The Game Theory of a Strategic Bitcoin Reserve \ stacker news ~bitcoin

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The Game Theory of a Strategic Bitcoin Reserve bitcoinmagazine.com/technical/the-game-theory-of-a-strategic-bitcoin-reserve-

1590 sats \ 10k boost \ 27 comments \ @k00b 28 Jan bitcoin

This is a thought-provoking analysis of what can go wrong when bitcoin's value is guaranteed by state power. Most bitcoiners don't appreciate how tenuous some of the game theory is, especially if the players are far more motivated by profit than freedom, and a nation more wealthy than the entire network several times over gets involved. In this worst case, USG bitcoin will fork off of whatever most of us will consider the true bitcoin, but how many bitcoiners do you know that will follow the less valuable coin?

As a rough estimate, I'd say any bitcoiner that isn't running a node, and KYCing gleefully to avoid doing so (probably 80% of bitcoiners that identify as such, attending all the fuck-state-money parties but really just want an Audi, let alone all the normal people that are merely bag holders), are just future USG bitcoiners. It's something to think about at the very least.

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417 sats \ 3 replies \ @SimpleStacker 28 Jan

I don't really see it. There's already a USG-sanctioned "chain" and that's the traditional financial system. Why would a USG controlled fork of Bitcoin fare better than fiat, with all its current advantages in ease-of-use?

I'm not saying some people won't stay with the USG fork. And I'm not saying the fork will die in one night. But in the long run, I don't really see what a USG-controlled fork offers as a value proposition and I'm not sure it'd be sustainable.

Long story short, Bitcoin is a dumb way to do things unless you care about decentralization. If it becomes centralized, then what's even the point.

75 sats \ 2 replies \ @k00b OP 28 Jan

I agree. I think the author would agree with you too. It's always tricky aligning time when discussing things.

50 sats \ 1 reply \ @SimpleStacker 28 Jan

Yeah, the timing of when things happen is always tricky. Something can be unsustainable, but still persist for a long time, especially if a lot of investment and infra was put into it already.

That being said, if USG made a fork, I think I'd just treat it as another fiat. I'd still continue to invest in the "true chain", but I'd happily use my "USG-coins" for purchases or whatever as long as the network persists.

The sad thing is that the CEX's will probably call USG-coin "Bitcoin", and those of us holding onto the "true chain" will need to adopt some other name, for the time-being.

30 sats \ 0 replies \ @BlokchainB 28 Jan

Yeah, the timing of when things happen is always tricky. Something can be unsustainable, but still persist for a long time, especially if a lot of investment and infra was put into it already.

Sounds like eth

117 sats \ 0 replies \ @028559d218 28 Jan

"As a rough estimate, I'd say any bitcoiner that isn't running a node, and KYCing gleefully to avoid doing so (probably 80% of bitcoiners that identify as such, attending all the fuck-state-money parties but really just want an Audi, let alone all the normal people that are merely bag holders)"

Bitcoiners who don't run their own node, who don't hold their own keys... aren't really Bitcoiners. They don't have a say in this.

67 sats \ 7 replies \ @Undisciplined 28 Jan

Wouldn't this only matter if the USG begins acting as an economic node?

If they're just holding a ton of bitcoin, that doesn't really do anything, if I'm understanding what @Scoresby's written on the topic.

33 sats \ 6 replies \ @k00b OP 28 Jan

If they turn it into a CBDCish thing and all US financial transactions are flowing through it, that's pretty economic.

25 sats \ 0 replies \ @Undisciplined 28 Jan

Yep, that would do it. I don't think we're close to that, though. Don't underestimate how far behind they are.

41 sats \ 4 replies \ @k00b OP 28 Jan

Also, what scoresby wrote only applies under normal bitcoin game theory. This is considering, explicitly, what happens when bitcoin's game theory is broken (selfish/monopoly mining, 51% attack).

17 sats \ 3 replies \ @Undisciplined 28 Jan

I think I get that. I'm just pushing back on the idea that a SBR will have much of an effect, in and of itself.

1372 sats \ 0 replies \ @Scoresby 28 Jan

Bitcoin's game theory accounts for this.

SBR or no, the USG could simply start subsidizing mining if they wanted to gain control of hashrate.

Imagine if there was a pool secretly subsidized by the USG that gave better payouts than other pools.

Seems likely that it could attract more hash than others because it didn't have to compete based on real-world profits. USG can print money and give it to their pool or can threaten violence to its citizens to demand their money (tax them) and subsidize the pool that way. Both things that non government pools can't do.

Govt subsidy of mining is a known threat to miner decentralization.

So, it seems to me that the threat described in the article is not new, just a different mechanism for achieving it.

The defense in both cases is which coin users want.

If there is a USG fork of Bitcoin and most users desire the USG coin over bitcoin, it's hard to see how miners stick with the bitcoin network.

However, if the USG fork does not offer the same value prop (censorship resistant, fixed supply money) it's hard to imagine no one wanting real bitcoin anymore.

If the USG coin isn't a fork but rather just a sustained 51% attack, it seems like the censorship argument comes back into play (ie. with enough censorship the fees for censored transactions rise high enough that hash rate leaves USG pool).

It does feel like it ultimately comes down to a race between how fast the USD devalues through money printing to subsidize mining and how fast the value of censorship resistant bitcoin increases.

39 sats \ 1 reply \ @k00b OP 28 Jan

Fair. I think this is just about considering failure modes more than it's identifying what's probable. Then again, if SBR succeeds in making the USG even partially solvent, you know they are going to fuck it up spectacularly.

50 sats \ 0 replies \ @Undisciplined 28 Jan

I don't know how it will play out, I need to give it more thought, but I'm highly confident that Bitcoin is going to be the undoing of the USG. It likely will be very spectacular.

50 sats \ 1 reply \ @frostdragon 28 Jan

Yep, this is a solid take.

I frequently wonder if the USG is just... unintentionally kneecapping themselves here? Or if there's something way worse going on.

Even without a hard fork, the idea of nations or even corporations accumulating bitcoin faster than the rest of us to the point that they own 90-95+% of all the bitcoins over time is a scary thought. In some ways that sounds worse than our current setup.

21 sats \ 0 replies \ @k00b OP 28 Jan

I think some people advocating for it are naive. Others I suspect view it as a sort of negotiation tactic - an ask so big it'll fail yet shifts the overton window.

17 sats \ 1 reply \ @Aardvark 28 Jan

The government is basically a glacier that slowly erodes everything in it's path. Even if it's not immediate, I don't see how the government doesn't eventually ruin bitcoin if it can.

Bitcoin just gives people too much freedom, and that's absolutely not something the government likes.

0 sats \ 0 replies \ @028559d218 28 Jan

That's why attempts to get government involved... are not necessarily a good thing. If government wants to buy Bitcoin of their own volition then great. But it's not a thing that should be pushed.

29 sats \ 2 replies \ @Bell_curve 28 Jan

An Audi? That’s a low bar lol

9 sats \ 1 reply \ @k00b OP 28 Jan

I'm a poor. I don't know what shitcoiners want.

9 sats \ 0 replies \ @Bell_curve 28 Jan

I’m not one to judge

I drive 2005 Infiniti

9 sats \ 1 reply \ @Satosora 28 Jan

I never thought about bitcoin forking. Wouldnt that defeat the purpose? I can see the bitcoin government for going down instantly. I thought they would want to keep it on the main blockchain.

0 sats \ 0 replies \ @Bell_curve 28 Jan

A better strategy is mining or subsidizing miners

0 sats \ 0 replies \ @Scoresby 28 Jan

If bitcoin requires players who are motivated by idealism, it is probably going to fail to be what we want.

My hope is that it is re-alligning enough incentives so that it is profitable to use and secure censorship resistant, fixed supply money.

I don't think that adoption of an SBR or not by the USG changes the current incentives very much.

0 sats \ 0 replies \ @kepford 28 Jan

It's something to think about at the very least.

Indeed

0 sats \ 2 replies \ @DarthCoin 28 Jan

If you want BSR, this is what you will get...

0 sats \ 1 reply \ @028559d218 28 Jan

Then how did we get here? To the point... where one is even being proposed? Provided it stays 'Bitcoin-only' (and it's a grab bag of lots of cryptos xrp, ethereum, doge, trump coin etc) why do Bitcoiners want it at all?

2 sats \ 0 replies \ @DarthCoin 28 Jan

All those cheering up for a BSR will be the first in line using CBDCs...