it is "not inflationary", yet for it's entire existence so far, the block reward has made it more inflationary than all major currencies -- it's easy to claim that at some point in the future you will stop inflation, I'll believe it when I see it.
- wildbunny 6y ago
  You don't need to 'claim' anything. It's written into the rules of the blockchain. You cannot change the rules like that and expect to have your blocks appended to the canonical chain.
  - fanciestManimal 6y ago
    It depends on where the miners and users go. I don't know that we can predict today what people in the future will view the incentives to be, but its certainly not impossible that the collective view of the bitcoin community might shift towards some change on that front. I'm not saying this is the only solution, but if having no block rewards really threatens the existence of bitcoin, and a regular inflation rate were deemed to be the beset way to solve that -- the cap on the number of coins isn't actually immutable. There would be a hard fork in that case, sure, but if that's where the people went, that's where the value would go. Keep in mind that the miners would have some incentive to back a change to that cap. Every block reward would be extracting value from the non-mining users and distributing it to themselves -- similar to the inflation tax we face with normal currencies. It's not inconceivable that they could drag the user base along with if it was seen as existential. A 2% inflation rate is better than the collapse of something holding a significant fraction of one's wealth.
- BelenusMordred 6y ago
  > yet for it's entire existence so far, the block reward has made it more inflationary than all major currencies Why does every HN bitcoin thread have this ridiculously incorrect statement being mindless parroted? The inflation rate of bitcoin is currently 1.8%, this is easily confirmed for anyone willing to put in 10 seconds of research. In comparison the US M1 monetary supply is up over 60% in the last year and the S&P 500 valuation is at all time highs despite a massive global recession. At what point will people actually capitulate regarding the value of cash in their wallet being rapidly inflated away across the planet? https://tradingeconomics.com/united-states/money-supply-m1 https://tradingeconomics.com/united-states/money-supply-m1
ajkdhcb2 6y ago
This is one of the reasons why I am glad that Monero has a tail emission: the block reward never drops to zero, but stays at a fixed amount per block, asymptotically getting closer to 0% inflation per year
- 4AoZqrH2fsk5UB 6y ago
  Yes. This is yet another reason I think Monero will become an actually usable currency
aaron695 6y ago
I haven't read the paper but I'll still be downvoted for this either way so please upvote, but Bitcoin uses a lot of energy that it shouldn't and banks work better and it is just a speculative market which means gambling, and I think it's probably racist. Please remember Bitcoin is bad. If I was smart I might ask if this paper is relevant within the next 100 year given how Bitcoin works currently, but I'm not :(
- SideburnsOfDoom 6y ago
  > and I think it's probably racist I know that you think you're being performatively stupid, but in a system where the benefits are captured almost entirely by a few techbros, and the pollution from the coal power plants powering it is felt mostly by ethnic minority rural poor (1) ... yes? I suggest that the burden of poof is on the other side: attempt to make a coherent case why this technology is somehow egalitarian and not going to drastically worsen inequality. Good luck. 1) https://qz.com/1978807/bitcoin-has-a-xinjiang-problem/ https://qz.com/1978807/bitcoin-has-a-xinjiang-problem/ https://twitter.com/ericholthaus/status/1362279679630204929 https://twitter.com/ericholthaus/status/1362279679630204929 https://diginomica.com/bitcoins-damage-planet-coal-powered-chinese-phenomenon-uses-more-electricity-whole-argentina https://diginomica.com/bitcoins-damage-planet-coal-powered-c...
  - hfsp 6y ago
    This is a smug take. Who do you think gets the benefit of the freshly printed fiat? In the central bank cantiollionaire system, there are three classes of citizens: 1) jamie dimons, warren buffets and the like who get access to practically 0 cost lending rates 2) the ~60% of citizens with assets (e.g. stonks, real estate) that get pumped along with the money printer 3) everyone else What do you think happens to "third class" citizens? The rules are NOT the same for everyone under the central banking system. The rules ARE the same for EVERYONE with BTC. https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr959.pdf https://www.newyorkfed.org/medialibrary/media/research/staff...
    - SideburnsOfDoom 6y ago
ronbombardier 6y ago
Here is a paper on the fallacy of selfish mining: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3004026 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3004026
zhoujianfu 6y ago
I have a controversial view.. (more than) enough mining will still happen even if there were no block reward AND no fees. Why would somebody mine Bitcoin in that scenario? Because they hold Bitcoin. I imagine the average investor would be willing to spend around 2% of their holdings a year to “protect” their investment, I.e. make sure the network is functional and immune to attack. Which comes out to about the total amount spent now on mining (1.8% annual block reward =~ 1.8% spent on mining).
- tromp 6y ago
  The "tragedy of the commons" will make that argument rather unconvincing.
trident5000 6y ago
This has been debunked numerous times. Layer 2 settlement (like lighting network as a single example) will batch transactions at an increased rate to the main chain, raising the fees and causing stability.
student2k 6y ago
Honestly bitcoin core will never need to use it, I will die before, It is not possible to adapt bitcoin as there is no governance (or a flawed one either accept what miners and few devs want or fractionate the community creating bch) , It is software, software needs to adapt, by definition. I think the implicit idea that bitcoin will never change helps to grow now, as we get false sentiment of stability, But we are at the mercy of devs/miners. If you think this is a concern, take a look at decred, is was born to be the best store of value, because it can adapt and evolve through governance, so it can last in time.
hakesdev 6y ago
This was published in 2016. The title should reflect that. https://dl.acm.org/doi/10.1145/2976749.2978408 https://dl.acm.org/doi/10.1145/2976749.2978408
stevenroose 6y ago
This paper is entirely based on a false assumption: > We also assume that miners always have space to include all available transactions. And that's exactly what the block size debate was about 2 years ago (paper is 4 years old). We did realize that it was crucial for Bitcoin to always have demand for block space, exactly for this reason. If the authors want to contribute to the space, they should revisit that assumption and try again. Also, the paper has a clear motive: > Perhaps instead, designers of new cryptocurrencies must resign themselves to the inevitability of monetary inflation and make the block reward permanent. Instead of suggesting changes that could be made to Bitcoin to reduce the thread of the scenario they describe, they suggest to discard Bitcoin altogether and move to a cryptocurrency with permanent inflation.

154 points by nayuki 6y ago

I may be misunderstanding because I largely skimmed, but it sounds like this is saying this is due to the variation in the transaction fee amounts. Assuming that that's the idea: What if only a fraction of the transaction fees go to the miner of the block including those transactions, and the remainder is "stored", and doled out gradually over the next n blocks, or something like that, resulting in it being a fairly steady rate of payout?

infogulch 6y ago
Say, the total payout of mining a block is half of the fees from the block you mined, a quarter of the fees from the block your parent mined, an eighth of the block before that, etc. The fee payout of mining a block becomes the sum of block_n_fees * 1/n^2 for the last n blocks (bounded by the minimum respresentable value, "1 Nakamoto" or whatever it's called).
- anothernewdude 6y ago
  Satoshi

xiphias2 6y ago

This is the first interesting paper I see here on HN about Bitcoin. While many people think that Bitcoin's energy usage is too high, I honestly hope that it's high enough to deter a nation state sized attacker. Many Bitcoiners argue that miner rewards shouldn't decrease more, but at the same time it's too late to change the concensus on it.

elcomet 6y ago
> I honestly hope that it's high enough to deter a nation state sized attacker. What's the point though? Bitcoin has no real use case apart from speculation.
- witweb 6y ago
  So people living in countries without a stable currency due to hyperinflation don't count as a real use case? It's sometimes the only way they can secure their capital. I think that we need to think outside of our elitist western bubble more often. Not all people live in a stable democracy with (semi-)stable currencies.
  - afiori 6y ago
    But for them there are better alternatives to BTC, one being BCH for example
    - orwin 6y ago
      And even if they do use BTC (they don't really, at least in Africa, i don't know about Venezuela), they do not trade using BTC but a second layer anyway.
      - hfsp 6y ago
        This is either an uninformed or misleading take. It isn't necessarily "Africa" or "Americas". The heuristic is "is my local fiat shitcoin stealing my purchasing power". Counter to your claim and easily provable with a basic search Nigeria is one of, if not the leading in BTC adoption %. https://www.msn.com/en-us/money/news/nigeria-is-the-second-largest-bitcoin-market-after-the-us/ar-BB1c1U1C https://www.msn.com/en-us/money/news/nigeria-is-the-second-l... https://www.statista.com/statistics/1194735/bitcoin-online-search-interest-country/ https://www.statista.com/statistics/1194735/bitcoin-online-s...
        imtringued 6y ago
        Is it the shitcoin or is it the fact that the economy itself is gone and thus your currency isn't worth anything because nobody is selling things to you? Here is an interesting article: https://www.washingtonpost.com/world/the_americas/venezuelas-paradox-people-are-hungry-but-farmers-cant-feed-them/2017/05/21/ce460726-3987-11e7-a59b-26e0451a96fd_story.html https://www.washingtonpost.com/world/the_americas/venezuelas...
steve_gh 6y ago
Maybe we need a heavy Carbon Tax on Proof of Work cryptocurrencies. Using the energy consumption of Argentina to verify financial transactions does not fit with moving to a Net Zero economy.
- lifty 6y ago
  We definitely need a heavy carbon tax on any energy production that has negative externalities. I don't care if its cryptocurrency, video gaming, datacenters or dryers, if it consumes a lot of electricity we need to incentivise people to use less of it or use energy from sources that have smaller carbon footprints. Same should be done for cars.
- moralsupply 6y ago
  Gaming uses more energy than Bitcoin. Shall we place carbon taxes on gaming too? How about a carbon tax on Gold and Silver, and on the whole of the banking system, which also consume more energy than Bitcoin? In any case, feel free to contact the Bitcoin CEO and discuss your ideas on how to implement those taxes.
  - bronzeage 6y ago
    Except you're wrong and all those things consume far less power than bitcoin. That's the entire point.
    - moralsupply 6y ago
      No they don't. Gaming is the sole demand for all consoles and GPUs produced in the world. Those devices alone consume a lot more energy than Bitcoin miners (by about an order of magnitude). Gold and Silver are extremely expensive to mine energy-wise. The banking system is amazingly expensive to run. Not only it requires lots of buildings and transportation for millions of workers, it also requires a lot of computing resources to be run -- without even guaranteeing you can withdraw your money from banks, and with your money there being corroded due to inflation. Bitcoin, in comparison, is actually pretty "green" once you consider the value it provides: a distributed ledger with 10+ years of operation and no flaws/attacks detected, meaning it's the safest store of value known to mankind, while not being under any control of any organization or government. In any case, even if your point that Bitcoin is "evil" as it requires "too much energy to run" is true, what are you going to do about it? Feel free to short Bitcoin in a futures market, and leave all your wealth allocated in assets associated to fiat currencies.
loceng 6y ago
Someone made a comment the other day stating that a 50%+1 attack is more and more likely as it's becoming only a handful of people doing the mining.
- xiphias2 6y ago
  I'm more worried about the concentration of miners in China than the miners themselves. For them it's not worth it to try the attack. But for China it may be worth to do it if too much Bitcoin is concentrated in American people's hands.
  - loceng 6y ago
    I'd rather you switch your language slightly to state that it'd be the CCP who could easily force the concentration of miners in China to do bad actions; afaik the CCP allows mining to occur in China but not for the Chinese to own Bitcoin?
- jki275 6y ago
  That's technically true. But. A 50% attack has the problem that an attacker with enough hash power to do it has enough hash power to simply mine on chain legitimately and create blocks and get 50% of the block reward and make tons of money that way, while actually doing the attack decreases confidence in the chain and might end up with massive losses in price.
  - pjerem 6y ago
    Your point makes sense if your goal is making money. If what you want is more power over the global economy. As a government, you may have more interest, say, in stopping Tesla rise (if you consider that making BTC a 0.1$ asset would harm them) than making some "tons of money".
zie 6y ago
What would a nation state level attack look like? If they took over the network, it wouldn't really give them anything useful. If they took all the bitcoins, the value would plummet rapidly towards zero, unless they were willing to prop it up with their own currency. Easier to just tax the crap out of BTC. i.e. any BTC mining done in this country owes us 80% of their BTC mining rewards.. etc. If China did that, and they are currently doing some 60+% of the mining... it would change the incentives for mining BTC in China drastically, but China would make some sweet cash for a while, and eventually effectively ban BTC in China. Rinse repeat in other countries, if they decide to hate on BTC. Though really, I don't see any country wanting to do that right now. They are having too much fun watching who is transacting on BTC thinking they are hiding their transactions from the govt(which they aren't).

Proven 6y ago

> Perhaps this will give rise to coin-hopping, i.e., miners hopping to the cryptocurrency with the largest transaction fee pool. Similar thing happened during the time Bitcoin Cash used legacy difficulty adjustment mechanism - it was easy to tell when to switch to mine that coin, and when to BTC. But that was coin-hopping for rewards, not tx fees.

netcruiser 6y ago

Sounds like its based on a flawed assumption: "Now, immediately after a block is found, there will be no more transactions in the network to be claimed by a miner making the next block" The fact is there is usually a large backlog of transactions.

Paul-E 6y ago
This paper was published when there were big fights going on about whether the block size should be increased. Om camp argued for the status quo, which was causing high transaction fees and long backlogs. The other camp argued for a larger block size, which would reduce or eliminate the transaction backlog. Eliminating the backlog was generally considered a good thing, and the arguments were mostly around the block size, but this paper essentially came in and said "wait a minute, we might actually need the backlog once the block reward is 0."
- cyphertruck 6y ago
  Not to disagree, but to emphasize that the idea that the only way to increase bitcoin capacity is increasing the block size is in error. You didn't push that idea but others do. Nearly every release of bitcoin over past 8 years has increased capacity or efficiency, often both.
  - troysk 6y ago
    Feels like natural progression as underlying technology (internet speeds and HDD space) improves. So more network traffic can now get synced across more nodes faster.
  - AaronFriel 6y ago
    How many kWh does one transaction consume? Is that higher or lower than 8 years ago?
    - drdeca 6y ago
      I don’t think individual transactions are meaningfully tied to an energy cost.

stblack 6y ago

Is there no date on this paper? It seems to be from 2016, or thereabouts.

ddeck 6y ago
Correct, October 2016. Suggest updating the title. https://dl.acm.org/doi/10.1145/2976749.2978408 https://dl.acm.org/doi/10.1145/2976749.2978408

dnprock 6y ago

I think demand for transactions is an issue. When it fluctuates, miners' earning becomes volatile. Some blockchains, like Grin and Dogecoin, have tail emission. But that's a pretty dumb solution. The reward/supply rate would approach 0. It's effectively the same as zero new supply unless dev teams decide to increase rewards. Changing reward defeats the purpose of decentralization. This problem is prevalent in any limited supply crypto. I've been involved with Bitflate, a crypto with 7% inflation. We propose running a parallel inflationary blockchain. Inflation discourages hoarding. People have incentives to spend. We can also "mix" the inflationary crypto with Bitcoin. This mixing allows us to create digital native crypto with any inflation rate. It also creates demand for transactions on the Bitcoin blockchain. More information about the project: https://bitflate.org/ https://bitflate.org/ Whitepaper: https://bitflate.org/bitflate.pdf https://bitflate.org/bitflate.pdf PS: Some bitcoiners think that fee volatility is not a big issue. There will always be demand for transactions. Miners just have to deal with volatility. But fee volatility will translate to price volatility. It contradicts with the claim that Bitcoin will become stable.

generalizations 6y ago
> Inflation discourages hoarding. People have incentives to spend. I'd rather we use a coin that people want more of (deflationary), rather than a coin people want less of (inflationary). There's no inherent reason we want there to be incentives to spend, unless you're some central planner trying to keep the populace invested in society.
- coliveira 6y ago
  The whole economy depends on people spending. If everybody starts to hoard currency, economy will implode. That's why deflation is worse than (light) inflation, from an economic standpoint.
  - cyphertruck 6y ago
    The idea that when purchasing power increases people spend absolutely nothing is the basis if this rationalization for inflation, and it isn’t supported by logic or experience. They actually spend more and more productively, because instead of barely getting by they are able to accumulate capital and start businesses.

idlewords 6y ago

Everyone has by now grown used to having cryptocurrencies that can't be used to buy anything, but having a cryptocurrency that's not even worth mining will mark a new level of conceptual purity that will no doubt propel Bitcoin past the $100,000 mark.

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troysk 6y ago

Arvind and the Priceton team did some awesome research and lectures back when most of us didn't pay attention to Bitcoin. This paper goes into how markets and its participants and not just the algorithm plays an important part.

Paul-E 6y ago

One of the assumptions the authors make in this paper is that miners can turn their hardware on and off quickly, and that they will benefit financially for doing so. Mainly by paying lower electricity bills. It turns out the really big miners don't pay for electricity the same way you or I do. Big miners sign long term contracts for continuous consumption of energy, and don't save any money for turning mining hardware off for a short duration. I know one of the authors personally and can try to forward on questions for anyone interested, though they have moved on from academic work so may have limited interest or context.

Closi 6y ago
Commercial energy prices do vary throughout the day though, so if they are signing a single fixed price contract per kWh that would miss the opportunity to run older hardware more profitably during cheaper times. Besides, I doubt miners are keeping going during triad periods.
troysk 6y ago
They talk about miner turning off the system just after they have mined a coin as they probability of getting another soon is very low while the cost of running the system same.
- deleted 6y ago
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- retsibsi 6y ago
  I don't think the probability changes, does it? But the block will be less valuable if there are fewer transaction fees to claim.
  - deleted 6y ago
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- bawolff 6y ago
  That sounds like gambler's fallacy.

chrisco255 6y ago

Why can't Bitcoin simply transition to proof of stake after mining dries up? Once there are few or no bitcoins left to mine then PoW is a lot of ceremony for very little security gain at that point (and perhaps opens up risks that this paper points out).

xiphias2 6y ago
It's because just because you write ,,simply'', it's not a simple thing. Just as an example Ethereum was trying hard to do it for many years now without any success. But the real reason is that there is no real solid formally written and proven ,,proof of stake'' algorithm so far.
- chrisco255 6y ago
  ETH2 proof of stake beacon chain shipped in December. There's tens of thousands of ETH2 validators live today. Proof of work is still in place for base chain, so ETH is a hybrid currently. But they'll be off proof of work within a year to year and a half. For blockchains as big and old as Bitcoin and Ethereum I understand migrating to a new consensus algorithm is no easy task and comes with risks. But it is doable. And they could even prove it out on one of the many BTC forks or dupes such as BCH or Doge or Litecoin if need be. My question isn't about the technical feasibility, but I'm more interested in the game theory mechanics. The arguments against proof of stake from that point of view seem to dry up as mining rewards dry up, no?
  - 0x64 6y ago
    >There's tens of thousands of ETH2 validators live today. Over 100,000 as of a few days ago!
  - xiphias2 6y ago
    If ETH is hybrid now, how much it helped the energy usage? Did it go down significantly compared to a year ago (even if measured in ETH)? Bitcoin had a halving, which was very sifnificant energy usage decrease measured in BTC (which caused the significant price increase).

RichardHeart 6y ago

Just think how secure Bitcoin will be when we have to Dyson sphere the sun to do the "proof of waste". Uh I meant work. But if the work has value you could sell it for on the side, then it reduces costs of attack, so waste as a feature. I like "proof of wait" for inflation rewards better :). The good news is, we can have other socially enforced consensus networks. (As all blockchain consensus is actually social.) So there's hope for real efficiency, it's just not on version 1 of blockchains. Caveat: I'm biased.

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geraldbauer 6y ago

Reminder: Instability? Yes, bitcoin is a ponzi and will collapse. Learn how the investment fraud works. [1] [1]: https://github.com/openblockchains/bitcoin-ponzi https://github.com/openblockchains/bitcoin-ponzi

gvv 6y ago
Nocoiners said that at every single price and adoption milestone...
- totalZero 6y ago
  You can make money in a Ponzi scheme, too. Just saying.
  - Applejinx 6y ago
    Until you can't. And that's the parallel right there: in practical terms, it's a scam for rewarding those that are insiders. Bottom line is there is no exit strategy for 'suckers' who are meant to be left holding the bag. When collapse is part of the curve and denial is part of the sales pitch, it might not literally be an exact Ponzi scheme, but you're meant to be one of the smart ones hyping and profiting off the dumb ones who chronologically come after you. That's the profit strategy.
    - behringer 6y ago
      Which suckers are meant to be holding the bag? At what point does bitcoin become useless altogether?
gruez 6y ago
"Needing new buyers for price to increase is not the definition of a Ponzi scheme" https://news.ycombinator.com/item?id=26203396 https://news.ycombinator.com/item?id=26203396

pharmakom 6y ago

given that most users have some kind of hosted wallet service these days, can't the wallet provider do massive "coin join" transactions to dramatically decrease transaction delays?

roenxi 6y ago

There is a slightly subtle contribution here (hidden deep in the 3rd line of the abstract). The stability of the blockchain and the equilibrium position amongst the miners might shift spectacularly when the chain shifts from new bitcoin to transaction fees. It doesn't matter if the paper's assumptions are good or bad after that - they showed there is a difference between the two states and that is interesting in itself.

CJefferson 6y ago

I've been interested in what will happen without the block reward. One (small) thing which really irritates me about bitcoin is how it is claimed it is "not inflationary", yet for it's entire existence so far, the block reward has made it more inflationary than all major currencies -- it's easy to claim that at some point in the future you will stop inflation, I'll believe it when I see it.

wildbunny 6y ago
You don't need to 'claim' anything. It's written into the rules of the blockchain. You cannot change the rules like that and expect to have your blocks appended to the canonical chain.
- fanciestManimal 6y ago
  It depends on where the miners and users go. I don't know that we can predict today what people in the future will view the incentives to be, but its certainly not impossible that the collective view of the bitcoin community might shift towards some change on that front. I'm not saying this is the only solution, but if having no block rewards really threatens the existence of bitcoin, and a regular inflation rate were deemed to be the beset way to solve that -- the cap on the number of coins isn't actually immutable. There would be a hard fork in that case, sure, but if that's where the people went, that's where the value would go. Keep in mind that the miners would have some incentive to back a change to that cap. Every block reward would be extracting value from the non-mining users and distributing it to themselves -- similar to the inflation tax we face with normal currencies. It's not inconceivable that they could drag the user base along with if it was seen as existential. A 2% inflation rate is better than the collapse of something holding a significant fraction of one's wealth.
BelenusMordred 6y ago
> yet for it's entire existence so far, the block reward has made it more inflationary than all major currencies Why does every HN bitcoin thread have this ridiculously incorrect statement being mindless parroted? The inflation rate of bitcoin is currently 1.8%, this is easily confirmed for anyone willing to put in 10 seconds of research. In comparison the US M1 monetary supply is up over 60% in the last year and the S&P 500 valuation is at all time highs despite a massive global recession. At what point will people actually capitulate regarding the value of cash in their wallet being rapidly inflated away across the planet? https://tradingeconomics.com/united-states/money-supply-m1 https://tradingeconomics.com/united-states/money-supply-m1

ajkdhcb2 6y ago

This is one of the reasons why I am glad that Monero has a tail emission: the block reward never drops to zero, but stays at a fixed amount per block, asymptotically getting closer to 0% inflation per year

4AoZqrH2fsk5UB 6y ago
Yes. This is yet another reason I think Monero will become an actually usable currency

aaron695 6y ago

I haven't read the paper but I'll still be downvoted for this either way so please upvote, but Bitcoin uses a lot of energy that it shouldn't and banks work better and it is just a speculative market which means gambling, and I think it's probably racist. Please remember Bitcoin is bad. If I was smart I might ask if this paper is relevant within the next 100 year given how Bitcoin works currently, but I'm not :(

SideburnsOfDoom 6y ago
> and I think it's probably racist I know that you think you're being performatively stupid, but in a system where the benefits are captured almost entirely by a few techbros, and the pollution from the coal power plants powering it is felt mostly by ethnic minority rural poor (1) ... yes? I suggest that the burden of poof is on the other side: attempt to make a coherent case why this technology is somehow egalitarian and not going to drastically worsen inequality. Good luck. 1) https://qz.com/1978807/bitcoin-has-a-xinjiang-problem/ https://qz.com/1978807/bitcoin-has-a-xinjiang-problem/ https://twitter.com/ericholthaus/status/1362279679630204929 https://twitter.com/ericholthaus/status/1362279679630204929 https://diginomica.com/bitcoins-damage-planet-coal-powered-chinese-phenomenon-uses-more-electricity-whole-argentina https://diginomica.com/bitcoins-damage-planet-coal-powered-c...
- hfsp 6y ago
  This is a smug take. Who do you think gets the benefit of the freshly printed fiat? In the central bank cantiollionaire system, there are three classes of citizens: 1) jamie dimons, warren buffets and the like who get access to practically 0 cost lending rates 2) the ~60% of citizens with assets (e.g. stonks, real estate) that get pumped along with the money printer 3) everyone else What do you think happens to "third class" citizens? The rules are NOT the same for everyone under the central banking system. The rules ARE the same for EVERYONE with BTC. https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr959.pdf https://www.newyorkfed.org/medialibrary/media/research/staff...
  - SideburnsOfDoom 6y ago

ronbombardier 6y ago

Here is a paper on the fallacy of selfish mining: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3004026 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3004026

zhoujianfu 6y ago

I have a controversial view.. (more than) enough mining will still happen even if there were no block reward AND no fees. Why would somebody mine Bitcoin in that scenario? Because they hold Bitcoin. I imagine the average investor would be willing to spend around 2% of their holdings a year to “protect” their investment, I.e. make sure the network is functional and immune to attack. Which comes out to about the total amount spent now on mining (1.8% annual block reward =~ 1.8% spent on mining).

tromp 6y ago
The "tragedy of the commons" will make that argument rather unconvincing.

trident5000 6y ago

This has been debunked numerous times. Layer 2 settlement (like lighting network as a single example) will batch transactions at an increased rate to the main chain, raising the fees and causing stability.

student2k 6y ago

Honestly bitcoin core will never need to use it, I will die before, It is not possible to adapt bitcoin as there is no governance (or a flawed one either accept what miners and few devs want or fractionate the community creating bch) , It is software, software needs to adapt, by definition. I think the implicit idea that bitcoin will never change helps to grow now, as we get false sentiment of stability, But we are at the mercy of devs/miners. If you think this is a concern, take a look at decred, is was born to be the best store of value, because it can adapt and evolve through governance, so it can last in time.

hakesdev 6y ago

This was published in 2016. The title should reflect that. https://dl.acm.org/doi/10.1145/2976749.2978408 https://dl.acm.org/doi/10.1145/2976749.2978408

stevenroose 6y ago

This paper is entirely based on a false assumption: > We also assume that miners always have space to include all available transactions. And that's exactly what the block size debate was about 2 years ago (paper is 4 years old). We did realize that it was crucial for Bitcoin to always have demand for block space, exactly for this reason. If the authors want to contribute to the space, they should revisit that assumption and try again. Also, the paper has a clear motive: > Perhaps instead, designers of new cryptocurrencies must resign themselves to the inevitability of monetary inflation and make the block reward permanent. Instead of suggesting changes that could be made to Bitcoin to reduce the thread of the scenario they describe, they suggest to discard Bitcoin altogether and move to a cryptocurrency with permanent inflation.