Topic: Cunicula's rebuttal to Bitcoin is Broken Idiocy - page 2. (Read 4998 times)

Interesting how you are "right in both cases", but when others use the same assumption, they are "incompetent" and have a "fundamental misunderstanding of the incentives".


If you assume that miners are atomistic, then the size of the investment is irrelevant, because the miner assumes that the attack will succeed or fail independently of whether he cheats. Therefore ANY consideration of the attack's impact on the valuation of any of his assets is erroneous. It is like trying to consider the effect of a possible crash of the stock market on my net wealth, when trying to decide whether to have egg or cereal for breakfast. Erroneous, not because I will be able to offload my shares fast enough, but for the more fundamental reason that the market will do what it does, for better or worse, irrespective of my choice of breakfast.

If miners are not atomistic, then bitcoin is not decentralised.


Nope, not really, I wanted to use the atomistic assumption in a counter-argument, but I couldn't remember where I had seen it defined. Forum search and voilla, guess who?

Thanks for pointing this out. As usual, I'm right in both cases, but I admit to being a little opportunistic in my exposition. I'm sure if you dig deeper you will find old posts conceding that hardware ownership mitigates the incentive problem. I never emphasized this before because it didn't further my agenda at that time. For this reason I was a bit torn about posting this. As I say in the beginning, I have a horse on the other side of the race.

The issue is liquidity.
You can sell off a small to medium-sized in investment in bitcoin very quickly.  Once you have a big investment this is no longer the case. You also do not need to hold bitcoin to conduct an attack (unless we move to PoS mining)

You cannot sell off your mining operation very quickly even if it is small to medium sized. You do need to hold mining equipment to conduct an attack.

Anyways, you go through a year of post history to try and attack my argument by impugning my character! Why not just meet me head on in battle if you are able?

Yes, if you can hold a sufficiently large short position this can cause problems. Same thing can happen in the vanilla stock market. That's why this stuff is regulated.
It is also why financial innovation caused huge problems. Value of derivatives issued on underlying assets >>> value of underlying assets ---> big incentive problems
No one is going to offer to insure huge short positions on bitcoin. The fact that someone is buying up huge short positions despite the incredible risk would tell you that you shouldn't sell them insurance.

Sorry man, but you are embarrassing yourself now. There is absolutely nothing wrong with their conclusion under the common game theory assumption that miners are rational and atomistic. If bitcoin mining truly is decentralised, then the atomistic assumption has to be true. A really smart guy who is worth listening to when he is not in full-on confirmation bias mode explained it as follows :


Similarly a rational atomistic miner will neglect the effect his selfishness will have on the bitcoin price or the value of his mining hardware. He is simply too small to matter and the price is unlikely to be affected by his individual action. Even if he believes that the price will be affected, the net gain can always be made positive by holding a sufficiently large short position.

If you add additional realism to the model, the rewards from cheating should depend on block reward. I ignored this to avoid confusing people.

A 51% attack allows imposition of monopoly fees generating miner revenue.

As block reward slowly approaches zero, the revenue from behaving honestly could go to near zero.
The revenue from cheating does not go to zero however, precisely because monopoly allows you to jack up fees.
The fees remain jacked up permanently as long as people play selfish.

Right now the block reward is really massive so there is no strong incentive to jack up fees (even if you could).
There should be some point where the block reward gets so low that conspiring to raise fees looks attractive.

This would happen a long time from now. I used to worry about this a lot under GPU mining, but feel better now that ASICs are in play (with many manufacturers). With specialized hardware I feel that we have many years to go before there is any danger.

The security of ASICs has nothing to do with their increased hashing power. It comes from the fact that they turn into expensive paperweights if bitcoin collapses. That keeps miners honest. GPUs have significant resale value. This tempts miners to cheat.

The fix is proof-of-stake which is a much stronger disciplinary device than ownership of an ASIC.

Can you elaborate on why you think Bitcoin is broken?

http://www.scribd.com/doc/182399858/Cunicula-s-game-theory-primer-pdf

See the above pdf.

Note that I also think bitcoin is broken, so if anything I have a horse on the opposing team. However, these guys are completely wrong. I mean completely wrong as in go back and get an academic degree before you write white papers wrong. They deserve to be treated with far more derision than they have received up till now.

Perhaps computer scientists simply aren't as mean as economists? (I hope this is the explanation.)