Topic: The BTC price is too high for it's current security model - page 2. (Read 4577 times)

I think you totally misunderstood the post. His point, I think, is that Bitcoin's price is not "too high" but is actually very low due to the problems you identify.

Perhaps if it hadn't failed on distributed mining, the price by now would be $5000 with a market cap of $60 billion. That is still a tiny number compared to what one expects for a widely adopted currency, so lack of full global adoption (yet) is hardly incompatible with a $5000 price.

It may be that people (meaning people at large, not just bitcoin developers or supporters) in fact aren't ignoring the problems you point out, but actually see them as a reason to be skeptical about it, therefore greatly depressing the price.

If you assume a future price of $100K for hypothetical global adoption, the current price implies a probability of 0.6% of success. You may well agree with the market on this.

Stake models are not required for coin weight to equal network control.  A finite variable is needed in the system for it to function, but it doesn't have to be coin age, coin weight, or any of the variables that have already been attempted.  Models already exist like this, such as BitsharesX, that use other variables (reputation), although I consider their system completely broken for numerous reasons, a few listed below.  

The current Bitcoin model is already an obvious failure while people walk around in a delusional state pretending it isn't.  It's advertised as requiring "no trusted 3rd parties", yet the entire thing relies on them in the form of a small number of mining pools for block verification.  Since Bitcoin never solved the "no trusted 3rd parties" dilemma, it's time to admit that and come up with a solution, most likely assign a performance metric to regulate those parties (i.e. PoS with reputation variable).

Unless every single iota of Bitcoin dev manpower is redirected towards the solitary goal of getting rid of mining pools, they're operating under the textbook definition of insanity.

Way to butcher my argument...

Carry on without me then.

Why would people who are mining now care about this?  Most of their equipment will be obsolete in a few months anyway.  If it looks like bitcoin is seriously starting to move in that direction, then just get out of the mining business.

A lot of people may be starting to give up on bitcoin now that it's lost some of its novelty.  Price stability may cause problems, too, as a lot of people are looking for the next bubble.  If it doesn't happen soon, more people may stop caring.

Well most of my non geeky friends have lost interest in Bitcoin beyond being something that would deliver more fiat money to use for mall shopping and going traveling, they just want a nice extra on their shitty situation (mine is shitty too) if it doesnt improve their life quality they get bored with it.

You are greatly exaggerating the problems of PoW.

In a blockchain type of probabilistic distributed consensus you can do the following attack:

1) erase transactions by creating a longer chain that does not include them.

All issues derive from this such as double spending or preventing any transactions at all.

The number blocks on top of a particular block give you some form of confidence on the stability of that block.
With a 51% attack you can deterministically change the blockchain (make a new chain that is longer) while attacks < 50% only have a certain probability of being successful.

PoS depends greatly on how random the minting process is (PoW has an element of randomness to it and this is crucial) or else you have a problem.
If I can split my stakes in a way that guarantees me to be chosen for block minting for x blocks in a row I can attempt attacks.
Of course I need 51% of the stakes to deterministically change the chain.

The mixed mining/staking approach by peercoin is actually a good compromise in this regards. The mining introduces randomness for choosing the next minting candidate.

I'm also unsure what you mean by adding reputation to PoS? So if someone tries to double spend you penalize them? that would be a huge problem because these coins would be worth less.
What happens when you move penalized coins to untainted ones etc?

Yup.  Know a couple of people that are sweating the fact that these types of changes are even being discussed at any level.  Pretty funny the parallels between massive mining operations and the central banks they where meant to conquer.

You're basically saying the so called "distributed trustless system" of Bitcoin relies entirely on trusting 1-3 guys.  This is obviously not a valid security model.  What is my personal definition of when a PoW network is secure?  If it relies on pools, I would say most likely never.  Best case scenario, secure temporarily over a brief period of time.  The sheer amount of attack vectors for pools renders the entire model nonfunctional.

PoW in current form, with pool mining, is an obvious dead end.  It's excellent for distribution (i.e. before an ASIC is created), but useless for anything else.  The only solution I see to move forward out of this already failed model, is to utilize proof of stake and introduce the variable of reputation to fix most of proof of stake's current issues, such as having no finite resource in the system, the root of most of stake's problems.

If someone is going to claim I'm wrong, then I hope you have some kind of method for enforcing p2pool for PoW at the protocol level?  And can defeat share withholding attack at the same time?  I'm going to try to move forward instead with the other system I described.  The current system is a complete dead end.

I have created a TLDR version of my post:

I agree with the analysis, r0ach. Mostly. changed my mind. OP has a valid point, wrapped up in a hysterical and sensationalist presentation.

De-decentralization is, in my view, the biggest (technical) challenge BTC faces at its current stage. Needless to say, just ignore the peanut gallery calling you a troll - shooting the messenger is always easier than accepting an unpleasant message.

That said, you seem to see the situation rather binary: either the network is decentralized, or it is not. I believe however that, taking into account human elements, i.e. not just looking at centralization/decentralization as a technical property of the network, we're very far from BTC being completely "centralized".

For one, the largest pools that could in principle collude in an attack have shown absolutely no sign of interest in doing so. In fact, them doing so would almost certainly be economically damaging to them. And other than a hypothetical attack, they don't hold special "voting powers" that grant them a disproportionate influence on decisions.

Second, the large pools are comprised to a large degree of individual miners, so the situation is different from, say, 2 or 3 large individual operators holding the same computing power as the currently largest pools.

Third, you mentioned it yourself, technical solutions (or proposals) exist, p2pool one of them. Right now, the incentive isn't there yet to fully switch to an alternative mining model, but I just don't see it as an urgent failure case either: if any form of abuse of a majority of computing power becomes known, the network's value will be damaged, I'm sure, but at the same time, the incentive to enforce decentralized mining will also be there finally. In the absence of such abuse, there is no urgent reason to switch (which is probably why we're not doing it). I'd prefer miners (and users, and investors) would think a bit more long term and provide more incentives to make the transition to a decentralized mining model (brought that up in a thread of my own), but until we're actually getting there, I fail to see how the current state is so bad that it prevents actual usage of the network for a pretty big portion of, say, online payment processing. It's not as if the alternatives are more secure, or less centralized. In fact, they're substantially worse on both counts - even if BTC security and centralization is not at its optimum.

Bitcoin is nothing more than a 'prototype' for something much bigger, much more advanced, and much more secure.

I'm confused.  Could you please explain what you mean?  Here's an example of what I'm saying: Let's say I buy $5,500 worth of mining equipment using fiat, and let's say that based on current and projected difficulty, I expect to be able to mine about 10 bitcoins before the difficulty becomes so high that I won't be able to mine profitably anymore.  As long as I can sell my mined coins for at least $550 each, I will break even (of course you'd have to consider electricity costs, too).  If the price starts rising, then I can be patient and see what happens since I know I'm still in profitable territory.  If price stays where it is or looks like it may start falling, then I may feel pressured to sell what I've mined so far so that I minimize my chances of taking a loss on my miner.

Of course, there might also be a point at which I would just hold my coins and hope for better prices.

If the miners did not earn enough bitcoin to recoup their initial investment them the miners would have nothing to sell.

I noticed the broken, east Asian English.  Wolong?  Is that you?

bitcoin is over price, $4xx and $3xx are coming

You would do better trying to predict price by calculating cost of production, then valuating a percentage premium on top of that which takes into account network security and other benefits or services it brings.  I already went over the network security part, the rest, or "killer app" of Bitcoin, seems to either be black market, or an avoiding financial armageddon motive, zombie apocalypse currency in other words.  Bitcoin doesn't currently lend itself well to such a task with large, centralized mining pools requiring nuclear reactors.  Bitcoin really needs more of a mission statement for people to try and attempt to mold the protocol to meet that task, otherwise, you're selling swiss army knives, and nobody really buys those.

That mission statement, in my opinion, should be something along the lines of a digital asset that provides utility by being able to survive the quadrillion dollar derivatives bubble, but like I already said in this post and the one below, Bitcoin currently does not perform well as a zombie apocalypse currency.  Going long on Bitcoin is also the equivalent of going long on treasury bonds and fiat not collapsing since BTC is useless without infrastructure.

https://bitcointalksearch.org/topic/m.7889487

This is why I believe proof of work mining is completely useless, but extremely necessary for distribution, and in order to fulfill some of Bitcoin's market niches as described above, it will have to make concessions and introduce something such as stake + reputation system to fix stake's inherent problems.  This will either be done by Bitcoin crashing tremendously and then big changes can be made, or by an altcoin overtaking it.  Someone will say, "can't do that, all reputation systems lead to centralization".  If you read the original post, you would see Bitcoin is already centralized with no distributed computing redundancy.  It would actually be extremely hard if not impossible to make it more centralized doing what I'm talking about.

This is something I've been wondering about recently.  With all the new mining hardware that's been purchased in the last few months, and the fact that the price hasn't moved much, I can see how there may be a lot of pressure to sell to pay off the equipment.  If it really looked like the price were going to take off again, more miners might hold on to their coins.  But as it doesn't look like we're about to hit ATHs anytime soon, they may be trying to get what they can, afraid that the price may drop more.

The new coins coming in everyday is clearly a major factor which prevents price rise and is costly for existing holders. All those in charge have also got big mining investments so they will not like to hear this.

Saw there were some initiatives on creating an exact chain as Bitcoin with some form of PoS. While it is impossible for it to happen now, things might change in a couple of years.

I might comment this later on because I've been at a party so bear with me:

Andrew Poelstra has no idea how distributed consensus works, not the slightest (I am assuming the language barrier is not so large as to twist can into can't etc...)

"It can be mathematically proven that given only a synchronous network it is impossible to achieve distributed consensus in a cryptographically guaranteed way"

Really? you are trying to quote FLP85 for synchronous systems?

FLP85 states that in an asynchronous system it becomes impossible to discern a failed process from one that is merely very slow.
This is a logical conclusion anyone can reasonably follow without requiring the formal proof. (If you can take as much time to answer to me as you want  I can't by any measure say you have not definitely sent me an answer without waiting indefinitely as for any time I wait you could take that time + 1 to answer me and that is still a valid amount of time I have to wait)

I've not rigorously looked through that paper but from flying over it I can tell the author has no idea what he is talking about.

Its not about whether or not bitcoin is going to be worth $10 billion each, smh.

Its about the fact that your posts dont make a lot of sense and they seem to be better placed in the Bitcoin Discussion Thread, not the Price Speculation thread.

Since we are in the Price Speculation Thread, why don't you tell us what you think the intermediate price outlook is? Personally, I think the ATHs will fall in the next 12 months. I think institutional money will be the main catalyst - institutional money has a long history of pumps and a long history of chasing price. It may take a little more time for that train to get down the track, but once it gets rolling, I think $5kish a coin is a reasonable topping estimate. After institutional money has its say, I think fundamentals such as halving and user adoption will determine how high the price gets beyond that.

I also think the more big money gets involved, the more pressure will be applied to miners to developers to safe guard in apparent, albiet small, chance of attacks, including the over hyped 51%.

Meanwhile, other 2.0 currencies will continue to have a chance to make a case for a better crypto. This is going to take years to be settled though.

I do not think $600 has anything to do with the 51% attack. $600 has to do with lack of regulatory framework foremost.