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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

#91

Post by kevinak »

paulgb wrote: post #84
bufferoverflow wrote: post #46

Earlier quoted context omitted.

Can you demonstrate this at all? Bitcoin has been mined for over a decade and never came even close. When miners drop off, mining difficulty decreases. If you're talking about a nuclear war scenario, we will have much bigger problems than bitcoin mining being slow.

> Bitcoin has been mined for over a decade and never came even close. The problem with using past performance of the Bitcoin network as an indicator of future performance is that the exponential nature of halvings means that each decade is a vastly less subsidized environment for the network than the one that came before it. Over the last decade the network has given ballpark 4.2mm BTC to miners for their services; t…

The reward has only gone down in absolute BTC numbers - in terms of purchasing power I'm pretty sure the reward is trending up.

Re: A systematic critique of Bitcoin's value proposition

#92

Post by rattlesnakedave »

arka2147483647 wrote: post #60
TheBlight wrote: post #37

Earlier quoted context omitted.

What's protected by math is the custody of the coins. The system is a delicate balancing act of incentives, math and social consensus. It's common among detractors to want to flippantly dismiss it as "only having value because of shared belief." That's not entirely accurate. All of the components are necessary to give Bitcoin its interesting properties which allow it to function as the first currency not managed by c…

But there has been changes to the way bitcoin works, and even forks because of it, eg bitcoin cash. Now, irrelevant of what you think of those, the community can, and has changed the way Bitcoin works. And, as such, it can also change what math it uses, if it so wishes. So the math ultimately depends on the community.

You get to decide what fork you run.

Re: A systematic critique of Bitcoin's value proposition

#93

Post by dllthomas »

anonymouskimmer wrote: post #44
dllthomas wrote: post #28

Earlier quoted context omitted.

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…

You can already spend coins twice, it's just that one of the addresses you send the coins to ultimately won't get them. So people have to wait some time to ensure the transaction fully processes before they can give you the goods in full confidence that they have received payment. At some point, if cryptocurrencies become more established, it might be financially beneficial for one blockchain if another blockchain be…

The point of a 51% attack is to destroy any such thing as "fully processes".

Re: A systematic critique of Bitcoin's value proposition

#94

Post by dllthomas »

ghiculescu wrote: post #31
dllthomas wrote: post #28

Earlier quoted context omitted.

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…

Okay sure. At best you can do that once, ever. So you’d better buy something worthwhile.

Yeah, "ideally" the cost of the attack can be paid with borrowed BTC; otherwise, it would certainly have to be a very large haul to be worthwhile.

Re: A systematic critique of Bitcoin's value proposition

#95

Post by bloppe »

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 is very much protected by math. Transactions require cryptographic signatures. That's math!

Obviously not talking about the Nash equilibrium but still relevant.

The important distinction is who (or what) is being trusted. It's always possible that a compromised bank employee commits fraud against me, or a capricious treasury secretary causes runaway inflation with stupid monetary policy (this was actually one of the main motivations behind bitcoin, as immortalized in the Genesis block "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"). These vulnerabilities aren't really possible with Bitcoin, because you place your trust in a massive community rather than a few key individuals.

Re: A systematic critique of Bitcoin's value proposition

#96

Post by tromp »

mrguyorama wrote: post #53
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?

I love how everyone responding to you seems to think that this is fine because you can just continue dividing the currency, as if the problem is a technical one, and seem to be ignoring or unaware of the actual problem: Constant deflation is HORRIBLE for any economic system. By design it rewards early capital holders and punishes you for needing to make any transaction. It disincentivizes doing anything. You are alwa…

I also find it infuriating when crypto fans defend the massive advantage afforded to early miners. To me the only truly fair distribution is one where the rewards never change; later generations of miners should get the same reward as those mining right after genesis, rather than fight over crumbs. A pure linear emission doesn't really make money any less sound [1].

[1] https://john-tromp.medium.com/a-case-for-using-soft-total-su...

Re: A systematic critique of Bitcoin's value proposition

#97

Post by jmcphers »

> I think the main value of Bitcoin in the long run will be as a store of value, comparable to precious metals but easier to move around.

I disagree with this. Bitcoin makes a terrible store of value because of the constant energy cost to prop up the network. This energy is paid for by diluting Bitcoin's value.

Source: https://cryptostackers.substack.com/p/bitcoin-is-not-a-store...

Re: A systematic critique of Bitcoin's value proposition

#98

Post by paulgb »

kevinak wrote: post #91
paulgb wrote: post #84

Earlier quoted context omitted.

> Bitcoin has been mined for over a decade and never came even close. The problem with using past performance of the Bitcoin network as an indicator of future performance is that the exponential nature of halvings means that each decade is a vastly less subsidized environment for the network than the one that came before it. Over the last decade the network has given ballpark 4.2mm BTC to miners for their services; t…

The reward has only gone down in absolute BTC numbers - in terms of purchasing power I'm pretty sure the reward is trending up.

Expecting this trend to continue forever means expecting the value of Bitcoin to double every four years. It’s basically the wheat and chessboard problem: possible the first few times, then quickly impossible https://en.m.wikipedia.org/wiki/Wheat_and_chessboard_problem

Re: A systematic critique of Bitcoin's value proposition

#99

Post by JumpCrisscross »

SilasX wrote: post #89
JumpCrisscross wrote: post #80

Earlier quoted context omitted.

> exchange is not long Bitcoin, and it hold me all trader assets separately from its own, so no, a crash in bitcoin wouldn’t “take out” LedgerX It would take Herculean effort for any crypto business to survive, well, crypto wiping out. Deposits would become worthless, cash would be pulled, credit would vanish as would investment. If markets don’t take them out, their banks and regulators will. It’s the crypto equival…

It doesn't matter -- LedgerX doesn't own those Bitcoin or the customer deposits and never did. Even if the business fails (from e.g. being in debt and the fees drying up), customer assets are held separately from their own assets and would be available for withdrawal. Since you pretty clearly didn't research before posting, you may not realize that FTX bought LedgerX (in late 2021), and that owner did become insolven…

> customer assets are held separately from their own assets and would be available for withdrawal

This protects cash and crypto at LedgerX. (Assuming it has few senior creditors.)

Shorts are different. If you place 1 BTC short with LedgerX, it doesn’t hold 1 BTC of cash. Instead, it maintains claims on others. Those claims become unlikely to pay in a crash. That’s LedgerX’s counterparty risk, which does it in, which does you in. Shorts are inherently leveraged in a way longs are not.

> that owner did become insolvent, and regulators did look into the books, and even that didn't prevent options contracts from being settled and assets withdrawn

Yes, standard bankruptcy priority was followed. Also, no leveraged positions needed to be unwound way out of the money.

There is plenty online about why shorting coins on crypto exchanges is stupid. It’s a simplified version of why FX shorts, when done with large anticipated gains, are placed offshore from the target currency.

Re: A systematic critique of Bitcoin's value proposition

#100

Post by JumpCrisscross »

overthrow wrote: post #88
JumpCrisscross wrote: post #83

Earlier quoted context omitted.

> would require something like 5% of global energy usage Fair enough, supercomputers + cloud was optimistic. They can’t do 40 zettaflops. Half of that, worst case, we could, though not triviallt. For bursts at a time. (Worst case because the math supercomputers designed to break encryption do is similar to that required to break Bitcoin.) Practically speaking, were we to do this, we’d procure the ASICs. (And target i…

> a law appropriating tens of billions to create a crypto deterrent would crash prices on its own Doubt that. All that would happen is driving the industry underground or overseas. It wouldn't be the first time a government overplayed its hand and failed to acknowledge that bitcoin is a global technology. https://data.nasdaq.com/data/BCHAIN/HRATE-bitcoin-hash-rate That isn't slowing down. I have exactly 0 faith that…

> cooperate to outpace and then surpass the private sector in a chip fabrication project

You move to seize it. ASICS are manufactured in China and among American allies.

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