Note that this is from last July, when the price of BTC was significantly lower and thus the price of the attack is likely higher now. That said, this becomes more feasible in the long-run when mining is purely funded by transaction fees.
Something I don’t see talked about much is the fact that, although Bitcoin is intended to be non-inflationary in the long run, the mining network that keeps it secure is currently 80-90% subsidized by inflation.
I always wondered about that and perhaps someone here can explain. After bitcoin reaches its "full" volume, mining rewards will go away and the only way miner income can stay the same is if transaction fees rise to match. Since the competition of miners basically converges to "block reward is equal to electricity cost equivalent", this would mean transaction costs increase to an insanely huge amount. Not paying the larger transaction costs would lead to the less efficient miners being squeezed out of the pool of miners, leading to less hashing power overall and thus an increased vulnerability to attack.
How does the system intend to keep up miner income after all bitcoins have been mined?
It's an unsolved problem, and all solutions would require a majority of the mining pool to get on board.
You could periodically increase the block size, splitting the transaction fee among more transactions. Although larger blocks make it more difficult to produce hashes, so more power would be consumed, thus increasing the transaction fees further.
You could change the block reward such that there's a larger block reward or even some kind of sustained rate of inflation. The cap of 21 million bitcoin isn't a fundamental unit, it can be changed if a majority of the mining pool decides to.
You could switch to Proof of Work, which doesn't use nearly as much electricity. Given how long this has taken Ethereum, this would probably be a multi year effort.
If the Lightning network were to take off, it might also help with this for day to day users. I'm not super confident about that though. I don't think a Layman is going to deal with the Lightning network, personally. Especially with the current narrative of bitcoin being a "store of value" rather than a currency. Bitcoin proponents don't seem to be advocating using it as a day to day payment tool.
Of course, there could also just never be any consensus on the direction to take, the network could be attacked, people could bail on bitcoin for other cryptocurrencies or just abandon cryptocurrencies all together and it could become a relic of history.
Block rewards are designed finite but also designed to end outside most peoples lives. So in short no one needs a solution. Block reward of 0 theoretically would be reached in 2140. Of course earlier halving will already have a similar effect BUT ONLY if the price does not at lest double every halving (4 year). Essentially this means bitcoin will allays run on inflation. The finite supply is a "lie" that just doesn't work the same way if the price per unite can simply multiply. You constantly add a smaller fraction of the total but suck out more and more value anyway. mining has never become cheaper if price/hash drops it just raises the hashing required to mine.
The people who hold BTC but dont use it pay (via inflation) for thous who use it so they have cheaper (still laughably expensive) transactions. They just dont care about that as long as price gains far outperform the inflation loses.
At some point it has to crash and wont recover because double-spends happened and the network can no longer be trusted which renders it useless.
If the price (real world purchase power not the price in USD) doesn't multiply for more than 4 years... the end is near. Likely the end would come before the 4 years are over.
historically hash rate drops the most 1-1.5 years before halving in sync with the price. it basically boils down to how good large miners are at managing risk. they need to have the money to keep mining while its not profitable. if a large player goes bankrupt it could create a chain reaction crashing the whole thing.
BTW, next generation blockchains like the XRPL have solved all of theses problems a long long time ago. The lead dev (ex btc dev) saw these problems ~10 years ago and it took them 1-2 years to come up with something better.
This is discussed in this bitcointalk thread [1].
By constraining the block size, bitcoin is developing a fee market where transactions have to bid up the fee in order to be included in the next few blocks. Without such a constraint, transactions would only pay around 1 cent to be included (just to cover network broadcast costs), and it's next to impossible to make up for that tiny fee with a huge tx volume.
In the next 3 or 4 halvings, as the block subsidy drops by an order of magnitude, fees will start to dominate the bitcoin block reward.
The exponentially diminishing block subsidy is a bigger problem for less popular PoW coins that fail to develop a fee market, such as Bitcoin Cash.
There is no strict technical limit on the number of transactions per block. Due to the rising price, each block is currently worth something like $350k.
The Bitcoin network rules restrict it to a couple thousand transactions per block. Even with that, each on-chain transaction would "only" need to cost $100 or so to replace the block reward. Infeasible for micropayments, perfectly fine for large scale settlements.
Another possible solution would be increasing the block size limit - the mining effort is a per-block cost, the cost of additional transactions is minimal. So small fees + massive transaction volume could work. With a million transactions each block, $0.35 per on-chain transaction is enough to pay for the current security level. More transactions allow for even lower fees. The Bitcoin Cash fork aims for this.
However, all of this is very long term. The halvings happen a bit faster than every 4 years. Let's assume 3.5 years - that means 20 halvings in 70 years. The block reward not drop to 0 until 34 halvings, so this is not a problem we have to deal with in our lifetime. So for the forseeable future, one possible solution is for the Bitcoin price to keep going up, paying for the same or an increasing security level despite the halvings.
Transactions will move to lightning, and since this allows multiple transactions to be aggregated into a single on-chain transaction, fees will be higher per transaction on chain.
There are a couple answers to this question, but the truth is we have ~100 years to figure this out, and the world will be a very different place then.
It's interesting as well. If block rewards+transactions fees over confirmation period is lower than value of transaction it will lead to 51% attack being actually profitable. And actually even the transaction fees don't matter. As you can still collect them in 51% attack.
I don't think it's a problem at all: There have already been blocks in the past where the transaction fee portion of the miner reward was higher than the block reward.
Hey, author here - I think you're absolutely right that there is a risk that demand for blockspace doens't generate sufficient block reward to provide useful security guarantees. If that is the case, it could cause the price of BTC to fall which could create a negative feedback loop. This would, at best, create an end of the 21m cap and at worst trigger a collapse of the game entirely.
Is the plan to secure a fully-mined chain just rampant value-inflation in a way that is completely detached from supply and demand? Today my 1e-1000 bitcoin is worth 10 carrots, tomorrow it is worth 20 everything else held equal? How does that even work in practice?
Alternatively you need transactions to pay entirely for the security of the chain. This doesn't seem feasible when chain security costs rise everyday as the cost of energy deceases. And if transaction fees increase to compensate and people transact less the whole thing blows up.
Many people (me included) would consider Bitcoin to have failed at that point. It's pretty clear that the ecosystem believed in the cap, and removing it is a bait-and-switch.
Given we're currently floating around 10-15% fee-supported at the moment, I'd say most people are optimistic that we will succeed in moving Bitcoin into its final economic phase (i.e. in 10 years it will be 50% fees).
This is why the original design focus on fees in great volume to be the main incentive to be a miner and using the block reward as both A) a way of distributing the original minting of coins and B) a transition mechanism until volume is so large that the fees can sustain the miner incentive.
A very simple way to increase block rewards is making blocks SMALLER.
It is game theory: If you really want your transaction to be on-chain, you pay for it. And smaller blocks means less transactions will fit in one block. So fees will need to go up.
The reward paid to miners is mostly newly minted BTC.
Presently 6.25 BTC newly created with each block, about 1-2 BTC in fees. Mining has been paid for by increasing the BTC supply, for all of Bitcoin's history so far. Eventually that will have to change as the reward keeps halving. At some point there is no block reward and it's all fees. Will people pay enough in fees to sustain mining at a rate that's impossible for a large actor to 51%?
No he means inflation. New coins are being mined all the time, causing existing coins to lose value. This does not really matter yet since total demand for bitcoins has been increasing faster than the total supply, leading to an increase in price.
I would assume that the author meant to mean "growth in the supply of bitcoin." Which seems like a reasonable error to make, because printing money typically has an inflationary effect, even if it isn't technically synonymous with inflation.
Maybe dilution is a better term? If all other factors could be held equal, then the real value of the ~6BTC reward for mining a block would, in effect, come from a tiny reduction in the real value of everyone else's BTC assets that would result from the supply of BTC having increased.
It creates an interesting situation. Right now, the cost of actually operating the BTC network is largely supported by every single person who owns BTC, proportionally to how much BTC they actually have. As the mining reward continues to taper off, that is going to shift toward the cost primarily being covered by transaction processing fees. That will change something fundamental about the economics of Bitcoin, although I'm not sure exactly how.
GP might be referring to the fact that currently, 80-90% of the miners' reward is "coinbase", ie newly minted coins (which expand the money supply and could be considered inflationary), while only 10-20% of the mining reward is from fees, ie cut on the transactions.
Thanks, but I mean inflation: miners were paid a subsidy in new Bitcoin for their contribution to the network. This has an inflationary effect on Bitcoin, although it was overshadowed by increased demand over the same period.
You don't need a DoS attack under the assumptions of this project. It's already assumed that you control ~80% of hash rate, so you execute a 51% attack that mass double-spends coins and destroy all confidence in the integrity of the currency. Poof, nobody uses it.
Note that China already controls ~65% of Bitcoin hash rate, so if they wanted to execute this right now, they probably could.
That they haven't is one reason I'm bullish on cryptocurrency, and specifically Ethereum and Stellar, and it's entirely separate from why many other Bitcoin bulls are bullish on cryptocurrency. You don't need proof-of-work to secure a blockchain. You only need game theory: as long as each participant has more to gain from allowing Bitcoin's continued existence than destroying it (and they can't subvert or destroy it in a way that will be invisible to other market participants), it will continue to exist. China gains no benefit from destroying Bitcoin; they can just continue to let it exist and tax all the Bitcoin miners in China, generating revenue for themselves and their citizens and continuing to be a thorn in the side of dollar hegemony.
This also implies that proof-of-stake (if done right) is just as good as proof-of-work, which'll solve the energy issues associated with Bitcoin. And it means that cryptocurrency adoption, if it happens, isn't going to be because it's particularly good: rather, it'll be because the U.S. has destroyed the dollar. There's value in cryptocurrency simply in it being an alternative that's readily available, so that civilization doesn't stop if the U.S. does end up miscalculating and hyperinflating the dollar.
> Note that China already controls ~65% of Bitcoin hash rate, so if they wanted to execute this right now, they probably could.
When you say "China" do you mean like an actor that can make coordinated decisions? Or just a geographic region? I'm asking out of curiosity because yeah there's a lot of miners in China across many geographic regions but I never saw any evidence that they even talking to each other, even less coordinated enough to agree on making a decision as drastic at attacking the Bitcoin blockchain.
I'd make a wild guess that when parent is talking about 'control', they mean that if a miner is located within China, the Chinese government has the ability to put a gun to that miners head and tell them what to do.
I think the concern is that the authoritarian Chinese government can exercise an awful lot of influence when they are inclined. For a supposedly decentralized system it's an awfully big risk.
The question is whether CCP has sufficient control over them. If it does not yet, it might consider working on that. OTOH I like the game-theoretic argument: they don't need to.
Same thing that a lot Chinese people thinking of the West. Like anything is coordinated behind thing, led by US, and followed up by the developed countries.
> rather, it'll be because the U.S. has destroyed the dollar. There's value in cryptocurrency simply in it being an alternative that's readily available, so that civilization doesn't stop if the U.S. does end up miscalculating and hyperinflating the dollar.
Even before Bitcoin, we had plenty of other alternative currencies that could have replaced the dollar. I’ve been reading headlines speculating about the dollar being replaced by other currencies as long as I can remember, before Bitcoin existed.
To your point: If Bitcoin somehow did become an alternative world currency and USD was out of the running, wouldn’t that create great incentive for China to crash Bitcoin prices and drive everyone to use their national currency?
I’m not happy with the current rate of inflation, but I think it’s also clear that true hyperinflationary scenarios aren’t likely in modern countries. As much as we like to criticize governments (often rightfully so), it takes orders of magnitude more incompetence and malice for a government to enter hyperinflation. It’s not something that is stumbled upon by accident.
US monetary dominance is up for grabs. This doesn't mean the US is necessarily supplanted as the world reserve currency, but it does mean lots of trade may dedollarize to some extent. My bet is there will be two major currency zones. Dollar/Euro in the West + Middle East + India, Renmimbi in the East + Australia + Africa.
Given the explosion of debt to GDP in the west vs the east, I see no way the Renmimbi will not continue to appreciate against the dollar, and I fully expect Chinese monetary dominance to increase with the government's continued annexation of Hong Kong.
BTC will probably dominate in countries were currency value is routinely destroyed (developing nations, Russia, the US and Europe to some extent) but as only as a back channel currency: I doubt any major commodity market or trade is ever going to be priced in BTC.
"If Bitcoin somehow did become an alternative world currency and USD was out of the running, wouldn’t that create great incentive for China to crash Bitcoin prices and drive everyone to use their national currency?"
It would, but there's no guarantee that if people left Bitcoin they would end up in RMB. More likely they'd jump to another cryptocurrency, or to Euros. People tend to distrust the last party that fucked them over.
I could see a dangerous situation if China let Bitcoin thrive for a generation, let all the other currencies wither on the vine through normal market mechanisms, and then decided to exercise their national control over Bitcoin. That's basically the Amazon strategy - make your product so appealing that all the other retailers go bankrupt, and then jack up prices once there's no alternative and a whole generation assumes you're the normal way to buy things. (Come to think of it, that's kinda the U.S. dollar strategy now.) But that's a generation off, so naturally I'm not thinking of it, and I doubt very many others outside of HN are either.
How would a hyperinflation on the US dollar cause civilization to stop?
In any case, crypto trading since 2017 has been nothing but people buying and selling imaginary ticker symbols on unregulated exchanges.
For example, XVG and ETC has been subject to successful 51% attacks more than once and every time the price was hardly affected. And each time the "solution" to deep chain reorg involved the exchanges freezing all trading while developers rushed to add a hardcoded checkpoint. Once the "correct" version of history has been manually restored, everybody sing kumbaya and goes back to paying real cash for monopoly money.
Crypto need no proof of anything (PoS is still vaporware - debate me if you want), other than a shared delusion of value headed by the bucket shops.
Tezos has a fully working Proof of stake system, and there are others. Feel free to share whatever you're on about, but I have a feeling "the debate" will be an exercise in goalpost moving.
> How would a hyperinflation on the US dollar cause civilization to stop?
The dollar is the value used to denominate world debt via the IMF. It's also (partially related to this fact) the "mattress currency" of a lot of nations... Nations hoard US dollars to back-stop their own economies, since if their currency starts to tank, they can use dollars to pay their international debts.
A worthless US dollar would have wide-ranging international currency disruption.
> In any case, crypto trading since 2017 has been nothing but people buying and selling imaginary ticker symbols on unregulated exchanges.
You can trade regulated BTC futures. (Regulation by itself isn't much of a feature. But it can be a good indicator to see how well something is integrated into mainstream finance.)
> [...] other than a shared delusion of value headed by the bucket shops.
You shouldn't dismiss the original bucket shops like that.
Citation needed on this one I'm afraid. If nothing else, a currency that the Party cannot control would be A Problem. China did not have much economic benefit in halting the ANT IPO, yet it did not go through all the same. There _might_ be a benefit in allowing bitcoin to continue to exist of course, if they think it advances their cause more than it hurts it. But as soon as that calculus changes, it seems quite likely that the big mining corps (with as you say at the moment of speaking about 65% of total hash rate)
will receive some "friendly invitations" (from unfriendly people with guns) to stop their business operations.
If they executed a 51% attack, it will most likely result in a hard fork. Every full node would be able to tell where China branched off. We'll have BTC and BTC-China, with their individual markets. Keep in mind that while China has the bulk of miners, the majority of reachable full nodes are in North America.
Right now they don't, no. But to my mind Bitcoin being subject to the whims of a major world power is a big knock against it, given that it aims to be a currency alternative. I don't want such an alternative to subject to any kind of geopolitical mood.
Yea I can't see a power like China controlling bitcoin to be a good thing. I also can't see myself maintaining a substantial fraction of my wealth in a unit of value subject to the whim of a totalitarian government.
It's not inconceivable (to me at least) that leaders could decide it's personally beneficial to them (or politically beneficial) to damage Bitcoin, even if it cost a ton of their tax payers money.
Yes. Much like mutually-assured-destruction with WMDs, we need to try to keep China to <50% of the mining pool, otherwise they can do as they wish with it.
Maybe the US government doesn't mind that? Maybe they hope it will die, and send everyone flocking back to the dollar?
Given China’s political structure, wouldn’t it just take one participant (President Xi) to wake up and decide “party over” if it became politically favorable to do so?
Even if you do control 51%, it would be a big long term capital and operational expense to do so, so you'd probably want to play nice rather than destroy what you've built.
Besides, even if you attack it, a new network will just spring up again, possibly with a different mining algorithm, making your old mining gear obsolete.
Also, in PoS, another last resort "nuclear option" defence strategy would be to slash the nodes that attack the network through a hard fork. It's a "nuclear option" because in theory it's unlikely to happen, only used a deterrent.
"Slash" here means to confiscate and burn their staking deposit on the new network. (The old one will continue to operate where the arrackers reside, thus a "fork")
I'm not so sure. If you don't need proof of work to secure a blockchain, then why is the free market of Bitcoin consensus continuing to expend huge amounts of capital to stick with it as its sybil resistance mechanism? If it wasn't considered a value destroying move, the transition away from PoW would've happened already no?
> If it wasn't considered a value destroying move, the transition away from PoW would've happened already no?
I think there's a conflict of interest issue here that would prevent such a move even if it would be worth it - the miners clearly have an incentive to keep the current PoW mechanism, as without it they're left holding a bunch of expensive useless tech. And without the miners willing to go along with a move from PoW to PoS, at best you're going to get a split between the PoW and PoS chains rather than a clean shift from one to the other and just create a mess, which isn't ideal for anyone.
It has, in new cryptocurrencies. Virtually all cryptocurrencies launched since 2017 are proof-of-stake: Cardano, EOS, Stellar, Polkadot, Tezos, TRON. Ethereum is in the process of a very expensive and painful transition from proof-of-work to proof-of-stake.
The reason you haven't seen this in the global cryptocurrency industry is because of network effects and adoption curves. Most programmers would probably agree that C++ is archaic and that the software industry has moved on to newer languages like Rust, Go, Kotlin, ES6, etc. Why then do Microsoft, Amazon, Apple, Google, etc. all rely on large quantities of C++ code? Because they were founded in the last millennia, when C++ was basically the only alternative for what they were trying to do, and have deeply enmeshed ecosystems and value chains that are all dependent on their existing C++ codebase. Throw it out and you throw out the $5T+ in value they've built. They couldn't have built that up without the 20 year head start they have, but if you're founding a tech company now, you're pretty dumb to use C++.
Similarly, Bitcoin has built a whole ecosystem of miners, speculators, traders, exchanges, payment systems, wallets, etc. Throw proof-of-work out and you throw all that out, and along with it your advantage over Ethereum, Cardano, Stellar, etc.
I think I agree with you and think there's a parallel to other conventional currencies.
Controlling the hash is similar to controlling a central bank - you've got the power to trash your currency, but that's coupled with you probably having the most to lose if you do so.
You could maybe do something stupid short-term - Say you own a controlling amount of hash, but a fraction of the currency. You could seize the currency, but by doing do you devalue it all. Who in their right mind would buy a seized bitcoin from you for any price, knowing you could seize it right back?
Currency equivalent would be the Fed suddenly stating a dollar was worth half-as-much as it was before (compared to some external thing) and compensating all US citizens by doubling their dollar earnings. As a dollar earner/spender you'd notionally be unaffected.
Dollar debt the US owed would be halved - Yay!
However the effect on non-US dollar holders would be cataclysmic - "You made half my money vanish, you might do it again, I don't want to ever hold US dollars again" and bricks of your currency is being used by children worldwide to build forts.
The entire selling point of BTC is that it's outside of conventional government control. If proved otherwise, it's without value.
More realistically, "Chinese Miners" aren't the government. They're miners, who happen to be in China, due to cheap power costs. At the first whiff of any meddling, their ASICs going to be on a plane and plugged into the Hoover Damn or Iceland's geothermals.
> More realistically, "Chinese Miners" aren't the government.
I think that's largely the point, other comments are appealing that somehow the Chinese govt has a lot to lose by seizing control of bitcoin, but in reality they probably just have no reason to yet, it beggars belief that an authoritarian government would allow private citizens to control an important currency on their own soil. My own take is that they are letting it run because of the shadow of doubt it is casting on the USD.
> ASICs going to be on a plane and plugged into the Hoover Damn or Iceland's geothermals
A little simplistic to think non-negligible percentages of the hash pool would turn themselves off, relocate internationally, completely disrupt the difficulty rate, put themselves at a massive disadvantage and subject themselves to an unknown foreign government who might be completely hostile toward them.
More pertinently the CCP might "meddle" with their ability to fly out of the country as they have done with countless dissidents already.
Will Bitcoin even be that decentralized in 50 years? The miners control the network, and most mining is done by big companies now and their data centres. If it’s like other companies, won’t they gradually acquire one another until there is only 1-2 companies controlling almost the entire future crypto economy? The scale of the computing power we are talking about is not something that individuals can compete with
I've posted here before about it. I'm of the opinion that it currently is not decentralized. There is such a shortage of hardware that can be competitive right now and there are only a few organizations that can get their hands on them. I think this problem is just going to get worse when the manufactures start to realize it doesn't make sense to sell any of their miners at all.
How do you account for “let the world burn”-type actors in this scenario though? It seems this pulls at the key misunderstanding around crypto and blockchain in general — it can’t sanitize the endpoints.
If any human party has the power to defraud, manipulate, or commit any other nefarious act (as you imply China does), the system is vulnerable.
This is why proof of work provides some level of resilience—you have to be nefarious AND have access to massive compute resources to do harm. China has the compute resources, but not the incentive. A proof of stake power broker may have the incentive and not need the compute.
I wonder if at some point Bitcoin might become important enough that nation states will work together to ensure that no one state has more than a 51% hashrate as a matter of national security.
> China gains no benefit from destroying Bitcoin; they can just continue to let it exist and tax all the Bitcoin miners in China, generating revenue for themselves and their citizens and continuing to be a thorn in the side of dollar hegemony.
That's making a lot of assumptions which I don't think there are good grounds to assume. For instance, that Bitcoin tax revenue is something the Chinese government cares enough about for it to affect its decision-making, or that Bitcoin is a "thorn in the side of dollar hegemony."
I think the reality is that Bitcoin (and cryptocurrency in general) is a niche thing that isn't nearly as important as its fans like to think it is, so there's little for a state-actor to gain by making the effort to disrupt it.
"You only need game theory: as long as each participant has more to gain from allowing Bitcoin's continued existence than destroying it (and they can't subvert or destroy it in a way that will be invisible to other market participants), it will continue to exist."
The CCP doesn't allow Chinese citizens to own Bitcoin as far as I know - however they allow mining because it's generating revenue.
And of course, Bitcoin's continued existence by the "army of HODLers" is a non-brainer when you join an MLM - everyone who has adopted it will push for its price to go up (or return to the prior buy price) so they can realize a profit - until the latest adopters are left holding the bag.
> China gains no benefit from destroying Bitcoin; they can just continue to let it exist and tax all the Bitcoin miners in China, generating revenue for themselves and their citizens and continuing to be a thorn in the side of dollar hegemony
CO2 emissions is probably why I'd do it if I were the Chinese government frankly.
I think under these circumstances, the economic majority of bitcoin users will fork to use, eg a new hash algorithm, rendering the seized mining farms useless. Remember, bitcoin is a collective trusted network based on agreement between users, miners and developers. If the miners turn, just switch to a set of new miners.
You mention that this wouldn't work in your article. Can you explain why?
Yeah it seems like the real defense of an obvious attack is "This Ethereum proof of stake chain with all of the wallets from right before the attack is the new Bitcoin".
In order for change in hash function to work, it would require remonitising to a significant hash rate. Why would anyone invest in mining equipment on that new hash function if they already know how the game ends? (ie. their equipment being written off)
Human beings already know how our game ends (we die), and yet we do all sorts of things on this earth in the ~80 years before that, even knowing that everything we do for ourselves becomes meaningless once we're gone.
Time preferences are a thing. Lots of folks do things with a time horizon much lower than their equipment being written off. Whole companies are destroyed for quarterly earnings, relationships are destroyed for a promo that lasts only for the ~2-5 years that you've got remaining at the company, people get married even knowing that 50% of them end in divorce, parents birth children knowing that they'll leave the nest and develop their own opinions and say they don't love you and eventually die.
Theres no need to start at a huge hash rate.
You can fork and then reset/reduce the difficulty, or adjust the difficulty in the way BCH does. You can also use POW algorithms that can be done only on commodity hardware like GPUs or CPUs so that the community can do it in a more distributed way.
In the general case I don't think that majority miner attacks can be defended against without changing the hash algorithm.
Specific cases like "empty blocks" could be addressed via a hard fork.
But there's nothing stopping miners from faking transactions in blocks, sending amounts to themselves, filling the block with OP_RETURNs, or just doing the minimum possible to get around your "fix".
PoW absolutely relies on >50% of miners being honest, always has done.
The purpose of this project is to challenge people to be specific about the details of that hard fork. Currently there are no theoretical proposals, or concrete BIPs to address.
It depends how rationally the market responds, I guess.
A reorg attack and a DoS are equivalent in my mind - anyone who's capable of pulling off a lengthy DoS is also capable of performing a reorg attack, whether they actually do or not is kind of irrelevant.
Ehh, this blog posts focuses way too much on technical tricks that are, in reality, not really the main risks to the bitcoin network.
For example, the blog posts focuses on things like 51% attacks to either reorg the chain, or prevent transactions from being published. This is not really as big of a deal. When 51% attacks happen, it certain disrupts crypto networks in the short term. But the defenders always have the nuclear option in their back pocket, which is to change the proof of work algorithm, and force the attackers to spend a bunch of money building their attack infrastructure up again.
Threats to change the POW algorithm, were thrown around during the 2017 blocksize debate, when things got really heated, and parties involved were threatened what amounted to 51% attacks. So it is already established that this is something that devs consider doing.
The only real avenue of attack against crypto networks, is simply the social one. You simply arrest anyone who does anything at all related to crypto, and hope the threat of government violence is enough to make it so most people dont use crypto.
Those social attacks would be the most likely to succeed, IMO, but they also have the problem of being difficult to implement. You know, because we living in a society, with a court system, and elections, and people that care about not living in a totalitarian hellscape, so any attempt by the government to simply arrest everyone, will likely be punished politically.
So sure. The blog post is correct that if the government simply arrests or kills everyone who has anything to do with bitcoin, then they could stop crypto. But the counter argument to that, is such recommendations are completely out there, and extreme, and society wouldn't let that happen and would punish the people doing that.
The actual attack vectors that matter, are not some fantasy land conspiracy, of every world government becoming a dictatorship. Instead, the attack vectors that matter would instead be every day bad actors, that seek to defraud people, in secret, and are not willing or able to kill/arrest everyone in the world who opposed it.
I don't think China being a dictatorship is much of a conspiracy. That's where a lot of ASICs are deployed, as well as the majority of the fabrication of the hardware itself.
> I don't think China being a dictatorship is much of a conspiracy.
But china enacting authoritarian measures isn't good enough. The blog post did not suggest that the attack vector to worry about was a single country banning crypto.
Instead, the blog post said that the attacks would only happen if every major country in the world colluded together, to all being authoritarian, and banning crypto everywhere.
If only China decides to take over crypto, the solution is relatively simple. The developers of bitcoin/whatever simply change the proof of world algorithm, and turn all of china's ASICs into space heaters.
That would be disruptive to crypto, sure. But lots of disruptive things have happened in the space. People would move on. And if china spent another X billion dollars building even more asics, then the algorithm could be changed again.
It’s crazy that some people seriously think Bitcoin is anything like these stores of value.
All these are ties to some fundamental value to society. If gold goes down, manufacturing will buy more of it because they use them for ICs and lots of other things. Most companies have some tangible assets behind them. If a stocks price goes far enough down someone might buy up a controlling stake and liquidate all the assets. A fiat currency in a functional state is generally strongly tied to borrowing for real physical assets. It’s deeply entangled with the economy.
There is no bottom for Bitcoin. Especially now that it’s not a very viable currency for most purchases or for lending.
What’s more, value is continually being extracted from the currency. People cashing out and payments to miners (who are basically just burning a lot of the money they make by converting electricity to heat without doing much useful work).
In gold or stocks the money put in actually exists in something valuable to society, and you own a piece of that. The the value might be boosted up 2-10x its real value today, perhaps due to its perceived future value. But you do own a piece of something tangible.
With Bitcoin, the money you put in is already gone. Used by a miner to pay for electricity or an early miner/purchaser who is now cashing out to buy an apartment. You just gotta pray that a few years down someone is willing to buy bitcoins from you for its perceived value alone. Because nobody is going to buy it for any other reason. Not to make something out of it (gold), not to liquidate the assets behind it (stocks), and not to pay taxes or pay back their mortgage (fiat currencies)
There’s so much utter insane and thinking around cryptocurrency these days. Especially Bitcoin. It’s madness.
I mean, it’s a super cool tech. But I think that blinds a lot of people to the facts around it.
Stocks are held up because they do have a grounding in the value of the corporations in the broader economy. For their value to go to zero everyone would have to pull out of the broad economy, stop buying manufactured goods and go back to farming their land.
There are a huge number of incentives that make it extraordinarily difficult for people to just wake up one day and pull out of the economy, stocks and USD.
There's literally no such incentives for crypto. Nobody has to buy into crypto or they can't buy food or cars or homes or pay their taxes or anything else. Opting out of crypto is very easy, opting out of the US economy is very hard.
>There is currently no defense for this attack in Bitcoin, as the simulation
demonstrates.
The entire Bitcoin miner reward model is the defense for this attack.
Nation states have powerful computers... but nowhere near as powerful as the decentralized Bitcoin mining network combined.
Even if they did currently, the endgame for Bitcoin as envisioned by Satoshi Nakamoto was for everyone on the planet to be mining Bitcoin at the same time.
If a Nation State could ever become more powerful than every single private processor on the planet combined... I think it would be game over for a lot more than just Bitcoin.
Nation state wouldn't need to become more powerful than all miners if most miners (more accurately, vast majority of hash power) were located in one, authoritarian country with a penchant of controlling "private" businesses.
I don’t think the realistic attack vectors include nation states trying to out-compete the network on hash rate by building a competing network. If China wanted to make this a priority, for example, they’d just use military force to seize existing mining operations which are heavily centralized and easy to find.
A more realistic attack angle would be a large mining corporation recognizing a financial opportunity to undermine Bitcoin. If some organization could position themselves as a superior alternative to Bitcoin, crashing the Bitcoin network with periodic mining attacks could be worth the cost. Alternatively, if an entity could amass a large enough short position on Bitcoin, attacking the network to drive down the price might be attractive. We’d have to run the math on the scenarios, which is the point of projects like this.
> Even if they did currently, the endgame for Bitcoin as envisioned by Satoshi Nakamoto was for everyone on the planet to be mining Bitcoin at the same time.
The amount of wasted energy would be insane if everyone on the planet was mining Bitcoin.
Currently, it looks like we’re on a trajectory where large mining operations will centralize a lot of the eventually custom mining hardware. Individuals will have less and less incentive to mine Bitcoin as the reward decreases.
ASIC chip fabrication is centralised in China. The government could seize the means of production, as well as the centralised mining operations that they've attracted by subsidising electricity.
If a handful of governments that control fabs agree Bitcoin has to go, the efficiency of ASIC mining becomes a big threat.
Governments can purchase large runs of ASICs while other mining will revert to GPU. Controlling 51% of the hash rate in this manner isn't as outlandish.
Further, you're not limited to double spend attacks. If you're the government with a decent advantage, you just treat your own chain as true and never accept blocks from other miners. The reward for mining will collapse, since even if you produce a valid block it'll not be on the longest chain once government miners catch up.
And once the reward for mining collapses you can probably even power down some of the ASICs.
There are counter measures, but combined with attacking the financial onramps and making possession criminal, it's hard for me to believe that BTC would survive an attack like this.
But of course, it's predicated on large governments agreeing it's worth seriously attacking. I don't know how likely that is.
I think eventually it will be nation states that bring the endgame, on national security grounds, through regulation.
Looking mostly at the US here. It is highly unlikely the government will sit by and watch trillions of US capital flowing into a Chinese-controlled infrastructure, undermining their reserve currency status.
Also worth mentioning that the US has leverage over the entire world’s banking system, that is how they enforce sanctions. Cutting the link between crypto and major currencies would qualify as an endgame.
I also imagine that after a few days of the network being jammed up, getting social consensus to fork the network to use a different hashing function would be fairly viable.
Right. And now this theoretical actor that controls 10x the hashrate of the rest of the world has lost 10x the amount of capital invested compared to the rest of the mining world.
It's the equivalent of shooting a bullet through your chest to shoot your enemy in the finger.
Right. The protections against this are already baked into the protocol.
51% attacks don't make sense because you're hurting yourself 51% and hurting everyone else 49%.
And for this theoretical attack you'd probably need to sustain 90%+ hash power for a long time.
Your first hurdle will be producing enough ASICs to surpass current hashrate by nearly 10x. Solve that problem and you'll need a massive amount of energy and you'll have to set up huge mining facilities in various locations to prevent crippling local power grids.
This would take years to plan & execute. A lot of people would have to be involved. Good luck keeping it a secret. Network hash rate will continue to increase while you're building this infrastructure.
If by some miracle you've pulled this off, Bitcoin users will switch to a fork of Bitcoin that uses a different mining algorithm and your entire investment is now completely worthless.
The protections aren't baked into the protocol because they don't account for external real world motives of nations states which could incent them to act in a "non-economic" way according to the internal rules of the Bitcoin game.
An interesting aspect of these cryptocurrencies is the aspect of consensus, not through the intended mechanisms like PoW, but through societal acceptance. Look at BTC and BTG (bitcoin and bitcoin gold). One has the suffix of "gold" while the other maintains the (arguably?) superior lack of any such embellishments/augmentations. Was it the miner's decision to call it that? Was it the users?
Look at Ethereum v Ethereum classic. Same deal. We have two chains that share a common history, yet at some point the users of both decided to split and then society had to come to a consensus on what each chain would be called. Again, did the miners sit around and conspire to which chain would be called "Ethereum?" I don't think so. I think the decision was decentralized and emergent.
My point is, even if there was a nefarious actor who attempted a 51% attack, it seems like there would be enough of a societal pressure to ignore their empty blocks. There would exist a chain that would still be valued by the perpetrators, but not so much by the individuals being harmed by such an attack. The attacked chain would be maintained and acquire a new name "Bitcoin Hacked" or something similar, and the chain where society ignores the empty blocks would go on its merry way still being called "bitcoin."
I take the point you're making (in principle, there is some off-chain consensus at work here), but for these particular examples I believe society didn't decide these names as much as the people deciding to do the forks did.
Readit News
Note that this is from last July, when the price of BTC was significantly lower and thus the price of the attack is likely higher now. That said, this becomes more feasible in the long-run when mining is purely funded by transaction fees.
Something I don’t see talked about much is the fact that, although Bitcoin is intended to be non-inflationary in the long run, the mining network that keeps it secure is currently 80-90% subsidized by inflation.
How does the system intend to keep up miner income after all bitcoins have been mined?
You could periodically increase the block size, splitting the transaction fee among more transactions. Although larger blocks make it more difficult to produce hashes, so more power would be consumed, thus increasing the transaction fees further.
You could change the block reward such that there's a larger block reward or even some kind of sustained rate of inflation. The cap of 21 million bitcoin isn't a fundamental unit, it can be changed if a majority of the mining pool decides to.
You could switch to Proof of Work, which doesn't use nearly as much electricity. Given how long this has taken Ethereum, this would probably be a multi year effort.
If the Lightning network were to take off, it might also help with this for day to day users. I'm not super confident about that though. I don't think a Layman is going to deal with the Lightning network, personally. Especially with the current narrative of bitcoin being a "store of value" rather than a currency. Bitcoin proponents don't seem to be advocating using it as a day to day payment tool.
Of course, there could also just never be any consensus on the direction to take, the network could be attacked, people could bail on bitcoin for other cryptocurrencies or just abandon cryptocurrencies all together and it could become a relic of history.
At some point it has to crash and wont recover because double-spends happened and the network can no longer be trusted which renders it useless. If the price (real world purchase power not the price in USD) doesn't multiply for more than 4 years... the end is near. Likely the end would come before the 4 years are over. historically hash rate drops the most 1-1.5 years before halving in sync with the price. it basically boils down to how good large miners are at managing risk. they need to have the money to keep mining while its not profitable. if a large player goes bankrupt it could create a chain reaction crashing the whole thing.
BTW, next generation blockchains like the XRPL have solved all of theses problems a long long time ago. The lead dev (ex btc dev) saw these problems ~10 years ago and it took them 1-2 years to come up with something better.
[1] https://bitcointalk.org/index.php?topic=5306354.0
The Bitcoin network rules restrict it to a couple thousand transactions per block. Even with that, each on-chain transaction would "only" need to cost $100 or so to replace the block reward. Infeasible for micropayments, perfectly fine for large scale settlements.
Another possible solution would be increasing the block size limit - the mining effort is a per-block cost, the cost of additional transactions is minimal. So small fees + massive transaction volume could work. With a million transactions each block, $0.35 per on-chain transaction is enough to pay for the current security level. More transactions allow for even lower fees. The Bitcoin Cash fork aims for this.
However, all of this is very long term. The halvings happen a bit faster than every 4 years. Let's assume 3.5 years - that means 20 halvings in 70 years. The block reward not drop to 0 until 34 halvings, so this is not a problem we have to deal with in our lifetime. So for the forseeable future, one possible solution is for the Bitcoin price to keep going up, paying for the same or an increasing security level despite the halvings.
the electricity cost falls significantly with the difficulty, see: https://en.bitcoin.it/wiki/Difficulty
..and: https://breakermag.com/difficulty-adjustment-is-why-bitcoin-...
Is the plan to secure a fully-mined chain just rampant value-inflation in a way that is completely detached from supply and demand? Today my 1e-1000 bitcoin is worth 10 carrots, tomorrow it is worth 20 everything else held equal? How does that even work in practice?
Alternatively you need transactions to pay entirely for the security of the chain. This doesn't seem feasible when chain security costs rise everyday as the cost of energy deceases. And if transaction fees increase to compensate and people transact less the whole thing blows up.
Given we're currently floating around 10-15% fee-supported at the moment, I'd say most people are optimistic that we will succeed in moving Bitcoin into its final economic phase (i.e. in 10 years it will be 50% fees).
Personally, I still consider it a risk.
It is game theory: If you really want your transaction to be on-chain, you pay for it. And smaller blocks means less transactions will fit in one block. So fees will need to go up.
Presently 6.25 BTC newly created with each block, about 1-2 BTC in fees. Mining has been paid for by increasing the BTC supply, for all of Bitcoin's history so far. Eventually that will have to change as the reward keeps halving. At some point there is no block reward and it's all fees. Will people pay enough in fees to sustain mining at a rate that's impossible for a large actor to 51%?
Maybe dilution is a better term? If all other factors could be held equal, then the real value of the ~6BTC reward for mining a block would, in effect, come from a tiny reduction in the real value of everyone else's BTC assets that would result from the supply of BTC having increased.
It creates an interesting situation. Right now, the cost of actually operating the BTC network is largely supported by every single person who owns BTC, proportionally to how much BTC they actually have. As the mining reward continues to taper off, that is going to shift toward the cost primarily being covered by transaction processing fees. That will change something fundamental about the economics of Bitcoin, although I'm not sure exactly how.
Note that China already controls ~65% of Bitcoin hash rate, so if they wanted to execute this right now, they probably could.
That they haven't is one reason I'm bullish on cryptocurrency, and specifically Ethereum and Stellar, and it's entirely separate from why many other Bitcoin bulls are bullish on cryptocurrency. You don't need proof-of-work to secure a blockchain. You only need game theory: as long as each participant has more to gain from allowing Bitcoin's continued existence than destroying it (and they can't subvert or destroy it in a way that will be invisible to other market participants), it will continue to exist. China gains no benefit from destroying Bitcoin; they can just continue to let it exist and tax all the Bitcoin miners in China, generating revenue for themselves and their citizens and continuing to be a thorn in the side of dollar hegemony.
This also implies that proof-of-stake (if done right) is just as good as proof-of-work, which'll solve the energy issues associated with Bitcoin. And it means that cryptocurrency adoption, if it happens, isn't going to be because it's particularly good: rather, it'll be because the U.S. has destroyed the dollar. There's value in cryptocurrency simply in it being an alternative that's readily available, so that civilization doesn't stop if the U.S. does end up miscalculating and hyperinflating the dollar.
When you say "China" do you mean like an actor that can make coordinated decisions? Or just a geographic region? I'm asking out of curiosity because yeah there's a lot of miners in China across many geographic regions but I never saw any evidence that they even talking to each other, even less coordinated enough to agree on making a decision as drastic at attacking the Bitcoin blockchain.
Thanks for calling out this mental bias.
Even before Bitcoin, we had plenty of other alternative currencies that could have replaced the dollar. I’ve been reading headlines speculating about the dollar being replaced by other currencies as long as I can remember, before Bitcoin existed.
To your point: If Bitcoin somehow did become an alternative world currency and USD was out of the running, wouldn’t that create great incentive for China to crash Bitcoin prices and drive everyone to use their national currency?
I’m not happy with the current rate of inflation, but I think it’s also clear that true hyperinflationary scenarios aren’t likely in modern countries. As much as we like to criticize governments (often rightfully so), it takes orders of magnitude more incompetence and malice for a government to enter hyperinflation. It’s not something that is stumbled upon by accident.
Given the explosion of debt to GDP in the west vs the east, I see no way the Renmimbi will not continue to appreciate against the dollar, and I fully expect Chinese monetary dominance to increase with the government's continued annexation of Hong Kong.
BTC will probably dominate in countries were currency value is routinely destroyed (developing nations, Russia, the US and Europe to some extent) but as only as a back channel currency: I doubt any major commodity market or trade is ever going to be priced in BTC.
It would, but there's no guarantee that if people left Bitcoin they would end up in RMB. More likely they'd jump to another cryptocurrency, or to Euros. People tend to distrust the last party that fucked them over.
I could see a dangerous situation if China let Bitcoin thrive for a generation, let all the other currencies wither on the vine through normal market mechanisms, and then decided to exercise their national control over Bitcoin. That's basically the Amazon strategy - make your product so appealing that all the other retailers go bankrupt, and then jack up prices once there's no alternative and a whole generation assumes you're the normal way to buy things. (Come to think of it, that's kinda the U.S. dollar strategy now.) But that's a generation off, so naturally I'm not thinking of it, and I doubt very many others outside of HN are either.
In any case, crypto trading since 2017 has been nothing but people buying and selling imaginary ticker symbols on unregulated exchanges.
For example, XVG and ETC has been subject to successful 51% attacks more than once and every time the price was hardly affected. And each time the "solution" to deep chain reorg involved the exchanges freezing all trading while developers rushed to add a hardcoded checkpoint. Once the "correct" version of history has been manually restored, everybody sing kumbaya and goes back to paying real cash for monopoly money.
Crypto need no proof of anything (PoS is still vaporware - debate me if you want), other than a shared delusion of value headed by the bucket shops.
Tezos has a fully working Proof of stake system, and there are others. Feel free to share whatever you're on about, but I have a feeling "the debate" will be an exercise in goalpost moving.
The dollar is the value used to denominate world debt via the IMF. It's also (partially related to this fact) the "mattress currency" of a lot of nations... Nations hoard US dollars to back-stop their own economies, since if their currency starts to tank, they can use dollars to pay their international debts.
A worthless US dollar would have wide-ranging international currency disruption.
Try using projects that aren't "shitcoins" as an example
You can trade regulated BTC futures. (Regulation by itself isn't much of a feature. But it can be a good indicator to see how well something is integrated into mainstream finance.)
> [...] other than a shared delusion of value headed by the bucket shops.
You shouldn't dismiss the original bucket shops like that.
Why is that? Aren't Cardano and Polkadot PoS as they claim or doesn't it work?
Citation needed on this one I'm afraid. If nothing else, a currency that the Party cannot control would be A Problem. China did not have much economic benefit in halting the ANT IPO, yet it did not go through all the same. There _might_ be a benefit in allowing bitcoin to continue to exist of course, if they think it advances their cause more than it hurts it. But as soon as that calculus changes, it seems quite likely that the big mining corps (with as you say at the moment of speaking about 65% of total hash rate) will receive some "friendly invitations" (from unfriendly people with guns) to stop their business operations.
Right now they don't, no. But to my mind Bitcoin being subject to the whims of a major world power is a big knock against it, given that it aims to be a currency alternative. I don't want such an alternative to subject to any kind of geopolitical mood.
It's not inconceivable (to me at least) that leaders could decide it's personally beneficial to them (or politically beneficial) to damage Bitcoin, even if it cost a ton of their tax payers money.
Maybe the US government doesn't mind that? Maybe they hope it will die, and send everyone flocking back to the dollar?
Even if you do control 51%, it would be a big long term capital and operational expense to do so, so you'd probably want to play nice rather than destroy what you've built.
Besides, even if you attack it, a new network will just spring up again, possibly with a different mining algorithm, making your old mining gear obsolete.
Also, in PoS, another last resort "nuclear option" defence strategy would be to slash the nodes that attack the network through a hard fork. It's a "nuclear option" because in theory it's unlikely to happen, only used a deterrent.
"Slash" here means to confiscate and burn their staking deposit on the new network. (The old one will continue to operate where the arrackers reside, thus a "fork")
I think there's a conflict of interest issue here that would prevent such a move even if it would be worth it - the miners clearly have an incentive to keep the current PoW mechanism, as without it they're left holding a bunch of expensive useless tech. And without the miners willing to go along with a move from PoW to PoS, at best you're going to get a split between the PoW and PoS chains rather than a clean shift from one to the other and just create a mess, which isn't ideal for anyone.
The reason you haven't seen this in the global cryptocurrency industry is because of network effects and adoption curves. Most programmers would probably agree that C++ is archaic and that the software industry has moved on to newer languages like Rust, Go, Kotlin, ES6, etc. Why then do Microsoft, Amazon, Apple, Google, etc. all rely on large quantities of C++ code? Because they were founded in the last millennia, when C++ was basically the only alternative for what they were trying to do, and have deeply enmeshed ecosystems and value chains that are all dependent on their existing C++ codebase. Throw it out and you throw out the $5T+ in value they've built. They couldn't have built that up without the 20 year head start they have, but if you're founding a tech company now, you're pretty dumb to use C++.
Similarly, Bitcoin has built a whole ecosystem of miners, speculators, traders, exchanges, payment systems, wallets, etc. Throw proof-of-work out and you throw all that out, and along with it your advantage over Ethereum, Cardano, Stellar, etc.
Controlling the hash is similar to controlling a central bank - you've got the power to trash your currency, but that's coupled with you probably having the most to lose if you do so.
You could maybe do something stupid short-term - Say you own a controlling amount of hash, but a fraction of the currency. You could seize the currency, but by doing do you devalue it all. Who in their right mind would buy a seized bitcoin from you for any price, knowing you could seize it right back?
Currency equivalent would be the Fed suddenly stating a dollar was worth half-as-much as it was before (compared to some external thing) and compensating all US citizens by doubling their dollar earnings. As a dollar earner/spender you'd notionally be unaffected.
Dollar debt the US owed would be halved - Yay!
However the effect on non-US dollar holders would be cataclysmic - "You made half my money vanish, you might do it again, I don't want to ever hold US dollars again" and bricks of your currency is being used by children worldwide to build forts.
The entire selling point of BTC is that it's outside of conventional government control. If proved otherwise, it's without value.
More realistically, "Chinese Miners" aren't the government. They're miners, who happen to be in China, due to cheap power costs. At the first whiff of any meddling, their ASICs going to be on a plane and plugged into the Hoover Damn or Iceland's geothermals.
I think that's largely the point, other comments are appealing that somehow the Chinese govt has a lot to lose by seizing control of bitcoin, but in reality they probably just have no reason to yet, it beggars belief that an authoritarian government would allow private citizens to control an important currency on their own soil. My own take is that they are letting it run because of the shadow of doubt it is casting on the USD.
> ASICs going to be on a plane and plugged into the Hoover Damn or Iceland's geothermals
A little simplistic to think non-negligible percentages of the hash pool would turn themselves off, relocate internationally, completely disrupt the difficulty rate, put themselves at a massive disadvantage and subject themselves to an unknown foreign government who might be completely hostile toward them. More pertinently the CCP might "meddle" with their ability to fly out of the country as they have done with countless dissidents already.
If any human party has the power to defraud, manipulate, or commit any other nefarious act (as you imply China does), the system is vulnerable.
This is why proof of work provides some level of resilience—you have to be nefarious AND have access to massive compute resources to do harm. China has the compute resources, but not the incentive. A proof of stake power broker may have the incentive and not need the compute.
51% attacks don't double-spend coins. It just means you get to control which blocks are accepted, it doesn't mean you can violate the rules.
Some people just want to watch the world burn. - Alfred from The Dark Knight
That's making a lot of assumptions which I don't think there are good grounds to assume. For instance, that Bitcoin tax revenue is something the Chinese government cares enough about for it to affect its decision-making, or that Bitcoin is a "thorn in the side of dollar hegemony."
I think the reality is that Bitcoin (and cryptocurrency in general) is a niche thing that isn't nearly as important as its fans like to think it is, so there's little for a state-actor to gain by making the effort to disrupt it.
The CCP doesn't allow Chinese citizens to own Bitcoin as far as I know - however they allow mining because it's generating revenue.
And of course, Bitcoin's continued existence by the "army of HODLers" is a non-brainer when you join an MLM - everyone who has adopted it will push for its price to go up (or return to the prior buy price) so they can realize a profit - until the latest adopters are left holding the bag.
CO2 emissions is probably why I'd do it if I were the Chinese government frankly.
https://news.bitcoin.com/65-of-global-bitcoin-hashrate-conce...
That's not correct. Most pools are in China, but the majority of the hash rate is generated in the USA.
I'm curious why you are bullish on those 2 specifically?
Lol.
kek
You mention that this wouldn't work in your article. Can you explain why?
Time preferences are a thing. Lots of folks do things with a time horizon much lower than their equipment being written off. Whole companies are destroyed for quarterly earnings, relationships are destroyed for a promo that lasts only for the ~2-5 years that you've got remaining at the company, people get married even knowing that 50% of them end in divorce, parents birth children knowing that they'll leave the nest and develop their own opinions and say they don't love you and eventually die.
Deleted Comment
Specific cases like "empty blocks" could be addressed via a hard fork.
But there's nothing stopping miners from faking transactions in blocks, sending amounts to themselves, filling the block with OP_RETURNs, or just doing the minimum possible to get around your "fix".
PoW absolutely relies on >50% of miners being honest, always has done.
A reorg attack and a DoS are equivalent in my mind - anyone who's capable of pulling off a lengthy DoS is also capable of performing a reorg attack, whether they actually do or not is kind of irrelevant.
For example, the blog posts focuses on things like 51% attacks to either reorg the chain, or prevent transactions from being published. This is not really as big of a deal. When 51% attacks happen, it certain disrupts crypto networks in the short term. But the defenders always have the nuclear option in their back pocket, which is to change the proof of work algorithm, and force the attackers to spend a bunch of money building their attack infrastructure up again.
Threats to change the POW algorithm, were thrown around during the 2017 blocksize debate, when things got really heated, and parties involved were threatened what amounted to 51% attacks. So it is already established that this is something that devs consider doing.
The only real avenue of attack against crypto networks, is simply the social one. You simply arrest anyone who does anything at all related to crypto, and hope the threat of government violence is enough to make it so most people dont use crypto.
Those social attacks would be the most likely to succeed, IMO, but they also have the problem of being difficult to implement. You know, because we living in a society, with a court system, and elections, and people that care about not living in a totalitarian hellscape, so any attempt by the government to simply arrest everyone, will likely be punished politically.
So sure. The blog post is correct that if the government simply arrests or kills everyone who has anything to do with bitcoin, then they could stop crypto. But the counter argument to that, is such recommendations are completely out there, and extreme, and society wouldn't let that happen and would punish the people doing that.
The actual attack vectors that matter, are not some fantasy land conspiracy, of every world government becoming a dictatorship. Instead, the attack vectors that matter would instead be every day bad actors, that seek to defraud people, in secret, and are not willing or able to kill/arrest everyone in the world who opposed it.
But china enacting authoritarian measures isn't good enough. The blog post did not suggest that the attack vector to worry about was a single country banning crypto.
Instead, the blog post said that the attacks would only happen if every major country in the world colluded together, to all being authoritarian, and banning crypto everywhere.
If only China decides to take over crypto, the solution is relatively simple. The developers of bitcoin/whatever simply change the proof of world algorithm, and turn all of china's ASICs into space heaters.
That would be disruptive to crypto, sure. But lots of disruptive things have happened in the space. People would move on. And if china spent another X billion dollars building even more asics, then the algorithm could be changed again.
All these are ties to some fundamental value to society. If gold goes down, manufacturing will buy more of it because they use them for ICs and lots of other things. Most companies have some tangible assets behind them. If a stocks price goes far enough down someone might buy up a controlling stake and liquidate all the assets. A fiat currency in a functional state is generally strongly tied to borrowing for real physical assets. It’s deeply entangled with the economy.
There is no bottom for Bitcoin. Especially now that it’s not a very viable currency for most purchases or for lending.
What’s more, value is continually being extracted from the currency. People cashing out and payments to miners (who are basically just burning a lot of the money they make by converting electricity to heat without doing much useful work).
In gold or stocks the money put in actually exists in something valuable to society, and you own a piece of that. The the value might be boosted up 2-10x its real value today, perhaps due to its perceived future value. But you do own a piece of something tangible.
With Bitcoin, the money you put in is already gone. Used by a miner to pay for electricity or an early miner/purchaser who is now cashing out to buy an apartment. You just gotta pray that a few years down someone is willing to buy bitcoins from you for its perceived value alone. Because nobody is going to buy it for any other reason. Not to make something out of it (gold), not to liquidate the assets behind it (stocks), and not to pay taxes or pay back their mortgage (fiat currencies)
There’s so much utter insane and thinking around cryptocurrency these days. Especially Bitcoin. It’s madness.
I mean, it’s a super cool tech. But I think that blinds a lot of people to the facts around it.
There are a huge number of incentives that make it extraordinarily difficult for people to just wake up one day and pull out of the economy, stocks and USD.
There's literally no such incentives for crypto. Nobody has to buy into crypto or they can't buy food or cars or homes or pay their taxes or anything else. Opting out of crypto is very easy, opting out of the US economy is very hard.
The entire Bitcoin miner reward model is the defense for this attack.
Nation states have powerful computers... but nowhere near as powerful as the decentralized Bitcoin mining network combined.
Even if they did currently, the endgame for Bitcoin as envisioned by Satoshi Nakamoto was for everyone on the planet to be mining Bitcoin at the same time.
If a Nation State could ever become more powerful than every single private processor on the planet combined... I think it would be game over for a lot more than just Bitcoin.
A more realistic attack angle would be a large mining corporation recognizing a financial opportunity to undermine Bitcoin. If some organization could position themselves as a superior alternative to Bitcoin, crashing the Bitcoin network with periodic mining attacks could be worth the cost. Alternatively, if an entity could amass a large enough short position on Bitcoin, attacking the network to drive down the price might be attractive. We’d have to run the math on the scenarios, which is the point of projects like this.
> Even if they did currently, the endgame for Bitcoin as envisioned by Satoshi Nakamoto was for everyone on the planet to be mining Bitcoin at the same time.
The amount of wasted energy would be insane if everyone on the planet was mining Bitcoin.
Currently, it looks like we’re on a trajectory where large mining operations will centralize a lot of the eventually custom mining hardware. Individuals will have less and less incentive to mine Bitcoin as the reward decreases.
Governments can purchase large runs of ASICs while other mining will revert to GPU. Controlling 51% of the hash rate in this manner isn't as outlandish.
Further, you're not limited to double spend attacks. If you're the government with a decent advantage, you just treat your own chain as true and never accept blocks from other miners. The reward for mining will collapse, since even if you produce a valid block it'll not be on the longest chain once government miners catch up.
And once the reward for mining collapses you can probably even power down some of the ASICs.
There are counter measures, but combined with attacking the financial onramps and making possession criminal, it's hard for me to believe that BTC would survive an attack like this.
But of course, it's predicated on large governments agreeing it's worth seriously attacking. I don't know how likely that is.
They don't need the processors - they can simply change the laws.
Looking mostly at the US here. It is highly unlikely the government will sit by and watch trillions of US capital flowing into a Chinese-controlled infrastructure, undermining their reserve currency status.
Also worth mentioning that the US has leverage over the entire world’s banking system, that is how they enforce sanctions. Cutting the link between crypto and major currencies would qualify as an endgame.
It's the equivalent of shooting a bullet through your chest to shoot your enemy in the finger.
51% attacks don't make sense because you're hurting yourself 51% and hurting everyone else 49%.
And for this theoretical attack you'd probably need to sustain 90%+ hash power for a long time.
Your first hurdle will be producing enough ASICs to surpass current hashrate by nearly 10x. Solve that problem and you'll need a massive amount of energy and you'll have to set up huge mining facilities in various locations to prevent crippling local power grids.
This would take years to plan & execute. A lot of people would have to be involved. Good luck keeping it a secret. Network hash rate will continue to increase while you're building this infrastructure.
If by some miracle you've pulled this off, Bitcoin users will switch to a fork of Bitcoin that uses a different mining algorithm and your entire investment is now completely worthless.
Look at Ethereum v Ethereum classic. Same deal. We have two chains that share a common history, yet at some point the users of both decided to split and then society had to come to a consensus on what each chain would be called. Again, did the miners sit around and conspire to which chain would be called "Ethereum?" I don't think so. I think the decision was decentralized and emergent.
My point is, even if there was a nefarious actor who attempted a 51% attack, it seems like there would be enough of a societal pressure to ignore their empty blocks. There would exist a chain that would still be valued by the perpetrators, but not so much by the individuals being harmed by such an attack. The attacked chain would be maintained and acquire a new name "Bitcoin Hacked" or something similar, and the chain where society ignores the empty blocks would go on its merry way still being called "bitcoin."