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The U.S. Government Can Nationalize the Bitcoin Network at Any Time

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Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#21

Post by michaniskin »

mikeblackson wrote: post #18
michaniskin wrote: post #15

Earlier quoted context omitted.

But that's just turtles all the way down. The Fed can mine that forked chain even more easily than the original one. When one actor has a money printer they can use the permissionless, decentralized nature of the bitcoin network as a weapon. It's a vulnerability they can exploit.

Regardless of how much money can be printed, no government has enough resources to attack a perpetually moving and atomizing target. As long as governments debase the currency to carry out this attack, they are also continuously creating more reasons for variations of Bitcoin to exist.

This "perpetually moving target" will need funding to operate. The Fed will always be able to afford to lose more money than the private sectors can afford to lose. Remember that the government doesn't need infinite resources, they just need more resources than the private sector can muster.

This is something the Fed does all the time, this is exactly how they distort the economy to set interest rates and bond yields. They have been 51% attacking the bond markets for decades, and all the bond shorts who thought "they can't possibly keep printing at this rate" lost their shirts.

Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#22

Post by michaniskin »

mikeblackson wrote: post #19
michaniskin wrote: post #11

Earlier quoted context omitted.

The point TFA is making is that the US government can force holders of bitcoin to sell their bitcoins to the government. And, importantly, they can do it via the Fed (which is nominally a private institution), thereby avoiding any politically messy legislation. The Fed can do this by launching their own bitcoin exchange and then dominating the mining of blocks on the blockchain (AKA a 51% attack). They can then preve…

The network would be forked long before all of that could be setup. Millions of developers around the world working towards a goal generally move faster than governments.

The Fed is (nominally at least) a private institution. They are not hobbled by government bureaucracy. Just look at all the things they did in 2020 that everyone would have imagined would have been impossible. All they need is the green light to do it, and the Fed can swoop in ninja style and get stuff done, as they do. There is no oversight, there are no constraints.

Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#23

Post by michaniskin »

mikeblackson wrote: post #17
michaniskin wrote: post #16

Earlier quoted context omitted.

What prevents the Fed from operating as many nodes as they need to overrule the "honest" node operators?

If fed nodes run a different version of bitcoin that permits censorship, they will not be in control of the forked chain.

Oh, I think i didn't understand your comment, sorry. In the scenario laid out by the article the Fed runs the same software as any other miner, they simply ignore transactions that are not depositing bitcoin into their wallet, they refuse to record those transactions in the blocks they mine.

This is completely compatible with the bitcoin network, any miner can do that today without forking the chain. However, if the Fed had say 85% of all hash power it would be extremely expensive for any other miner to mine a block, so the Fed would gain complete control over the network over time.

Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#24

Post by michaniskin »

mikeblackson wrote: post #18
michaniskin wrote: post #15

Earlier quoted context omitted.

But that's just turtles all the way down. The Fed can mine that forked chain even more easily than the original one. When one actor has a money printer they can use the permissionless, decentralized nature of the bitcoin network as a weapon. It's a vulnerability they can exploit.

Regardless of how much money can be printed, no government has enough resources to attack a perpetually moving and atomizing target. As long as governments debase the currency to carry out this attack, they are also continuously creating more reasons for variations of Bitcoin to exist.

Also consider that the price of crypto is determined by people's expectations of future price; since it pays no dividends the only way to make a return is to sell it or rent it out. What effect do you think this "perpetually moving and atomizing target" would have on investors? How would a rational investor price this completely unpredictable asset? Clearly there would be a discount for risk, like a shitcoin.

Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#25

Post by mikeblackson »

michaniskin wrote: post #21
mikeblackson wrote: post #18

Earlier quoted context omitted.

Regardless of how much money can be printed, no government has enough resources to attack a perpetually moving and atomizing target. As long as governments debase the currency to carry out this attack, they are also continuously creating more reasons for variations of Bitcoin to exist.

This "perpetually moving target" will need funding to operate. The Fed will always be able to afford to lose more money than the private sectors can afford to lose. Remember that the government doesn't need infinite resources, they just need more resources than the private sector can muster. This is something the Fed does all the time, this is exactly how they distort the economy to set interest rates and bond yields…

All these coins are funded by the people that adopt them, funding is not an issue for projects that solve the issues Bitcoin does. These projects exist because there is demand for the solutions they offer, attacking any single network does nothing to limit that demand.

I disagree with the 2nd part too, the idea that the Fed does anything tech related with a higher level of competency than the private sector has not been proven to me.

The idea that a centralized closed network that's severely hampered by operating restrictions can beat a well designed adaptable open network in the long run is a joke.

Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#26

Post by mikeblackson »

michaniskin wrote: post #24
mikeblackson wrote: post #18

Earlier quoted context omitted.

Regardless of how much money can be printed, no government has enough resources to attack a perpetually moving and atomizing target. As long as governments debase the currency to carry out this attack, they are also continuously creating more reasons for variations of Bitcoin to exist.

Also consider that the price of crypto is determined by people's expectations of future price; since it pays no dividends the only way to make a return is to sell it or rent it out. What effect do you think this "perpetually moving and atomizing target" would have on investors? How would a rational investor price this completely unpredictable asset? Clearly there would be a discount for risk, like a shitcoin.

That is irrelevant because the main point is, the attack will be unsuccessful. People will pay a premium for a coin/payment network that defeated the Fed and proved its censorship resistance.

How long can the fed fight a few hundred million (soon to be few billion) people?

In the war of attrition, this small group of people with incentives that are not aligned with the majority of the humans on this planet will lose, it's just a matter of time.

I expect Bitcoin will destroy/neuter most central banks in your lifetime.

Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#27

Post by mikeblackson »

michaniskin wrote: post #22
mikeblackson wrote: post #19

Earlier quoted context omitted.

The network would be forked long before all of that could be setup. Millions of developers around the world working towards a goal generally move faster than governments.

The Fed is (nominally at least) a private institution. They are not hobbled by government bureaucracy. Just look at all the things they did in 2020 that everyone would have imagined would have been impossible. All they need is the green light to do it, and the Fed can swoop in ninja style and get stuff done, as they do. There is no oversight, there are no constraints.

I have seen no evidence that central banks are as agile as you claim. Changing a number on a central database is not impressive and doesn't prove they can execute a much more technical attack on a well defended network.

Central banks are more fragile than the Bitcoin network and they definitely don't have the support of the masses. I expect they would lose a lot more than just money in this attack.

Bitcoiners would love to pull these institutions out of the shadows and I don't think central banks survive when exposed to sunlight. Just a small community of coders caught wind of how CBs operate and constructed powerful platforms to carry out large scale speculative attacks on them. Imagine what happens when a few billion people understand how CBs operate... their days are numbered.

Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#28

Post by theamk »

mikeblackson wrote: post #12
theamk wrote: post #3

This seems highly inefficient - why give money to random people (many of them non-US citizens) when you don’t have to? Here is a much cheaper plan which grants US a lot of control over bitcoins: - Some US government agency publishes “bad bitcoin address” list - this is initially a list of addresses of clearly evil people, like ransomware attackers. - The new law is passed, requiring all US-based bitcoin firms to refu…

This will just fuel the rise of background mixing and decentralized exchanges. Many Bitcoin holders and devs will consider it an honor to make as much of the Bitcoin supply as "dirty" as possible and the community will mostly support it. Layer 2 also further hinders easy tracking of "dirty" addresses/transactions. The FBI wants to interact with and attack the 200M+ people that will eventually hold "dirty bitcoin"? Mu…

Oh, the FBI is secondary. The primary method id carrot: do you want your to buy bitcoin via Paypal? Do you want to pay bitcoin everywhere where the VISA is accepted? Do you want touse US based firms like coinbase? Do you want to invest into bitcoin via tax-free retirement saving program? Then avoid “bad bitcoin”.

People may want to participate in mixing, but then they won’t be able to get their money back in the US. It is that simple. Imagine a future where almost everyone has a Paypal(tm) Bitcoin app on their phone. And here is a bitcoin dev who has mixed all of their money. They just had a pizza with their non-technical friend, and the friend asks “Can you send me you portion of the bill? Thanks! Ugh, my phone is not accepting your payment, something about dirty money error.. Can’t you send me some normal bitcoin”? There will be no convicing that non-technical person of the problem with the “bad list”, the do not care.

In other words, you are going to have 46M people who just want bitcoin to work and don’t care about “bad bitcoin” list (US non-technical population), maybe 0.1M of principled bitcoin holders and dev who are against the mix, and 150M+ people in other countries who simply don’t care.

Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#29

Post by michaniskin »

mikeblackson wrote: post #26
michaniskin wrote: post #24

Earlier quoted context omitted.

Also consider that the price of crypto is determined by people's expectations of future price; since it pays no dividends the only way to make a return is to sell it or rent it out. What effect do you think this "perpetually moving and atomizing target" would have on investors? How would a rational investor price this completely unpredictable asset? Clearly there would be a discount for risk, like a shitcoin.

That is irrelevant because the main point is, the attack will be unsuccessful. People will pay a premium for a coin/payment network that defeated the Fed and proved its censorship resistance. How long can the fed fight a few hundred million (soon to be few billion) people? In the war of attrition, this small group of people with incentives that are not aligned with the majority of the humans on this planet will lose,…

> That is irrelevant because the main point is, the attack will be unsuccessful.

Is your claim here that the Fed cannot afford to buy the 51% attack? Keep in mind that they printed about 6 trillion dollars last year.

If the Fed can buy a 51% attack then they will be successful. They will demonstrate beyond a doubt that an entity with the power to print fiat can always take down a decentralized, permissionless network by exploiting those very features.

Re: The U.S. Government Can Nationalize the Bitcoin Network at Any Time

#30

Post by michaniskin »

mikeblackson wrote: post #25
michaniskin wrote: post #21

Earlier quoted context omitted.

This "perpetually moving target" will need funding to operate. The Fed will always be able to afford to lose more money than the private sectors can afford to lose. Remember that the government doesn't need infinite resources, they just need more resources than the private sector can muster. This is something the Fed does all the time, this is exactly how they distort the economy to set interest rates and bond yields…

All these coins are funded by the people that adopt them, funding is not an issue for projects that solve the issues Bitcoin does. These projects exist because there is demand for the solutions they offer, attacking any single network does nothing to limit that demand. I disagree with the 2nd part too, the idea that the Fed does anything tech related with a higher level of competency than the private sector has not b…

> funding is not an issue for projects that solve the issues Bitcoin does

Funding is far less of an issue for an attacker who has a printing press, and it's the relative level of funding that matters. In order to defend against a 51% attack the defender must be able to spend more resources than the attacker. It's the "who can afford to lose more money game", where one side can just print as much money as they need while the other side has to earn every dollar. Are you really betting on the workin' man here? I wouldn't.

> attacking any single network does nothing to limit that demand

Demonstrating that they can afford a 51% attack on any blockchain they want to attack will affect the price of all crypto. Investors will need to discount that risk. This will surely affect demand.

> The idea that a centralized closed network that's severely hampered by operating restrictions can beat a well designed adaptable open network in the long run is a joke.

Nobody is claiming that the Fed's intention is to compete with bitcoin. They only need to attack it and destroy it. Remember, they want people to be stuck using their fiat currency, they don't want to make a competing type of sound money.

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