Bitcoin's Security Budget Issue: Problems, Solutions and Myths Debunked

It has everything to do with the deflationary nature of the currency. Its stated so right in their potential solutions:

> Tail emission: stop halvings and allow infinite inflation

The reality that no one wants to talk about is that Bitcoin is screwed and there's no way out of it, because of bad fundamental design.

Increasing block size will only work to solve the problem of Bitcoin's Security Budget if it brings in more usage/transactions; but Bitcoin's adherence to its traditionalist values is what led to the creation of a billion other cryptocurrencies to solve this exact problem, they do solve it, and they experience significantly higher transaction volume as a result. There's no evidence that volume is going to come back to Bitcoin. On the contrary; volume is down on Bitcoin, significantly, the usage these days looks more like 2018/2019. Its not coming back.

It also doesn't help that crypto, in general, is a dying technology.

> Burning dormant coins (e.g., Satoshi’s)

The fact that this is suggested, even as the last possible solution, should scream volumes about where this project and Bitcoin is at. This possibility shouldn't even be on this list. Not only would it do all the things the article says it would do (violate property rights, incite riots); it wouldn't even solve the problem. It would just buy a few years of time.

But as long as the miners have to buy their mining equipment using inflationary US Dollars; they're screwed. The only thing that would keep it going is growth in the usage of the currency, but (1) all growth stops eventually, and (2) even if it didn't, Bitcoin seems designed from day one to inhibit its own growth, because it was designed by an idiot crypto-maxy anarchist teenager who made the predictable software engineer mistake of thinking skill in compsci makes you skilled at everything.

I guess all of these arguments have existed since the beginning of Bitcoin (51% attack, miner centralization, supply chain centralization, etc). What we do know is while it theoretically could happen it hasn't happened yet.

The big issue is the fork and fixing it represents a decision about who has and hasn't gotten paid so the fork is quite sticky for those who's transactions do not appear on the post attack branch to want to stick the the attacked branch. This was relatively easy when they did it in the early days of ETH after the DAO hack but AFAIK there's no on chain mechanism for a similar hard fork to happen to BTC. Even in ETH I'd be surprised if a similar response happened to a similar level of attack, voting power on EIPs was significantly more concentrated back in 2016.

Any way you slice it there's still a centralization of power of when to activate any of these defense mechanisms.

Just for the energy: Current hash rate is around 995m TH/s[1]. The best off the shelf miner on the market is the S21 which can hash at ~200 TH/s [2]. Assuming all of the hash rate comprised of S21s without operational inefficiency, we would have ~4,975,000 S21s hashing on the network. They also use up about 16.67 J/TH , which is 3334 J for 200TH. This is what’s expended per second.

The average time to mine a block is 10 minutes so let’s convert our J spent per block for one miner : 33346010 ‎ = 2,000,400. With about 4m of these, that’s about 8 trillion joules per block. Now if we divide that by 3.6m to get kWh, we’re back around ~2m kWh per block. Texas is about 15 cents per kWh so we get about $300k spent per block.

To 51% attack, we’d need to spend a little bit more than that. With full competition, and an attempt to mine empty blocks, it would take about $48m to attack the network for a day (144 blocks). And that’s just back of the envelope math.

Realistically, not everyone has the latest and greatest in mining equipment and probably burn more money with less efficient miners.

And all this is on top of the capex required to acquire 4m S21s, which would be around $10B at around $3k a pop.

[1] https://ycharts.com/indicators/bitcoin_network_hash_rate

[2] https://hashrateindex.com/rigs/bitmain-antminer-s21+

> sustain current miner revenue

Why should this be the goal?

I'm sure miners would love to see their revenue never decrease, but this isn't a problem for users or for the security of the network. Block reward does not need to remain at or above current levels forever; it just needs to remain predictable from block to block. Difficulty adjustment works both up and down, even if we've only seen it go up so far. The 51% risk is overblown - the network is significantly overprotected right now, and we could stand to lose a few orders of magnitude without jeopardizing security/availability. Plus, it might even placate the energy consumption doomsayers.

As GP notes, empty blocks are now common, which is in fact a bigger risk in a low-subsidy environment. Maybe we should instead reduce minrelaytxfee to 0.1 sat/vB to incentivize full blocks.