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On the Instability of Bitcoin Without the Block Reward [pdf]

cs.princeton.edu

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Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#201

Post by rspeele »

trophycase wrote: post #172
jariel wrote: post #140

Earlier quoted context omitted.

"Citation needed" I literally just explained it to you. The price of BTC has always been highly unstable. There is absolutely no evidence it will ever be stable, to the contrary in fact, all evidence points to the fact that it will remain unstable. Every single commodity or currency extant to an economy is unstable relative to the currency of that economy. The only thing 'stable' in terms of USD are things closely ti…

"Financial Services are an entire industry. Lending, transactions, authorizations, contracts, accounting, risk management, asset allocation, it's a gigantic industry." Right, this is all on ethereum

Yeah, using the magic of DeFi I can easily get a loan for $100K with no bank approval and no wasteful bank employees checking my credit.

All I need is more than $100K worth of crypto assets I can tie up as collateral for my loan. So I'll be able to buy a car or a house, as long as I have more than enough money to do so already. Banks don't know about this one weird trick that makes them obsolete!

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#202

Post by behringer »

Applejinx wrote: post #102
totalZero wrote: post #35

Earlier quoted context omitted.

You can make money in a Ponzi scheme, too. Just saying.

Until you can't. And that's the parallel right there: in practical terms, it's a scam for rewarding those that are insiders. Bottom line is there is no exit strategy for 'suckers' who are meant to be left holding the bag. When collapse is part of the curve and denial is part of the sales pitch, it might not literally be an exact Ponzi scheme, but you're meant to be one of the smart ones hyping and profiting off the d…

Which suckers are meant to be holding the bag? At what point does bitcoin become useless altogether?

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#203

Post by mistrial9 »

Paul-E wrote: post #12

One of the assumptions the authors make in this paper is that miners can turn their hardware on and off quickly, and that they will benefit financially for doing so. Mainly by paying lower electricity bills. It turns out the really big miners don't pay for electricity the same way you or I do. Big miners sign long term contracts for continuous consumption of energy, and don't save any money for turning mining hardwar…

the box on page 5 defines DefaultCompliant as "The default Bitcoin mining strategy, including all available transactions, mining on the end of the longest chain, choosing the older block in a tie, and publishing all blocks."

the core code does not choose the older block in a tie, the code chooses the block with the largest legitimate chainwork (under current TARGET epoch)

Second note: this paper investigates the era in the future when there are no mining rewards, only transaction fees. How far away is that ? How valuable is one satoshi now? Much of what is said is relative to that far-away case

(reading through the paper) This is an interesting (and thorough) thought experiment for what behavior might emerge when only transaction fees are the reward for mining. However the case the paper makes for a serious security problem gets weaker, as the argument depends on a growing number of assumptions as the paper goes on..

I fail to understand why a PETTY-COMPLIANT miner would ever realistically take a set of Tx that does not short-term maximize profit, given the competition for new blocks goes WAY up as the value increases. In other words, the undercutting and LAZY-FORK behavior would be crowded out right away, as it is insufficiently popular.

In the AGGRESSIVE-UNDERCUTTING discussion, it assumes a lot of "forks" or alternate chain tips, to chose from, is this true in practice? Are there really that many chain tips to chose from, to make this practice even a consideration?

I see in page 10 that there is a more refined and detailed descriptions on miner strategy. From a math perspective this is interesting, but the comments above stand.. would anyone even have a chance to move ONE BLOCK using these considerations, given the value and competition for every single block?

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#204

Post by temptemptemp111 »

imtringued wrote: post #181
moralsupply wrote: post #106

Earlier quoted context omitted.

Gaming uses more energy than Bitcoin. Shall we place carbon taxes on gaming too? How about a carbon tax on Gold and Silver, and on the whole of the banking system, which also consume more energy than Bitcoin? In any case, feel free to contact the Bitcoin CEO and discuss your ideas on how to implement those taxes.

Yes, carbon taxes everywhere so we can solve this stupid problem and focus on other things.

I bet you wear 3 masks and got the vax from every manufacturer!

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#205

Post by hulahoof »

trophycase wrote: post #172
jariel wrote: post #140

Earlier quoted context omitted.

"Citation needed" I literally just explained it to you. The price of BTC has always been highly unstable. There is absolutely no evidence it will ever be stable, to the contrary in fact, all evidence points to the fact that it will remain unstable. Every single commodity or currency extant to an economy is unstable relative to the currency of that economy. The only thing 'stable' in terms of USD are things closely ti…

"Financial Services are an entire industry. Lending, transactions, authorizations, contracts, accounting, risk management, asset allocation, it's a gigantic industry." Right, this is all on ethereum

Can't reply directly to the sibling comment on DeFi, but that solves the issue raised above e.g.: I have 100k worth of BTC, I want to spend that on something but I expect the value of my BTC to rise, so I use it as collateral for a pegged coin (say USDC or DAI) and make a purchase.

I am protected from losses of spending my BTC. As with all finance yes I also carry the risk of BTC falling and liquidating my loan - but assuming I have not also lost my loan I am protected from a major fall, as my collateral will be taken and I still have my loaned coins.

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#206

Post by hfsp »

SideburnsOfDoom wrote: post #152
hfsp wrote: post #148

Earlier quoted context omitted.

This is a smug take. Who do you think gets the benefit of the freshly printed fiat? In the central bank cantiollionaire system, there are three classes of citizens: 1) jamie dimons, warren buffets and the like who get access to practically 0 cost lending rates 2) the ~60% of citizens with assets (e.g. stonks, real estate) that get pumped along with the money printer 3) everyone else What do you think happens to "thir…

> The rules ARE the same for EVERYONE with BTC. No, This is a very smug take from the "must be good because I got mine" BTC crowd. "Smug" practically defines them. Anyway congrats on some smug "whatabout fiat" https://en.wikipedia.org/wiki/Whataboutism

The rules of btc will not change and become a multiple-tier system because of your feelings. Sorry.

I provided evidence (from NY fed) to your burden of proof request.

All one can ask is to have the same rules for everyone. Equal access. No special privileges.No cantillionaires.

If you are a cantiollionaire - good for you.

If you are not a cantiollionaire, then wtf are you defending a clearly corrupt system that further drives inequality and perpetuates cronyism? Is it because you want to be the person distributing freshly printed fiat?

Assuming your well founded intentions are to make the world less inequal via the money printer, the money printer has been proven to do the exact opposite.

If you want to properly critique btc, you can argue that there is a one time cantillon effect until hyperbitcoinization. Then you can get into the discussion of what happens to the people who don't have any. You could discuss UBI or other social systems.

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#207

Post by hulahoof »

tromp wrote: post #155
dmichulke wrote: post #138

Earlier quoted context omitted.

Can you give an example of an egalitarian currency or store of value?

One that has a fixed block subsidy. After any amount of time, whether years or decades or centuries, it will have been distributed evenly over all that time. Rather than having 50% distributed in just the first 4 years, and only crumbs in later decades. Gold is much more like the former.

I don't see how that logic follows, if this was a fixed block subsidy over the first 4 years instead of just 50%, surely the situation you are describing would be worse ?

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#208

Post by kybernetikos »

jrek wrote: post #107
kybernetikos wrote: post #92

Earlier quoted context omitted.

I'm obviously no expert, but I don't think it'd make sense for the real interest rate being higher under deflation to factor into anyones decisions about whether to make loans available, so the supply of loans would be lower. Keeping the money in a hole in the ground gets you that return without taking on any risk, so when you're considering whether to invest your money in a potentially risky venture, you aren't goin…

The availability of credit is a separate question from the interest rate, and may indeed fall. Rising real interest rates directly impact borrowers and their ability to borrow, as their debt burden increases without any changes to interest rates. Borrowers are therefore both less likely and less able to borrow. Lenders may simultaneously decide not to lend. Japan is a good case study and has suffered from both phenom…

Thanks, this is very interesting, and certainly gives me something to think about. Is the causation the right way round though (i.e. that the deflation has caused low interest rates)?

Could it be rather that because of the deflationary situation, the government tries to stimulate the economy with cheap money, and without that action, the natural rates of interest would be set by supply and demand and would be much higher?

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#209

Post by rstuart4133 »

tim333 wrote: post #199
dcolkitt wrote: post #165

Earlier quoted context omitted.

As a tangent, I wonder if Bitcoin mining could re-ignite the nuclear power industry. Nuclear power plants involve a high upfront capital cost, then produce a long-life of fixed electricity output at near-zero marginal cost. My understanding is that one reason more plants were built in the 60s was because electricity prices were fixed by regulators. That made financial modeling easier, because investors could legibly…

Nuclear power isn't cheap. Miners need cheap.

> Nuclear power isn't cheap. Miners need cheap.

Yep. And I suspect there isn't any power cheaper than the output of an over provisioned wind or solar farm on a windy or sunny day. And they all will be over provisioned. In fact they all assume a faction of nameplate output now.

Re: On the Instability of Bitcoin Without the Block Reward [pdf]

#210

Post by jrek »

kybernetikos wrote: post #208
jrek wrote: post #107

Earlier quoted context omitted.

The availability of credit is a separate question from the interest rate, and may indeed fall. Rising real interest rates directly impact borrowers and their ability to borrow, as their debt burden increases without any changes to interest rates. Borrowers are therefore both less likely and less able to borrow. Lenders may simultaneously decide not to lend. Japan is a good case study and has suffered from both phenom…

Thanks, this is very interesting, and certainly gives me something to think about. Is the causation the right way round though (i.e. that the deflation has caused low interest rates)? Could it be rather that because of the deflationary situation, the government tries to stimulate the economy with cheap money, and without that action, the natural rates of interest would be set by supply and demand and would be much hi…

I think you’re right on the supply side of the equation, that the profit motive applies upward pressure. But the constraint is on the demand side - if I increase or even maintain my interest rate, the number of borrowers that are able to service the loan drops and the amount of bad debt increases. That’s in addition to the general disincentive to bring forward spending caused by deflation, which has already reduced the pool of borrowers. If I lower my interest rate I’m making less money but still taking on the same risk (if I calibrated my reduction in the rate to that effect). I might then mitigate the risk by tightening my lending requirements. Or I can choose to just stop lending. The result is a simultaneous drop in interest rates and in available credit. The central bank can try to boost lending by dropping its interest rates. When rates get near or below zero things get weird.
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