We could really do with a webpage with a list of crypto currencies, the hashing power currently behind them, and how much it would cost somebody to take over 50% of the network.
Or does that already exist?
Shooting from the hip:
They've go this 51% vulnerability that is well known and hypothetically cannot be truly closed. Instead, we rely on the idea that mounting such an attack would be "too expensive". But at the same time, the cost/benefit of mounting such an attack is fairly easy to estimate using public data - all you really need to know is the cost to get to 51% and stay there for a given amount of time, which you can infer by monitoring mining activity, and the current price of the currency you'd want to attack. And you have to assume that whenever the cost of mounting such an attack dips below the benefit, such a thing _will_ happen.
So then, I think that implies that the only other feature you'd need to throw into the mix to ensure a cryptocurrency is ultimately doomed is to make the rate at which new coin can be mined asymptotically approach zero. Such a feature would mean that, in the long term, miners' revenue would ultimately be dominated by transaction fees, which, this being a supremely commodity service, market forces will presumably tend to keep relatively low. That would, in turn, limit the number of miners the economy can support, which would serve to limit the cost of mounting a 51% attack.
Meanwhile, what with a money supply that can't grow being inherently deflationary, the benefit of mounting such an attack would be constantly growing, for as long as said cryptocurrency remains in use.
Or, to turn this around, if X is the amount of money needed to sustain a 51% attack for 1 block, then you have to wait for 1 confirmation for every X amount of coins received.
Luckily, there are deeper incentives protecting large asic mined chains such as bitcoin.
That's actually, if anything, underestimating the likelihood of a 51% attack. It seems that the more likely path to that situation is collusion between segments of the existing mining community. For such a cartel, the "cost" is zero, it's just a matter of trust.
One example of this sort of behavior is in mining. We tend to think of miners as being selfish to a fault, and to some degree, that's true. But sometimes miners have the opportunity to mine empty blocks (a form of attack), and refrain from doing so, because it would harm the ecosystem as a whole and jeopardize their long-term profitability.
And then if that's true, one might dream of a power plant arms race, where two competing nations build additional power plants as fast as possible to prevent the other from gaining enough electrical capacity to attack the network...
Oh...
I'm not saying it's perfect -- there are some downsides like needing a cap on fork distance in order to prevent stake bleeding attacks [1] -- but it's certainly viable.
Why would you think an enormous amount of hashing power helps? Even with Bitcoin, the actual marginal cost of a 51% attack is quite low. The difficulty is the capital expense of actually connecting to a couple GW of power and finding enough rentable ASICs.
I think this is fundamental. In a proof-of-work scheme, if the mining rewards in whatever time frame is considered a full confirmation are less than the amount of gain available using a 51% attack, then a 51% attack is economical.
ASIC mining during boom time helps mitigate the issue a bit, since the ASICs are worth more if the currency isn’t devalued by 51% attacks, but even Bitcoin will be vulnerable of older, less efficient ASICs start flooding the market, which seems inevitable if the price of BTC stagnates enough.
- The exchange/betting website not catching onto your scheme
- The volume of the coin being enough to mass sell it and not majorly affect the price
- How fast the community can act in unison against you
I am emphatically not taking a stance on which I prefer here, I might add, just pointing out that there are more variables here than you're acknowledging.
With a blockchain, you still need to trust the counterparty, but now you also need to trust that the coders have properly designed and programmed the system, and that the miners either don't have the power to corrupt the system or aren't corrupt, and you need to trust whatever exchange you use to get into and out of the cryptocurrency.
Plus, you've added in a significant amount of time--at a minimum 20x the time with Bitcoin and significant transaction fees that as a practical matter have exceeded card interchange fees by 2x or more for the past 3 years straight.
Your right about their being more variables...with cryptocurrency.
One obvious tradeoff you're not considering is that of a criminal getting its assets frozen, for instance. There are less black and white situations where you might prefer bitcoin as well, if you have a little imagination. If you could address that, I'd probably appreciate your comments more.
With fiat, I at least have some idea who I am trusting, and if my trust is betrayed, I have some idea who to work with others to organize to work to inflict punishment. And, the people involved are aware of that.
With crypto, I have to trust an anonymous network of people that I have only distant and indirect indications aren't, in overwhelming majority, mutually cooperating agents of a single potentially adverse party, and no idea of who to go after if my trust is betrayed. And the people involved know that, too.
Yes, except the trust is free. Bitcoin replaces that trust with burning electricity.
It's kind of like standing on the ground. The surface of the Earth stops you from accelerating under gravity for free. But if you want to hover just above it, you have to burn ungodly amounts of energy, because you're now replacing surface with active propulsion. This is the same relationship as Bitcoin has with trust.
And yes, flying is occasionally useful. So are trustless systems. But both the ground and trust are features that cut out a lot of unnecessary energy usage from our lives.
And since we're taking into account all of the underlying systemic costs going into banks, we need to do the same for Bitcoin. That means including all of the power utilities, factories, and mining facilities that went into making the hardware, plus the cost of shipping the hardware worldwide, plus the cost of the utilities and transmission lines needed to operate the network. And that's clearly not 1/20,000th the cost or resource usage of our current financial system.
In the case of bitcoin they aren't inherently necessary to the function of the system, although with the risk of hacks you can make the case for them.
Fort Knox has basically nothing to do with the modern U.S. dollar financial system.
The U.S. dollar isn't backed by gold. The total value of the gold at Fort Knox, about $100 billion, is negligible [1] and does not appear on the Federal Reserve's balance sheet [2]. It is mostly an anachronism from the eras of the gold standard.
[1] https://en.wikipedia.org/wiki/United_States_Bullion_Deposito...
[2] https://www.federalreserve.gov/monetarypolicy/bst_fedsbalanc...
There are ~8000 banks in the US alone, around 15K around the world.
According to your made up number, it costs $6K/year to run a bank. That's not even remotely close. That would pay maybe a month of the desk clerk's salary + overhead.
All you bitcoin shysters can keep telling yourself that to sleep at night, but you are lying to yourself and you know it.
Bitcoin consumes massive amounts of energy for a pathetically small amount of transactions per second. ON a per transaction basis, Bitcoin uses several orders of magnitude more energy than anything used by modern day financial systems.
Like, embarrassingly, shamefully large amounts of electricity. Y'all should bow your heads in shame for the harm you are doing to the world.
> The service it provides is to guarantee the integrity of the blockchain without the requirement of a central authority.
The blockchain, whose only use case is to enable rampant speculation and amazingly large quantities of fraud.
The whole "space" needs to go away.
But if the new system is better than the old one, why would comparing it to the old one imply that anyone using the new one should be ashamed of doing so?
But it turns out that the new system is significantly worse than the old one, for little to no practical benefit. That's why people are comparing and complaining.
It's an open question as if it actually does serve a purpose, though.
There's not anything wrong with having a central monetary authority. There's not anything wrong with having institutional trust.
The fundamental problems of inequality don't stem from Treasury, but rather from the game theory concept of the https://en.wikipedia.org/wiki/Gambler%27s_ruin making barriers to entry for new players always higher than the incumbents. You can take this all the way down to the bottom, in the example of having no car to be a delivery driver, and to get a loan for a car is a tremendous risk.
Also they pay for all the energy they spend so what exactly is the problem? Do you see vegans complain for the resources spent to raise animals?
Yes, because the resources (Material or labour) that went into building those renewable power plants could have gone into building something else that people want or need. Houses. Retaining walls. High-speed rail tracks. Electric cars. Bicycles. Video games. Rolls of sushi.
I will keep asking that question until we are in a post-scarcity society.
Opportunity cost. All that 100% renewable energy could be used for something that actually adds value to society but isn't because it is being pissed away on the Rube Goldberg invention known as Satoshi's BlockChain.
> Also they pay for all the energy they spend so what exactly is the problem?
Give me a fucking break. These miners raise the price of electricity for everybody else and produce absolutely nothing of value to society at large.
Same thing these miners have done with graphics cards -- they've made graphics cards more expensive than most people can afford... you know, people who want to use those video cards for playing games instead of sucking down large quantities of non-renewable energy in a vain attempt to Get Rich Quick.
Bitcoin and all the others in the crypto "space" add absolutely zero value to society.
How much energy do you and everyone else waste doing things that don't add value to my life or society?
Using your own comparison, why is it a big deal if little Jimmy can't afford a graphics card to play some Counter-Strike? Is gaming a better use for energy?
Seems weird to pick on cryptocurrencies if you actually believe your premise, which I don't think you do.
Hardly. What, exactly, does bitcoin add to our world? Near as I can tell it's only use case is Making Money Fast (for the folks at the top of the pyramid, anyway) and scamming the bejesus out of all the rubes who fall for the con.
> How much energy do you and everyone else waste doing things that don't add value to my life or society?
Bitcoin is estimated to consume more than 0.5% of all the worlds energy. Many nations use less power than bitcoin consumes. Bitcoin can process a mere 4 transactions per second. Please go on and explain to me why this is even a remotely acceptable thing.
The whole space is a deplorable shame and people like you should be absolutely ashamed of yourselves. You are a drain on the planet's limited resources.
Bitcoin is relevant for the US economy and a rogue state tries to have 51% of hashing power? Military and intelligence to the rescue.
Someone is very rich in Bitcoins? Bunker services for offline storage, physical/computer security, etc.
Too many scams with altcoins? Legal enforcement, more bureaucracy, education, etc.
One could say that, somehow, the cryptocurrencies won't require as much of any of that, but I don't see this point being made as often (and not with any realistic estimations).
Protecting cryptocurrency: there are cryptographic ways to achieve very high security that are free or very inexpensive. Physical encryption keys cost under $100. Combine those with multiple signatures and offline storage in a safe deposit box and you have several physical and cryptographic layers of security for pretty cheap. Services that do those things do not need to be very expensive.
Too many scams? Point taken. We will still need police.
BTW there's a reason I said cryptocurrency and not Bitcoin. Bitcoin is one of the slower cryptocurrencies. Energy spent securing the chain is per block, and its block size limit and other aspects of its design artificially boost its energy per TX. That and in the long term I expect people to find less energy intensive ways to secure block chains.
Also Bitcoin is one of the slower block chain coins.
> How much energy is spent securing conventional financial systems? You have to include everything: banks, minting, enforcement, physical security, even military and intelligence action.
I really feel like I shouldn't have to explicitly point out why this reasoning is so flawed, but to start with, bitcoin does not IN ANY WAY obviate the need for banks, law enforcement, physical security, or "military and intelligence". There isn't some kind of "well, actually..." response to this, it's totally and obviously incorrect and we're living in two different fundamental realities if we can't agree on that base line.
Cryptocurrencies, on the other hand, have energy use as a feature, not cost. Unlike conventional financial systems, cryptocurrencies try not to minimize energy expenditure, but maximize it, as a core function ensuring their integrity.
(Also, military and intelligence action count to stability of both conventional and cryptocurrency-based systems. After all, you can't run a crypto economy without stable and secure nation states with rule of law that allow for development and availability of advanced microelectronics (for mining), electricity and the Internet. Crypto is much more dependent on that than conventional systems.)
--
A tangentially related analogy that comes to mind: cryptocurrencies are like trying to build a city on a big hovering platform, kept aloft by great fans or jets. In order to keep the whole thing airborne, you'd find yourself constantly burning fuel just to counter gravity. Now we find this idea stupid because we can just build city on the ground and not waste any fuel at all - the surface of the Earth counters gravity for free. This is cryptocurrencies' relationship with trust. Trust works 99% of the time for free. Cryptocurrencies try to replace it with burning energy.
Your reply about trust though...
Trust is massively less expensive until it's not. The trouble with trust is that when it breaks "fixing" it is immensely painful, often requiring major political upheaval or worse. In extreme cases people die when trust has to be "fixed."
I do still wonder... what happens when you amortize the cost of trust across say two hundred years time? Reminds me of the cost analysis of nuclear power. Nuclear power is cheap until Fukushima happens, and one Fukushima amortized over even 50-100 years renders nuclear power more expensive than any other energy source.
I do not think it's a coincidence that the cryptocurrency explosion happened right after the 2008 financial crisis. The level of corruption revealed by the crisis and by the nature of the state and financial sector response to the crisis (selective bailouts, bailouts only to the rich, bailouts that preserved the wealth of those responsible, etc.) showed that our trust in the financial sector and possibly in larger institutions is dangerous. People started looking for alternatives. I have doubts about whether cryptocurrency would have caught on to the level it has prior to 2008.
What cryptocurrency needs to be successful is some alternative to proof of work mining. I'm not convinced proof of stake is it since it has a lot of other problems.
What conventional economic systems need to be successful is a housecleaning and a restoration of public trust.
The average state employes about 300'000 people (324'000) to be exact (about 16 million in total, which includes teachers and similar).
So already the Ethereum network uses half of an entire average US state to just secure it's network. The US state in question does a lot more and it includes education and similar.
Bitcoin uses 68 TWh anually, about 17 times as much or about 8.5 average US states. To secure 200'000 TX per day. In contrast the US employees handle the entire state affairs, including taxes, education, etc. for 54 million people every day.
I think you may be missing my point and sarcasm.
And maybe they're worthless even then. Time will tell on that.
I think this is only true if you assume that crypto-currencies must be based on proof-of-work algorithms.
What about proof of stake systems?
Doesn't the cost depend on who you assume the attacker is? The required hashing power doesn't have the same acquisition and operating costs for all potential attackers.
Each currency would need an explanation of what resources the calculation was based on. E.g, n instances of a blah node on Google Cloud Platform running software x in config y for z hours.