A good writeup but flawed due to its core arguments.
The first flaw: Bitcoin is not money and will never be money. Money is entirely a phenomenon of the law (Good for all debts public and private) and bitcoin is the opposite of law. Transaction cost and capacity is an issue but is secondary to the reality that Bitcoin <> currency.
The second flaw : The assumption that bitcoin is orthogonal to the establishment. That may have been true 5 years ago; it is not true now. Bitcoin is being supported via CUSIP for HNWs - the HNWs themselves are largely the establishment.
The above then points to the unlikelihood of the remaining attacks: government won't because the PMCs and oligarchs have no interest in doing so. Hedge funds won't succeed because they would be opposed by other hedge funds and CUSIP institutions.
As for other secondary and tertiary benefits: privacy/crime. The reality is that if any government really wanted to crack down - they'd institute a Great Wall of China type setup. That would be the end of cryptocurrency in that country's internet = that country. Throw in some egregious cell phone surveillance and the net is complete.
However, this is not to say Bitcoin cannot have value ... as nerd art. If people are willing to pay millions for a painting or an old Ferrari, I don't see why they couldn't (not must, but could) pay tens or hundreds of thousands for a bitcoin.
It is a beautiful dream, like liberty itself. I'm not really a "disappointed libertarian"; my expectations were always low, and they continue to plummet. The price of liberty is just too damn high. Five minutes of vigilance seems a lot to expect nowadays.
“Over time, the accumulation of obsolete mining rigs becomes like a restive Ronin; for sale to whoever wants to launch an attack.” The same argument used for why these old rigs are useful to an attacker applies to being mostly useful to miners as well. Hence many fewer of the old rigs would be “obsolete” and ready for usage by an attacker assuming an end to Moore’s law.
Interesting theories. I personally feel that if Western governments and western friendly governments ban the banking and equities sectors that they regulate from accepting/interacting with BTC/crypto currency as a bigger threat. Now the obvious response is that even if they do that, this does not stop bitcoin. I would posture that if the on-ramps and off-ramps are shut down this reduces the retail user base by 60-90% (I have no data behind this - just a semi-educated guess) and removes institutional involvement 95+%. This in itself, IMO, would dramatically reduce the MC of BTC, likely by 90+% with limited growth opportunities. It is not a zero, but it is not too far off.
“As long as the payout is higher than the fees for honest mining, miners will prefer to mine empty blocks, rendering the Bitcoin network useless.”
I don’t think this is true. Miners aren’t stupid. They know the are undermining themselves in the long run by mining empty blocks. There is some multiple of mining revenues for which certain miners would accept to make an empty block. But it’s probably much higher than 1.
There are two good use-case scenarios for crypto (in general, not just BTC) and thus two market-cap / prices for it: The most maximalist is obviously broad adoption across OECD as the currency of reserve, but the second is the currency of exchange for gray/black markets of US/China/EU under a Sovietized world economy. That's not just vice goods, but general consumer needs (e.g. need a new tire? either procure a letter of need from local apparatchik or send Tony the Tire 20,000 sats). I estimate that's somewhere in the 2-20% of world economy range.
Can these gray markets be significantly discouraged by coordinating parties wielding vast mining and energy resources to 51 percent attack? I'm skeptical that attack would be sustainable for the malicious parties, or that a once-off attack would crater the price long term.
If I'm remembering correctly, 51 percent attack simply allows you to double spend from an account you own, not that it allows you to unlock tokens from addresses for which you do not have the keys for. Furthermore, such attacks have a limited time from when they start to end (based on the chance that the 49 percent of *selfish* will find a longer chain of legitimate blocks, thus negating the attackers chain as the consensus chain.). With those ideas in mind, it almost seems like a "wire clearance wait time" of a day or two for large-sum transfers (essentially "bank" to "bank") to be authenticated is sufficient to reduce the cost of the risk of attack to less than 1%. But I could be wrong there, if anyone know better...
The only disagreement I have is with the author’s guess that Bitcoin goes to zero. Company stock can go to zero because of bankruptcy and delisting. But Bitcoin isn’t a company with a balance sheet. It can’t go bankrupt anymore than a refrigerator can go bankrupt. As long as there is a single buyer for all sellers, the price will be a nonzero, positive number. My guess is that bitcoin goes to $0.01.
Thank you, Elon. Well said. Another method of conducting a 51% attack is to control the very few global companies that manufacture the Application-Specific Integrated Circuits used for Bitcoin mining. Global Governments have a well-established history of requiring manufacturers to implant code and hardware into circuit boards. With just a few years of preparation along with government bribery or threat of force sufficient to require quietly installing a small amount of code into each new bitcoin ASIC, Government would be able, after just a few years of modified ASIC production, to quietly, instantly and cheaply, switch on control of all Bitcoin transaction verifications. Your link to Joe Kelly's work is appreciated, "How To Kill Bitcoin (Part 3): No Can Defend", https://joekelly100.medium.com/ See also, https://medium.com/what-government-will-do-with-bitcoin/governments-can-and-will-attack-bitcoin-c8979c077577
A good writeup but flawed due to its core arguments.
The first flaw: Bitcoin is not money and will never be money. Money is entirely a phenomenon of the law (Good for all debts public and private) and bitcoin is the opposite of law. Transaction cost and capacity is an issue but is secondary to the reality that Bitcoin <> currency.
The second flaw : The assumption that bitcoin is orthogonal to the establishment. That may have been true 5 years ago; it is not true now. Bitcoin is being supported via CUSIP for HNWs - the HNWs themselves are largely the establishment.
The above then points to the unlikelihood of the remaining attacks: government won't because the PMCs and oligarchs have no interest in doing so. Hedge funds won't succeed because they would be opposed by other hedge funds and CUSIP institutions.
As for other secondary and tertiary benefits: privacy/crime. The reality is that if any government really wanted to crack down - they'd institute a Great Wall of China type setup. That would be the end of cryptocurrency in that country's internet = that country. Throw in some egregious cell phone surveillance and the net is complete.
However, this is not to say Bitcoin cannot have value ... as nerd art. If people are willing to pay millions for a painting or an old Ferrari, I don't see why they couldn't (not must, but could) pay tens or hundreds of thousands for a bitcoin.
It is a beautiful dream, like liberty itself. I'm not really a "disappointed libertarian"; my expectations were always low, and they continue to plummet. The price of liberty is just too damn high. Five minutes of vigilance seems a lot to expect nowadays.
“Over time, the accumulation of obsolete mining rigs becomes like a restive Ronin; for sale to whoever wants to launch an attack.” The same argument used for why these old rigs are useful to an attacker applies to being mostly useful to miners as well. Hence many fewer of the old rigs would be “obsolete” and ready for usage by an attacker assuming an end to Moore’s law.
Interesting theories. I personally feel that if Western governments and western friendly governments ban the banking and equities sectors that they regulate from accepting/interacting with BTC/crypto currency as a bigger threat. Now the obvious response is that even if they do that, this does not stop bitcoin. I would posture that if the on-ramps and off-ramps are shut down this reduces the retail user base by 60-90% (I have no data behind this - just a semi-educated guess) and removes institutional involvement 95+%. This in itself, IMO, would dramatically reduce the MC of BTC, likely by 90+% with limited growth opportunities. It is not a zero, but it is not too far off.
“As long as the payout is higher than the fees for honest mining, miners will prefer to mine empty blocks, rendering the Bitcoin network useless.”
I don’t think this is true. Miners aren’t stupid. They know the are undermining themselves in the long run by mining empty blocks. There is some multiple of mining revenues for which certain miners would accept to make an empty block. But it’s probably much higher than 1.
This criticism in part has been addressed imo. https://jimmysong.medium.com/debunking-the-empty-block-attack-10513858b3f8
I'm amused by your first paragraph as that's how I've described myself in the past.
"I basically turned up the knob on 'libertarian' to all the way to 'anarchist'. Think of it like the '11' setting on Spinal Tap's amps."
And then the rest of it was rather disappointing. (Insofar as I really want Bitcoin to work out.) Fuck fiat currency.
Bravo bravo!
There are two good use-case scenarios for crypto (in general, not just BTC) and thus two market-cap / prices for it: The most maximalist is obviously broad adoption across OECD as the currency of reserve, but the second is the currency of exchange for gray/black markets of US/China/EU under a Sovietized world economy. That's not just vice goods, but general consumer needs (e.g. need a new tire? either procure a letter of need from local apparatchik or send Tony the Tire 20,000 sats). I estimate that's somewhere in the 2-20% of world economy range.
Can these gray markets be significantly discouraged by coordinating parties wielding vast mining and energy resources to 51 percent attack? I'm skeptical that attack would be sustainable for the malicious parties, or that a once-off attack would crater the price long term.
If I'm remembering correctly, 51 percent attack simply allows you to double spend from an account you own, not that it allows you to unlock tokens from addresses for which you do not have the keys for. Furthermore, such attacks have a limited time from when they start to end (based on the chance that the 49 percent of *selfish* will find a longer chain of legitimate blocks, thus negating the attackers chain as the consensus chain.). With those ideas in mind, it almost seems like a "wire clearance wait time" of a day or two for large-sum transfers (essentially "bank" to "bank") to be authenticated is sufficient to reduce the cost of the risk of attack to less than 1%. But I could be wrong there, if anyone know better...
The only disagreement I have is with the author’s guess that Bitcoin goes to zero. Company stock can go to zero because of bankruptcy and delisting. But Bitcoin isn’t a company with a balance sheet. It can’t go bankrupt anymore than a refrigerator can go bankrupt. As long as there is a single buyer for all sellers, the price will be a nonzero, positive number. My guess is that bitcoin goes to $0.01.
Thank you, Elon. Well said. Another method of conducting a 51% attack is to control the very few global companies that manufacture the Application-Specific Integrated Circuits used for Bitcoin mining. Global Governments have a well-established history of requiring manufacturers to implant code and hardware into circuit boards. With just a few years of preparation along with government bribery or threat of force sufficient to require quietly installing a small amount of code into each new bitcoin ASIC, Government would be able, after just a few years of modified ASIC production, to quietly, instantly and cheaply, switch on control of all Bitcoin transaction verifications. Your link to Joe Kelly's work is appreciated, "How To Kill Bitcoin (Part 3): No Can Defend", https://joekelly100.medium.com/ See also, https://medium.com/what-government-will-do-with-bitcoin/governments-can-and-will-attack-bitcoin-c8979c077577