Why there will never be another Bitcoin
blog.kraken.com
blog.kraken.com
Aren’t bitcoin holders trusting that no authority/state actor is going to 51% attack the blockchain?
It seems like a reasonable assumption honestly, everyone would know and value would tank.
I'm by no means a fan of bitcoin, but miner collusion was never what kept me away. I like the original arguments for bitcoin related to a decentralized currency and privacy. Neither have proven to be possible on the bitcoin blockchain and I see absolutely no value in btc if I have to use off chain solutions to make it fit any real world use case.
I would see a 51% attack as a nuclear option, since it could take a while for cryptocurrency users to once again believe that the network is secure, but you could imagine a situation where there is geopolitical conflict with a country, the people in that country adopt a cryptocurrency due to fiat currency collapse, and then it becomes useful to induce a cryptocurrency collapse as well.
Edit: oops, might have added this comment in the wrong place.
I'm not sure how early users tolerated this risk though.
But the true worst-case scenario is one where a coalition of governments decided to use 51% attacks as part of a plan to kill bitcoin.
They don't need to invest in mining equipment, they could just declare bitcoin as illegal and seize the biggest mining operations. It would take maybe 10 coordinated raids to grab more than 51% of rigs. Then they turn their seized mining farms towards mining a chain that rejects all transactions. Nobody would be able to move their bitcoins, other mining farms wouldn't be able to sell their coins and they would shut down from the combined threat of no revenue and potential future raids.
When combined with raids on the major exchanges to eliminate off-ramps, the value of bitcoin would crash as everyone rushed to liquidate.
And once the value of bitcoin crashes, it's much easier to continue the 51% attack, they would be able to shut down most of their rigs and leave them in reserve. You couldn't switch to a clean fork, as the government miners would just follow the fork, make their empty blocks look valid with spam transactions.
I guess some encryption could hold even if the whole world agreed to break it, so there might still be a gap for an absolutely indestructive currency. Of course, excluding aliens or future generations with sufficient technology, or total data erasure somehow. Or our extinction, but it's not a fault of the currency if there's no one to give it value.
You don't even need to get that far, perhaps you don't even need 51% of miners. A much lower percentage of people loosing faith in the value of the currency, or just agreeing not to value it, or just realizing it's not actually very useful, would be enough to kill it. Most of the value of crypto is speculative anyways, when the bubbles burst, the actual real utilitarian value of the currency that is left is small enough that it just gets crushed with the momentum of the bank run.
That's a much larger threat in practice, and it has happened to a lot of crypto over the years.
Just throwing some thoughts out for the sake of conversation, this has already been endlessly discussed much more thoroughly for nearly two decades. I'm not even much into crypto, it's just fun to think about the possibilities.
The transactions you create still have to follow protocol rules, which means you can only send funds from wallets you have the keys for - you cannot create money out of thin air, or steal funds from someone else's wallet.
Perhaps the exchange would let it go if the amount is small enough, so that the value of the currency doesn't crash for everyone, but remember you are trying to recoup the enormous investment needed to get to 51%.
It's true that you can withdraw a large amount of money once, let the whole thing crash and run away with the cash. But you need to control that money to withdraw it, so you'd need to take it from other's accounts using your 51% advantage, and get the cash from the exchange before anyone notices. How are you gonna do that for such a large amount of money?
The exchange would never let you withdraw anywhere close to such an amount anyways, they just don't have it. Even if you somehow do it on all exchanges at the same time, it's too much. Even if they somehow have the capital, they just wouldn't let you, because they know it will tank the value of the currency, even if the withdrawal is legitimate.
I really can't see how you can steal more than you spent with the 51% move. The only thing you can do is spend a lot of money to crash the currency with a big loss on your side.
It makes it so easy to get large amounts of cash equivalents out of an exchange and then launder them though mixers (even laundering it though the deposit wallets of other exchanges would obscure the path long enough for them to covert it to real cash).
An attacker can deposit coins, trade it for USDT and have it deposited in another exchange before they even reveal the 51% attack.
But it's been going strong for 15 years now, completely open for attack 24/7 and with an enormous bounty for anyone successful. And yet, tick-tock, next block.
value = demand/supply.
It takes a few months for the supply reduction to filter through to the market, but then things get wild.
Any other physical commodity such as gold for example, will naturally see a supply increase as the value increases (retired miners dusting off their picks to profit on the high prices) but bitcoin's issuance is hard fixed. No amount of effort will produce more bitcoin than 3.125 every 10 minutes. Mankind has never seen anything like this before.
https://www.nicehash.com/countdown/btc-halving-2024-05-10-12...
What happens to existing hardware at that point? Resold for video games? Sold to people who have cheaper electricity?
I think some is sold to people who have cheaper electricity. Some miners shall probably also mine at a loss for a while, sitting on reserves, while smaller ones dies.
Cannot resell for video games: Bitcoin is mined using dedicated ASICs since many years. And Ethereum, the second biggest after Bitcoin, is now mined using proof-of-stake (so neither GPUs nor ASICs involved).
But in a few halvings (every four years, so in a "few halvings" I won't be here anymore) I don't understand how it'd work out: too little BTCs rewarded per block and I don't see tx fees paying the miners.
The math only works out if value of bitcoin continues to increase in value, at least a constant 25% annual return, year after year (on top of inflation).
If the price of bitcoin ever stabilises (or worse, drops) over the long term, then the security of bitcoin will go down, until eventually it becomes viable for someone to launch a 51% attack.
As the network stores more and more value, the demand for transactions increases against a fixed supply, driving fees higher.
The fees are independent of transaction amount, so what looks like high fees to someone transferring $1000 - let's say $50 fee - will be extremely cheap for someone transferring $1,000,000,000 (when you consider it includes final settlement, and loss-less storage of value for eternity).
By 2140 all of the miners income will come from transaction fees, by which time the base layer will likely be transferring millions and billions of dollars worth of value in each transaction.
less folk mining means less energy per coin mined
So the price going down is great news for anyone concerned about energy conservation, but because the amount of energy wasted is directly correlated to the difficulty of launching a 51% attack, the energy usage going down is bad news for anyone actually using bitcoin.
Bitcoin hugely advantages early miners/adopters by the exponential reward reduction over time. Every successive generation gets to mine 32x less of the supply than the previous one.
A truly fair distribution would have an unchanging block reward. It would still be disinflationary [1], crucially setting it apart from fiat currency.
[1] https://john-tromp.medium.com/a-case-for-using-soft-total-su...
You buy bitcoin at the price you deserve.
The premise of the article. I don't believe this for a second.
Imagine the delusional hopefulness one would have to have to believe that something will, for eternity, not be superseded. Nothing in the history of humanity, or even life, remains unsurpassed from it's inception. Yet somehow this thing is unbeatable.
There are cryptocurrencies out there that meet all of the criteria that is laid forth in the article as the reason for this conclusion. True, most, I'd say almost all, don't, as the article does point out, but some do. So what's the secret sauce that makes those currencies incapable if it isn't simply these criteria laid out? Is it magic? Is it some emergent property we have yet to comprehend? If so, why not say it in the article? No, the article says those traits are all you need to draw that conclusion and yet, there's no compelling reason why that's the case. It's hand waving.
The criteria not mentioned is network effects. But we know, network effects are not an insurmountable obstacle. So the conclusion still does not follow. Those criteria are a must, and network effects make it incredibly difficult to supersede bitcoin, but not impossible.
I say the opposite: bitcoin's demise is inevitable. Not because I don't like bitcoin, don't believe in it, think it's a scam. I am a bitcoiner. But because nothing lasts forever, bitcoin isn't perfect, and there are people out there trying to make it better that aren't getting their PRs merged and/or making it to consensus to become a part of the network software.
I can think of at least one cryptocurrency that is better than bitcoin in every way, that meets all the criteria in the article, but just doesn't have the network effects. And to surmount that, the technical superiority, the benefit to the user to switch has to be so compelling that network effect diminishes. It's not enough to be marginally better, it has to be astronomically better. Maybe that one I have in mind doesn't have that, but you can bet that one will be made that will have that eventually.
Aside from being the Catholic cryptocurrency, it has been surpassed technologically in every way by newer and better designed protocols. Why would anyone who doesn't already own Bitcoin choose to use it for anything over, ex. Ethereum?
Bitcoin maxis aren't technologists; they're grifters trying to convince you their magic beans are the most special magic beans.
Generally I agree with your point though. Money over IP can takeany forms, and the likelihood that the first form it took is the best it could possibly be is miniscule.
Study bitcoin long enough and you'll realise it is the best it could possibly be (allowing for small tweaks, additions that don't change the underlying fundamentals) It's not what it first appears and catches everyone out to start with.
Give me any number of negatives and I'll explain with clear reasoning why you're wrong and why they're a strength.
I know it's not the first attempt at internet money, but it is the first form that didn't require a central intermediary for all transactions. That's what sets all this apart.
I can give you a number of shortcomings and I promise you I've heard what you have to say, and thought about it too. I'm hoping you have something new for me, I enjoy changing my mind.
To start, let's commit blasphemy: the hard cap. It's a bad idea. So is a percentage debasement rate, as is the supposed target of central banks. I'm partial to continuous, linear debasement, which translates to a geometrically decreasing debasement as a percentage of supply. For one, holders free ride the network. Two, no other asset anywhere ever behaves this way. Bitcoin is the most scarce thing in the universe, and that's a good thing until it's not. Something that's always predictably scarce temporally but, taken to infinity, has no hard limit, is superior IMO as long as there's no feedback loops in the supply change.
Bitcoin cannot handle enough transactions. Lightning is just fractional banking with extra steps. Again, you're not here to sell layer 2, you're here to convince me (or at least make the case) that this is a strength.
All monetary exchange for all of history is public to anyone.
For the strongest security guarantee, all history must be stored forever by everyone participating in consensus. Note, if this were solved, block size would be a non issue. It is solved actually, believe it or not, just not in bitcoin.
That's what I've got off the top of my head. Bitcoin isn't the best it could be, it could be the best if everyone's commerce was private and historical data was not needed to ensure security. My other point, hard cap, is more contentious and we could argue that one for days and make no progress.
Note that I did not mention PoW, ASICs, fees, block size (although one of my points alludes to the possibility of getting rid of that entirely) or any of the usual surface level talking points because I don't think they're worth going over again. I tend to like PoW and think trying to prevent ASICs is counterproductivr, as far as fees go, they're a symptom of a couple of the problems I laid out above.
Okay, so the hard cap.
>To start, let's commit blasphemy: the hard cap. It's a bad idea. So is a percentage debasement rate, as is the supposed target of central banks. I'm partial to continuous, linear debasement, which translates to a geometrically decreasing debasement as a percentage of supply. For one, holders free ride the network. Two, no other asset anywhere ever behaves this way. Bitcoin is the most scarce thing in the universe, and that's a good thing until it's not. Something that's always predictably scarce temporally but, taken to infinity, has no hard limit, is superior IMO as long as there's no feedback loops in the supply change.
Now yes, that is blasphemy.
1) Personally I don't see holders as freeriding. They are simply storing their wealth until they need to buy something. They can also lend it out to receive interest which most will likely do, once there's safe methods of doing this. Far better this than storing their wealth in real estate, pushing up prices for people that actually want a home to live in and are forced to be rent slaves for the rest of their lives.
2) That no asset behaves this way is a pro for me. I'm interested to hear why you think an ever increasing supply is superior? As you say, we could deliberate on whether a constant sat rate of issuance is preferable for an economy for days on end, but ultimately, the scarcer asset will always be more attractive to large amounts of wealth that need to be stored and so will go up forever when priced in a less scarce asset. Dare I say "honey badger don't care"?
Next, transaction rate.
> Bitcoin cannot handle enough transactions. Lightning is just fractional banking with extra steps. Again, you're not here to sell layer 2, you're here to convince me (or at least make the case) that this is a strength.
No blockchain will be able to both accommodate retail transactions of 50,000 tx/s like VISA and also be decentralised. The equipment needed will simply be too expensive. The slow transaction rate is a strength for a number of reasons:
- almost anyone on earth can afford to run a node
- the network can run on very low bandwidth networks such as ham radio
- it increases security and is optimal (through decentralisation and robustness) for the transactions that count - large amounts of value. It's the large amounts of value, stored for long periods of time that are going to take bitcoin to $100M+, even without any higher layer payment rails.
> All monetary exchange for all of history is public to anyone. For the strongest security guarantee, all history must be stored forever by everyone participating in consensus. Note, if this were solved, block size would be a non issue. It is solved actually, believe it or not, just not in bitcoin.
Yes, monetary exchange is public to everyone. But the source/destination of the exchange are as anonymous as we need them to be. I see it as flexibility. Coinjoining or moving the value temporarily through an anonymous network like Monero or Lightning helps maintain privacy if required and the public transactions mean we can hold governments and public bodies to account who can voluntarily remove the pseudo-anonymity. More importantly means that everyone is able to confirm that the bitcoin issuance is not being violated - I'm interested in knowing how this has been solved elsewhere - this is obviously very significant if it truly has. My assumption is that the solution is very complex - and this is why being able to validate the supply by looking at all the transactions is important - it's very simple and robust.
I don't think fees are really an issue at all. Ultimately, the network will be used for very large sums of money and to pay even $100 to store $1B losslessly for 50 years sounds like a bargain to me. To the point that the fee is insignificant.
I'm glad we can agree on PoW. After all, what is money if it's not proof of work?
Just to add, I don't think we'll ever stop fractional reserve banking. But as Satoshi's message in the genesis block implies, bitcoin's job is to prevent zero-reserve banking - that is the real cancer on the world. If banks can't print infinite money then they can't be bailed out and so will need to have a hard lower limit on their reserve %age, or else risk going out of business, just like before central banking. Although there will be fractional reserve banking, the total supply will still be hard capped. It will at least be a big improvement on gold - Bitcoin is far more auditable - custodians can easily supply the bitcoin owners with the public keys to the owner's wallet to prove they have not rehypothecated it.
The network has ongoing costs and only people that spend money contribute to, unless there's a tail emission. In that case, in addition, everyone holding contributes to maintenance of the network to the degree they benefit from it's maintenance in the form of debasement of their savings, which go directly to the miners keeping the network alive. Holders are free riders in bitcoin, game theory wise this is a fact.
> No blockchain will be able to both accommodate retail transactions of 50,000 tx/s like VISA and also be decentralised
This is a statement of fact but has not been thoroughly demonstrated. The 2 bottlenecks to throughput are 1) block size, and 2) network latency between nodes. Block size is only an issue for decentralization if you have to store all historical data forever to get theaximum security guarantee possible. Mimblewimble eliminates this requirement, and therefore enables the same decentralization regardless of block size. At that point, block size is only limited by how fast transactions propagate across the network, that is, latency, and verification of them, which is trivial, within the block time. You can have 1GB blocks in mimblewimble and have the block chain shrink one block to the next with no sacrifice in security guarantees.
All transactions count.
> Yes, monetary exchange is public to everyone. But the source/destination of the exchange are as anonymous as we need them to be.
You don't really believe that do you? This is a system built on cryptography and we just accept that our finances are open to anyone, to be blacklisted, to make a single mistake and our entire transaction history can be tied to us, and even, other peoples history can be erroneously tied to us, weust behave with the most rigorous sterile technique or anyone anywhere can know everything we have and everything we have ever bought. You believe this is all we need?
You can voluntarily remove anonymity for example in Monero with viewkeys, and selectively remove it with transaction keys for individual transactions. You can confirm issuance is not being violated with range proofs. Greg Maxwell's bulletproofs are formally proven, and implementation has been thoroughly audited.
Fees are an issue. If I have a not insignificant sum in bitcoin and I can't move it, bitcoin is broken. I've saved nothing, I've thrown it down a well. I don't like to talk about this because my above points are the cause of it and the solutions I talk about that exist already resolve it, so it's not something that we need to go into depth on. But, I did an analysis about this a while ago that I published on nostr and I think that bitcoin fees will rise asymptotically to reach the median transaction value, which is a positive feedback loop. It's not a problem until it is, and it is already a problem for a lot of people.
You can stop fractional reserve banking. It began because moving and protecting gold was expensive. Moving and protecting cryptocurrency is cheap, people don't need custodians, but we are getting fractional reserve bitcoin because it is artificially kept expensive. The tools exist to alleviate this, you can, right now, have astronomically higher amounts of commerce on a layer 1 chain directly than bitcoin provides, and I'm not talking about some sham scamcoin like iota or whatever. The solution was developed at blockstream! It was initially a BIP!
I see the hard cap, with 100% fees from transactions, as optimisation for storing large amounts for large periods of time, which is the use-case you want for bitcoin to become as valuable as possible. It's just Gresham's law. People will hoard the hardest money and sell any softer money supply inflation.
> This is a statement of fact but has not been thoroughly demonstrated. The 2 bottlenecks to throughput are 1) block size, and 2) network latency between nodes. Block size is only an issue for decentralization if you have to store all historical data forever to get theaximum security guarantee possible. Mimblewimble eliminates this requirement, and therefore enables the same decentralization regardless of block size. At that point, block size is only limited by how fast transactions propagate across the network, that is, latency, and verification of them, which is trivial, within the block time. You can have 1GB blocks in mimblewimble and have the block chain shrink one block to the next with no sacrifice in security guarantees. All transactions count.
I appreciate that I'm making assumptions that technology like MimbleWimble can't compete for robustness/confidence in the network with Bitcoin's straightforward approach to validating the total supply, but MimbleWimble is also certainly not thoroughly demonstrated. I'll investigate the technology though and get back to you. Are you confident that MimbleWimble will adequately protect against rogue issuance that nation states can use it as their reserve asset?
> You don't really believe that do you? This is a system built on cryptography and we just accept that our finances are open to anyone, to be blacklisted, to make a single mistake and our entire transaction history can be tied to us, and even, other peoples history can be erroneously tied to us, weust behave with the most rigorous sterile technique or anyone anywhere can know everything we have and everything we have ever bought. You believe this is all we need?
The reason I believe it's all we need is because I see the bitcoin network simply as a base layer network or savings tool. The transactions will either be limited to peoples savings, pensions, investments etc. or the transactions will be to/from higher level networks such as lightning, or even centralised payment rails like Paypal. In both cases, supply auditing and simplicity (i.e. robustness) wins over absolute privacy in my view. This is what makes sats the ultimate store of value, and any future faster, more private layer 2 network that doesn't use sats as it's native "token" won't be able to compete, just as the dollar won't.
> Fees are an issue. If I have a not insignificant sum in bitcoin and I can't move it, bitcoin is broken. I've saved nothing, I've thrown it down a well. I don't like to talk about this because my above points are the cause of it and the solutions I talk about that exist already resolve it, so it's not something that we need to go into depth on. But, I did an analysis about this a while ago that I published on nostr and I think that bitcoin fees will rise asymptotically to reach the median transaction value, which is a positive feedback loop. It's not a problem until it is, and it is already a problem for a lot of people.
Fees aren't an issue if its used for large enough values as they tend to 0. I can't see how the fees could ever end up being average transaction value because people will simply stop using the network if it gets anywhere close. As the demand for the network drops, so do the fees.
> You can stop fractional reserve banking. It began because moving and protecting gold was expensive. Moving and protecting cryptocurrency is cheap, people don't need custodians, but we are getting fractional reserve bitcoin because it is artificially kept expensive. The tools exist to alleviate this, you can, right now, have astronomically higher amounts of commerce on a layer 1 chain directly than bitcoin provides, and I'm not talking about some sham scamcoin like iota or whatever. The solution was developed at blockstream! It was initially a BIP!
I firmly believe there will always be a place for custodians. Most people simply aren't capable of keeping private keys safe - especially once it becomes more popular and scams are rife. How much rehypothication goes on depends on how much demand there is for fully auditable custodians - bitcoin provides the option if people want it.
Replace "bitcoin maxis" with any cryptocoin promoter and the statement remains true and equally as useless to those who refuse to consider digital coinage money.
Money is simply a natural and far more efficient progression from barter and the associated coincidence of wants problem.
If you mined bitcoin from the start and then abandoned it, it proves you know very little about what money is at all.
Every single crypto bro I tell this to always has the same reaction and that does nothing but vindicate my position to me. Thanks for making my week.