5 ms·

If the blockchain is dominated by a single interest, and that player starts abusing their market position, BitCoin's exchange rate will plummet and the economic

by Aqueous 12y ago

If the blockchain is dominated by a single interest, and that player starts abusing their market position, BitCoin's exchange rate will plummet and the economic interest in question will lose millions. So yes, it is in the community's interest and individual miners' interest to keep the hashrate distributed enough to prevent that from happening. What happens when people lose faith in the system? The 2008 financial crisis, the great depression, etc.... Nobody wins if the entire system breaks down.

alwaysdoit 12y ago
What stops them from taking a short position in Bitcoins and forcing the exchange rate into the ground?
bunderbunder 12y ago
This reasoning is based on the assumption that a 51% player must also be long on Bitcoin, and that they interpret the nature and value of the Bitcoin market in a similar manner to most members of the Bitcoin community. In other words, assuming that they don't know anything you don't. Considering we're talking about an entity that's managed to become a 51%er, that assumption sounds downright Pollyannaish to me. The same line of reasoning also supposedly implies that nobody should want to get even close to this point. Counterfactually, as it turns out. That said, I can see the attraction of that line of reasoning, too. When you've got a tiger by the tail, it probably is best not to contemplate too carefully what's at the other end.
- joaorj 12y ago
  When they bought the mining machines they were entering bitcoin as long weren't they? They can't even sell their future winnings as they don't have them yet, so they are really long!
  - bunderbunder 12y ago
    Maybe they were. . . or maybe they've figured out something others haven't. Some sort of shorting-type scheme, perhaps. Normally I'm not so inclined toward conspiracist thinking, but considering all the different capers that have put Bitcoin in the news over the past couple years, in this particular case I'm inclined to make an exception.
  - dllthomas 12y ago
    Well, they aren't long bitcoin from buying mining rigs, they are long bitcoin call options denominated in energy. If the return seems likely to be too low, as eventually it must be when (if things continue) people make more efficient rigs, then it would eventually be in their interest to let the longer term options expire. It is totally conceivable that taking a huge short position and scaring everyone off of btc could mean more profit than the could be mined out of those rigs. Of course, you would need someone to take the other side of that bet, in a setting with sufficiently little counterparty risk that you can collect (which typically means a more regulated setting) and a sufficiently lax regulatory environment that you aren't likely to be accused of some illegal type of market manipulation. That said, people do seem to overlook such details... and this all only seems unlikely to very unlikely, not impossibly or absudly unlikely.
    - Aqueous 12y ago
      In other words, the stars would have to align in order for this to occur. I don't really know what GHash knows, but I can tell you that GHash's hashrate has dipped well below 50% only a day later, as it did when this happened before.
      - dllthomas 12y ago
        The stars would have to align for it to be genuinely a good idea. Which... well... stars align, sometimes. Moreover, people make mistakes and think stars have aligned. The threat here is that a single group has the capability to produce 51% of the hashes, possibly reliably (we can't know whether scaling back was deliberate or happenstance). It doesn't matter whether they are persistently using that capability.
        bunderbunder 12y ago
        Perhaps the deeper threat here is the rate at which the goalpost is moving. It's strange, this situation where in there are all these things that would be seriously problematic were they to happen, unless of course they actually happen, in which case they're not actually a problem at all.
marcosdumay 12y ago
And nobody in the world wants Bitcoin to break down?
- Aqueous 12y ago
  GHash doesn't - and that's why they will figure out a way to dip below 50% again.

by Aqueous 12y ago

alwaysdoit 12y ago

What stops them from taking a short position in Bitcoins and forcing the exchange rate into the ground?

bunderbunder 12y ago

This reasoning is based on the assumption that a 51% player must also be long on Bitcoin, and that they interpret the nature and value of the Bitcoin market in a similar manner to most members of the Bitcoin community. In other words, assuming that they don't know anything you don't. Considering we're talking about an entity that's managed to become a 51%er, that assumption sounds downright Pollyannaish to me. The same line of reasoning also supposedly implies that nobody should want to get even close to this point. Counterfactually, as it turns out. That said, I can see the attraction of that line of reasoning, too. When you've got a tiger by the tail, it probably is best not to contemplate too carefully what's at the other end.

joaorj 12y ago
When they bought the mining machines they were entering bitcoin as long weren't they? They can't even sell their future winnings as they don't have them yet, so they are really long!
- bunderbunder 12y ago
  Maybe they were. . . or maybe they've figured out something others haven't. Some sort of shorting-type scheme, perhaps. Normally I'm not so inclined toward conspiracist thinking, but considering all the different capers that have put Bitcoin in the news over the past couple years, in this particular case I'm inclined to make an exception.
- dllthomas 12y ago
  Well, they aren't long bitcoin from buying mining rigs, they are long bitcoin call options denominated in energy. If the return seems likely to be too low, as eventually it must be when (if things continue) people make more efficient rigs, then it would eventually be in their interest to let the longer term options expire. It is totally conceivable that taking a huge short position and scaring everyone off of btc could mean more profit than the could be mined out of those rigs. Of course, you would need someone to take the other side of that bet, in a setting with sufficiently little counterparty risk that you can collect (which typically means a more regulated setting) and a sufficiently lax regulatory environment that you aren't likely to be accused of some illegal type of market manipulation. That said, people do seem to overlook such details... and this all only seems unlikely to very unlikely, not impossibly or absudly unlikely.
  - Aqueous 12y ago
    In other words, the stars would have to align in order for this to occur. I don't really know what GHash knows, but I can tell you that GHash's hashrate has dipped well below 50% only a day later, as it did when this happened before.
    - dllthomas 12y ago
      The stars would have to align for it to be genuinely a good idea. Which... well... stars align, sometimes. Moreover, people make mistakes and think stars have aligned. The threat here is that a single group has the capability to produce 51% of the hashes, possibly reliably (we can't know whether scaling back was deliberate or happenstance). It doesn't matter whether they are persistently using that capability.
      - bunderbunder 12y ago
        Perhaps the deeper threat here is the rate at which the goalpost is moving. It's strange, this situation where in there are all these things that would be seriously problematic were they to happen, unless of course they actually happen, in which case they're not actually a problem at all.

marcosdumay 12y ago

And nobody in the world wants Bitcoin to break down?

Aqueous 12y ago
GHash doesn't - and that's why they will figure out a way to dip below 50% again.