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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]

#101

Post by melolife »

xiphias2 wrote: post #96
chrisco255 wrote: post #30

Earlier quoted context omitted.

ETH2 proof of stake beacon chain shipped in December. There's tens of thousands of ETH2 validators live today. Proof of work is still in place for base chain, so ETH is a hybrid currently. But they'll be off proof of work within a year to year and a half. For blockchains as big and old as Bitcoin and Ethereum I understand migrating to a new consensus algorithm is no easy task and comes with risks. But it is doable. A…

If ETH is hybrid now, how much it helped the energy usage? Did it go down significantly compared to a year ago (even if measured in ETH)? Bitcoin had a halving, which was very sifnificant energy usage decrease measured in BTC (which caused the significant price increase).

ETH cannot be described as a hybrid. The 2.0 chain is currently independent of the existing chain. The plan is to dock the existing chain as a shard of the new one, at which point it immediately becomes 100% proof of stake.

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

#102

Post by Applejinx »

totalZero wrote: post #35
gvv wrote: post #34

Earlier quoted context omitted.

Nocoiners said that at every single price and adoption milestone...

You can make money in a Ponzi scheme, too. Just saying.

Until you can't. And that's the parallel right there: in practical terms, it's a scam for rewarding those that are insiders.

Bottom line is there is no exit strategy for 'suckers' who are meant to be left holding the bag. When collapse is part of the curve and denial is part of the sales pitch, it might not literally be an exact Ponzi scheme, but you're meant to be one of the smart ones hyping and profiting off the dumb ones who chronologically come after you. That's the profit strategy.

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

#103

Post by jcpham2 »

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…

Absolutely! When miners are priced out they will be. If you can make a profit mining bitcoin, you’ll have already _arbitraged_ the pricing discrepancies in energy prices and made a boatload of money by now doing it.

And once you get priced out, you are operating at a loss. Then you turn the miners off, sell ‘em to the next person willing to gamble vs. doing their homework.

Re read that first paragraph real closely. I personally used to have a blog teaching people how to mine bitcoin on Ubuntu 10.04... until I didn’t anymore.

Now, whether anyone likes it or not: Bitcoin has both value and utility until at least 2040, block rewards incentivize mining for 20 more years (19, whoops) if we read the white paper.

Two thousand and forty. Every 10 mins, new block. Chain, new block. Huge billion dollar economy of SHA256 miners custom built for proof of work. That money to pay for all of that is coming from somewhere. Mark my words, proof of work doesn’t crash overnight. It wasn’t built built in a day either.

AFTER that, there’s 100 years of “will bitcoin live” because of minimal to NO block rewards.

These papers are so old and the subject matter is still misunderstood, it’s nice to see people learning and stuff but HN gah, just omagersh

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

#104

Post by sjy »

drdeca wrote: post #58
AaronFriel wrote: post #39

Earlier quoted context omitted.

How many kWh does one transaction consume? Is that higher or lower than 8 years ago?

I don’t think individual transactions are meaningfully tied to an energy cost.

Why can’t you estimate the power consumption of the whole network and divide it by the number of transactions per second?

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

#105

Post by ryebit »

xorcist wrote: post #89
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…

> 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 adve…

What would a successful attack even look like?

My understanding was that malicious validator has to publish votes for two different blocks in one round; which then can be used to slash them. Unlike PoW they can't "sit" on their second vote, because voters are known ahead of time, and once vote is done, opportunity is gone.

They also can't choose transactions to go into block unless they're the proposer, so that's only time they can control whether attack will even benefit them.

So they'll have to wait to get randomly assigned as proposer, in a committee where they control enough of the other randomly selected validators, and have pending txns at the ready to double spend (while receiving party has been sitting waiting for funds).

And even then, won't that just create a fork where the minority of the validators recognize the double vote, and slash them anyways? And what users / services will stay w original fork given that proof?

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

#106

Post by moralsupply »

steve_gh wrote: post #69
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.

Maybe we need a heavy Carbon Tax on Proof of Work cryptocurrencies. Using the energy consumption of Argentina to verify financial transactions does not fit with moving to a Net Zero economy.

Gaming uses more energy than Bitcoin.

Shall we place carbon taxes on gaming too?

How about a carbon tax on Gold and Silver, and on the whole of the banking system, which also consume more energy than Bitcoin?

In any case, feel free to contact the Bitcoin CEO and discuss your ideas on how to implement those taxes.

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

#107

Post by jrek »

kybernetikos wrote: post #92
jrek wrote: post #84

Earlier quoted context omitted.

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 mone…

I'm obviously no expert, but I don't think it'd make sense for the real interest rate being higher under deflation to factor into anyones decisions about whether to make loans available, so the supply of loans would be lower. Keeping the money in a hole in the ground gets you that return without taking on any risk, so when you're considering whether to invest your money in a potentially risky venture, you aren't goin…

The availability of credit is a separate question from the interest rate, and may indeed fall.

Rising real interest rates directly impact borrowers and their ability to borrow, as their debt burden increases without any changes to interest rates. Borrowers are therefore both less likely and less able to borrow. Lenders may simultaneously decide not to lend. Japan is a good case study and has suffered from both phenomena. But interest rates in Japan are very low and fell substantially as soon as the economy got stuck in a deflation rut:

The charts below are illustrative if you set them both from 1979 to now:

https://tradingeconomics.com/japan/bank-lending-rate

https://tradingeconomics.com/japan/inflation-cpi

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

#108

Post by rawtxapp »

steve_gh wrote: post #69
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.

Maybe we need a heavy Carbon Tax on Proof of Work cryptocurrencies. Using the energy consumption of Argentina to verify financial transactions does not fit with moving to a Net Zero economy.

Carbon tax everything, why limit yourself to cryptocurrencies?

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

#109

Post by jrek »

BelenusMordred wrote: post #64
CJefferson wrote: post #48

I've been interested in what will happen without the block reward. One (small) thing which really irritates me about bitcoin is how it is claimed it is "not inflationary", yet for it's entire existence so far, the block reward has made it more inflationary than all major currencies -- it's easy to claim that at some point in the future you will stop inflation, I'll believe it when I see it.

> yet for it's entire existence so far, the block reward has made it more inflationary than all major currencies Why does every HN bitcoin thread have this ridiculously incorrect statement being mindless parroted? The inflation rate of bitcoin is currently 1.8%, this is easily confirmed for anyone willing to put in 10 seconds of research. In comparison the US M1 monetary supply is up over 60% in the last year and the…

Growth in money supply =/= inflation. If price stability is what you want then the money supply has to increase as production increases to avoid deflation.

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

#110

Post by phroobster »

herodoturtle wrote: post #88
michaelscott wrote: post #86

Earlier quoted context omitted.

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 d…

>do you think the distribution of bitcoin will be somewhat equitable as we approach 2140

I don’t see why the distribution of anything would be “equitable”, outside of a communist utopia/dystopia. These days that word is mostly used by people exploiting the empathy of others to gain power for themselves.

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