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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

#81

Post by ghiculescu »

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…

If someone tried to buy 10s of billions of dollars of Bitcoin shorts, who would take the other side of that deal?

Re: A systematic critique of Bitcoin's value proposition

#82

Post by ursuscamp »

medellin wrote: post #14
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

The author really undersells how difficult/nearly impossible this is and will be for a long time, at the very least. If the market transfers successfully from miner subsidy to transaction fees, then it will always be nearly impossible.

Re: A systematic critique of Bitcoin's value proposition

#83

Post by JumpCrisscross »

overthrow wrote: post #34
JumpCrisscross wrote: post #13

Earlier quoted context omitted.

> 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.

Remember that general-purpose computers use orders of magnitude more energy than specialized hardware for the same task. So if bitcoin uses (say) 0.05% of energy globally, matching the hashrate using general-purpose hardware (assuming an alternate reality where the planet has enough hardware for someone to attempt this) would require something like 5% of global energy usage. Diverting that much energy away from the r…

> would require something like 5% of global energy usage

Fair enough, supercomputers + cloud was optimistic. They can’t do 40 zettaflops.

Half of that, worst case, we could, though not triviallt. For bursts at a time. (Worst case because the math supercomputers designed to break encryption do is similar to that required to break Bitcoin.)

Practically speaking, were we to do this, we’d procure the ASICs. (And target in-jurisdiction mining, lowering the hurdle.) No private party is particularly incentivised to launch such an attack de novo. We may never need to actually attack: a law appropriating tens of billions to create a crypto deterrent would crash prices on its own.

Re: A systematic critique of Bitcoin's value proposition

#84

Post by paulgb »

bufferoverflow wrote: post #46
paulgb wrote: post #21

Something I've always considered a curious decision about Bitcoin is the decision for halvings to occur as discrete events rather than as an exponential decay occurring on each block. Having them be discrete events is probably easier for someone to verify by eyeball, I guess, but it has the disadvantage that it creates moments in time where some large portion of the hardware in the market can suddenly no longer mine…

Can you demonstrate this at all? Bitcoin has been mined for over a decade and never came even close. When miners drop off, mining difficulty decreases. If you're talking about a nuclear war scenario, we will have much bigger problems than bitcoin mining being slow.

> Bitcoin has been mined for over a decade and never came even close.

The problem with using past performance of the Bitcoin network as an indicator of future performance is that the exponential nature of halvings means that each decade is a vastly less subsidized environment for the network than the one that came before it. Over the last decade the network has given ballpark 4.2mm BTC to miners for their services; there are now about 1.7mm BTC available for miners for all time.

Re: A systematic critique of Bitcoin's value proposition

#85

Post by danans »

overthrow wrote: post #67
mrguyorama wrote: post #53

Earlier quoted context omitted.

I love how everyone responding to you seems to think that this is fine because you can just continue dividing the currency, as if the problem is a technical one, and seem to be ignoring or unaware of the actual problem: Constant deflation is HORRIBLE for any economic system. By design it rewards early capital holders and punishes you for needing to make any transaction. It disincentivizes doing anything. You are alwa…

Sounds a lot like VTSAX. But somehow people still buy food and shelter even though they could put their money in VTSAX instead and get 7% returns. Either way less spending sounds good to me. We could use a world with more saving and less consumerism.

> But somehow people still buy food and shelter even though they could put their money in VTSAX instead and get 7% returns.

Silly people, needing a roof over their heads and nutrition.

> We could use a world with more saving and less consumerism.

Everyone saving more would be disastrous for global human welfare. It won't preserve resources in any meaningful way and would set society back generations. If that's your goal, great.

But what we need to do instead is shift toward consuming sustainably. That might mean consuming less in some instances, but in a many cases it means consuming differently, especially in how we consume energy.

Re: A systematic critique of Bitcoin's value proposition

#86

Post by ursuscamp »

The author is correct, in a sense, that Bitcoin's core security is social consensus, but he falsely equivocates it with fiat currency. They are most definitely not governed by the same sets of incentives. The incentives of Bitcoin ensure its monetary policy won't change, and those incentives have strengthened consistently over time.

He oversells the need of miners to band together to defend Bitcoin. They do not. All that's needed is for nodes to invalidate blocks, which is a simple command. No code changes or anything required. If an attacker is 10 blocks deep into an attack, node operators can just invalidate the first block of the attack, wasting all of the effort and resources of the attacker. Nodes can invalidate blocks longer than an attacker can stay solvent.

Miners must follow the economic majority of the network or risk wasting resources mining a losing chain. Miners aren't rule makers, they're rule takers. This was the main lesson of the Bitcoin Cash fork which the author mentions several times, but maybe he missed the point of it.

Re: A systematic critique of Bitcoin's value proposition

#87

Post by yellowapple »

lisper wrote: post #78
yellowapple wrote: post #55

> The cost of a 51% attack drops dramatically if you can rent the necessary hardware rather than buy it. Bitcoin mining hardware is available for rent. Would carrying out a 51% attack on rented hardware be possible? Would it be practical? A back-of-the-envelope calculation indicates that the answer to both of these questions is "yes", indeed, that it might be even worse than possible and practical, it might even be p…

> Bitcoin Cash is not Bitcoin That's true, but that is just branding. The values of fiat currencies are bound to the economies of their sponsoring countries. The value of cryptocurrency is not bound to anything except the name, so if enough people start to believe that "bitcoin" and "bitcoin cash" are interchangeable, it will become so. And the only reason this is not a problem right now is because the BTC/BTCC split…

Right, but that necessitates that people actually do believe two sides of a given split chain to be interchangeable. That's not the case for Bitcoin and Bitcoin Cash; they may have a shared transaction history in their ledgers up to the point where their chains split, but after the split there is no way to turn BTC into BCH or otherwise reconnect the chains. Accordingly:

> Had it not been, had both sides insisted on branding themselves as "Bitcoin", then it would be a lot less clear which side's claim to the name was legitimate.

The clarity would come from whichever chain a majority of the network adopts. Rogue chains calling themselves "Bitcoin" happen all the time; they're short-lived because they fail to attract consensus that they're the "one true chain".

Re: A systematic critique of Bitcoin's value proposition

#88

Post by overthrow »

JumpCrisscross wrote: post #83
overthrow wrote: post #34

Earlier quoted context omitted.

Remember that general-purpose computers use orders of magnitude more energy than specialized hardware for the same task. So if bitcoin uses (say) 0.05% of energy globally, matching the hashrate using general-purpose hardware (assuming an alternate reality where the planet has enough hardware for someone to attempt this) would require something like 5% of global energy usage. Diverting that much energy away from the r…

> would require something like 5% of global energy usage Fair enough, supercomputers + cloud was optimistic. They can’t do 40 zettaflops. Half of that, worst case, we could, though not triviallt. For bursts at a time. (Worst case because the math supercomputers designed to break encryption do is similar to that required to break Bitcoin.) Practically speaking, were we to do this, we’d procure the ASICs. (And target i…

> a law appropriating tens of billions to create a crypto deterrent would crash prices on its own

Doubt that. All that would happen is driving the industry underground or overseas. It wouldn't be the first time a government overplayed its hand and failed to acknowledge that bitcoin is a global technology.

https://data.nasdaq.com/data/BCHAIN/HRATE-bitcoin-hash-rate

That isn't slowing down. I have exactly 0 faith that governments across the world could start from scratch and cooperate to outpace and then surpass the private sector in a chip fabrication project, no matter how many billions they throw at it.

Re: A systematic critique of Bitcoin's value proposition

#89

Post by SilasX »

JumpCrisscross wrote: post #80
SilasX wrote: post #72

Earlier quoted context omitted.

The exchange is not long Bitcoin, and it holds (edit: typo) all trader assets separately from its own, so no, a crash in bitcoin wouldn’t “take out” LedgerX. You’re just making stuff up now.

> exchange is not long Bitcoin, and it hold me all trader assets separately from its own, so no, a crash in bitcoin wouldn’t “take out” LedgerX It would take Herculean effort for any crypto business to survive, well, crypto wiping out. Deposits would become worthless, cash would be pulled, credit would vanish as would investment. If markets don’t take them out, their banks and regulators will. It’s the crypto equival…

It doesn't matter -- LedgerX doesn't own those Bitcoin or the customer deposits and never did. Even if the business fails (from e.g. being in debt and the fees drying up), customer assets are held separately from their own assets and would be available for withdrawal.

Since you pretty clearly didn't research before posting, you may not realize that FTX bought LedgerX (in late 2021), and that owner did become insolvent, and regulators did look into the books, and even that didn't prevent options contracts from being settled and assets withdrawn. Guess we found Hercules!

If you're not willing to admit when you're wrong, you'd be doing the site a favor to stop posting out of ignorance -- it's not helping.

Re: A systematic critique of Bitcoin's value proposition

#90

Post by throwaway22032 »

TheBlight wrote: post #29
throwaway22032 wrote: post #6

Earlier quoted context omitted.

It's divisible down to 0.00000001. If that ever became a significant issue I imagine users would be happy to increase the precision via a fork. LN supports sub satoshi (i.e. higher precision) payments on L2. If you're talking about the numbers getting super small and being unwieldy, most fiat currencies have the opposite problem of the numbers getting super large, they just redenominate every now and then.

>It's divisible down to 0.00000001. This is an artifact of the implementation. I don't think there's any real reason it couldn't be divided further using higher precision.

Yes.

In the implementation the units are actually integers, 1 is the minimum.

Could easily fork in a new transaction format though.

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