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A systematic critique of Bitcoin's value proposition

35 points by lisper 4y ago

amadeuspagel 4y ago
> In the third section I analyze its security model, specifically the cost of mounting a 51% attack on the assumption that hash power is available for rent and doesn't need to be purchased by the attacker. Bitcoin mining requires special devices (ASICs). These ASICs would lose their value if Bitcoin lost its value. Given this fact, why would anyone rent them out, or rent out the hash power?
- pcthrowaway 4y ago
  If your hash power typically translates to $X per day and someone offers you 2X $ to rent the hash power for a day, I suspect most people would rent them out
  - yellowapple 4y ago
    Why would someone offer you that, though?
- JumpCrisscross 4y ago
  > mining requires special devices (ASICs) Profitable mining does. If you’re looking to make money, you need ASICs. If you’re just looking to disrupt the network, e.g. for military purposes, commandeering a cloud or two would do.
  - wyager 4y ago
    > commandeering a cloud or two would do. No; The ASICs are orders of magnitude faster and more efficient per dollar. Every GPU on earth couldn't touch the bitcoin hashrate.
    - JumpCrisscross 4y ago
      > ASICs are orders of magnitude faster and more efficient per dollar Every supercomputer in either the U.S. or China plus its cloud resources would be able to mount a 51% attack. And this isn’t counting e.g. the NSA or GCHQ’s supercomputers, which are optimised for code cracking.
      - overthrow 4y ago
        Remember that general-purpose computers use orders of magnitude more energy than specialized hardware for the same task. So if bitcoin uses (say) 0.05% of energy globally, matching the hashrate using general-purpose hardware (assuming an alternate reality where the planet has enough hardware for someone to attempt this) would require something like 5% of global energy usage. Diverting that much energy away from the rest of the world is not even remotely feasible.
        JumpCrisscross 4y ago
        > would require something like 5% of global energy usage Fair enough, supercomputers + cloud was optimistic. They can’t do 40 zettaflops. Half of that, worst case, we could, though not triviallt. For bursts at a time. (Worst case because the math supercomputers designed to break encryption do is similar to that required to break Bitcoin.) Practically speaking, were we to do this, we’d procure the ASICs. (And target in-jurisdiction mining, lowering the hurdle.) No private party is particularly incentivised to launch such an attack de novo. We may never need to actually attack: a law appropriating tens of billions to create a crypto deterrent would crash prices on its own.
        overthrow 4y ago
        > a law appropriating tens of billions to create a crypto deterrent would crash prices on its own Doubt that. All that would happen is driving the industry underground or overseas. It wouldn't be the first time a government overplayed its hand and failed to acknowledge that bitcoin is a global technology. https://data.nasdaq.com/data/BCHAIN/HRATE-bitcoin-hash-rate https://data.nasdaq.com/data/BCHAIN/HRATE-bitcoin-hash-rate That isn't slowing down. I have exactly 0 faith that governments across the world could start from scratch and cooperate to outpace and then surpass the private sector in a chip fabrication project, no matter how many billions they throw at it.
- medellin 4y ago
  51% of the bitcoin mining hashing power being available for rent is so far fetched that it’s silly to even consider as a valid critique
  - ursuscamp 4y ago
    The author really undersells how difficult/nearly impossible this is and will be for a long time, at the very least. If the market transfers successfully from miner subsidy to transaction fees, then it will always be nearly impossible.
- osigurdson 4y ago
  >> Bitcoin mining requires special devices (ASICs) Nitpick: Any computer can mine bitcoin. Economic bitcoin mining requires special devices.
  - latchkey 4y ago
    My favorite way to mine bitcoin! https://www.righto.com/2014/09/mining-bitcoin-with-pencil-and-paper.html https://www.righto.com/2014/09/mining-bitcoin-with-pencil-an...
akira2501 4y ago
Aside from Satoshi's hoard.. there's also just regular destruction. Units can be mined and then permanently lost. The system has a limited number of units that can be generated in total and no mechanism to replace the lost units. Why is this not a long term problem for bitcoin?
- TigerTeamX 4y ago
  1. As other people mention Bitcoin is highly divisible. 2. Other Bitcoins simply becomes more valuable and thus strengthening the system
- rattlesnakedave 4y ago
  Infinitely divisible
  - checkdrain 4y ago
    [dead]
- deleted 4y ago
  [deleted]
- throwaway22032 4y ago
  It's divisible down to 0.00000001. If that ever became a significant issue I imagine users would be happy to increase the precision via a fork. LN supports sub satoshi (i.e. higher precision) payments on L2. If you're talking about the numbers getting super small and being unwieldy, most fiat currencies have the opposite problem of the numbers getting super large, they just redenominate every now and then.
  - TheBlight 4y ago
    >It's divisible down to 0.00000001. This is an artifact of the implementation. I don't think there's any real reason it couldn't be divided further using higher precision.
ghiculescu 4y ago
> In private discussions I have heard three counter-arguments, none of which I accept I think this article skips the most compelling (to me) counter argument. If there’s a 51% attack, the currency loses all value. Nobody will want to trade Bitcoin or use it as a currency once this attack is exploited. So a 51% attacker is disincentivized to perform said attack because doing so would make the prize lose its value. Now I write this, I suppose if your worry is a government trying to destroy Bitcoin, then that’s exactly how to do it…
- JumpCrisscross 4y ago
  > a 51% attacker is disincentivized to perform said attack because doing so would make the prize lose its value North Korea and Russia heavily use crypto. If either does something super stupid, the Congress could create a credible commitment to repeatedly launching attacks on their payment networks, including Bitcoin. This isn’t some far-fetched threat.
  - pcthrowaway 4y ago
    I think the U.S. would be reluctant to do so (although I'd love it if they did), because they hold several billion dollars of bitcoin
    - JumpCrisscross 4y ago
      > the U.S. would be reluctant to do so (although I'd love it if they did), because they hold several billion dollars of bitcoin And billions more in private losses. It should be something we’re reluctant to do. But things break in war.
      - pcthrowaway 4y ago
        Devaluing bitcoin reduces the incentive to mine it, which I consider a net positive all around
- DennisP 4y ago
thesausageking 4y ago
> it means that bitcoin is ultimately not, as is often claimed, protected by mathematics or physics or even economics, but rather by the social cohesion, cooperation, and (dare I say it?) trustworthiness of the mining community This isn't a dig. Bitcoin's value does come from the community and authority of the chain. If it were just math, you could fork Bitcoin and have a competing currency that had the exact same code as Bitcoin. It wouldn't have any value because miners, exchanges, and users wouldn't believe it did. They believe in Bitcoin because it's been around a long time (it's Lindy) and the community around it has proven very resilient to all sorts of different kinds of attacks over the years.
- JumpCrisscross 4y ago
  > Bitcoin's value does come from the community and authority of the chain Agree it isn’t a dig. But it’s a refutation of a common argument in favour of crypto, namely, that it’s protected by math, not custom.
  - ipaddr 4y ago
    It is still protected by math. The value is found between trustless entities. Math prevents fraud. The group can change the math. There isn't one true coin protected by math. An unlimited number of coins can be created between different groups of people. Math protects each coin.
  - robcohen 4y ago
    I mean, it solves the byzantine general's problem, which requires two thirds honest participants. I'm not aware of anyone who's ever claimed that bitcoin "mathematically protects" you even when everyone else is lying.
  - bufferoverflow 4y ago
    It's protected by both. So ommitting one factor isn't wrong. If you say flu is caused by a virus, it's not wrong. But flu is also caused by weak immune system, human interaction, lack of UV lights everywhere, evolution, among other reasons.
  - 4y ago
paulgb 4y ago
Something I've always considered a curious decision about Bitcoin is the decision for halvings to occur as discrete events rather than as an exponential decay occurring on each block. Having them be discrete events is probably easier for someone to verify by eyeball, I guess, but it has the disadvantage that it creates moments in time where some large portion of the hardware in the market can suddenly no longer mine honestly and profitably. This decision seems to greatly increase an attacker's chances at obtaining a huge supply of hardware that is too inefficient to mine profitably, but can be used profitably for a short time to attack the network. I suppose Satoshi never imagined there would be specialty hardware used to mine, and that whatever commodity hardware mined bitcoin could find another use.
- TheBlight 4y ago
  I don't follow your attack logic. If mining hardware becomes inefficient why would using it to "attack the network" be profitable? Can you say more about what attack you're thinking of? He absolutely did imagine speciality hardware would be used to mine: "At first, most users would run network nodes, but as the network grows beyond a certain point, it would be left more and more to specialists with server farms of specialized hardware."
  - paulgb 4y ago
    > If mining hardware becomes inefficient why would using it to "attack the network" be profitable? Can you say more about what attack you're thinking of? The idea is that under normal day-to-day circumstances, a big deterrent to dishonest mining is that miners are deeply invested in the hardware and attacking the network would devalue that investment (if it craters the market). Normally if you have a big mining operation, the winning strategy is not to “defect”. But halvings change the dynamic, because they take a bunch of hardware that was profitable one day and make it unprofitable the next. So for a brief period there's a bunch of hardware floating around that can't be used profitably to mine, and so has no value to honest miners, but has temporary value to dishonest ones if they can accumulate enough of it. I don't think this will be feasible for a while, but a few halvings from now it could be. > He absolutely did imagine speciality hardware would be used to mine I stand corrected, I hadn't seen that post: https://satoshi.nakamotoinstitute.org/emails/cryptography/2/#selection-71.0-32.51 https://satoshi.nakamotoinstitute.org/emails/cryptography/2/...
0zemp1c 4y ago
misses out on the single biggest threat to BTC Western governments simply outlaw its use and ownership without the USD, there really isn't even a USA, Western governments live and die by their fiat currencies outlawing it would not be that hard, confiscate all Coinbase assets would be an easy first step
- latchkey 4y ago
  The single biggest threat to BTC isn't that. It is tokenized BTC. As soon as enough people realize that there is a lot more utility to bitcoin, as a tokenized version, on other networks, they might stop using bitcoin itself. I did that years ago.
  - ashwagary 4y ago
    >As soon as enough people realize that there is a lot more utility to bitcoin, as a tokenized version, on other networks, they might stop using bitcoin itself. That is extremely unlikely due to the introduction of counterparty risks that Bitcoin users are growing more careful to avoid.
    - latchkey 4y ago
      That is why people are working on that specific problem. Badger is one with ebtc. There is also going to be people who are comfortable with the risk/reward ratio.
- TigerTeamX 4y ago
  Outlawing Bitcoin assumes quite some things. 1. The governments are competent and could do outlaw it - The outlawing of guns, drugs, alcohol, tax evasion seems to have had the opposite effect. 2. For all of the flaws of western governments, they are still within some kinda laws. Coinbase is a public US based company. They are entangled with pension funds, hedge funds, rich people. I am sure they would fight against this 3. This also assumes people follow the law. In general, people follow the law but when they see their banks implode, prices going like crazy, they lose their job... Well then they might not. 4. This also assumes the current system could survive. If you look at the math you'll see that there are not enough currency to pay of the debt. It is increasingly more levered system that is breaking apart.
greyface- 4y ago
The consequences of a 51% attack are greatly overstated. A 51% attacker can prevent new transactions from confirming, and roll back recent transactions. They can't roll back transactions that happened (roughly) longer ago than the sustained duration of the attack. They can't mint extra coins, or double-spend arbitrarily old transactions. Under 51% conditions, you need to be more careful about accepting recently-confirmed payments, similar to 1 sat/vB transactions in a full mempool today. You can still transact, you just need to be patient and careful. The value will drop, yes, but it won't go to zero unless the attacker is able to sustain the attack indefinitely.
- pcthrowaway 4y ago
  Just the possibility of 51% attacks (if they occur 'occasionally') means people have to wait longer til they can consider transactions settled. Do they need to wait 4 hours instead of 1? 1 day? 3 days? 2 weeks? Whatever it is, it's materially significant. What does bitcoin do well now? What does it do better than other networks?
  - deleted 4y ago
    [deleted]
  - dxhdr 4y ago
    > What does it do better than other networks? Provides you complete control over your money. You can send any amount to whoever you want, whenever you want, with no third parties capable of approving, disapproving, or delaying the transaction. Obviously, there are downsides to that. But that's what it does better.
    - pcthrowaway 4y ago
      That completely ignores the question. How does it do this better or differently than Ethereum, or Solana, or Avalanche, or Polygon.
      - mr_woozy 4y ago
Animats 4y ago
Trying to rent 51% of Bitcoin mining capacity in the short term would mean that major Bitcoin miners would have to be set up for remote short-term rental. Are they? A bigger threat is collusion by the top Bitcoin mining companies. At one time, that was five guys in China. There was a picture of them together at a conference. Not sure what the situation is now.
- latchkey 4y ago
  > Trying to rent 51% of Bitcoin mining capacity in the short term would mean that major Bitcoin miners would have to be set up for remote short-term rental. Are they? They just need to point their hashrate at a pool which enables rental. Nicehash is a prime example. See also: https://www.crypto51.app/ https://www.crypto51.app/ > Not sure what the situation is now. It is a pool based in the US. https://miningpoolstats.stream/bitcoin https://miningpoolstats.stream/bitcoin
yellowapple 4y ago
> The cost of a 51% attack drops dramatically if you can rent the necessary hardware rather than buy it. Bitcoin mining hardware is available for rent. Would carrying out a 51% attack on rented hardware be possible? Would it be practical? A back-of-the-envelope calculation indicates that the answer to both of these questions is "yes", indeed, that it might be even worse than possible and practical, it might even be profitable. If it was possible (let alone practical, let alone profitable), it would've happened by now. The article acknowledges this, but doesn't quite grasp on why - that being that the rewards and difficulty are not static. By the time one's able to rent 30,000 of the article's proposed 3.3GH/s miners, the number of hashes required to win a block would be accordingly higher. Had this article been written a decade ago, it would've likely proposed a hash rate that's readily feasible today - and it would still be dwarfed by the increase in difficulty. > Bitcoin can be inflated through chain splits and also by policy. Chain splits do not inflate Bitcoin. They inflate the supply of cryptocurrencies overall, but there is precisely one Bitcoin, that being the "one true chain". Bitcoin Cash is not Bitcoin, and the chain split that produced the former did not impact the latter in the slightest; they are entirely separate currencies, and always will be. As for "by policy", it's possible in the sense that a camel passing through the eye of a needle is possible: a lot of work, and the camel would in all likelihood cease to exist as such. Such a policy change would itself result in a split chain, and it's entirely possible/probable that the unaltered chain would continue on its merry way. In other words: the chain with the altered policy would not be Bitcoin (at least not without the global network of miners and nodes agreeing to it), for the same reason that Bitcoin Cash is not Bitcoin. > I'll just point out that irreversibility is no panacea. If it were, it would be universally adopted as the de facto standard. It was the de facto standard for nearly the entire history of the very concept of currency. Cash transactions are already irreversible, and legal systems have managed fine with that fact for hundreds (if not thousands) of years. Likewise: > In particular, if you lose your keys, or entrust them to a third party who decides to defect, then you have no recourse. If you lose your cash, or entrust it to a third party who decides to defect, then you have no recourse. > In fact, it is arguable that the rise of bitcoin was the catalyst that birthed ransomware as a global industry. A thief can now steal your money with impunity from the comfort of their own living room. Theives have been able to do that with gift cards, wire transfers, check fraud, and countless other non-cryptocurrency media of exchange for about as long as telephones have existed. Bitcoin being the catalyst of nefarious acts long predating it is certainly "arguable", but even Elastigirl would pull a muscle or two in doing so. > I think the main value of Bitcoin in the long run will be as a store of value, comparable to precious metals but easier to move around. I agree with this. Between Lightning and the umpteen million cryptocurrencies iterating on Bitcoin's design, I don't think Bitcoin needs to be the currency of choice for day-to-day transactions, but rather for moving large sums of money around and storing it relatively securely (in the technical and valuation senses).
jerry1979 4y ago
As far as I can tell, for most users a 51% would at worst look like their transaction didn't "go through". This is because wallet software waits for the system to mine a certain number of blocks before showing the final wallet balance. A 51% attack that is 1 block deep may actually be a good thing for bitcoin because it would cement the idea of needing to wait for confirmations in the minds of users. In this way, 51% attacks do not kill bitcoin, but instead the attack simply makes the network appear as though it is moving more slowly than it used to because users would need to wait for more confirmations.
- lisper 4y ago
  No, it's much worse than that. The nightmare scenario for most people is thinking that a transaction for which they are the recipient did go through and then later have it turn out that it didn't, and the money actually went somewhere else. Because of this, the net effect of a 51% attack would be to very quickly destroy confidence in the system for the duration of the attack (at least).
  - jerry1979 4y ago
    Wouldn't that nightmare scenario mean that an attacker would need to perform a 51% attack 7-ish blocks deep?
    - lisper 4y ago
      That's right. To be effective, the attack would have to be sustained for at least an hour, maybe more.
ursuscamp 4y ago
The author is correct, in a sense, that Bitcoin's core security is social consensus, but he falsely equivocates it with fiat currency. They are most definitely not governed by the same sets of incentives. The incentives of Bitcoin ensure its monetary policy won't change, and those incentives have strengthened consistently over time. He oversells the need of miners to band together to defend Bitcoin. They do not. All that's needed is for nodes to invalidate blocks, which is a simple command. No code changes or anything required. If an attacker is 10 blocks deep into an attack, node operators can just invalidate the first block of the attack, wasting all of the effort and resources of the attacker. Nodes can invalidate blocks longer than an attacker can stay solvent. Miners must follow the economic majority of the network or risk wasting resources mining a losing chain. Miners aren't rule makers, they're rule takers. This was the main lesson of the Bitcoin Cash fork which the author mentions several times, but maybe he missed the point of it.
jmcphers 4y ago
> I think the main value of Bitcoin in the long run will be as a store of value, comparable to precious metals but easier to move around. I disagree with this. Bitcoin makes a terrible store of value because of the constant energy cost to prop up the network. This energy is paid for by diluting Bitcoin's value. Source: https://cryptostackers.substack.com/p/bitcoin-is-not-a-store-of-value https://cryptostackers.substack.com/p/bitcoin-is-not-a-store...

35 points by lisper 4y ago

> In the third section I analyze its security model, specifically the cost of mounting a 51% attack on the assumption that hash power is available for rent and doesn't need to be purchased by the attacker. Bitcoin mining requires special devices (ASICs). These ASICs would lose their value if Bitcoin lost its value. Given this fact, why would anyone rent them out, or rent out the hash power?

pcthrowaway 4y ago
If your hash power typically translates to $X per day and someone offers you 2X $ to rent the hash power for a day, I suspect most people would rent them out
- yellowapple 4y ago
  Why would someone offer you that, though?
JumpCrisscross 4y ago
> mining requires special devices (ASICs) Profitable mining does. If you’re looking to make money, you need ASICs. If you’re just looking to disrupt the network, e.g. for military purposes, commandeering a cloud or two would do.
- wyager 4y ago
  > commandeering a cloud or two would do. No; The ASICs are orders of magnitude faster and more efficient per dollar. Every GPU on earth couldn't touch the bitcoin hashrate.
  - JumpCrisscross 4y ago
    > ASICs are orders of magnitude faster and more efficient per dollar Every supercomputer in either the U.S. or China plus its cloud resources would be able to mount a 51% attack. And this isn’t counting e.g. the NSA or GCHQ’s supercomputers, which are optimised for code cracking.
    - overthrow 4y ago
      Remember that general-purpose computers use orders of magnitude more energy than specialized hardware for the same task. So if bitcoin uses (say) 0.05% of energy globally, matching the hashrate using general-purpose hardware (assuming an alternate reality where the planet has enough hardware for someone to attempt this) would require something like 5% of global energy usage. Diverting that much energy away from the rest of the world is not even remotely feasible.
      - JumpCrisscross 4y ago
        > would require something like 5% of global energy usage Fair enough, supercomputers + cloud was optimistic. They can’t do 40 zettaflops. Half of that, worst case, we could, though not triviallt. For bursts at a time. (Worst case because the math supercomputers designed to break encryption do is similar to that required to break Bitcoin.) Practically speaking, were we to do this, we’d procure the ASICs. (And target in-jurisdiction mining, lowering the hurdle.) No private party is particularly incentivised to launch such an attack de novo. We may never need to actually attack: a law appropriating tens of billions to create a crypto deterrent would crash prices on its own.
        overthrow 4y ago
        > a law appropriating tens of billions to create a crypto deterrent would crash prices on its own Doubt that. All that would happen is driving the industry underground or overseas. It wouldn't be the first time a government overplayed its hand and failed to acknowledge that bitcoin is a global technology. https://data.nasdaq.com/data/BCHAIN/HRATE-bitcoin-hash-rate https://data.nasdaq.com/data/BCHAIN/HRATE-bitcoin-hash-rate That isn't slowing down. I have exactly 0 faith that governments across the world could start from scratch and cooperate to outpace and then surpass the private sector in a chip fabrication project, no matter how many billions they throw at it.
medellin 4y ago
51% of the bitcoin mining hashing power being available for rent is so far fetched that it’s silly to even consider as a valid critique
- ursuscamp 4y ago
  The author really undersells how difficult/nearly impossible this is and will be for a long time, at the very least. If the market transfers successfully from miner subsidy to transaction fees, then it will always be nearly impossible.
osigurdson 4y ago
>> Bitcoin mining requires special devices (ASICs) Nitpick: Any computer can mine bitcoin. Economic bitcoin mining requires special devices.
- latchkey 4y ago
  My favorite way to mine bitcoin! https://www.righto.com/2014/09/mining-bitcoin-with-pencil-and-paper.html https://www.righto.com/2014/09/mining-bitcoin-with-pencil-an...

akira2501 4y ago

Aside from Satoshi's hoard.. there's also just regular destruction. Units can be mined and then permanently lost. The system has a limited number of units that can be generated in total and no mechanism to replace the lost units. Why is this not a long term problem for bitcoin?

TigerTeamX 4y ago
1. As other people mention Bitcoin is highly divisible. 2. Other Bitcoins simply becomes more valuable and thus strengthening the system
rattlesnakedave 4y ago
Infinitely divisible
- checkdrain 4y ago
  [dead]
deleted 4y ago
[deleted]
throwaway22032 4y ago
It's divisible down to 0.00000001. If that ever became a significant issue I imagine users would be happy to increase the precision via a fork. LN supports sub satoshi (i.e. higher precision) payments on L2. If you're talking about the numbers getting super small and being unwieldy, most fiat currencies have the opposite problem of the numbers getting super large, they just redenominate every now and then.
- TheBlight 4y ago
  >It's divisible down to 0.00000001. This is an artifact of the implementation. I don't think there's any real reason it couldn't be divided further using higher precision.

ghiculescu 4y ago

> In private discussions I have heard three counter-arguments, none of which I accept I think this article skips the most compelling (to me) counter argument. If there’s a 51% attack, the currency loses all value. Nobody will want to trade Bitcoin or use it as a currency once this attack is exploited. So a 51% attacker is disincentivized to perform said attack because doing so would make the prize lose its value. Now I write this, I suppose if your worry is a government trying to destroy Bitcoin, then that’s exactly how to do it…

JumpCrisscross 4y ago
> a 51% attacker is disincentivized to perform said attack because doing so would make the prize lose its value North Korea and Russia heavily use crypto. If either does something super stupid, the Congress could create a credible commitment to repeatedly launching attacks on their payment networks, including Bitcoin. This isn’t some far-fetched threat.
- pcthrowaway 4y ago
  I think the U.S. would be reluctant to do so (although I'd love it if they did), because they hold several billion dollars of bitcoin
  - JumpCrisscross 4y ago
    > the U.S. would be reluctant to do so (although I'd love it if they did), because they hold several billion dollars of bitcoin And billions more in private losses. It should be something we’re reluctant to do. But things break in war.
    - pcthrowaway 4y ago
      Devaluing bitcoin reduces the incentive to mine it, which I consider a net positive all around
DennisP 4y ago

thesausageking 4y ago

> it means that bitcoin is ultimately not, as is often claimed, protected by mathematics or physics or even economics, but rather by the social cohesion, cooperation, and (dare I say it?) trustworthiness of the mining community This isn't a dig. Bitcoin's value does come from the community and authority of the chain. If it were just math, you could fork Bitcoin and have a competing currency that had the exact same code as Bitcoin. It wouldn't have any value because miners, exchanges, and users wouldn't believe it did. They believe in Bitcoin because it's been around a long time (it's Lindy) and the community around it has proven very resilient to all sorts of different kinds of attacks over the years.

JumpCrisscross 4y ago
> Bitcoin's value does come from the community and authority of the chain Agree it isn’t a dig. But it’s a refutation of a common argument in favour of crypto, namely, that it’s protected by math, not custom.
- ipaddr 4y ago
  It is still protected by math. The value is found between trustless entities. Math prevents fraud. The group can change the math. There isn't one true coin protected by math. An unlimited number of coins can be created between different groups of people. Math protects each coin.
- robcohen 4y ago
  I mean, it solves the byzantine general's problem, which requires two thirds honest participants. I'm not aware of anyone who's ever claimed that bitcoin "mathematically protects" you even when everyone else is lying.
- bufferoverflow 4y ago
  It's protected by both. So ommitting one factor isn't wrong. If you say flu is caused by a virus, it's not wrong. But flu is also caused by weak immune system, human interaction, lack of UV lights everywhere, evolution, among other reasons.
- 4y ago

paulgb 4y ago

Something I've always considered a curious decision about Bitcoin is the decision for halvings to occur as discrete events rather than as an exponential decay occurring on each block. Having them be discrete events is probably easier for someone to verify by eyeball, I guess, but it has the disadvantage that it creates moments in time where some large portion of the hardware in the market can suddenly no longer mine honestly and profitably. This decision seems to greatly increase an attacker's chances at obtaining a huge supply of hardware that is too inefficient to mine profitably, but can be used profitably for a short time to attack the network. I suppose Satoshi never imagined there would be specialty hardware used to mine, and that whatever commodity hardware mined bitcoin could find another use.

TheBlight 4y ago
I don't follow your attack logic. If mining hardware becomes inefficient why would using it to "attack the network" be profitable? Can you say more about what attack you're thinking of? He absolutely did imagine speciality hardware would be used to mine: "At first, most users would run network nodes, but as the network grows beyond a certain point, it would be left more and more to specialists with server farms of specialized hardware."
- paulgb 4y ago
  > If mining hardware becomes inefficient why would using it to "attack the network" be profitable? Can you say more about what attack you're thinking of? The idea is that under normal day-to-day circumstances, a big deterrent to dishonest mining is that miners are deeply invested in the hardware and attacking the network would devalue that investment (if it craters the market). Normally if you have a big mining operation, the winning strategy is not to “defect”. But halvings change the dynamic, because they take a bunch of hardware that was profitable one day and make it unprofitable the next. So for a brief period there's a bunch of hardware floating around that can't be used profitably to mine, and so has no value to honest miners, but has temporary value to dishonest ones if they can accumulate enough of it. I don't think this will be feasible for a while, but a few halvings from now it could be. > He absolutely did imagine speciality hardware would be used to mine I stand corrected, I hadn't seen that post: https://satoshi.nakamotoinstitute.org/emails/cryptography/2/#selection-71.0-32.51 https://satoshi.nakamotoinstitute.org/emails/cryptography/2/...

0zemp1c 4y ago

misses out on the single biggest threat to BTC Western governments simply outlaw its use and ownership without the USD, there really isn't even a USA, Western governments live and die by their fiat currencies outlawing it would not be that hard, confiscate all Coinbase assets would be an easy first step

latchkey 4y ago
The single biggest threat to BTC isn't that. It is tokenized BTC. As soon as enough people realize that there is a lot more utility to bitcoin, as a tokenized version, on other networks, they might stop using bitcoin itself. I did that years ago.
- ashwagary 4y ago
  >As soon as enough people realize that there is a lot more utility to bitcoin, as a tokenized version, on other networks, they might stop using bitcoin itself. That is extremely unlikely due to the introduction of counterparty risks that Bitcoin users are growing more careful to avoid.
  - latchkey 4y ago
    That is why people are working on that specific problem. Badger is one with ebtc. There is also going to be people who are comfortable with the risk/reward ratio.
TigerTeamX 4y ago
Outlawing Bitcoin assumes quite some things. 1. The governments are competent and could do outlaw it - The outlawing of guns, drugs, alcohol, tax evasion seems to have had the opposite effect. 2. For all of the flaws of western governments, they are still within some kinda laws. Coinbase is a public US based company. They are entangled with pension funds, hedge funds, rich people. I am sure they would fight against this 3. This also assumes people follow the law. In general, people follow the law but when they see their banks implode, prices going like crazy, they lose their job... Well then they might not. 4. This also assumes the current system could survive. If you look at the math you'll see that there are not enough currency to pay of the debt. It is increasingly more levered system that is breaking apart.

greyface- 4y ago

The consequences of a 51% attack are greatly overstated. A 51% attacker can prevent new transactions from confirming, and roll back recent transactions. They can't roll back transactions that happened (roughly) longer ago than the sustained duration of the attack. They can't mint extra coins, or double-spend arbitrarily old transactions. Under 51% conditions, you need to be more careful about accepting recently-confirmed payments, similar to 1 sat/vB transactions in a full mempool today. You can still transact, you just need to be patient and careful. The value will drop, yes, but it won't go to zero unless the attacker is able to sustain the attack indefinitely.

pcthrowaway 4y ago
Just the possibility of 51% attacks (if they occur 'occasionally') means people have to wait longer til they can consider transactions settled. Do they need to wait 4 hours instead of 1? 1 day? 3 days? 2 weeks? Whatever it is, it's materially significant. What does bitcoin do well now? What does it do better than other networks?
- deleted 4y ago
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- dxhdr 4y ago
  > What does it do better than other networks? Provides you complete control over your money. You can send any amount to whoever you want, whenever you want, with no third parties capable of approving, disapproving, or delaying the transaction. Obviously, there are downsides to that. But that's what it does better.
  - pcthrowaway 4y ago
    That completely ignores the question. How does it do this better or differently than Ethereum, or Solana, or Avalanche, or Polygon.
    - mr_woozy 4y ago

Animats 4y ago

Trying to rent 51% of Bitcoin mining capacity in the short term would mean that major Bitcoin miners would have to be set up for remote short-term rental. Are they? A bigger threat is collusion by the top Bitcoin mining companies. At one time, that was five guys in China. There was a picture of them together at a conference. Not sure what the situation is now.

latchkey 4y ago
> Trying to rent 51% of Bitcoin mining capacity in the short term would mean that major Bitcoin miners would have to be set up for remote short-term rental. Are they? They just need to point their hashrate at a pool which enables rental. Nicehash is a prime example. See also: https://www.crypto51.app/ https://www.crypto51.app/ > Not sure what the situation is now. It is a pool based in the US. https://miningpoolstats.stream/bitcoin https://miningpoolstats.stream/bitcoin

yellowapple 4y ago

> The cost of a 51% attack drops dramatically if you can rent the necessary hardware rather than buy it. Bitcoin mining hardware is available for rent. Would carrying out a 51% attack on rented hardware be possible? Would it be practical? A back-of-the-envelope calculation indicates that the answer to both of these questions is "yes", indeed, that it might be even worse than possible and practical, it might even be profitable. If it was possible (let alone practical, let alone profitable), it would've happened by now. The article acknowledges this, but doesn't quite grasp on why - that being that the rewards and difficulty are not static. By the time one's able to rent 30,000 of the article's proposed 3.3GH/s miners, the number of hashes required to win a block would be accordingly higher. Had this article been written a decade ago, it would've likely proposed a hash rate that's readily feasible today - and it would still be dwarfed by the increase in difficulty. > Bitcoin can be inflated through chain splits and also by policy. Chain splits do not inflate Bitcoin. They inflate the supply of cryptocurrencies overall, but there is precisely one Bitcoin, that being the "one true chain". Bitcoin Cash is not Bitcoin, and the chain split that produced the former did not impact the latter in the slightest; they are entirely separate currencies, and always will be. As for "by policy", it's possible in the sense that a camel passing through the eye of a needle is possible: a lot of work, and the camel would in all likelihood cease to exist as such. Such a policy change would itself result in a split chain, and it's entirely possible/probable that the unaltered chain would continue on its merry way. In other words: the chain with the altered policy would not be Bitcoin (at least not without the global network of miners and nodes agreeing to it), for the same reason that Bitcoin Cash is not Bitcoin. > I'll just point out that irreversibility is no panacea. If it were, it would be universally adopted as the de facto standard. It was the de facto standard for nearly the entire history of the very concept of currency. Cash transactions are already irreversible, and legal systems have managed fine with that fact for hundreds (if not thousands) of years. Likewise: > In particular, if you lose your keys, or entrust them to a third party who decides to defect, then you have no recourse. If you lose your cash, or entrust it to a third party who decides to defect, then you have no recourse. > In fact, it is arguable that the rise of bitcoin was the catalyst that birthed ransomware as a global industry. A thief can now steal your money with impunity from the comfort of their own living room. Theives have been able to do that with gift cards, wire transfers, check fraud, and countless other non-cryptocurrency media of exchange for about as long as telephones have existed. Bitcoin being the catalyst of nefarious acts long predating it is certainly "arguable", but even Elastigirl would pull a muscle or two in doing so. > I think the main value of Bitcoin in the long run will be as a store of value, comparable to precious metals but easier to move around. I agree with this. Between Lightning and the umpteen million cryptocurrencies iterating on Bitcoin's design, I don't think Bitcoin needs to be the currency of choice for day-to-day transactions, but rather for moving large sums of money around and storing it relatively securely (in the technical and valuation senses).

jerry1979 4y ago

As far as I can tell, for most users a 51% would at worst look like their transaction didn't "go through". This is because wallet software waits for the system to mine a certain number of blocks before showing the final wallet balance. A 51% attack that is 1 block deep may actually be a good thing for bitcoin because it would cement the idea of needing to wait for confirmations in the minds of users. In this way, 51% attacks do not kill bitcoin, but instead the attack simply makes the network appear as though it is moving more slowly than it used to because users would need to wait for more confirmations.

lisper 4y ago
No, it's much worse than that. The nightmare scenario for most people is thinking that a transaction for which they are the recipient did go through and then later have it turn out that it didn't, and the money actually went somewhere else. Because of this, the net effect of a 51% attack would be to very quickly destroy confidence in the system for the duration of the attack (at least).
- jerry1979 4y ago
  Wouldn't that nightmare scenario mean that an attacker would need to perform a 51% attack 7-ish blocks deep?
  - lisper 4y ago
    That's right. To be effective, the attack would have to be sustained for at least an hour, maybe more.

ursuscamp 4y ago

The author is correct, in a sense, that Bitcoin's core security is social consensus, but he falsely equivocates it with fiat currency. They are most definitely not governed by the same sets of incentives. The incentives of Bitcoin ensure its monetary policy won't change, and those incentives have strengthened consistently over time. He oversells the need of miners to band together to defend Bitcoin. They do not. All that's needed is for nodes to invalidate blocks, which is a simple command. No code changes or anything required. If an attacker is 10 blocks deep into an attack, node operators can just invalidate the first block of the attack, wasting all of the effort and resources of the attacker. Nodes can invalidate blocks longer than an attacker can stay solvent. Miners must follow the economic majority of the network or risk wasting resources mining a losing chain. Miners aren't rule makers, they're rule takers. This was the main lesson of the Bitcoin Cash fork which the author mentions several times, but maybe he missed the point of it.

jmcphers 4y ago

> I think the main value of Bitcoin in the long run will be as a store of value, comparable to precious metals but easier to move around. I disagree with this. Bitcoin makes a terrible store of value because of the constant energy cost to prop up the network. This energy is paid for by diluting Bitcoin's value. Source: https://cryptostackers.substack.com/p/bitcoin-is-not-a-store-of-value https://cryptostackers.substack.com/p/bitcoin-is-not-a-store...