Hashing power could decrease in future but is not really probably. There is point of force in the whole system:
if bitcoin will be still there in 6-8 years its base of users will probably be of some millions of users. Due to the limited number of coins their value must be high enough to permit exchange and transactions. If we arrive to 5 millions of users (0.25% of the 2 billion of internet users or 1.3% of the users who are on facebook every day) and we consider 500$ as a average value of BTC that a single user wants spend in BTC in one year that brings a value of at least 80-100$ for every BTC (the same BTC can be used more times in a year but some are probably lost or used as reserve/speculation). And the transctions fees that now are really low can become intersting for miners (with 5millions of BTC users there will be at least 8/1000 transctions for blocks, putting an average 0.001BTC of fee on it and you have near 1BTC for block of fees). So mining a 13,5 BTC block gives you even high revenue than today (50x14$ -> 13,5x80$, but even if we consider another 5 years with blocks at 7BTCx80$ mining still gives revenues).
On the other side if you consider only 500.000 nodes with the client running on CPU/APU (100MHash/sec in 5/6 years will probably be normal value for them) you have 50THash of power (enough to keep half of the net sure at the today power with few GPU miners)
If we can't reach this numbers in 6/8 years probably there will not be BTC any more.
Topic: will bitcoin become less secure over time? - page 2. (Read 2653 times)
The current level of permanent hashing power is probably unsustainable in the long term (due to the declining block reward) but it is not too hard to think of keeping a considerable amount of hashing power on standby, ready to start working as soon as an attack seems to be taking place. Everybody using Bitcoin should have an incentive to contribute some short-term hashing power to secure the network in case of an attack.
If Bitcoin becomes mainstream I could even see a market for some kind of insurance for the Bitcoin network. It would basically only be necessary to contract some operators of large GPU clusters which are normally used for other scientific or industrial purposes but can be rented short-term on demand for securing the Bitcoin network.
For larger companies (merchants, banks) it could even be cost effective to operate some hashing clusters themselves, using it in part to speed up their own transactions and in part to standby for emergencies.
So even if difficulty will be lower than today, the network could be effectively secured against malicious attacks.
If Bitcoin becomes mainstream I could even see a market for some kind of insurance for the Bitcoin network. It would basically only be necessary to contract some operators of large GPU clusters which are normally used for other scientific or industrial purposes but can be rented short-term on demand for securing the Bitcoin network.
For larger companies (merchants, banks) it could even be cost effective to operate some hashing clusters themselves, using it in part to speed up their own transactions and in part to standby for emergencies.
So even if difficulty will be lower than today, the network could be effectively secured against malicious attacks.
"Everybody using Bitcoin" has a strong incentive to free ride - both now AND in the event of a crisis. The community is already two or three orders of magnitude too big for that to work. It will only get bigger (well maybe it will).
Where does the fund come from to pay for the clusters in case of attack? Voluntarism?
If voluntarism is sufficient for security, then why incentivize miners to burn fossil fuels and hash money. It is a tax on everyone holding bitcoin (not small, around a 50% rate this year for example).
I have no problem with taxation if it goes to something useful, but the idea of taxing for security now and relying on voluntarism later is problematic to say the least. It seems highly improvident to spend down almost all of the effective security funds in the first few years of operation.
1. You are ignoring initial investment.
It might not be profitable to buy more hardware because the rate of return is so low that it will take too long to recover, but it might still be profitable to keep the hardware running. Miners will hardly stop mining as long as the income is slightly above the price of electricity. So maintaing a certain hashing power once the network has gotten there is not that difficult.
2. The value of Bitcoin creates incentive both ways.
If Bitcoin value goes up incentivates more cheaters, but it also makes mining more profitable atracting more hashing power. Also, Bitcoin has been created to be used widely, so it will generate a big amount of transaction and therefore transaction fees. The initial compensation for block is a way to jumpstart the system and at the same time distribute the currency.
3. What you are proposing is already posible
The "solution" to the no-problem is already in place. Miners can decide which transactions they process and which transactions they dont. If they feel they are not being payed enough they can decide to not process transactions with a fee that does not met a certain percentage of the bitcoins being transfered, for example a 0.5%. So if someone with a lot of bitcoins wants to transfer them the miners can decide not to unless that person pays a fee that pleases them.
And last, this has been discussed already. Why keep opening threads discussing the same again and again?
It might not be profitable to buy more hardware because the rate of return is so low that it will take too long to recover, but it might still be profitable to keep the hardware running. Miners will hardly stop mining as long as the income is slightly above the price of electricity. So maintaing a certain hashing power once the network has gotten there is not that difficult.
2. The value of Bitcoin creates incentive both ways.
If Bitcoin value goes up incentivates more cheaters, but it also makes mining more profitable atracting more hashing power. Also, Bitcoin has been created to be used widely, so it will generate a big amount of transaction and therefore transaction fees. The initial compensation for block is a way to jumpstart the system and at the same time distribute the currency.
3. What you are proposing is already posible
The "solution" to the no-problem is already in place. Miners can decide which transactions they process and which transactions they dont. If they feel they are not being payed enough they can decide to not process transactions with a fee that does not met a certain percentage of the bitcoins being transfered, for example a 0.5%. So if someone with a lot of bitcoins wants to transfer them the miners can decide not to unless that person pays a fee that pleases them.
And last, this has been discussed already. Why keep opening threads discussing the same again and again?
The current level of permanent hashing power is probably unsustainable in the long term (due to the declining block reward) but it is not too hard to think of keeping a considerable amount of hashing power on standby, ready to start working as soon as an attack seems to be taking place. Everybody using Bitcoin should have an incentive to contribute some short-term hashing power to secure the network in case of an attack.
If Bitcoin becomes mainstream I could even see a market for some kind of insurance for the Bitcoin network. It would basically only be necessary to contract some operators of large GPU clusters which are normally used for other scientific or industrial purposes but can be rented short-term on demand for securing the Bitcoin network.
For larger companies (merchants, banks) it could even be cost effective to operate some hashing clusters themselves, using it in part to speed up their own transactions and in part to standby for emergencies.
So even if difficulty will be lower than today, the network could be effectively secured against malicious attacks.
If Bitcoin becomes mainstream I could even see a market for some kind of insurance for the Bitcoin network. It would basically only be necessary to contract some operators of large GPU clusters which are normally used for other scientific or industrial purposes but can be rented short-term on demand for securing the Bitcoin network.
For larger companies (merchants, banks) it could even be cost effective to operate some hashing clusters themselves, using it in part to speed up their own transactions and in part to standby for emergencies.
So even if difficulty will be lower than today, the network could be effectively secured against malicious attacks.
(adding thread to my watchlist; no, it's not the same as clicking the notify button)
The solution is simple, integrate gpu mining directly into the client, that would easily jack up hash rate if millions of people were using the client. you could also integrate pooling in too. make a new protocol where you select the pool you want in a drop-down box. then you send your BC address to the pool, and the pool automatically sends your coins or when you press send in the client. you could also put in the address of a pool you wanted as long as it is compatible.
Please discuss these off topic issues in another thread. Relevant posts should make comments on the incentives to provide hashing power and the incentives to attack the network and how these are likely to change over time.
The solution is simple, integrate gpu mining directly into the client, that would easily jack up hash rate if millions of people were using the client. you could also integrate pooling in too. make a new protocol where you select the pool you want in a drop-down box. then you send your BC address to the pool, and the pool automatically sends your coins or when you press send in the client. you could also put in the address of a pool you wanted as long as it is compatible.
But what we have to do right now?
The only way which I see is equalization of pools (Deepbit is so mighty that it could easily change something)...
The only way which I see is equalization of pools (Deepbit is so mighty that it could easily change something)...
I think this is a bit of a red herring. The attacker could also use 50 pools all apparently separate, but secretly controlled by one bastard. Point is that any problem now becomes worse over time. I would greatly prefer a system which tried to keep security levels constant (approx.) over time. Front-loading security seems very concerning to me. A little front-loading could be justified by network effects arguments, but i am worried that bitcoin security is far more front-loaded than people realize. It could be that all this security is unnecesary, but then why are we paying miners to provide so much of it?
But what we have to do right now?
The only way which I see is equalization of pools (Deepbit is so mighty that it could easily change something)...
The only way which I see is equalization of pools (Deepbit is so mighty that it could easily change something)...
Seems to me that as the rate of bitcoin generation declines (every 4 years), unless the price also rises, the amount of computing resources dedicated to the network will also decline, unless users pay enough increase in transaction fees to make up for the decreased rate of bitcoin production. But it's not clear to me what is the incentive for users to pay high transaction fees, unless they are in an unusual hurry to complete their transactions. So the amount of computing resources dedicated to block hashing will fall, and thus you are right that the cost of an attack will fall, while the value of the money supply stays the same or grows slowly (assuming the price doesn't crash). So the security of the network may indeed fall, and users' awareness of this issue may put a long-term cap on the price. So I'd say you are basically right, unfortunately... Unless someone has a counter-argument.
Assume the following:
1) profits from attacking network are a fixed fraction of btc money supply
2) costs of attacking network ~= btc rental price of all mining hardware
3) btc rental price of all mining hardware ~= coin generation rate + txn fee generation rate
Implication: security of network ~ (coin generation rate + txn fee rate)/money supply
If the assumptions are correct ( please correct them if they are bad), then network security should fall over time. The implied txn fee necessary to maintain network security will skyrocket. I doubt then that the present level of network security is sustainable in the long run. Security risks are proportional to market cap not data size in kb. Therefore the future txn fee will have to include a fixed percentage of send amounts in addition to a fee per kb. Otherwise the wealthy will freeride on network security paid for by the btc poor. The tax on the poor will become ridiculously large without this modification.
In terms of network security, bitcoin appears to be a lot like a ponzi scheme.
(for intuition on the wealthy being forced to pay for security, See articles in the Journal of Political Economy by Earl Thompson. Intuition is that those with movable assets provide a temptation to attackers. Therefore fees for collective security should be levied on owners of movable assets. Clearly this is how the private market works (you don't see homeless people walking around with bodygaurds).
1) profits from attacking network are a fixed fraction of btc money supply
2) costs of attacking network ~= btc rental price of all mining hardware
3) btc rental price of all mining hardware ~= coin generation rate + txn fee generation rate
Implication: security of network ~ (coin generation rate + txn fee rate)/money supply
If the assumptions are correct ( please correct them if they are bad), then network security should fall over time. The implied txn fee necessary to maintain network security will skyrocket. I doubt then that the present level of network security is sustainable in the long run. Security risks are proportional to market cap not data size in kb. Therefore the future txn fee will have to include a fixed percentage of send amounts in addition to a fee per kb. Otherwise the wealthy will freeride on network security paid for by the btc poor. The tax on the poor will become ridiculously large without this modification.
In terms of network security, bitcoin appears to be a lot like a ponzi scheme.
(for intuition on the wealthy being forced to pay for security, See articles in the Journal of Political Economy by Earl Thompson. Intuition is that those with movable assets provide a temptation to attackers. Therefore fees for collective security should be levied on owners of movable assets. Clearly this is how the private market works (you don't see homeless people walking around with bodygaurds).
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