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Instead of killing it by banning it, I suspect they could kill it by buying it. If the Fed wanted to "invest" in Bitcoin, it would kill it by soaking up liquid

Instead of killing it by banning it, I suspect they could kill it by buying it. If the Fed wanted to "invest" in Bitcoin, it would kill it by soaking up liquidity and creating a liquidity-squeeze. Because the amount in circulation is fixed, it wouldn't have to buy all of the Bitcoin -- just enough to kill any utility. This is a downside of an asset with a fixed quantity. Once the community discovered the liquidity-squeeze spike, it would lead to a run-to-the-exit with a price crash. The short-squeeze spike and crash would spread across alt-coins as well due to rush-in-rush-out and leverage across alt-coins. Once liquidity is killed, liquidity-squeezed, and a crash happens, the FED / SEC could make it illegal citing volatility and losses of citizens. The Fed would need to do this discretely and never disclose their purchases. If it became public, the community would probably choose to fork.

gruez 6y ago
Can you elaborate on why a "liquidity-squeeze" is bad for bitcoin? It's subdivisible to 8 decimal places, so it's not like reducing the supply would make it harder to transact or anything.
lambda_obrien 6y ago
The USG could kill it by using a 51 percent attack; the NSA must have rows upon rows of servers that could be repurposed for a week or two to destroy the market. Split the blockchain every couple of hours into several different versions, eventually there would be little chance to reconcile things.
- gruez 6y ago
  >the NSA must have rows upon rows of servers that could be repurposed for a week or two to destroy the market Their general purpose servers are nearly useless for mining bitcoin because their hashrates are orders of magnitude lower than the ASICs that professional miners use. If you want to 51% attack bitcoin you either need an absurd number of general purpose computers (possibly more than all CPUs/GPUs that exist on earth) or pour billions into making hardware that can only be used to mine.
  - SubjectToChange 6y ago
    $1B would be more than enough to design and manufacture all the necessary ASICs to cripple the network. They wouldn't even need to do a 51% attack to do so, e.g. selling coins at a complete loss would bleed the other miners white.
    - gruez 6y ago
      >$1B would be more than enough to design and manufacture all the necessary ASICs to cripple the network Source? Some napkin math using the current bitcoin network hash rate[1] and the price/performance ratio of a yet-to-be-released bitcoin mining ASIC[2] suggests that you'd need $9.5B to take over the network. [1] https://www.blockchain.com/charts/hash-rate https://www.blockchain.com/charts/hash-rate [1] https://shop.bitmain.com/product/detail?pid=00020210224195530399kqcF32sc06B9 https://shop.bitmain.com/product/detail?pid=0002021022419553...
- maxerickson 6y ago
  I think specialized chips work too well for repurposing other computing capacity to work. I expect the most effective attacks would go after control of mining capacity, either directly seizing it or taking it offline.
- Karunamon 6y ago
  The NSA/CIA/etc. is precisely why this won't happen, for the same reason the same are launching no wide-scale attacks to take down Tor - the guys in suits doing questionable government things need anonymity too.
  - fastball 6y ago
    Hell, Satoshi Nakamoto probably is the NSA.
    - wil421 6y ago
      Bingo. I’ve always thought it was the NSA, CIA, or maybe UK or Israel but I doubt the latter two. Especially since Satoshi’s wallet is so large and hasn’t moved. Bitcoin has to make it much easier for 3 letter type agencies to follow money.
      - RealityVoid 6y ago
        Most darknet stuff uses monero and that is... tricky to follow.
      - rodiger 6y ago
        Unfortunately it's almost definitely a smart nerd (using this as a compliment here) who passed away.
    - p1peridine 6y ago
      I don't think NSA would include a video poker game in the source code https://github.com/trottier/original-bitcoin/blob/master/src/uibase.cpp#L1573 https://github.com/trottier/original-bitcoin/blob/master/src...
- arminiusreturns 6y ago
  I theorized back in 2009 that this is exactly what would happen, but instead of having NSA use it's server farms, it would be the central banks using third party cutouts to buy up chunks get to a collective 51 percent. Why I didn't predict that the obvious result would be a runaway market I still kick myself for, because at the time I rejected bitcoin for it's lack of privacy and just moved on... My current guess is that they are going to pressure all the other coins, and come to some collective agreement after some farcicle fact finding mission ala 1907 to agree there should be some sort of central bank controlled digital coin... which of course they will control, but will lack anonymity. BTC will crash then. (but again, maybe I'm not the best person to listen to on this topic!)
Y_Y 6y ago
But won't you also increase the mining activity if the price shoots up? I'd like to hear more detail on this "liquidity-squeeze" plan.
- gruez 6y ago
  That wouldn't affect emission rates (at least in the long term), due to network difficulty adjustments.
throwaway6734 6y ago
Or make it illegal and have the NSA directly attack the compute used to secure it
- RealityVoid 6y ago
  Hah! :)) So naive. No way this is possible. Attacking compute used to secure it means attacking a whole lot of machines. And the people near those machines will patch them. An you need to attack 51% of them at the same time. Even if you manage to do a 2x spend, they will live with it and patch the stuff and people will still use it. Because what is a couple of 2x somewhere along the way compared to the rest of the blocks it secured? Not to mention of the geopolitical consequence. No, this "have the NSA directly attack the compute " is not feasible and would only strengthen its position in the long term.
  - ac29 6y ago
    If government agencies can hack into and disable secured nuclear facilities (this happened... yesterday), I dont see why it would be "impossible" to attack random Bitcoin mining facilities. When state level intelligence agencies are your adversary, I wouldn't assume you can "just patch it" either.
    - RealityVoid 6y ago
      Oh, it's possible. You hack into, what? One? A couple? But it does not scale up like that. Do you really honestly think you can reach 51% like that? Besides, yes, you can just patch the vulnerabilities. Contrary to popular belief, vulns are not plentiful and are not cheap. Using one kind of burns it. So it would be a _very_ stupid usage of vulns. Precisely the decentralized nature of BTC makes it impossible to shut it down exactly the same way you shut down a nuclear power plant. And ok, you 51% the network. Then what? You can't create BTC's or change the rules of the game dramatically, without a fork. so the people on the original network are kind of... meh, at your attack. You could double spend but you need to own the coins you spend, so you shaft a couple of people. What then? I do not think that would kill it, there are cryptos that were 51%'ed (looking at ETH classic) and are still alive and chugging along.
liquidify 6y ago
This is nonsense. Bitcoin has not had much utility since 2015 when the repo was taken over by people who refused to increase the block capacity. A purchase of bitcoin by the govt would massively increase the prices. Transaction of value by the big players would become even easier. The high degree of divisibility would ensure that small players could still play. There would be no more liquidity issue than there is currently.
thebean11 6y ago
You're claiming that an entity buying up a ton of Bitcoin would crash the price? Do you have any references? I'm not familiar with that economic phenomenon. Also like others have said, the price is divisible to many decimal places, and with consensus could be updated to be further subdivided.
sleavey 6y ago
The FBI did once own a significant amount of Bitcoin after busting the Silk Road, but auctioned most of it off.
cwkoss 6y ago
“Whatever you do,” cried Brer Crypto, “Don’t throw me into the briar short squeeze”
deleted 6y ago
[deleted]

gruez 6y ago

Can you elaborate on why a "liquidity-squeeze" is bad for bitcoin? It's subdivisible to 8 decimal places, so it's not like reducing the supply would make it harder to transact or anything.

lambda_obrien 6y ago

The USG could kill it by using a 51 percent attack; the NSA must have rows upon rows of servers that could be repurposed for a week or two to destroy the market. Split the blockchain every couple of hours into several different versions, eventually there would be little chance to reconcile things.

gruez 6y ago
>the NSA must have rows upon rows of servers that could be repurposed for a week or two to destroy the market Their general purpose servers are nearly useless for mining bitcoin because their hashrates are orders of magnitude lower than the ASICs that professional miners use. If you want to 51% attack bitcoin you either need an absurd number of general purpose computers (possibly more than all CPUs/GPUs that exist on earth) or pour billions into making hardware that can only be used to mine.
- SubjectToChange 6y ago
  $1B would be more than enough to design and manufacture all the necessary ASICs to cripple the network. They wouldn't even need to do a 51% attack to do so, e.g. selling coins at a complete loss would bleed the other miners white.
  - gruez 6y ago
    >$1B would be more than enough to design and manufacture all the necessary ASICs to cripple the network Source? Some napkin math using the current bitcoin network hash rate[1] and the price/performance ratio of a yet-to-be-released bitcoin mining ASIC[2] suggests that you'd need $9.5B to take over the network. [1] https://www.blockchain.com/charts/hash-rate https://www.blockchain.com/charts/hash-rate [1] https://shop.bitmain.com/product/detail?pid=00020210224195530399kqcF32sc06B9 https://shop.bitmain.com/product/detail?pid=0002021022419553...
maxerickson 6y ago
I think specialized chips work too well for repurposing other computing capacity to work. I expect the most effective attacks would go after control of mining capacity, either directly seizing it or taking it offline.
Karunamon 6y ago
The NSA/CIA/etc. is precisely why this won't happen, for the same reason the same are launching no wide-scale attacks to take down Tor - the guys in suits doing questionable government things need anonymity too.
- fastball 6y ago
  Hell, Satoshi Nakamoto probably is the NSA.
  - wil421 6y ago
    Bingo. I’ve always thought it was the NSA, CIA, or maybe UK or Israel but I doubt the latter two. Especially since Satoshi’s wallet is so large and hasn’t moved. Bitcoin has to make it much easier for 3 letter type agencies to follow money.
    - RealityVoid 6y ago
      Most darknet stuff uses monero and that is... tricky to follow.
    - rodiger 6y ago
      Unfortunately it's almost definitely a smart nerd (using this as a compliment here) who passed away.
  - p1peridine 6y ago
    I don't think NSA would include a video poker game in the source code https://github.com/trottier/original-bitcoin/blob/master/src/uibase.cpp#L1573 https://github.com/trottier/original-bitcoin/blob/master/src...
arminiusreturns 6y ago
I theorized back in 2009 that this is exactly what would happen, but instead of having NSA use it's server farms, it would be the central banks using third party cutouts to buy up chunks get to a collective 51 percent. Why I didn't predict that the obvious result would be a runaway market I still kick myself for, because at the time I rejected bitcoin for it's lack of privacy and just moved on... My current guess is that they are going to pressure all the other coins, and come to some collective agreement after some farcicle fact finding mission ala 1907 to agree there should be some sort of central bank controlled digital coin... which of course they will control, but will lack anonymity. BTC will crash then. (but again, maybe I'm not the best person to listen to on this topic!)

Y_Y 6y ago

But won't you also increase the mining activity if the price shoots up? I'd like to hear more detail on this "liquidity-squeeze" plan.

gruez 6y ago
That wouldn't affect emission rates (at least in the long term), due to network difficulty adjustments.

throwaway6734 6y ago

Or make it illegal and have the NSA directly attack the compute used to secure it

RealityVoid 6y ago
Hah! :)) So naive. No way this is possible. Attacking compute used to secure it means attacking a whole lot of machines. And the people near those machines will patch them. An you need to attack 51% of them at the same time. Even if you manage to do a 2x spend, they will live with it and patch the stuff and people will still use it. Because what is a couple of 2x somewhere along the way compared to the rest of the blocks it secured? Not to mention of the geopolitical consequence. No, this "have the NSA directly attack the compute " is not feasible and would only strengthen its position in the long term.
- ac29 6y ago
  If government agencies can hack into and disable secured nuclear facilities (this happened... yesterday), I dont see why it would be "impossible" to attack random Bitcoin mining facilities. When state level intelligence agencies are your adversary, I wouldn't assume you can "just patch it" either.
  - RealityVoid 6y ago
    Oh, it's possible. You hack into, what? One? A couple? But it does not scale up like that. Do you really honestly think you can reach 51% like that? Besides, yes, you can just patch the vulnerabilities. Contrary to popular belief, vulns are not plentiful and are not cheap. Using one kind of burns it. So it would be a _very_ stupid usage of vulns. Precisely the decentralized nature of BTC makes it impossible to shut it down exactly the same way you shut down a nuclear power plant. And ok, you 51% the network. Then what? You can't create BTC's or change the rules of the game dramatically, without a fork. so the people on the original network are kind of... meh, at your attack. You could double spend but you need to own the coins you spend, so you shaft a couple of people. What then? I do not think that would kill it, there are cryptos that were 51%'ed (looking at ETH classic) and are still alive and chugging along.

liquidify 6y ago

This is nonsense. Bitcoin has not had much utility since 2015 when the repo was taken over by people who refused to increase the block capacity. A purchase of bitcoin by the govt would massively increase the prices. Transaction of value by the big players would become even easier. The high degree of divisibility would ensure that small players could still play. There would be no more liquidity issue than there is currently.

thebean11 6y ago

You're claiming that an entity buying up a ton of Bitcoin would crash the price? Do you have any references? I'm not familiar with that economic phenomenon. Also like others have said, the price is divisible to many decimal places, and with consensus could be updated to be further subdivided.

sleavey 6y ago

The FBI did once own a significant amount of Bitcoin after busting the Silk Road, but auctioned most of it off.

cwkoss 6y ago

“Whatever you do,” cried Brer Crypto, “Don’t throw me into the briar short squeeze”

deleted 6y ago

[deleted]