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You're wrong. Block rewards halve every 4 years. Next halving is in 2 years. This means that electricity use funded by block rewards trends to zero. Miners earn

by Geee 4y ago

You're wrong. Block rewards halve every 4 years. Next halving is in 2 years. This means that electricity use funded by block rewards trends to zero. Miners earn also transaction fees, which will gradually replace block rewards in the long term. Transaction fees are revenue from utility. It's a well designed incentive system; it will keep Bitcoin running as long as people find it useful, and it won't eat the world.

Retric 4y ago
The issue is total transaction fees must be kept high enough to avoid miners defecting into double spend attacks. That would be easy if people where using it as a high turnover currency, but if people want to use it as a long term store of value transaction fees can quickly become many orders of magnitude smaller than the value stored in Bitcoins. It need not be illegal. Short Bitcoin, preform double spend attack between addresses you own, profit.
- louloulou 4y ago
  There's a simple solution to this... just wait longer
  - Retric 4y ago
    51% attacks work on arbitrarily long timescales. Though obviously you can still do short double spend attacks at some probability with less hashing power.
    - ssl232 4y ago
      An attempt to rewrite the ledger with a 51% attack would be detected almost immediately. The Bitcoin in the rewritten ledger would quickly become worthless, including that belonging to the keys owned by the attacker. All that mining gear used to perform the attack would then be worthless too. This doesn't seem to me like a profitable attack vector once you consider the complete picture.
      - Retric 4y ago
        Shorting Bitcoin doesn’t require you to ever own any Bitcoin. It does require a counter party(s) that would pay out. The value of the gear is just a question of the future profits it can generate. If that future revenue is less than what you get from the great short then it’s profitable. And that’s assuming you can’t reuse the same equipment for some other purpose.
        louloulou 4y ago
        > doesn’t require you to ever own any Bitcoin It requires you to borrow bitcoins from someone -> sell them -> do the attack -> buy them back -> and then return them. If you could borrow enough bitcoin, and gain enough hash, and crash the price enough for it to be profitable, it could possibly kill Bitcoin. Seems like an insane gamble to me though.
        Retric 4y ago
        I agree. That said if I where writing a story I would have the protagonist gain the hashing power first, something strands their assets such as increased electricity prices making mining unprofitable or a next generation of hardware coming out etc. Then they come up with the idea of a big short.
        louloulou 4y ago
        The cool thing about that also is the hash power can be accumulated secretly and dumped on the network all at once
    - louloulou 4y ago
      If you can maintain it, sure. But you can only double spend coins you already control, so at this point you would control 51% of global SHA2 hash and have a bunch of bitcoin that you would be double spending? Who would accept that as payment? What incentive would you have to do something like that since you would be taking a massive loss? Maybe as a government attack?
      - Retric 4y ago
        The assumption was the point of the attack would be to destroy Bitcoin’s value to make money from a short position not to sell the same coins twice.
- Geee 4y ago
  We don't know what will happen. These problems and potential solutions have been hashed for years, but we'll have to just wait and see. You'll have to just believe that the economic incentive the preserve all the value will result in a solution.
- rcxdude 4y ago
  This is the same conclusion I came to. Bitcoin's incentive structure makes sense if the users of it gain value by being able to use it as a common medium of exchange. If you look at the money that e.g. mastercard and visa pull in, it makes sense that you could sustain bitcoin off of that indefinitely. It could also conceivable result in a relatively lower market cap if people do not in fact save money in bitcoin, reducing the threat of 51% attacks. As a store of value, the incentives no longer make sense: for the 'store of value', it must be deflationary, thus mining cannot produce new coins indefinitely. But it also cannot be too expensive: if just keeping your coins requires paying a significant percentage of the value of them to secure them on an ongoing basis, you're ultimately losing in just the same way as someone in an inflationary coin does. There's also no particular mechanism which makes sure said price is actually correct: ultimately you need to figure out how much mining is 'enough', and also realistically have some mechanism to spread those costs out evenly amongst holders of bitcoin, lest it become a tragedy of the commons where no-one wants to contribute.

by Geee 4y ago

Retric 4y ago

The issue is total transaction fees must be kept high enough to avoid miners defecting into double spend attacks. That would be easy if people where using it as a high turnover currency, but if people want to use it as a long term store of value transaction fees can quickly become many orders of magnitude smaller than the value stored in Bitcoins. It need not be illegal. Short Bitcoin, preform double spend attack between addresses you own, profit.

louloulou 4y ago
There's a simple solution to this... just wait longer
- Retric 4y ago
  51% attacks work on arbitrarily long timescales. Though obviously you can still do short double spend attacks at some probability with less hashing power.
  - ssl232 4y ago
    An attempt to rewrite the ledger with a 51% attack would be detected almost immediately. The Bitcoin in the rewritten ledger would quickly become worthless, including that belonging to the keys owned by the attacker. All that mining gear used to perform the attack would then be worthless too. This doesn't seem to me like a profitable attack vector once you consider the complete picture.
    - Retric 4y ago
      Shorting Bitcoin doesn’t require you to ever own any Bitcoin. It does require a counter party(s) that would pay out. The value of the gear is just a question of the future profits it can generate. If that future revenue is less than what you get from the great short then it’s profitable. And that’s assuming you can’t reuse the same equipment for some other purpose.
      - louloulou 4y ago
        > doesn’t require you to ever own any Bitcoin It requires you to borrow bitcoins from someone -> sell them -> do the attack -> buy them back -> and then return them. If you could borrow enough bitcoin, and gain enough hash, and crash the price enough for it to be profitable, it could possibly kill Bitcoin. Seems like an insane gamble to me though.
        Retric 4y ago
        I agree. That said if I where writing a story I would have the protagonist gain the hashing power first, something strands their assets such as increased electricity prices making mining unprofitable or a next generation of hardware coming out etc. Then they come up with the idea of a big short.
        louloulou 4y ago
        The cool thing about that also is the hash power can be accumulated secretly and dumped on the network all at once
  - louloulou 4y ago
    If you can maintain it, sure. But you can only double spend coins you already control, so at this point you would control 51% of global SHA2 hash and have a bunch of bitcoin that you would be double spending? Who would accept that as payment? What incentive would you have to do something like that since you would be taking a massive loss? Maybe as a government attack?
    - Retric 4y ago
      The assumption was the point of the attack would be to destroy Bitcoin’s value to make money from a short position not to sell the same coins twice.
Geee 4y ago
We don't know what will happen. These problems and potential solutions have been hashed for years, but we'll have to just wait and see. You'll have to just believe that the economic incentive the preserve all the value will result in a solution.
rcxdude 4y ago
This is the same conclusion I came to. Bitcoin's incentive structure makes sense if the users of it gain value by being able to use it as a common medium of exchange. If you look at the money that e.g. mastercard and visa pull in, it makes sense that you could sustain bitcoin off of that indefinitely. It could also conceivable result in a relatively lower market cap if people do not in fact save money in bitcoin, reducing the threat of 51% attacks. As a store of value, the incentives no longer make sense: for the 'store of value', it must be deflationary, thus mining cannot produce new coins indefinitely. But it also cannot be too expensive: if just keeping your coins requires paying a significant percentage of the value of them to secure them on an ongoing basis, you're ultimately losing in just the same way as someone in an inflationary coin does. There's also no particular mechanism which makes sure said price is actually correct: ultimately you need to figure out how much mining is 'enough', and also realistically have some mechanism to spread those costs out evenly amongst holders of bitcoin, lest it become a tragedy of the commons where no-one wants to contribute.