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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

#11

Post by ghiculescu »

> 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 I write this, I suppose if your worry is a government trying to destroy Bitcoin, then that’s exactly how to do it…

Re: A systematic critique of Bitcoin's value proposition

#12

Post by osigurdson »

amadeuspagel wrote: post #2

> In the third section I analyze its security model, specifically the cost of mounting a 51% attack on the assumption that hash power is available for rent and doesn't need to be purchased by the attacker. Bitcoin mining requires special devices (ASICs). These ASICs would lose their value if Bitcoin lost its value. Given this fact, why would anyone rent them out, or rent out the hash power?

>> Bitcoin mining requires special devices (ASICs)

Nitpick: Any computer can mine bitcoin. Economic bitcoin mining requires special devices.

Re: A systematic critique of Bitcoin's value proposition

#13

Post by JumpCrisscross »

wyager wrote: post #10
JumpCrisscross wrote: post #7

Earlier quoted context omitted.

> mining requires special devices (ASICs) Profitable mining does. If you’re looking to make money, you need ASICs. If you’re just looking to disrupt the network, e.g. for military purposes, commandeering a cloud or two would do.

> commandeering a cloud or two would do. No; The ASICs are orders of magnitude faster and more efficient per dollar. Every GPU on earth couldn't touch the bitcoin hashrate.

> ASICs are orders of magnitude faster and more efficient per dollar

Every supercomputer in either the U.S. or China plus its cloud resources would be able to mount a 51% attack. And this isn’t counting e.g. the NSA or GCHQ’s supercomputers, which are optimised for code cracking.

Re: A systematic critique of Bitcoin's value proposition

#14

Post by medellin »

amadeuspagel wrote: post #2

> In the third section I analyze its security model, specifically the cost of mounting a 51% attack on the assumption that hash power is available for rent and doesn't need to be purchased by the attacker. Bitcoin mining requires special devices (ASICs). These ASICs would lose their value if Bitcoin lost its value. Given this fact, why would anyone rent them out, or rent out the hash power?

51% of the bitcoin mining hashing power being available for rent is so far fetched that it’s silly to even consider as a valid critique

Re: A systematic critique of Bitcoin's value proposition

#15

Post by JumpCrisscross »

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% attacker is disincentivized to perform said attack because doing so would make the prize lose its value

North Korea and Russia heavily use crypto. If either does something super stupid, the Congress could create a credible commitment to repeatedly launching attacks on their payment networks, including Bitcoin. This isn’t some far-fetched threat.

Re: A systematic critique of Bitcoin's value proposition

#16

Post by DennisP »

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.

Re: A systematic critique of Bitcoin's value proposition

#17

Post by paulgb »

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 attack broke, so they could (for example) take a short position on a portfolio of financial stocks before launching the attack.

Re: A systematic critique of Bitcoin's value proposition

#18

Post by thesausageking »

> 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 code as Bitcoin. It wouldn't have any value because miners, exchanges, and users wouldn't believe it did. They believe in Bitcoin because it's been around a long time (it's Lindy) and the community around it has proven very resilient to all sorts of different kinds of attacks over the years.

Re: A systematic critique of Bitcoin's value proposition

#19

Post by JumpCrisscross »

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…

> take a short position on a portfolio of financial stocks before launching the attack

This is subject to detection and reversal. FX, credit and rates, on the other hand, could be massively exploited in a risk-on trade.

Re: A systematic critique of Bitcoin's value proposition

#20

Post by JumpCrisscross »

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.

> short the coin

Unacceptable counterparty risk and scale limits.

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