Comment by tannerbrockwell | Hacker News Reader

Comment by tannerbrockwell | Hacker News Reader

tannerbrockwell

China will nationalize the domestic miners and treat Bitcoin as a commodity asset that the state controls.

I believe this will immediately cause a constriction in supply as those coins will not be sold at least initially on the open market.

Look for this messaging to coincide with the pronouncements around the new five-year plan(FYP)[1]. As the first major section of the 13th FYP, innovation is emphasized as a cornerstone of China’s development strategy.[2] Bitcoin is a technology and has already come along way from the Satoshi whitepaper. State-Owned Enterprises will be emphasized as they strengthen SOEs as national champions at home and abroad and protect their interests in this emerging blockchain space. The goal of the One Belt, One Road (OBOR) initiative is to facilitate access to natural resources and encourage economic development in China’s poorer western provinces.

While such an initiative can continue without bitcoin, it is interesting to think of how OBOR would be strengthened on the world stage with an instantly settled mechanism such as bitcoin behind its infrastructure.

[1] https://en.wikipedia.org/wiki/19th_National_Congress_of_the_...

[2] https://www.uscc.gov/sites/default/files/Research/The%2013th...

Interesting theory. I don't like the idea of 2/3rds of the hashpower to be owned by one player. 50% hash power means not only the ability to double spend, but also to censor txs. If someone else mines a block they don't like they can just ignore that block and eventually get the longer chain.

> 50% hash power means not only the ability to double spend, but also to censor txs. If someone else mines a block they don't like they can just ignore that block and eventually get the longer chain.

This is not true if you just have 50%. You'd have to consistently win the next block for double spending to be reliable, and users would just be wary to wait for more confirmations before accepting payment.

Besides, if China takes over all bitcoin exchanges and mining in China, that changes the "bad news" to huge positive news and basically a Bitcoin endorsement by a major world power. Once that happens the value of bitcoin would likely increase at a rate such that maintaining even a 50% hold on hash power would be difficult for a single player.

Why a disruptive nationalisation should be better than just buing the bitcoins on the open market? Or investing into the new rigs itself?

>China will nationalize the domestic miners and treat Bitcoin as a commodity asset that the state controls

Sounds like a good reason for a fork.

But if China has the majority of mining power, they can start mining your fork and do as they please with it.

which (at this point in time and in the foreseeable future) they definitely do.

Then you fork to proof of stake or another proof that mining-power alone cannot control.

I agree that centralization is antithetical to Bitcoin, game theory says that it is to China's advantage to mine for profit. I believe they will want to mine and hodl, vs sell immediately to cover costs. Think of it as their strategic crypto reserve... how much is enough to float an e-yuan?

This would be a good test for the whole concept of decentralized cryptocurrency and Bitcoin design in particular.

Bitcoin could hard-fork to a memory-hard algorithm (like Lyra2RE), or even change to any hashing algorithm for which ASICs don't exist yet.

Even if they switched to Scrypt (from SHA256) for which dedicated hardware exist, it would cost them millions of dollars and require months of manufacturing re-organization to get to their share of hashrate.

Of course, the miners would still be able to mine the old fork and at that point it is more likely that an altcoin (like Ethereum, Litecoin or Vertcoin) would eat up Bitcoin's marketshare.

If China is able to do it, wouldn't Bitcoin lose all its value ?

No.

Miners can only double spend transactions if they have > 50 % of the hash rate.

The only purpose of miners is to add proof of work to in exchange for new coins that users value. If the proof of work is on a chain that contains valid transactions and conforms to consensus rules, it'll be valuable.

Bitcoin is not the only game in town, there would be a mad scramble to Ethereum et al.

I prefer a blockchain that is immutable, has controlled inflation.

Bitcoin users can always choose a different PoW algorithm if a threat actor coerces too high of a percentage of SHA256 mining equipment

But that would just create an invalid side chain and result in all the miners' hash power being wasted.

https://bitcoin.stackexchange.com/questions/55316/what-happe...

Your link doesn't address the question. It's about an invalid transaction within the block, not the refusal to place a particular transaction into one. With over 50% of mining power you can definitely do this.

https://en.bitcoin.it/wiki/Invalid_block

> Clients will ignore invalid blocks when determining which chain is difficultywise-longest. Mining clients will not build on top of invalid blocks. Clients will not propagate invalid blocks (or invalid transactions).

Proof of work does not mean full nodes trust miners blindly. It only means they prefer the longest chain that follows the rules.

Like I said, yes, with 50% mining power you can double-spend all you want. But other nodes know what you are doing, expel you from the network, and discard your work, just as if you had 25% of hash power or 0.1%. The Bitcoin blockchain is not a democratic system where the majority always wins.

A double spend isn't an invalid block. This renders the rest of your argument invalid.

> For each input, if the referenced output has already been spent by a transaction in the main branch, reject.

https://en.bitcoin.it/wiki/Protocol_rules

That isn't a double spend!

If you control >50% of the hash power you can also censor tx by ignoring any block that contains them.

Same story if you control 1% of hash power. Anyone can ignore any block, but you can't completely block a transaction unless you prevent it from being included in ANY block. Even if 90% of the hash power is blocking your transactions it just means it takes 10x longer for your transaction to go through.

This is not ignoring transactions, this is ignoring any block that contains those transactions. You make your own pure chain that's longer, and everyone else uses it too because it's longer. If someone else mines a block then such a transaction can temporarily get a confirmation or two, but the 90% steamroller will come by and quickly reduce it back to 0 confirmations on the longest chain.

If someone with 1% hash power ignores certain blocks, they make a chain that's totally irrelevant in their own corner. If someone with 60% hash power does it, they win.

China can exert a lot of control on it's business regarding bitcoin but they wouldnt be able to control or censor the network so this wouldnt kill bitcoin.

Interesting theory but how can China control Bitcoin if there's nothing stopping people in other countries from mining it?

The majority of the hash power is in China. If China can seize the miners all at once, they'll have control over the blockchain. At that point, other countries would be foolish to compete, and may focus on alternate alt currencies.

But they still can't change the blockchain. And there would still be miners outside of China.

If you control 50 + epsilon percent of the hash power you can censor blocks at will. You can ignore every block that anyone else makes and still have the longest chain.

Except for the fact that they can still get confirmation from the other 50 - epsilon percent.

Having 51% of hash power doesn't mean you mine 100% of blocks. That's not how Bitcoin works. With 51% you will probably mine around 51%.

You're forgetting that every miner chooses how they mine. Someone with 51% hash power can decide to always mine on top of their previous block, ignoring what everyone else does. And because the 51% chain is longer, the 49% chain get discarded by any miner following default bitcoin rules. So the effective block rate gets slowed down, and the person with 51% of the power has control of 100% of the canonical blocks.

This would make the 51% miners' chain grow at half the speed as the 49% miners' chain, because the 49% are building on both their blocks and the other miners' blocks, whereas the 51% are only building on their blocks.

This, of course, is assuming that the 51% doesn't create blocks considered invalid on the other chain. This would cause a hard fork and it's exactly what is happening now with Bitcoin Cash, except with a much smaller fraction than 51%.

So no, what you are describing cannot happen with the default rules.

> the 49% are building on both their blocks and the other miners' blocks, whereas the 51% are only building on their blocks.

They are building on some of their blocks and some of the other miner's blocks. This doesn't make them faster.

Whenever a 49%er mines a block, there is a temporary fork. The 49% and the 51% start mining on two completely separate branches, both of which progress at half speed. Eventually the 51% branch is longer, and the 49% discard their previous work and switch to it. So the 49% were using their blocks, and now they are using the 51% blocks, but never both at the same time.

The canonical blockchain does not progress at full speed. Half the blocks that get mined eventually become orphans.

It would be impossible for the 49% to build on everyone's blocks, because the 51%-created blocks are always mutually incompatible preexisting 49%-created blocks.

> This, of course, is assuming that the 51% doesn't create blocks considered invalid on the other chain.

Yes, of course.

If this were so then Bitcoin Cash would have been dead from the start. They hard forked with much less than 49% of hashpower.

There are really two separate scenarios we're talking about here. Miner activated hard forks, which are a real thing that have happened (though not exactly like you describe), and a hypothetical situation where a group of miners agree to create an exclusive chain that is also backwards compatible. I'm no expert but I don't think that would have the intended result.

If bitcoin cash was making blocks that were exactly compatible with bitcoin blocks, in both directions, then yes it would be dead immediately.

That's the difference between a hard fork and a 51% attack. In a 51% attack you keep making normal bitcoin blocks, just the ones you want.

You can effectively freeze anyone's funds by refusing any transactions that originate from their address

Nothing "stopping" it, except the tens (hundreds?) of millions of dollars worth of hardware investment it would take before your new hashrate becomes at all competitive. It's a bit like saying there's nothing stopping you from launching your own soft drink and beating out Coca Cola (you could try, but you probably won't win).

China has a huge and possibly insurmountable lead in not just existing built hardware, but a head start in the know-how of rolling out new ASIC designs to production, (relatively) cheap factories to mass-produce hardware, access to cheap/state-subsidized electricity, and (in this hypothetical scenario of nationalization) the support of the central government of one of the largest/most-powerful nations on Earth.

Miners have very little power over Bitcoin as a whole. They are constrained both by Bitcoin's rules and economics. If they mine invalid blocks or optimize for something other than fees, the operation will turn unprofitable. If they just stop mining, the mining difficulty will adjust and suddenly ASICs will not be needed to turn a profit. There is a delicate balance in Bitcoin, currently tipped slightly in their favor, that they probably don't want to disrupt.

> Miners have very little power over Bitcoin as a whole.

Chinese miners currently control significantly more than 50% of Bitcoin mining.

If the government takes control of the the miners, they take control of the bitcoin network. There's plenty of mischief they could make with that if they were so inclined.

Your reply does not refute the point you quoted in any way, nor does it address the other points I made. You are merely restating what the other person said in an equally hand-wavy manner.

Miners obviously are okay taking a hit as there are plenty that are working on the less profitable BCH chain.

BCH is roughly on par with BTC in terms of mining profitability.

https://cash.coin.dance/blocks/profitability

China will nationalize the domestic creation of Bitcoin. This is their sphere of influence. Thus they will control the domestic production of bitcoins. This nationalization will kick off the next leg up of the exponential growth for bitcoin. Just as the US Marshals auctioning off the Silk Road coins established legality in the American market. China will want to control capital flight and will use bitcoin as the release valve for their outrageously overhigh investment in US Treasuries.

Bitcoins are not like some manufactured physical item where a group of people can collectively seize the means of production with force to control supply of said item. It would be kind of funny if the CCP views it that way but I doubt they do. They probably have more knowledge about how Bitcoin works than everybody on HN combined.

The miner's mining Rig's are plugged into the state controlled power grid. If China wants to control the means of production, they simply follow the power hogs, remember we're talking about operations that are industrial scale. The small players have 500+ mining rigs alone. The means of production will be seized. Existing coins are a toss-up. Although since the penalty could be a death sentence, I'm sure the business's that have these will comply with what ever orders follow.

You are still thinking about this in terms of a physical object. Miners don't "produce" anything except in the same sense that I "produce" the answer to a crossword puzzle. You can take away my pencil but it doesn't make the puzzle unsolvable.

Dude. The mining rigs are physical. All I said was that China will seize the 'means of production' so they control the manufacture domestically. It's a phrase that was used a lot to describe the basic tenets of different types of economy and harkens to a time when industrialization was a major focus of the first world and people trying to find their place in an industrial society. The "means of production" phrase has been distilled and entered the zeitgeist as a way to talk about communism.

Yep, thanks, I'm aware of the history of the term.

Think back to what I said about crossword puzzles. If China had a world-class crossword puzzle team, winning every competition, why on earth would they seize their own team's pencils? It wouldn't stop the competitions from happening, and it wouldn't stop other teams from winning them.

I'm not trying to be a pedantic prick on the internet, so please excuse me if I'm coming off that way, but I enjoy this topic a lot, probably too much.

Because it is the most efficient way to build a reserve of a limited commodity (bitcoin) that has a much longer exponential curve to expand along. Currently, the Chinese miners are operating as a business to squeeze a margin out of the discounted electricity available in China. It is in China's interests to treat this as a national resource wherein it is produced domestically. My thesis is NOT that they want to control Bitcoin, only the domestic production for their long term national interests. Remember mining will continue until approximately 2140, that is a significant horizon to look at.

Thanks for explaining! I finally understand what you were saying and it actually makes a lot of sense.

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