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Long-term Bitcoin security (avoiding the death spiral)
41 sats \ 14 comments \ @mynym 15 Dec 2022 bitcoin
Hi, maybe this has been discussed umpteen times on here and if it has please point me there.
The one dark spot in my Bitcoin conviction is the possibility of the miners-no-longer-properly-incentivised-to-secure-the-network-death-spiral. You always hear the heavy-hitters like Saylor throwing out claims that Bitcoin will outlast humanity and whatnot, but I still see a lot some fudders respond with the death spiral claim and it raises my ears a bit.
I know that there are lots of companies creating ways to mine with stranded/wasted energy, but will that be enough to keep the network secure even if the massive farms start bailing out? Please, improve my understanding of the game theory and point me to resources that will prove all this moot and make me feel dumb for even bringing this up, I beg of you!
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40 sats \ 0 replies \ @NorthKoreanHostage 15 Dec 2022
Dude check out the mempool
https://Mempool.space
Miners get paid the transaction fees for the transactions they include in the block they find. This is already enough to secure the network.
And look at the difficulty adjustment. It's genius. It guarantees the most efficient miners will always be profitable, aside from everyone ensuring 10 minute average block times.
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10 sats \ 7 replies \ @jk_14 15 Dec 2022
Because you beg - I may improve your understanding of the game theory and point you to resources that will prove... well... you will see :)
"Milton Friedman originally proposed a fixed monetary rule, called Friedman's k-percent rule, where the money supply would be automatically increased by a fixed percentage per year. Friedman, for example, viewed a pure gold standard as impractical. (...) if the growth of population or increase in trade outpaces the money supply, there would be no way to counteract deflation and reduced liquidity (and any attendant recession) except for the mining of more gold" ( https://en.wikipedia.org/wiki/Monetarism )
halving means: mining of less gold = strongly reduced liquidity (strongly reduced number of transactions)
reduced mining + reduced transactions = network security in spiral of death
*** Q.E.D. *** (sorry)
P.S. for more check comment and links inside: #107021
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0 sats \ 6 replies \ @mynym OP 15 Dec 2022
lmao yes yes i've seen you propose this on other posts. i'm certainly not saying i completely disagree, as i'm simply not knowledgeable enough to take a side on the issue. but this is a very uncommon take in the space, pretty much everyone with a large platform evangelizes the hard supply cap. why do you think this is? and if i'm missing someone who doesn't, please point me to them
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0 sats \ 5 replies \ @jk_14 15 Dec 2022
https://en.wikipedia.org/wiki/Papal_infallibility
But Satoshi was normal guy without infallibility atribute. So there is some chance he didn't predict EVERYTHING, perfectly, in every detail, and years ahead.
Simple, obvious economic rule tells this: the better given money is, the more is such money hoarded by people. That's vicious circle for Bitcoin security long term - and cult of Satoshi's infallibility prevent to name it properly.
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0 sats \ 4 replies \ @mynym OP 15 Dec 2022
I'm not sure that this is convincing to me. Of course Satoshi wasn't infallible, otherwise he/she/they would have designed the perfect product and no BIPs would ever be needed. But Satoshi clearly got enough right we are seeing the emergence of a completely unique asset with brilliant properties that are transforming how people on a mass scale are looking at the concept of money.
And like I said, many people believe that Bitcoin's hard supply cap is instrumental to its utility as a sounds money. Can you strongman why this is for me? Why are so many brilliant economists and technologists pointing to this as one of the greatest strengths of Bitcoin, and not instead advertising the idea of tail emission? As soon as tail emission is introduced, no longer can Bitcoin be said to be the only absolutely scarce asset. Why would node runners ever agree to a change that would potentially devalue their holdings? And even if it did get through, how do we decide what is the right amount of tail emission? Who gets to decide what the tail emission is? Why wouldn't people will argue again, "uh oh, Bitcoin reward is getting too scarce again, bump up the tail emission" ad infinitum until BTC is another fiat currency?
The hard cap is what makes people who hold it have incredibly long time preference. People will only hoard as much of the strong money money as they can afford to, if the hoarding gets in the way of meeting their basic needs, they will trade it. So to me the scarceness is a mechanism that makes people think long and hard on what to trade their hard earned energy for, rather than piss it away like the fiat system encourages us to do. I'm just not seeing the argument for tail emission.
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0 sats \ 3 replies \ @mynym OP 15 Dec 2022
I guess maybe the arguments that other people are making on this post as to why network security is not at risk are convincing me a little more than your arguments about tail emission. :P
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0 sats \ 2 replies \ @jk_14 15 Dec 2022
other people are making on this post as to why network security is not at risk are convincing me a little more than your arguments
but all that above is strictly about the network security! i.e. how to avoid spiral of death in network security (and tail emission is only one of possible counter-measures)
how do we decide what is the right amount of tail emission
The moment we will see the first "destructive halving" - i.e. network difficulty was not able to recover during long four years after given halving - is right moment to switch-off halvings completely, and that's best possible method to set level of annual inflation rate. Best - because empirically done, by saturation of Bitcoin system at global scale.
Things destructive to the Bitcoin should be eliminated (no matter from where they are). So destructive halvings as well. I predict we will see it probably in 10 years, just around 0.1% annual inflation rate, reached "naturally". ( #107033 )
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21 sats \ 1 reply \ @mynym OP 15 Dec 2022
switching off halvings doesn't seem to be an unreasonable method if it turns out that tail emission is an absolute must. after all this discussion, my prediction remains that it won't be. but whether it is or isn't, i look forward to an sharing an inevitable orange future with my you friend
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20 sats \ 0 replies \ @jk_14 15 Dec 2022
my point is: let's be mentally ready if it turns out that tail emission is an absolute must that should be enough to mitigate this risk
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10 sats \ 0 replies \ @brugeman 15 Dec 2022
If mining gets unprofitable, some miners leave, difficulty lowers, and miners who stayed are profitable again. The spiral could in theory be launched if bitcoin price consistently dropped after a lot of miners exit, but that hasn't been the case empirically (see Chinese miner exodus). There are enough big holders that understand how difficulty adjustment works, so I don't think such a spiral could ever happen.
And for 51% attack - suppose someone was buying all the ASICs sold by unprofitable miners for a long period of time (or just built his own ASICs plant and built lots of them). So now they are ready to start 51% attack on a low difficulty network. What happens?
A) difficulty jumps 2x, they are paying for electricity a lot and don't get compensated from the fees, so they've burned huge cash to buy ASICs and now burning cash on electricity.
B) the only thing they could really do with their attack is censor transactions (because double-spending their own funds at such a scale as to make the attack profitable is very hard to imagine).
So they're censoring some txs and thus not getting compensated for them and thus are burning even more cash. Meanwhile, the other 49% are not censoring and are taking those extra fees left on the table, and thus are more likely to survive and grow. The more attackers censor, the more pressure they get from honest miners.
This is from Erik Voskuil's book 'Cryptoeconomics', free version here: https://github.com/libbitcoin/libbitcoin-system/wiki/Cryptoeconomics
I can't say I agree with everything in the book, but this part seems very reasonable.
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10 sats \ 3 replies \ @02c142fbe9 15 Dec 2022
This type of fud is common during bull markets.
Mining can get so easy that it can be done by hand with pencil and paper. But for that to happen we need this "death spiral". In other words if miners die it is cause for celebration, because then more among us can mine.
Pray every day for more miners to go bankrupt. Only then can I mine using the slowest cheapest computer available
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0 sats \ 2 replies \ @mynym OP 15 Dec 2022
but this is the very thing im worried about. if it gets this easy, the network can easily be 51% attacked. don't we want the difficulty stay as hard as possible and for mining to be as competitive as possible because that's where the network security comes from?
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10 sats \ 1 reply \ @02c142fbe9 15 Dec 2022
Network security comes from many things. e.g. full node operators are more powerful than miners in order to enforce network security. Full nodes are very cheap to operate. I run one on my Raspberry Pi at home. It costs me around ~1-2 USD per month in electricity.
Miners just make it hard to edit an old transaction. To edit an old transaction a dishonest miner has to re-narrate the history of the transactions, for the last ~30-60 minutes. But that means the dishonest miner has to recreate the previous 3 to 6 blocks.
If it ever becomes profitable to mine using pencil and paper, then only pencil and paper miners will have the ability to generate 3 to 6 blocks in say 30 minutes. But since many people will be using pencil and paper it is unlikely one of them will be able to renarrate the history of the chain for the last 30 minutes. It is likely someone else will have taken more aderal to do it faster than you.
You might ask what about the abacus user, isn't that person faster than a pencil paper miner. Sure, but we already established it is so easy to mine, that there are no abacus users left, only pencil paper miners are left. As soon as abacus users enter the mining business the difficulty changes, and pencil and paper miners can no longer find any blocks.
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0 sats \ 0 replies \ @mynym OP 15 Dec 2022
yes, i run my node on umbrel :) i've been meaning to read Jonathan Bier's "The Blocksize War", because although I've heard people say miners merely serve nodes, i haven't quite grokked it for myself why that is. this does help clarify though so thank you
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