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A systematic critique of Bitcoin's value proposition

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Re: A systematic critique of Bitcoin's value proposition

#21

Post by paulgb »

Something I've always considered a curious decision about Bitcoin is the decision for halvings to occur as discrete events rather than as an exponential decay occurring on each block. Having them be discrete events is probably easier for someone to verify by eyeball, I guess, but it has the disadvantage that it creates moments in time where some large portion of the hardware in the market can suddenly no longer mine honestly and profitably.

This decision seems to greatly increase an attacker's chances at obtaining a huge supply of hardware that is too inefficient to mine profitably, but can be used profitably for a short time to attack the network.

I suppose Satoshi never imagined there would be specialty hardware used to mine, and that whatever commodity hardware mined bitcoin could find another use.

Re: A systematic critique of Bitcoin's value proposition

#22

Post by alex_suzuki »

paulgb wrote: post #17
ghiculescu wrote: post #11

> In private discussions I have heard three counter-arguments, none of which I accept I think this article skips the most compelling (to me) counter argument. If there’s a 51% attack, the currency loses all value. Nobody will want to trade Bitcoin or use it as a currency once this attack is exploited. So a 51% attacker is disincentivized to perform said attack because doing so would make the prize lose its value. Now…

You're right that the article doesn't address that counter-argument, but the suggested means of profiting from the attack is immune from it: > A successful 51% attack, indeed even a credible threat of such an attack succeeding, would almost certainly sow fear and uncertainty in a wide range of public markets. An attacker could leverage this because they would have a certain amount of control over when news of the att…

I think one could argue that there are probably easier ways to manipulate a market than a 51% attack on Bitcoin.

Re: A systematic critique of Bitcoin's value proposition

#24

Post by overthrow »

DennisP wrote: post #16
ghiculescu wrote: post #11

> In private discussions I have heard three counter-arguments, none of which I accept I think this article skips the most compelling (to me) counter argument. If there’s a 51% attack, the currency loses all value. Nobody will want to trade Bitcoin or use it as a currency once this attack is exploited. So a 51% attacker is disincentivized to perform said attack because doing so would make the prize lose its value. Now…

One approach would be to just rent the hardware, and short the coin.

Not enough rentable hardware exists on the planet. The article's suggestion that someone would throw billions of dollars into a black hole to "buy up" all hardware globally, get nothing in return, and outpace those who act in their own rational self-interest is just silly.

Re: A systematic critique of Bitcoin's value proposition

#25

Post by JumpCrisscross »

thesausageking wrote: post #18

> it means that bitcoin is ultimately not, as is often claimed, protected by mathematics or physics or even economics, but rather by the social cohesion, cooperation, and (dare I say it?) trustworthiness of the mining community This isn't a dig. Bitcoin's value does come from the community and authority of the chain. If it were just math, you could fork Bitcoin and have a competing currency that had the exact same co…

> Bitcoin's value does come from the community and authority of the chain

Agree it isn’t a dig. But it’s a refutation of a common argument in favour of crypto, namely, that it’s protected by math, not custom.

Re: A systematic critique of Bitcoin's value proposition

#26

Post by SilasX »

JumpCrisscross wrote: post #20
DennisP wrote: post #16

Earlier quoted context omitted.

One approach would be to just rent the hardware, and short the coin.

> short the coin Unacceptable counterparty risk and scale limits.

Even when buying puts on a regulated exchange like LedgerX, which custodies all the cash that would pay out on the bet?

Re: A systematic critique of Bitcoin's value proposition

#27

Post by TheBlight »

paulgb wrote: post #21

Something I've always considered a curious decision about Bitcoin is the decision for halvings to occur as discrete events rather than as an exponential decay occurring on each block. Having them be discrete events is probably easier for someone to verify by eyeball, I guess, but it has the disadvantage that it creates moments in time where some large portion of the hardware in the market can suddenly no longer mine…

I don't follow your attack logic. If mining hardware becomes inefficient why would using it to "attack the network" be profitable? Can you say more about what attack you're thinking of?

He absolutely did imagine speciality hardware would be used to mine:

"At first, most users would run network nodes, but as the network grows beyond a certain point, it would be left more and more to specialists with server farms of specialized hardware."

Re: A systematic critique of Bitcoin's value proposition

#28

Post by dllthomas »

ghiculescu wrote: post #11

> In private discussions I have heard three counter-arguments, none of which I accept I think this article skips the most compelling (to me) counter argument. If there’s a 51% attack, the currency loses all value. Nobody will want to trade Bitcoin or use it as a currency once this attack is exploited. So a 51% attacker is disincentivized to perform said attack because doing so would make the prize lose its value. Now…

A 51% doesn't get you coins, it lets you spend coins twice. Imagine:

1) borrow a bunch of BTC, 2) use it to buy stuff you want, 3) 51% attack to fork the chain and reverse your spend, 4) pay back the borrowed BTC

What does it matter if the price of BTC falls through the floor afterward?

Of course depending on what you buy, what your lender knows and cares about, and more, you might still face repercussions that make it unreasonable to expect to benefit, but that's enforced outside of BTC rather than by BTC, relying on the systems BTC proponents often explicitly distrust.

Re: A systematic critique of Bitcoin's value proposition

#29

Post by TheBlight »

throwaway22032 wrote: post #6
akira2501 wrote: post #3

Aside from Satoshi's hoard.. there's also just regular destruction. Units can be mined and then permanently lost. The system has a limited number of units that can be generated in total and no mechanism to replace the lost units. Why is this not a long term problem for bitcoin?

It's divisible down to 0.00000001. If that ever became a significant issue I imagine users would be happy to increase the precision via a fork. LN supports sub satoshi (i.e. higher precision) payments on L2. If you're talking about the numbers getting super small and being unwieldy, most fiat currencies have the opposite problem of the numbers getting super large, they just redenominate every now and then.

>It's divisible down to 0.00000001.

This is an artifact of the implementation. I don't think there's any real reason it couldn't be divided further using higher precision.

Re: A systematic critique of Bitcoin's value proposition

#30

Post by 0zemp1c »

misses out on the single biggest threat to BTC

Western governments simply outlaw its use and ownership

without the USD, there really isn't even a USA, Western governments live and die by their fiat currencies

outlawing it would not be that hard, confiscate all Coinbase assets would be an easy first step

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