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1. Bitcoin's "coinbase" mining reward halves every 210,000 blocks. Is it conceivable that miners band together and quietly remove that part of the code? (I gues

by FabHK 5y ago

1. Bitcoin's "coinbase" mining reward halves every 210,000 blocks. Is it conceivable that miners band together and quietly remove that part of the code? (I guess that you'd then have a "good miners" and "bad miners" hard fork, and it all depends on who's in the majority, so it boils down to a good old 51% attack. But what are the game theoretic elements there?) 2. Those that have gotten rich - where did the money come from? It seems like a negative sum game to me (as you have to pay the ASICs and power, ie mining rewards). How is that different from a "normal" stock?

davidgerard 5y ago
1. So remember that bitcoin has had its 51% event - in 2014, when GHash went over 51%, and promptly split into smaller pools, so as not to spook the suckers. Nobody talks about that now. But from 2014 on, bitcoin mining was indisputably centralised - it's only ever been decentralised in the sense of "can't sue me bro", not in operational practice. In 2015, the men controlling 80% of bitcoin mining stood on stage together at a conference. Three or four entities have run bitcoin mining since then - assuming they don't share ownership behind the scenes. The only thing preventing miner misbehaviour is wanting to avoid spooking the suckers. That's the game theory here. The miners would love to increase the reward. The trouble will be selling it to the subculture. They'd need to make a convincing case that it was necessary to number going up. 2. You're correct: no money comes out of bitcoin that didn't go in. So for everyone who got rich, there's a pile of suckers who got poor. Everyone who talks about bitcoin as an great investment does so with massive survivorship bias. A securities issuance is supposed to (this is the brochure version) fund investment in a productive enterprise. You get a pile of capital together, you invest it in an enterprise, it generates wealth. A pile of bitcoins can't do that. It's just a pile of a commodity, that doesn't do anything else. All you can do is buy, hold or sell it. Early bitcoin buyers are only ever paid with actual dollars from later bitcoin buyers. This is technically not a Ponzi, because nobody is running it, but it works very like one. Holders are incentivised to promote the scheme so as to help grow the supply of later bitcoin buyers to offload their bags onto, so they can cash out at all.
simonw 5y ago
"Those that have gotten rich - where did the money come from?" People who bought in later than they did. The reason I find Bitcoin speculation so distasteful is that the only way to make money from it is to wait for more people to be convinced to buy in, so you can sell your Bitcoin at a higher price then you bought it. The reason this differs from the stock market is that stocks are attached to companies which have an inherent value and, through dividends, share that value with the holders of the stock. Sure, there's a lot of speculation, but there's also genuinely useful economic activity happening, generating real value.

by FabHK 5y ago

davidgerard 5y ago

1. So remember that bitcoin has had its 51% event - in 2014, when GHash went over 51%, and promptly split into smaller pools, so as not to spook the suckers. Nobody talks about that now. But from 2014 on, bitcoin mining was indisputably centralised - it's only ever been decentralised in the sense of "can't sue me bro", not in operational practice. In 2015, the men controlling 80% of bitcoin mining stood on stage together at a conference. Three or four entities have run bitcoin mining since then - assuming they don't share ownership behind the scenes. The only thing preventing miner misbehaviour is wanting to avoid spooking the suckers. That's the game theory here. The miners would love to increase the reward. The trouble will be selling it to the subculture. They'd need to make a convincing case that it was necessary to number going up. 2. You're correct: no money comes out of bitcoin that didn't go in. So for everyone who got rich, there's a pile of suckers who got poor. Everyone who talks about bitcoin as an great investment does so with massive survivorship bias. A securities issuance is supposed to (this is the brochure version) fund investment in a productive enterprise. You get a pile of capital together, you invest it in an enterprise, it generates wealth. A pile of bitcoins can't do that. It's just a pile of a commodity, that doesn't do anything else. All you can do is buy, hold or sell it. Early bitcoin buyers are only ever paid with actual dollars from later bitcoin buyers. This is technically not a Ponzi, because nobody is running it, but it works very like one. Holders are incentivised to promote the scheme so as to help grow the supply of later bitcoin buyers to offload their bags onto, so they can cash out at all.

simonw 5y ago

"Those that have gotten rich - where did the money come from?" People who bought in later than they did. The reason I find Bitcoin speculation so distasteful is that the only way to make money from it is to wait for more people to be convinced to buy in, so you can sell your Bitcoin at a higher price then you bought it. The reason this differs from the stock market is that stocks are attached to companies which have an inherent value and, through dividends, share that value with the holders of the stock. Sure, there's a lot of speculation, but there's also genuinely useful economic activity happening, generating real value.