Hashrate not securing the network?!?

[BlackJacky]

Hi folks,

I just watched a SF Devs Seminar video about 51% attacks. The guy said "Hashrate/POW does not secure bitcoin/transactions - full nodes do! POW only distributes votes" ...I dont understand that. I always thought that the Hashrate (currently around 400 petahash) is always an indicator of the safety of the network?

Thanks in advance for some answers

[1715393836]

1715393836

[DannyHamilton]

I'm not sure what video you are talking about. I haven't seen it.  It's possible that you mis-understood something that was said, or it is possible that the speaker was simply mistaken.

As for hash power and full nodes, a decentralized peer-to-peer crypto-currency needs both.

The full nodes enforce the consensus rules and keep the controllers of the hashpower from being able to do anything that is against those rules.

Hash power prevents double-spends and sets the order of the transactions.

[Carlton Banks]

Hash power prevents double-spends and sets the order of the transactions.

I would add that hashpower, both past and present, is protecting the information (i.e. your money) stored in the database, as the accumulated POW is more difficult to usurp than a collection of every block hash on the blockchain existing independently of one another.

Arguably, Danny was saying that anyway, but framing it more simply. He knows this stuff very intimately, as I'm sure most people are aware.

[BlackJacky]

Its this video:

minute 47

https://www.youtube.com/watch?v=LN6Yhm0TMAM

[odolvlobo]

I am also not convinced that a high hash rate secures the network as people believe. It is said that a 51% attack would not be cost effective, yet if mining is profitable for miners in general, then it would also be profitable for the attacker, assuming that the value of a bitcoin is unaffected by the attack. Keep in mind that in a 51% attack, the attacker could mine 100% of the blocks, not just 51%.

Here is a possible scenario: Bitcoin is widely adopted in the U.S., but at some point it encounters problems (continuing battles over block size I suppose). The U.S. government secretly builds enough mining power to successfully launch a 51% attack, and then one day hijacks the network. Tired of the problems, users would welcome a centralized solution, and they (and all of the full-nodes) accept the coup d'etat and fall in line. Assuming that mining is profitable in general, the U.S. government would realize a profit as the only miner.

For Bitcoin to truly be secured by POW, the cost of mining must be much higher than the block reward, and there must be other reasons for miners to mine that a single attacker would not benefit from. I believe that if Bitcoin becomes widely adopted and there are no strong reasons for miners to mine at a loss, then governments will become the primary miners and mining will be subsidized by taxes.

[RGBKey]

-

If there is a 51% attack, people will know, and the price will start dropping like a rock. Nobody is going to want to keep their bitcoin when they know it could be changed at any time by someone malicious.

[odolvlobo]

-

If there is a 51% attack, people will know, and the price will start dropping like a rock. Nobody is going to want to keep their bitcoin when they know it could be changed at any time by someone malicious.

In my scenario, the attack is not considered malicious.

[RGBKey]

-

If there is a 51% attack, people will know, and the price will start dropping like a rock. Nobody is going to want to keep their bitcoin when they know it could be changed at any time by someone malicious.

In my scenario, the attack is not considered malicious.

Regardless of who does the attack and whether or not it's malicious, if there is a scenario with a 51% attack, the price of bitcoin is going to go down dramatically.

[Carlton Banks]

I am also not convinced that a high hash rate secures the network as people believe. It is said that a 51% attack would not be cost effective, yet if mining is profitable for miners in general, then it would also be profitable for the attacker, assuming that the value of a bitcoin is unaffected by the attack. Keep in mind that in a 51% attack, the attacker could mine 100% of the blocks, not just 51%.

Here is a possible scenario: Bitcoin is widely adopted in the U.S., but at some point it encounters problems (continuing battles over block size I suppose). The U.S. government secretly builds enough mining power to successfully launch a 51% attack, and then one day hijacks the network. Tired of the problems, users would welcome a centralized solution, and they (and all of the full-nodes) accept the coup d'etat and fall in line. Assuming that mining is profitable in general, the U.S. government would realize a profit as the only miner.

For Bitcoin to truly be secured by POW, the cost of mining must be much higher than the block reward, and there must be other reasons for miners to mine that a single attacker would not benefit from. I believe that if Bitcoin becomes widely adopted and there are no strong reasons for miners to mine at a loss, then governments will become the primary miners and mining will be subsidized by taxes.

Remember also that governments don't actually have the resources and expertise to do this themselves directly, they will always depend on industry to do it. Maybe the industrial giants will support a government to do so. Maybe they will consider their own self interest instead. They're all (arguably) rather like competing gangs, in essence.

[BlackJacky]

However, if the hashrate or hashpower is going to increase more and more...is this an indicator of the safety of the network?

[RGBKey]

However, if the hashrate or hashpower is going to increase more and more...is this an indicator of the safety of the network?

I think it's more of an indicator that we are getting more and more specialized hardware for mining. I think it does come with increased safety but some of it is just better hardware being developed.

[odolvlobo]

-

If there is a 51% attack, people will know, and the price will start dropping like a rock. Nobody is going to want to keep their bitcoin when they know it could be changed at any time by someone malicious.

In my scenario, the attack is not considered malicious.

Regardless of who does the attack and whether or not it's malicious, if there is a scenario with a 51% attack, the price of bitcoin is going to go down dramatically.

That is possible, of course, but it is not guaranteed. Don't underestimate the power of the status quo. When the U.S. abandoned the gold standard in 1971, one would have expected the value of a dollar to plummet to zero, since there was no longer anything backing its value and no reason to believe that its value could be maintained. Instead, the dollar kept most of its value and remains the world's reserve currency due to the power of the status quo.

[Carlton Banks]

When the U.S. abandoned the gold standard in 1971, one would have expected the value of a dollar to plummet to zero, since there was no longer anything backing its value and no reason to believe that its value could be maintained. Instead, the dollar kept most of its value and remains the world's reserve currency due to the power of the status quo.

And the US (as well as the rest of the world) suffered some of the most serious economic problems of the 20th century for the subsequent 8-9 years. US interest rates peaked in the 20% range in 1980.

And you're also exhibiting the "worthless paper" fallacy. Gold's price is massively inflated as a consequence of the demand that exists to use it as money. This happens with anything you use as money, whether it has any intrinsic value or not. It just so happens that in the long, long history of using physical objects as value tokens, gold bullion is intrinsically good as a monetary substance because of it's physical properties, but those properties only confer that kind of value in that monetary context. Essentially, gold as money is worth alot more than gold as jewelry, or gold as an electrical conductor. You can tell that this "overpriced for physical use" still exists today by plain observation: alot of very useful applications of gold are overlooked, because "it's too expensive for that".

So the paper is OK, as long as it can be forced or perceived to share the properties of gold (indeed, the rhetoric for selling paper money was "good as gold"). In practice, money printers do not have the self control required to make it so. But that doesn't mean they can't make it work for a relatively short period of time, that being the same short period in which we've mostly lived our lives.