I was listening to the first part of this Nic Carter podcast where Nic talked for a bit about the btc security budget in the coming years. This topic has been around and around, but Nic made a prediction about how it will ultimately shake out, which I hadn't heard before.
TLDR: the security budget will be inadequate to secure the chain. As a result, the biggest bitcoin-holding institutions will basically decide on chain state by a combination of coordination and un-economic mining. This will technically still be mining, but not in the way that people currently think about it. It will take place under different economic incentives than the ones currently presenting.
Nic gets endless shit among maxis, so maybe I'll emphasize that this isn't the outcome that he wants or that he thinks is the most desirable, but is rather what he thinks will happen given the economic forces in play, the trajectory of the fee market as observed over the last 14 years, and the game theory that ensues.
If this sounds alarming, you may consider tail emission as perhaps the lesser of these evils. Also worth noting that the mining economics around the falling block subsidy is a topic Udi frequently raises. The fact that he does so in the face of so much abuse is one reason among many why he's an asset to the community.
IMO the security budget is important enough that it's never not worth discussing. Transaction fee forecasting is as much haruspicy as price analysis though. His prediction is premised on an inadequate security budget and we simply don't know what the future security budget will be ... even Nic, who I will momentarily grant divine chart reading abilities, cannot predict demand for block space. I find security budget optimism as void of content as security budget pessimism.
My problem with Udi is I can't tell what he actually believes and what's schmäh.
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Dude, you just taught me two words in one post. Slow down!
Yup, agreed wrt the budget. And I think Nic would admit that he doesn't know, and that nobody knows. He (and many) just want to fucking be able to discuss it without being accused of heresy and thoughtcrime.
And same wrt Udi. He's a rabble-rouser. I find him frequently annoying. But also necessary.
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I think Nic would admit that he doesn't know, and that nobody knows.
He would but he's beginning to play the same reverse countershading 😉 game that Udi is.
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I think that's a defense mechanism. It's probably troll or die.
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That's a great read. I never thought of it that way.
I'd prefer to die - whatever that means in this context.
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Probably means just dropping out, either leaving the space or never talking about it. I'd for sure do the latter; maybe dissonance would bring me to the former, too.
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I'd say Udi does doxic schmäh haruspicy.
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I'd say that's a full accounting.
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I would suggest you watch this video on why thinking in terms of a security budget is perhaps wrong.
So far, I have found him to make the most intelligible points about bitcoin issues. He just started his channel so there is not much there, but the value is high.
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That was really good, I'll keep an eye on him, thanks for the link!
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ohhh,,, was this whole thread an ad spot for this channel? if so, well played.
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Although note (didn't think to say this last night) that the video is no way contradictory to the idea of a security budget, or the consequences that fall out from reduced block reward. It is, instead, a graphical representation of how to visualize the dynamics of it -- in this case, it would move one of the curves to the right, as he describes; less existing mining capacity becomes profitable, and the area that can be mustered for an attack (those rectangles he draws) gets bigger.
Nothing really new there, unless I missed something. Just a formalization of game theory dynamics, which has been discussed many times by many people. Still, a nice visualization, and I always get excited when smart and thoughtful people explain things precisely, vs the usual suspects.
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So when the reward is low and there are a tonne of unused ASICS and the cost of attack is low enough a 50% attack might be successful. That will depend of the slope of the curve though.
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Somewhat disagree. I can't really see a future where a) Institutions want to use Bitcoin and b) Demand for blockspace is so low that tx fees don't cover even our current miner rewards (which would need to be ~$100 / tx to account for the missing block subsidy, a pittance for large players).
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At the extremes, this topic is pretty easy to reason about.
  • Extreme 1: btc is super valuable and actively used; demand for block-space is high, tx-based block reward also high. No problem.
  • Extreme 2: nobody gives a shit about btc -- it's worth very little, demand for block space is low. Nobody cares enough to do anything to save it.
The interesting territory, with a wide space of possible outcomes, is in the middle. There are so many variables in play that it would take a book to explore them. I certainly have no confidence in anybody who claims to be sure about what will happen or what should happen.
The only thing I am sure about is that it would be better for the issue to be absolutely beaten to death by as many smart people as possible, so that if we get to a point where btc becomes vulnerable to state attack, there's an abundance of mature ideas to consider whose pros and cons have been exhaustively described.
This is how threat modeling works in every other domain, yet somehow the dominant btc cultural practice seems to be faith-based. And even then, it would be fine, since the people opining so loudly are useless and contribute nothing, but they do create a social environment that makes it hard for other people who could contribute.
Ironically, a lot of the loudest bitcoiners are running the same thoughtcrime playbook that the woke people do. Same attitude, same energy, just pointed the other way.
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Oh, I agree with everything you said regarding faith-based culture and all the rest of it. Perhaps I should have stated that upfront.
My comment was geared towards Nic's particular conclusion here, which as far as I can tell seems to be an intersection of two mutually exclusive outcomes. I don't begrudge him or anyone else for exploring these threats. System security and threat modelling benefits more from the realists and pessimists than the eternal optimists.
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I don't know man I think this security budget debate is a lot of fear-mongering, or maybe it's just me just sensitive about anything that messes with the hard cap. Surely there's a lot more that can be done before entertaining things like those extremes?
I want Bitcoin to win, and to do that ideas need to proliferate, and should be discussed but we don't know what the future holds. If we do get more on-chain volume that make side chains more popular, merged mine income is also part of the deal, maybe spider chain validator income, maybe miners are routing on LN too
As long as transactions are moving on-chain or on L2s theres fees to be earned, and I think the main way to do that is to either bring the ability for exchanges to run on-chain or make it way more attractive to not use exchanges for internal settlement where they are pocketing the fees
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Nobody (not me, and, so far as I know, nobody else) is arguing that anything be done about this right now. Like you say, these are extreme measures! And we're not having a problem right now. And who knows what the future holds? So many things could happen.
The issue is whether the community becomes so dominated by faith-based reasoning that people don't do the work, they don't think adversarially, they don't threat model, they don't prepare. Basically, kicking the can down the road, covering their eyes and ears and pretending that everything will be fine because it would be really inconvenient if everything weren't fine.
About as fiat-mindset as it gets.
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I am with you there, whats the point of this whole thing if it can be taken down by something? Then we are larping about this network being the most robust, immutable, censorship-resistant money, it needs to be attacked, be that through computation, policy, alternative networks, legal means, and more.
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Spiderchain is a remora chain thet would increase miner centralization(if the node is expensive/hard to run) while siphoning off txn fees from mainchain. Unfortunately sidechain txn fees paid to L2 validators etc does not secure Bitcoin from the cost to attack. Im not saying spiderchain etc are attacks on BTC but if they had some incredible fantastic magical features and took away traffic from L1 it would be bad. Drivechain blind merge mining is a potential solution to this. Regular merge mining is good too but BMM allows for new mining pools to spin up and compete far easier than if they had to tool for an expensive (potentially permissioned) L2 validator thing
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You bring up two shitcoiners as the basis for a discussion? bleh.
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I'll bring up anyone who's smart and makes good points.
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thanks for doing so!
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appeals to authority. you should bring up good points without needing to sycophantically name drop self-serving influencers.
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He didn't appeal to any authority, he just said he thinks Nic made good points (which he laid out in the OP).
You literally started this thread with an ad hominem.
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nah, OP definitely playing apologetics as a ruse to argue for tail emissions. What does Udi or Nic having argued anything matter? Name-dropping people, THEM especially, sure, comes off poorly to me.
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He was just bringing them up because those are the people he heard the ideas from. You're dismissing the ideas out of hand because you don't like those people.
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I dismiss tail emissions for different reasons than I dismiss shitcoin shills. Don't get it twisted. I find regurgitating influencer arguments boring. Why even bring those people up? If OP agrees with the argument he could make it himself.
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Thank you for understanding what "citing your sources" means, and why it's useful.
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We cite sources for facts, not for opinions. This is just name-dropping. What is YOUR opinion? Do you agree with Nick's argument, or are you presenting it for attention?
people who argue about the security budget are like people who say a boat would sink if it was made out of metal. they are so fucking stupid it makes my physically ill. they lack nuance, critical thinking and just enjoy sucking on their own assholes. the security budget is addressed in the whitepaper and its operating exactly as it should 15 years later. there are a whole host of things i worry about, the security budget is not one of them.
either that or its bad faith, shitcoinery fud, which is what this almost certinley is.
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Why not make an argument rather than just calling people stupid?
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Originally, the topic was raised by Hasu who also pissed off by Bitcoin community. But likely he couldn't raise any money for his ideas. Nic also hopped on this topic and pissed off as well.
The truth is that both started ringing alarming bells exactly when Lightning Network offloaded small transactions from onchain activity and changed previous Bitcoin fees dynamics. Interestingly one of FED banks did quantitative research on this topic.
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Interesting comment.
I’m not going to slag off anyone for raising it as a potential issue, but it deserves a nuanced take instead of scaremongering. Nic and Udi - I trust neither of them and doubt they are acting in good faith.
The simple answer is we don’t know. Bob Burnett on Natalie Brunell had some interesting thoughts on the scarcity of block space the other week though. Tldr - it’s wholly scarce. We haven’t even begun to see the consequences of this yet - as you say lightning (and Segwit before?) has had a big dampening effect.
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Both Nic and Udi have vague understanding of Lightning and don't follow it.
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I think this is quite particular to Bitcoin also - a signal of a very low time preference ecosystem. Forgive, maybe, but don’t forget
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Man this is a bullshit take. I cannot emphasize enough that simply giving your opinion on something like " as observed over the last 14 years " doesn't make it true. this is fiat brain 100%, you can't see past your feelings, and you feel like the price won't move dramatically. This whole perspective is a pied piper method of sleepwalking into despair, misery loves company.
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It may be helpful to know, as you presumably encounter broader human society from time to time, that what you call "fiat brain" is more commonly described as "learning from data." I mention this in case you see it written down somewhere, and are confused.
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Anyone who thinks hard forking Bitcoin to add inflation and break the 21M cap has a chance of reaching consensus is delusional.
This is just a social attack on the network as far as I'm concerned. I'll certainly be dumping the inflation-coins to get more bitcoins.
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You could also ignore Nic and Udi, as they are clowns and bitcoin doesn't have a "security budget."
Bitcoin is a decentralized project and "budget" implies centralization.
The only problem we have is people trying to predict the future using today's data.
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The same hashrate we have now can be achieved with lower costs. And the network of miners will find cheaper hashrates when the need arises.
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bad faith actor
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Dont invest more than you can afford to lose. Real wealth is in property and tools, and skill anyway. Bitcoin is just a means to an end or a tool in itself. So if you feel like the security budget is a concern to you just sell a bit.
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Mining is where bitcoin interfaces with reality and the economics are largely energy arbitrage. Hash price vs hash cost.
For bitcoin to have the benefits it currently does for energy grids and energy systems there is almost an equilibrium of price and margin. Ie if price were to 2X+ today and it become profitable for people to mine with S9s in their home at 10 cent power that won’t be good for energy grids and the demand response narrative (although difficulty adjustment would eventually return market to equilibrium).
When the halving happens it leaves room for Bitcoin price to double and hash price economics and energy margins to remain relatively the same.
NGU solves subsidy goes down. Everything mining incentive wise is in the hashprice vs hashcost and naturally it’s better for btc price to double around halving events while minimizing extreme upside volatility in hashprice so as to not negatively unbalance grid incentives for miners.
Also even if institutional / public miners capture more and more hashrate bitcoin mining will always be global and Russian / nation state mining will get transactions added to the ledger.
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Bitcoin price WILL NOT go x2 every halving. Do the math: 2^30 of current purchasing power of 26k usd
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stackers have outlawed this. turn on wild west mode in your /settings to see outlawed content.