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Sabotaging Bitcoin

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Re: Sabotaging Bitcoin

#101

Post by mrb »

sebbyBinx wrote: post #93

Part of this post addresses the economics of creating a 6 block re-org. This makes sense as 6-confimations is the standard for Bitcoin finality today . However, as Bitcoin's security inevitably weakens over the coming years due to diminishing miner rewards (denominated in BTC), I believe this "6-confimation" acceptance policy will change to include not only the number of confirmations, but the timing of those confirm…

"Bitcoin's security inevitably weakens over the coming years due to diminishing miner rewards (denominated in BTC)"

That's incorrect. Security scales with USD-denominated rewards, not BTC-denominated. And there are 16 years of real-world data showing they have been generally increasing, so a healthy sign that the Bitcoin experiment is working:

https://newhedge.io/bitcoin/block-reward-per-block

And not only that, but rewards are still expected to stabilize even when measured in BTC (thereby not relying on an increase of BTC's price) as they are progressively composed more and more of tx fees instead of newly mined BTC.

It's puzzling to me why some still don't understand the systemic incentives that make all this work as it has for 16 years and counting...

Re: Sabotaging Bitcoin

#102

Post by onion2k »

phonicwheel wrote: post #98
onion2k wrote: post #95

Earlier quoted context omitted.

Why would you expect the scale of the derivatives to be related to the scale of the spot market, especially if the derivatives are cash-settled futures? One is basically gambling on the price of BTC going up or down, and the other is trading the actual BTC, right?

How is trading the actual BTC not also gambling on the price of BTC going up or down?

It's not really, but the difference is that I'm limited by the supply of BTC, and it requires that I actually have the money to make the 'bet' at the start. That restricts the size of the spot market.

If I'm buying futures I can enter into a contract that says "I'll buy a contract for 1BTC that says BTC is going to go from $88.5k to $98.5k in 1 year." I don't actually hand over any money. In a year's time, if BTC is now $100k the person who agreed on the contract gives me $10k. If it doesn't go up then I owe the seller $10k. The futures contract is settled in cash - no BTC is involved.

Right now though, I don't have a $88.5k to spend on BTC, so the spot market isn't an option. I probably could find $10k in a year's time so a bet on a BTC future might be viable. The actual derivative 'value' isn't real though. The only money changing hands is the delta of the change in value when the contract is settled.

(Caveat: I am a total noob at finance stuff so this could be quite wrong. One of the many reasons I will not be buying that futures contract. :) )

Re: Sabotaging Bitcoin

#103

Post by tenuousemphasis »

utopiah wrote: post #97
gerdesj wrote: post #2

TIL: https://ccaf.io/cbnsi/cbeci - quite horrifying! EDIT: For comparison: https://gridwatch.co.uk/

Well what's arguably even more horrifying is according to "Estimated average energy efficiency of bitcoin mining hardware" no significant changed happened since 2014. I imagine we went from CPU to GPU to ASIC in couple of years and now for more than a decade, no change, just more.

I'm not sure what data you looking at but we went from 8300 J/TH in 2014 to 33.4 J/TH in 2023. So... what are you talking about?

Re: Sabotaging Bitcoin

#104

Post by free_bip »

mrb wrote: post #101
sebbyBinx wrote: post #93

Part of this post addresses the economics of creating a 6 block re-org. This makes sense as 6-confimations is the standard for Bitcoin finality today . However, as Bitcoin's security inevitably weakens over the coming years due to diminishing miner rewards (denominated in BTC), I believe this "6-confimation" acceptance policy will change to include not only the number of confirmations, but the timing of those confirm…

"Bitcoin's security inevitably weakens over the coming years due to diminishing miner rewards (denominated in BTC)" That's incorrect. Security scales with USD-denominated rewards, not BTC-denominated. And there are 16 years of real-world data showing they have been generally increasing, so a healthy sign that the Bitcoin experiment is working: https://newhedge.io/bitcoin/block-reward-per-block And not only that, but…

How are you so confident that it will never weaken? Especially since there will come a time when the block reward is literally 0.

Re: Sabotaging Bitcoin

#105

Post by mrb »

free_bip wrote: post #104
mrb wrote: post #101

Earlier quoted context omitted.

"Bitcoin's security inevitably weakens over the coming years due to diminishing miner rewards (denominated in BTC)" That's incorrect. Security scales with USD-denominated rewards, not BTC-denominated. And there are 16 years of real-world data showing they have been generally increasing, so a healthy sign that the Bitcoin experiment is working: https://newhedge.io/bitcoin/block-reward-per-block And not only that, but…

How are you so confident that it will never weaken? Especially since there will come a time when the block reward is literally 0.

Tx fees make up a bigger and bigger fraction of miner rewards over time.

Re: Sabotaging Bitcoin

#106

Post by copirate »

sebbyBinx wrote: post #93

Part of this post addresses the economics of creating a 6 block re-org. This makes sense as 6-confimations is the standard for Bitcoin finality today . However, as Bitcoin's security inevitably weakens over the coming years due to diminishing miner rewards (denominated in BTC), I believe this "6-confimation" acceptance policy will change to include not only the number of confirmations, but the timing of those confirm…

If the attacker is waiting for a lucky event to occur (finding more blocks than others while having less than 51% of the mining power) it means that they are constantly wasting mining time. That in itself is a huge cost (operational cost and block rewards thrown away), but it also means that they can't predict when it will happen. A double spend attack must be planned in advance because the first transaction must occur at the beginning of the attack. I'm not sure how they could constantly try double spends without risking losing the money each time the attack doesn't happen.

I don't see how it could be profitable. If it can't be profitable, then the risk of someone doing it is pretty low. If they already have the necessary hardware, they'd be much better off mining.

Re: Sabotaging Bitcoin

#107

Post by RealityVoid »

copirate wrote: post #100
roenxi wrote: post #28

The Eyal & Sirer paper is pretty interesting - they basically point out that there is actually some game theory involved in when miners should reveal that they mined a block to compete most effectively with their fellows. If a pool can set up a situation where they mine a block and wait X seconds to reveal it, they can force other miners to waste X seconds of has power and gain an advantage. It looks like a result wi…

> If a pool can set up a situation where they mine a block and wait X seconds to reveal it, they can force other miners to waste X seconds of has power and gain an advantage. How is it wasted if they work on the current chain? If they find a block during those X seconds, they'll propagate it before the waiting pool does. The waiting pool will then just lose the revenue from the block they put on hold. They're the one…

Right, but the odds of this happening is small(ish) - I'm certain there is a sweet spot for witholding time. If they don't find a block within the time interval, then effectively all the work for that time is "wasted" by the other participants since it could not have been put on the chain anyway AND the witholder has a headstart of a couple of seconds searching for a new block.

Re: Sabotaging Bitcoin

#108

Post by yellow_lead »

copirate wrote: post #100
roenxi wrote: post #28

The Eyal & Sirer paper is pretty interesting - they basically point out that there is actually some game theory involved in when miners should reveal that they mined a block to compete most effectively with their fellows. If a pool can set up a situation where they mine a block and wait X seconds to reveal it, they can force other miners to waste X seconds of has power and gain an advantage. It looks like a result wi…

> If a pool can set up a situation where they mine a block and wait X seconds to reveal it, they can force other miners to waste X seconds of has power and gain an advantage. How is it wasted if they work on the current chain? If they find a block during those X seconds, they'll propagate it before the waiting pool does. The waiting pool will then just lose the revenue from the block they put on hold. They're the one…

I might be wrong but I think it's like this..

A finds a block after 1 minute, then powers off and waits for another minute. They reveal the block after 2 minutes.

B searches for the block for 2 minutes.

After 2 minutes, A has used 1 minute of their compute, and B has used 2.

Re: Sabotaging Bitcoin

#109

Post by johnnienaked »

onion2k wrote: post #102
phonicwheel wrote: post #98

Earlier quoted context omitted.

How is trading the actual BTC not also gambling on the price of BTC going up or down?

It's not really, but the difference is that I'm limited by the supply of BTC, and it requires that I actually have the money to make the 'bet' at the start. That restricts the size of the spot market. If I'm buying futures I can enter into a contract that says "I'll buy a contract for 1BTC that says BTC is going to go from $88.5k to $98.5k in 1 year." I don't actually hand over any money. In a year's time, if BTC is…

It's very wrong. Futures contracts on traditional exchanges have no counterparty risk and require the deposit of a significant amount of upfront capital as collateral. If the spot price of the underlying moves in either direction, debits or credits are made to and from each margin account and if you don't have the money to cover a margin call, the contract gets closed.

Re: Sabotaging Bitcoin

#110

Post by emil-lp »

copirate wrote: post #100
roenxi wrote: post #28

The Eyal & Sirer paper is pretty interesting - they basically point out that there is actually some game theory involved in when miners should reveal that they mined a block to compete most effectively with their fellows. If a pool can set up a situation where they mine a block and wait X seconds to reveal it, they can force other miners to waste X seconds of has power and gain an advantage. It looks like a result wi…

> If a pool can set up a situation where they mine a block and wait X seconds to reveal it, they can force other miners to waste X seconds of has power and gain an advantage. How is it wasted if they work on the current chain? If they find a block during those X seconds, they'll propagate it before the waiting pool does. The waiting pool will then just lose the revenue from the block they put on hold. They're the one…

If you mine a block without revealing it, not only are you the only one that can mine the next block after that, but everyone is mining on the "wrong head". There's of course the risk that someone finds a different head in the meantime, but otherwise, you waste competitors' resources, while you get an advantage on the next block.
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