Sabotaging Bitcoin

The Eyal & Sirer paper is pretty interesting - they basically point out that there is actually some game theory involved in when miners should reveal that they mined a block to compete most effectively with their fellows. If a pool can set up a situation where they mine a block and wait X seconds to reveal it, they can force other miners to waste X seconds of has power and gain an advantage.

It looks like a result with complex implications - eg, maybe making it impossible for new miners to set up unless they have a meaningful advantage in operating costs instead of just parity with the entrenched players. It is hard to tell because market reality is a mess but if there is a meaningful strategic choice to be made beyond simply announcing a block when it is mined then there is a lot of room for weird equilibriums even if the paper's specific analysis turns out to have flaws.

Part of this post addresses the economics of creating a 6 block re-org. This makes sense as 6-confimations is the standard for Bitcoin finality today.

However, as Bitcoin's security inevitably weakens over the coming years due to diminishing miner rewards (denominated in BTC), I believe this "6-confimation" acceptance policy will change to include not only the number of confirmations, but the timing of those confirmations as well. Consider a scenario where an exchange deciding whether a tx with 6-confirmations that took 4 hours to arrive (this happens occasionally) is safe to consider finalized/settled. Even though 6-confimations may be considered safe by today's acceptance policies, this tx would still have a high probability of double spend due to the assumed 4-hour long wait for the 6 confirmations (as the attacker would have 4 hours to produce 7 blocks instead of the normal/expected 1 hour). Instead of ignoring block interarrival timing, it may make sense to include block timing as part of an acceptance policy.

So, going forward Bitcoin acceptance policies may change from today's 6-confirmation standard to something more complicated that involves the amount of time those blocks took to arrive. This would significantly enhance Bitcoin's double spending resistance without adding/altering any code and may give the network a much needed security boost in the coming years to prevent the attack discussed in the post.

TIL the scale of bitcoin derivatives in 2020 (hence volatility): ~2T on 2B market activity. Jeepers!

--- Starting in late 2020, as shown in The Economist's graphic, the spot market in Bitcoin became dwarfed by the derivatives markets. In the last month $1.7T of Bitcoin futures traded on unregulated exchanges, and $6.4B on regulated exchanges. Compare this with the $1.8B of the spot market in the same month. ---

This is good analysis. The main longitudinal aspect omitted is that the profitability of the attack goes up as long as the price of BTC doesn't double or more each halving.

In ~6 more years, Bitcoin will undergo two more halvings, so if the price of BTC is not ~400k by then, then attack will have become more feasible.

The answer to this problem is in the original Bitcoin whitepaper itself. It gives the formula for the required number of confirmations.

The Monero PoW community has had to deal with such nonsense, as have other smaller PoW coins.

With ε=1e-3, the expected number of 6 confirmations works only so long as the largest pool size does not exceed 12%. For a pool size of 30%, at least 24 confirmations should be required in Bitcoin, but 49 in Monero with its stricter ε=1e-6. You can see the table and the math at https://gist.github.com/impredicative/0907e1699f5ff97a9fed5d... and again it's all cleanly reproducible from the whitepaper. Anyone who is still requiring only 6 confirmations then will be setting themselves up for a risk of reversal.

Is it illegal to attack cryptocurrency?

Before the AI bubble, Bitmain was only worth ~$1 billion. Now they are worth ~15, because they make chips for AI also. Either way, you could buy bitmain for the budget mentioned in the attack if it were for sale. Or bitmain could pull off the attack, if indeed they do "control ... all the major mining pools" as the article alleges.

But who ultimately controls Bitmain? The Chinese state.

So, by extension, bitcoin is controlled by the CCP.

What a shitshow. Crypto needs to move on from bitcoin already, pick something better... anything better. There are so many options, and bitcoin is the worst of all of them.

TIL: https://ccaf.io/cbnsi/cbeci - quite horrifying!

EDIT: For comparison: https://gridwatch.co.uk/

Bitcoin is the least efficient technology ever created. There is no limit to how much electricity it can consume just to handle 7 transactions per second. No matter HOW much electricity it uses this value will never increase.

I look forward to more open an earnest conversation about bitcoin on the orange site.

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This article is FUD. No one is spending $30B+ for an attack that gasp extends the required confirmations to a few hours until a re-org can be achieved and accounts settled.

In fact, wiping out the derivative markets would be seen as a net-postive by most individual hodlers.

you can wipe out Russia with thousands of nuclear bomb