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On the Instability of Bitcoin Without the Block Reward [pdf]

cs.princeton.edu

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Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#81

Post by throw_away_moth »

hjorthjort wrote: post #73
0x64 wrote: post #63

Earlier quoted context omitted.

>Proof if work is a solution where you do not have to trust anyone, as the block is won by the person who finds the right math result, essentially a lottery. The same applies to Eth2's PoS network, as block proposers are randomly selected with on-chain randomness. Block rewards are also not a major source of income for a staker on Eth2 — the majority of income (>90%) comes from simply attesting the chain correctly. T…

> and one would need more than half of that total stake to have a chance at attacking the network Actually 1/3rd to disrupt consensus, and 2/3rds + 1 to take control of the chain like you could with a 51% attack on a PoW chain, only you'd get almost immediate and complete control over the consensus.

The strength required to take control is probably 1/3 as it is with most Byzantine setups. (The 1/3 control attack against Bitcoin is selfish mining.)

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#82

Post by loceng »

xiphias2 wrote: post #3

This is the first interesting paper I see here on HN about Bitcoin. While many people think that Bitcoin's energy usage is too high, I honestly hope that it's high enough to deter a nation state sized attacker. Many Bitcoiners argue that miner rewards shouldn't decrease more, but at the same time it's too late to change the concensus on it.

Someone made a comment the other day stating that a 50%+1 attack is more and more likely as it's becoming only a handful of people doing the mining.

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#83

Post by loceng »

Nextgrid wrote: post #53
elcomet wrote: post #24

Earlier quoted context omitted.

> I honestly hope that it's high enough to deter a nation state sized attacker. What's the point though? Bitcoin has no real use case apart from speculation.

Besides speculation there is a minority who does use it as an actual currency, often in countries where their domestic currency is unusable (sanctions, inflation, etc). Also, just because there isn't a use-case now doesn't mean it isn't valuable to keep a currency immune to government interference around just in case you end up having a use-case for it later.

Okay, so then how do we protect ourselves, security services, where normally we'd use financially penalty against known bad actors via the Magnitsky Act - but can't do so through Bitcoin?

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#84

Post by jrek »

kybernetikos wrote: post #52
cyphertruck wrote: post #33

Earlier quoted context omitted.

The idea that when purchasing power increases people spend absolutely nothing is the basis if this rationalization for inflation, and it isn’t supported by logic or experience. They actually spend more and more productively, because instead of barely getting by they are able to accumulate capital and start businesses.

Surely with a deflationary currency, interest rates would need to be significantly higher, making it harder to borrow the capital you need to start a business. As someone with capital the expected rate of return will have to be high to make it worth lending rather than just holding on to it in a deflationary situation.

The opposite actually. The Real interest rate is the nominal rate minus inflation. So negative inflation of, say, 2% pa, effectively adds 2% of real interest to any loan, since 100k of principal today will be worth ~111k in 5 years’ time. In response lenders and central banks are likely to decrease interest rates as, firstly, the money is appreciating in real terms anyway and, secondly, the appreciating value of money makes it harder for debtors to repay debt, so people won’t be able to afford high interest loans. Compare that with high inflation periods where repaying the principal gets easier, since the 100k you borrowed five years ago is only worth ~90k in today’s money (with 2% inflation).

A lot of western economies experienced the inflation side of the equation in recent history - see the 70s/80s in the us, when both the inflation rate and interest rate were very high. In reality the Real interest rate is generally less variable than either inflation or nominal rates.

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#85

Post by konschubert »

comex wrote: post #44
Paul-E wrote: post #12

One of the assumptions the authors make in this paper is that miners can turn their hardware on and off quickly, and that they will benefit financially for doing so. Mainly by paying lower electricity bills. It turns out the really big miners don't pay for electricity the same way you or I do. Big miners sign long term contracts for continuous consumption of energy, and don't save any money for turning mining hardwar…

Given that we’re talking about less than 10 minutes’ worth of energy, I wonder if a battery might be a viable option.

Energy from a battery is almost always more expensive than energy from a grid.

You have to account for the depreciation of the battery.

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#86

Post by michaelscott »

Paul-E wrote: post #12

One of the assumptions the authors make in this paper is that miners can turn their hardware on and off quickly, and that they will benefit financially for doing so. Mainly by paying lower electricity bills. It turns out the really big miners don't pay for electricity the same way you or I do. Big miners sign long term contracts for continuous consumption of energy, and don't save any money for turning mining hardwar…

A much bigger assumption is that this will even be necessary, considering the last BTC mined will be in 2140. With such a long time horizon any prediction is basically fanciful guesswork; at that time miners might have all moved to renewables after they become cheap enough, we may have new forms of energy generation which make supply both super easy and cost negligible, or Earth may have entered a post-apocalyptic state and mining is no longer even a consideration. To assume no advancement in tech between now and then seems reductive.

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#87

Post by SideburnsOfDoom »

aaron695 wrote: post #70

I haven't read the paper but I'll still be downvoted for this either way so please upvote, but Bitcoin uses a lot of energy that it shouldn't and banks work better and it is just a speculative market which means gambling, and I think it's probably racist. Please remember Bitcoin is bad. If I was smart I might ask if this paper is relevant within the next 100 year given how Bitcoin works currently, but I'm not :(

> and I think it's probably racist

I know that you think you're being performatively stupid, but in a system where the benefits are captured almost entirely by a few techbros, and the pollution from the coal power plants powering it is felt mostly by ethnic minority rural poor (1) ... yes?

I suggest that the burden of poof is on the other side: attempt to make a coherent case why this technology is somehow egalitarian and not going to drastically worsen inequality. Good luck.

1) https://qz.com/1978807/bitcoin-has-a-xinjiang-problem/

https://twitter.com/ericholthaus/status/1362279679630204929

https://diginomica.com/bitcoins-damage-planet-coal-powered-c...

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#88

Post by herodoturtle »

michaelscott wrote: post #86
Paul-E wrote: post #12

One of the assumptions the authors make in this paper is that miners can turn their hardware on and off quickly, and that they will benefit financially for doing so. Mainly by paying lower electricity bills. It turns out the really big miners don't pay for electricity the same way you or I do. Big miners sign long term contracts for continuous consumption of energy, and don't save any money for turning mining hardwar…

A much bigger assumption is that this will even be necessary, considering the last BTC mined will be in 2140. With such a long time horizon any prediction is basically fanciful guesswork; at that time miners might have all moved to renewables after they become cheap enough, we may have new forms of energy generation which make supply both super easy and cost negligible, or Earth may have entered a post-apocalyptic st…

I read this comment with interest, thanks for sharing. Makes good sense to me.

If I may ask, do you think the distribution of bitcoin will be somewhat equitable as we approach 2140?

And do you you think it will actually become a medium of exchange as originally hoped? Or will it remain a store of wealth only (as things currently seem to indicate)?

And if it indeed remains only a store of wealth, will said wealth be distributed relatively equally, or will we be left with a relatively small pool of large holders?

Just trying to wrap my mind around the long-term evolution of bitcoin - and your way of explaining the energy conundrum above makes me think you probably have good insight on this.

I'd value your opinion, thanks :)

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#89

Post by xorcist »

0x64 wrote: post #63
cyphertruck wrote: post #28

Earlier quoted context omitted.

There is no such thing as “Proof of stake” to replace proof of work. Proof if work is a solution where you do not have to trust anyone, as the block is won by the person who finds the right math result, essentially a lottery. Proof if stake is either really proof of work that is less secure and obscured, or more often dimply giving the creators of the coin the power and your trust.... which reverses the entire point…

>Proof if work is a solution where you do not have to trust anyone, as the block is won by the person who finds the right math result, essentially a lottery. The same applies to Eth2's PoS network, as block proposers are randomly selected with on-chain randomness. Block rewards are also not a major source of income for a staker on Eth2 — the majority of income (>90%) comes from simply attesting the chain correctly. T…

> really only a matter of how you ensure your chain can't be attacked

The consensus mechanism serves two distinct purposes. The first is to keep global monotonic time (which is what you call "protect from attacks"). The second is as an inflation protocol. Any time you create value where there previously wasn't you have inflation.

> a failed attack resulting in massive slashings

That's not a good mental model for adverse actors in blockchain systems. Failed attacks are normally not published, so they won't exist unless the conditions are right.

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#90

Post by xorcist »

toomim wrote: post #32
chrisco255 wrote: post #15

Why can't Bitcoin simply transition to proof of stake after mining dries up? Once there are few or no bitcoins left to mine then PoW is a lot of ceremony for very little security gain at that point (and perhaps opens up risks that this paper points out).

It's difficult for the Bitcoin community to find consensus on changes to the consensus rules. We couldn't change a constant from 1MB to 2MB. I think changing PoW entirely is extremely unlikely to happen. It's much easier for the people who believe in PoS to sell their Bitcoin and buy Ethereum instead.

Or any of the other PoS coins. If you want to invest (which is a word I hesitate to use in the context of any cryptocurrency) in a PoS coin there are more mature ones.

It would be interesting if someone would research why this hasn't already happened? It's not like that alternative hasn't been available for a long time now.

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