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BTC Endgame

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Re: BTC Endgame

#31

Post by mumblemumble »

treve wrote: post #7
paulgb wrote: post #2

The linked Medium posts have a bit more content https://joekelly100.medium.com/how-to-kill-bitcoin-part-1-is... 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 Bi…

You probably mean deflation, right? In inflation the cost of goods and services are higher, because the currency is losing value.

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.

Re: BTC Endgame

#32

Post by PragmaticPulp »

flyGuyOnTheSly wrote: post #3

>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 Bitco…

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.

Re: BTC Endgame

#33

Post by AffableSpatula »

nostrademons wrote: post #17

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 reas…

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?

Re: BTC Endgame

#34

Post by doggosphere »

AffableSpatula wrote: post #13
yrral wrote: post #6

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?

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)

The same reason they got into it in the first place; you can make money by doing it.

Re: BTC Endgame

#35

Post by nugget »

nostrademons wrote: post #17

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 reas…

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?

Re: BTC Endgame

#36

Post by WJW »

nostrademons wrote: post #17

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 reas…

> China gains no benefit from destroying Bitcoin;

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.

Re: BTC Endgame

#37

Post by pvarangot »

nostrademons wrote: post #17

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 reas…

> 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.

Re: BTC Endgame

#38

Post by stale2002 »

AffableSpatula wrote: post #28
stale2002 wrote: post #23

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…

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.

Re: BTC Endgame

#39

Post by trevelyan »

Distributed Proof-of-Work is not vulnerable to this:

https://org.saito.tech/eliminating-51-attacks-in-proof-of-wo...

The community of users simply attaches harder cryptographic proofs to their transactions, forcing up the cost of producing empty blocks. The approach is capable of bankrupting nation-states as a side-effect of eliminating 51% attacks.

Re: BTC Endgame

#40

Post by janandonly »

AffableSpatula wrote: post #5
paulgb wrote: post #2

The linked Medium posts have a bit more content https://joekelly100.medium.com/how-to-kill-bitcoin-part-1-is... 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 Bi…

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.

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.

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