Why the Bitcoin Security Model Is Broken | Hacker News Reader

Why the Bitcoin Security Model Is Broken

danxrd.substack.com

4 pointshggh18 comments

> However, the key point is that with more transactions per block, the total sum of all those fees will be higher than what we have now with the 1 MB limit due to the competitive fee market, but still cheaper for the end user than it would be with a remaining 1MB limit.

This is quite wrong. The only way to make users pay substantial fees is to create a fee market by constraining block space. Without congestion, users will just pay the minimal fee, which doesn't amount to much even with enormous tx volumes.

For this reason Bitcoin Cash will have a security problem long before Bitcoin does.

The way to avoid problems in the distant future is not to cap supply [1].

[1] https://john-tromp.medium.com/a-case-for-using-soft-total-su...

> Without congestion, users will just pay the minimal fee, which doesn't amount to much even with enormous tx volumes.

But that minimal fee is chosen by the miner.

And historically, the minimum miner acceptable fee has been <= 1 cent per tx. A single miner (or any group short of a supermajority) that starts raising their minimal fee will just see their margins erode as other miners take over their fees.

1 sat/vByte

Actually, the minimum used to be 0 sat/byte.

"I don't anticipate that fees will be needed anytime soon, but if it becomes too burdensome to run a node, it is possible to run a node that only processes transactions that include a transaction fee." - Satoshi Nakamoto

https://www.bitcoin.com/satoshi-archive/emails/mike-hearn/1/...

Everybody thinks they know bitcoin's fatal flaw when they first learn about bitcoin. It's easy to do that.

The hard bit is continuing to learn until you can't see any flaws.

I can't see any flaw to the original Bitcoin described in the whitepaper. The flaws started when a temporary anti-DDoS became a permanent "feature".

What flaws are those?

1. High transaction fees

2. Reversible transactions (return by fee)

3. Waste of energy due to small blocks (you could put more transactions in a block with the same difficulty so same energy expenditure, with bigger blocks)

4. Returned transactions if tx fee is too low due to points 1 and 2

5. Lack of micro-transactions due to point 4, which were possible with the original Bitcoin

1) Transaction fees are extremely low. I can currently store $1M for 100 years protected from supply inflation and counter party risk for a fee of around 0.0002%.

2) Do you mean "replace-by-fee"? That only affects unconfirmed transactions, in the mempool.

3) There's no waste of energy - smaller blocks provide greater decentralisation (through cheaper HW) and greater robustness (through lower BW). Both are _extremely_ important.

4) Not an issue if you pay around the market rate for your transaction. Even if you bid far too cheaply, you can use RBF mentioned in point 2 to accelerate your transaction.

5) Microtransactions would absolutely destroy the decentralisation and robustness as they would require far, far greater block-sizes. Without a robust base network the value of bitcoin would be at risk. Small transactions are best suited to a layer-2 network such as Lightning, Fedimint, or even centralised payment rails. These will gain more attention as bitcoin proves itself as a store-of-value which is required of any asset before it can be used as money.

It sounds like you'd be more interested in forks like "bitcoin cash" or "bitcoin sv" (which are both failing extremely badly relative to bitcoin!).

interesting. executing an attack is not riskless. if the chain is forced the attacker may be left with coins that are worthless.

what about the bitcoin cash fork, that increased block size to 8mb? What about Segwit2x?

> that increased block size to 8mb?

It increased the maximum block size. First to 8MB, then 32MB, and now it's automatically adjusted with a 32MB floor (Adaptive Blocksize Limit Algorithm): https://i.redd.it/ijnh2nep1fed1.jpeg

Aaaaaannd it lost all its worth

You mean monetary worth? BCH is the 3rd PoW cryptocurrency by market cap: https://www.coingecko.com/en/categories/proof-of-work-pow

Segwit2x had 2 off by 1 errors and never worked

Increasing the block size is one potential solution but the projections that "the security model" is somehow compromised by no longer having exponential growth in value is a hypothetical thought experiment with no real backing. If you compare to real world mining of minerals of value those minerals don't have exponential growth in value over time. They have a steady growth and value controlled by supply and demand and augmented by inflation. Yet huge amounts of capital are spent constantly in order to mine these to sell them in this market that does not have massive growth like Bitcoin growth.

Even as growth tapers off because there is already value held there is incentive to maintain the integrity of the blockchain. What is the incentive to maintain the price of gold? The current price of gold has risen a lot but not at Bitcoin levels but it is far above the industrial use of what gold would demand. Those that own gold at a large scale, Banks and governments, have an interest in maintaining its value above its industrial use value so it can act as a physical store of wealth. Now we all know that alchemy isn't true but if we hypothetically say if you could control 51% of the gold market you could then be 51% of the gold market you could then be substitute an imitation product for the real thing and because of the control you have you could insist that it is still real. This is a disincentive to everyone who values any kind of market stability and capitalization. Because if you get caught doing this, which you will, not only have you destroyed the value of your imitation but you've destroyed the value of the real thing because trust is lost in it.

The only people who have an incentive to fundamentally break something like gold or Bitcoin or comic book super villains. The US government certainly has the budget and the power to be able to do a 51% attack and wipe out all faith in Bitcoin but they have no incentive to do it. Most other businesses or governments around the world that have the budget to be able to do that also have no incentive to do it.

So while there may come a time when increasing the block size is something that's required to make the network better I believe that is many years off. The doom saying about Bitcoin has been around for a long time, but people often put their faith into a thing and can create it as a store of value far beyond its worth. Why are diamonds worth so much? Why is gold worth so much? Why are many of the precious metals worth above their actual use case values?

> The US government certainly has the budget and the power to be able to do a 51% attack and wipe out all faith in Bitcoin but they have no incentive to do it.

Certainly? How do you think they would do it?

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