Wall Observer BTC/USD - Bitcoin price movement tracking & discussion

[JayJuanGee]

Very good Bitcoin talk:

https://www.youtube.com/watch?v=ad0Pjj_ms2k

The theory breaks down in a certain point.

Given low fees, tx demand can tend to infinite.
He argues that this is not the case due to miners not being incentivized to produce bigger blocks.

It also seems that any criticism that miners are not adequately incentivized to continue to mine bitcoin is not playing out in actuality, even after the reward halvening.  The hashrate continues to go up fairly steadily - sure there are periods of ups and downs, but the inclination remains upwards which tends to show that there continue to be a lot of resources put into bitcoin mining.

Now there are two components in the game theory of bitcoin. One is internal, the other is external.

The internal is the game theory that surrounds how the internal ecosystem works. For example 51% issues. Attacks of 51% do not make sense in the internal context (the 51% attacker devalues his coins because he attacked the system he is living in).

They do however make sense in the external context (ie, external actors to the bitcoin ecosystem, employing means to disrupt it - like attacking pools, renting hashpower etc). The external context has to do with threats to bitcoin from banks, governments, payment companies etc, all those who want to see bitcoin harmed.

In order to have a system that is resilient, you must be able to have a game theory that is both internally and externally robust. External robustness is an ideal... a dream (due to the resources external actors have at their disposal)... but at least you don't have to make it easy for them.

In this case, if you allow miners the liberty to include as large blocks as they like, an external actor that hates bitcoin can just say to a miner "you know what? I'll pay you more fees than what the others are making, and if your block is orphaned, I'll pay that too - just make sure to put in there as many txs as you like".

At that point, the enemy of bitcoin who has employed "bad miners" for very little money (compared to the multi-billion dollar interests of banks/payment companies/governments), can bloat bitcoin to death for extremely small costs.

This is the element that is lacking in the above analysis, overlooking the fact that it's not only the internal game theory, but also the external. The external enemies are far more dangerous. By giving them the tools to bloat bitcoin, they can centralize it and then make it even easier to attack - or even shut down.

Thanks for that framing AlexGR.  Even though I remain uncertain whether your framing captures all of the incentives or the security vulnerabilities, any of us who continue to study bitcoin and aspire towards its ultimate success need to recognize that any attempts at quick and ill thought out solutions, such as radically increasing the blocksize limit, when such blocksize limit increase is not needed, put bitcoin in a place of vulnerability.  

Therefore in the end, many proponents of bitcoin, already recognize that bitcoin had been fairly robustly designed from the start, and ANY kind of change to its fundamentals should be made only after thorough vetting, testing and assurance that such changes fall into the realm of non-controversial, otherwise, we may end up in a position kind of like that other unnamed coin that is mysteriously still being pumped almost as if it were bitcoin 2.0  (when many quasi-informed bitcoiners recognize that the other unnamed coin remains too centralized, too mutable, and accordingly not secure enough from either of the internal or external attacks that you outline).

[1714633334]

1714633334

[79b79aa8d5047da6d3XX]

In this case, if you allow miners the liberty to include as large blocks as they like, an external actor that hates bitcoin can just say to a miner "you know what? I'll pay you more fees than what the others are making, and if your block is orphaned, I'll pay that too - just make sure to put in there as many txs as you like".

At that point, the enemy of bitcoin who has employed "bad miners" for very little money (compared to the multi-billion dollar interests of banks/payment companies/governments), can bloat bitcoin to death for extremely small costs.

This is the element that is lacking in the above analysis, overlooking the fact that it's not only the internal game theory, but also the external. The external enemies are far more dangerous. By giving them the tools to bloat bitcoin, they can centralize it and then make it even easier to attack - or even shut down.

either
1. the hypothetical bad miners are consciously, permanently jeopardizing the blockchain, which would only make sense if the amount they are being paid for attacking it is superior to their total investment + expected returns.  these are not "extremely small costs" but very large amounts, given the already concentrated nature of mining. under these conditions the attacker might as well start mining itself, which takes us back to the original 51% attack and its "internal" game theory.

or
2. the hypothetical bad miners aim to make some cash on the side by colluding with the attacker, but will only do as much of it consistent with not permanently undermining the blockchain, their total investment and their expected returns. furthermore, corrupt miners running pools must bloat the blockchain in non-evident way, or they would lose hashrate. hence their spamming must be to some extent limited.

[EDIT: in fact, all corrupt miners must be cautious with their spamming or risk having their blocks orphaned as jbreher below notes; that the attacker would pay for the orphaned blocks is irrelevant as orphaned blocks do not make it to the blockchain and therefore cannot bloat it.]

so the question becomes: can enough bloat be purchased from such venal miners consistent with actually putting the blockchain in permanent jeopardy? is this even a remotely probable scenario?

[jbreher]

In this case, if you allow miners the liberty to include as large blocks as they like, an external actor that hates bitcoin can just say to a miner "you know what? I'll pay you more fees than what the others are making, and if your block is orphaned, I'll pay that too - just make sure to put in there as many txs as you like".

At that point, the enemy of bitcoin who has employed "bad miners" for very little money (compared to the multi-billion dollar interests of banks/payment companies/governments), can bloat bitcoin to death for extremely small costs.

Just because the miners (in this hypothetical) are allowed to create blocks as large as they desire, does not mean that other miners are foced to accept those blocks as valid. If such a large block (presumably the result of your bribe above) is deemed detrimental to the system by the other miners (i.e., detrimental to these other miners' interests), these other miners are incentivized to orphan that block. Resulting in no problem to the network. The 'problem' solves itself.

[AlexGR]

In this case, if you allow miners the liberty to include as large blocks as they like, an external actor that hates bitcoin can just say to a miner "you know what? I'll pay you more fees than what the others are making, and if your block is orphaned, I'll pay that too - just make sure to put in there as many txs as you like".

At that point, the enemy of bitcoin who has employed "bad miners" for very little money (compared to the multi-billion dollar interests of banks/payment companies/governments), can bloat bitcoin to death for extremely small costs.

Just because the miners (in this hypothetical) are allowed to create blocks as large as they desire, does not mean that other miners are forced to accept those blocks as valid. If such a large block (presumably the result of your bribe above) is deemed detrimental to the system by the other miners (i.e., detrimental to these other miners' interests), these other miners are incentivized to orphan that block. Resulting in no problem to the network. The 'problem' solves itself.

Not really.

1) The network is being spammed every day - even with stated spam attacks and stress tests. These blocks are now sitting in the blockchain as bloat. If the rejection scenario actually happened, they wouldn't be sitting in there.

2) Let's asssume I'm the exo-attacker and plan to do what I laid above. I also hire a programmer, modify bitcoin core to use GPU for validating big blocks, the ability to process blocks is raised significantly, and then release that software as open source so that miners will use it to "speed up new block verification and help scale bitcoin".

By employing GPU power *and* the fact that network propagation between the large miners is good, there is no valid reason for others to reject very big blocks because I've also given them the tools to process them. I mean the (other) miner is not going to need minutes to process them, so why not?

(this could happen too:)
3) The larger the miner, the biggest the incentive to accept even bigger blocks so that they can crush the opposition who can't handle them. It's like corporate cartel forming. You lower the price (to your detriment) until others fall out of the market. And then you raise the price. You can do the same with blocks. You accept the largest blocks possible, so that those who can't catch up fall behind. It's their problem, not yours. The less they mine, the more you earn.


All these things are fucked up scenarios. Personally, I like to think as an attacker - not a wishful thinker. I want to think the worst that could happen so that I can prepare for it. Not make good assumptions and leave "holes" that trucks can drive through.

So, if I were the banks, what would I do to bitcoin? One of the things I'd do, would be to bloat it to unusable levels, increasing centralization and decreasing the ability of people to adopt it directly - forcing them through centralized means. But the 1MB is an obstacle to this attack vector. So I would have to "raise awareness" (=divide the community) in order for parts of the community to ...demand the rope with which they'll get hanged (in our case "big blocks"). And these blocks are useless except for spamming. Every day, tens of thousands of txs are processed for 0 to 0.01$ per tx. If there was actual demand, this wouldn't be happening.

Satoshi said to increase it when we are closer to needing it. Need is a very specific word. The blockchain covering every possible spamming tx with near zero fees is not a need. Increases should be in line with actual demand. IMO the network should operate by balancing

a) the covering of legit txs
b) room for expansion or spikes
c) covering of low-priority txs and even some spam, when there is no (b).

Alternatively, you can just increase blocksize but demand a high tx fee as a minimum. Monero used adaptive block size and they quickly found out it doesn't work when spammed. So they raised the fees to pretty high per tx after their bloat attack, in order to stop it. It was a case of exo-attack, the external game theory. It was presumed to be an attack by an other altcoin (bytecoin) - so all the internal incentives / internal game theory of miners acting this and that, were useless, and the rule book had to be rewritten (high tx fees) to prevent external actors from attacking the coin. Why would I pretend that these things haven't happened or aren't happening in bitcoin? Why would I make best-case assumptions that everything will be fine? That's not how you make a robust cryptocurrency.

[AlexGR]

either
1. the hypothetical bad miners are consciously, permanently jeopardizing the blockchain, which would only make sense if the amount they are being paid for attacking it is superior to their total investment + expected returns.  these are not "extremely small costs" but very large amounts, given the already concentrated nature of mining.

Remember that ample blockchain space reduces the fees needed. Plus the "costs" are nothing if the external actors are involved in the trillion dollar market.

Every day 1800 bitcoins are mined. These cost only 1 million bucks. And you need only a fraction of that, per day, to pull of an attack.

Banks and payment companies, process tens of billions per day. They have manipulated multi-trillion dollar markets like the precious metals. Their sizes are ridiculously high - if they want to attack BTC. There is no cost that is too high. The only thing that there is is whether this attack is visible or not (they don't want "banks are scared" type of publicity), and the cost of preparedness for the next "iteration" of BTC.

For every attack you do, you burn one card where your opponent is then more prepared. You only want to use your attacks wisely and in a timely manner.

2. the hypothetical bad miners aim to make some cash on the side by colluding with the attacker, but will only do as much of it consistent with not permanently undermining the blockchain, their total investment and their expected returns. furthermore, corrupt miners running pools must bloat the blockchain in non-evident way, or they would lose hashrate. hence their spamming must be to some extent limited.
+
[EDIT: in fact, all corrupt miners must be cautious with their spamming or risk having their blocks orphaned as jbreher below notes; that the attacker would pay for the orphaned blocks is irrelevant as orphaned blocks do not make it to the blockchain and therefore cannot bloat it.]

Addressed above to jbreher (plus the GPU enhancement scenario).

[JayJuanGee]

Alternatively, you can just increase blocksize but demand a high tx fee as a minimum. Monero used adaptive block size and they quickly found out it doesn't work when spammed. So they raised the fees to pretty high per tx after their bloat attack, in order to stop it. It was a case of exo-attack, the external game theory. It was presumed to be an attack by an other altcoin (bytecoin) - so all the internal incentives / internal game theory of miners acting this and that, were useless, and the rule book had to be rewritten (high tx fees) to prevent external actors from attacking the coin. Why would I pretend that these things haven't happened or aren't happening in bitcoin? Why would I make best-case assumptions that everything will be fine? That's not how you make a robust cryptocurrency.

That's what gets me too about some of these steadfast big blockers who first argue that there is some kind of problem, that does not even exist in the first place, and then they also argue that the solution is harmless or at least it cures more than it harms.. but then the whole situation loops back to what is the supposed problem that the big block is supposed to fix, and really is it worth the risk to incorporate big blocks when it is really not solving anything.

[savetherainforest]

[...]

Sure those kinds of described actions can be helpful in expanding the bitcoin space and useage, yet each person has to decide for himself the extent to which he wants to buy, sell or otherwise be involved in bitcoin.  

If you learn about bitcoin, and you believe that it is a good thing, then at minimum you should attempt to allocate a reasonable amount of bitcoin for yourself 1% to 10% of your asset investment allocated towards bitcoin could be reasonable depending upon the level of your bullishness, and your other personal financial circumstances.

In essence, I would suggest that you establish a comfortable position towards yourself, lead by example, and then allow others to chose the level to which they want to get involved.  For the most part, I would not recommend attempting to proselytize others, but that is just me.  If they are receptive to learn about bitcoin and to hear about your investments, then fine, no problem sharing information with them.  On the other hand, I have no problem with people who are out there and proselytizing because some of those kinds of folks are going to exist in any kind of wide spread adoption.

You still don't get it... But let me ask you a question... : Have you ever thought about how you could destroy bitcoin?

And I meditated a lot about it... and the only solution would be a full blown planetary nuclear war. And... well sh!t... who cares about bitcoin in that situation??    

[JayJuanGee]

[...]

Sure those kinds of described actions can be helpful in expanding the bitcoin space and useage, yet each person has to decide for himself the extent to which he wants to buy, sell or otherwise be involved in bitcoin.  

If you learn about bitcoin, and you believe that it is a good thing, then at minimum you should attempt to allocate a reasonable amount of bitcoin for yourself 1% to 10% of your asset investment allocated towards bitcoin could be reasonable depending upon the level of your bullishness, and your other personal financial circumstances.

In essence, I would suggest that you establish a comfortable position towards yourself, lead by example, and then allow others to chose the level to which they want to get involved.  For the most part, I would not recommend attempting to proselytize others, but that is just me.  If they are receptive to learn about bitcoin and to hear about your investments, then fine, no problem sharing information with them.  On the other hand, I have no problem with people who are out there and proselytizing because some of those kinds of folks are going to exist in any kind of wide spread adoption.

You still don't get it...

If you are suggesting that I may not understand your logic or communication, then you could be correct.

Nonetheless, I frequently attempt to adequately substantiate my posts in order that they do not rely on some kind of goofy and unknown logic in order to be comprehensible. 

But let me ask you a question... : Have you ever thought about how you could destroy bitcoin?

I doubt that is a great subject for this thread; although it could be relevant to bitcoin's security and long term future.  I think that there could be some folks who plot regarding the destruction of bitcoin, and accordingly, bitcoin seems to be sufficiently robust in order to not be vulnerable to a large number of attacks.

And I meditated a lot about it... and the only solution would be a full blown planetary nuclear war. And... well sh!t... who cares about bitcoin in that situation??    

I'm fairly certain that there are other scenarios, as well, that could result in the destruction of bitcoin, yet we do not need to get caught up in unlikely scenarios in order to understand more likely scenarios and the utility of bitcoin under a large number of more likely scenarios.

[savetherainforest]

And I meditated a lot about it... and the only solution would be a full blown planetary nuclear war. And... well sh!t... who cares about bitcoin in that situation??    

I'm fairly certain that there are other scenarios, as well, that could result in the destruction of bitcoin, yet we do not need to get caught up in unlikely scenarios in order to understand more likely scenarios and the utility of bitcoin under a large number of more likely scenarios.

Yes... Another scenario would be to track everyone and assassinate them all.... but that will create a sh!tload of problems. So it is not feasible. But you could try to steal them from everybody... I mean take each person at a time on a global scale... but that would be impossible as well. I mean... it will just turn the world in to a police state... and there will be isolated cities or countries where there will be 1 bitcoin for everybody with an endless numbers of zeroes behind it due to the global shortage.(No necessarily translated directly in to adding more zeroes to bitcoin but pegging an alternative currency to create the subdivision) ... Like for example making 0.00000001 satoshi at the current rate for 13.25 cents. (13 cents and 25 mini-sub-cents)

[TERA]

This is no fun without a Bitcoinity full of walls somewhere to look at.

[rolling]

There is really nothing useful in this thread anymore.

[mymenace]

bitstamp





what happens when the green shaded peaks meet back down to the yellow line, seems to be occurring again

[jbreher]

In this case, if you allow miners the liberty to include as large blocks as they like, an external actor that hates bitcoin can just say to a miner "you know what? I'll pay you more fees than what the others are making, and if your block is orphaned, I'll pay that too - just make sure to put in there as many txs as you like".

At that point, the enemy of bitcoin who has employed "bad miners" for very little money (compared to the multi-billion dollar interests of banks/payment companies/governments), can bloat bitcoin to death for extremely small costs.

Just because the miners (in this hypothetical) are allowed to create blocks as large as they desire, does not mean that other miners are forced to accept those blocks as valid. If such a large block (presumably the result of your bribe above) is deemed detrimental to the system by the other miners (i.e., detrimental to these other miners' interests), these other miners are incentivized to orphan that block. Resulting in no problem to the network. The 'problem' solves itself.

Not really.

1) The network is being spammed every day - even with stated spam attacks and stress tests. These blocks are now sitting in the blockchain as bloat. If the rejection scenario actually happened, they wouldn't be sitting in there.

Well, no. Any transaction that has made it into the blockchain is -- by definition -- a valid transaction. You don't get to call valid transactions 'bloat'.

Not to mention the fact that this has nothing to do with the scenario you posited to which I was replying.

2) Let's asssume I'm the exo-attacker and plan to do what I laid above. I also hire a programmer, modify bitcoin core to use GPU for validating big blocks, the ability to process blocks is raised significantly, and then release that software as open source so that miners will use it to "speed up new block verification and help scale bitcoin".

By employing GPU power *and* the fact that network propagation between the large miners is good, there is no valid reason for others to reject very big blocks because I've also given them the tools to process them. I mean the (other) miner is not going to need minutes to process them, so why not?

There is nothing wrong with your scenario 2. Other than the fact that you are completely changing the terms of the scenario re: the single attacker incentivized by an external payment that you opened with. If miners make bigger blocks, and other miners accept them as valid, then great. The system is able to accommodate more transaction volume. Wishful transactors don't need to shuffle off to alt coins in order to transactionate. The only possible problem here is if a critical number of validators can't keep up. Note that validators are free to employ the same techniques to improve their performance. Regardless, I say good riddance to a network hobbled by RasPis.

(this could happen too:)
3) The larger the miner, the biggest the incentive to accept even bigger blocks so that they can crush the opposition who can't handle them. It's like corporate cartel forming. You lower the price (to your detriment) until others fall out of the market. And then you raise the price. You can do the same with blocks. You accept the largest blocks possible, so that those who can't catch up fall behind. It's their problem, not yours. The less they mine, the more you earn.

Technological advancement rather akin to the CPU > GPU transition, the GPU > FPGA transition, the FPGA > ASIC transition, etc. That's worked out reasonably well in practice. Except this advantage is really not about size, but rather efficiency.

But really - you want to put some efficiency improvement numbers out for discussion? If it is more than a scant percent or two, would such not already be coded up and in the wild? Lacking evidence, reasoning suggests your 'crushing' speedup is not a potential significant possibility.

[jbreher]

the whole situation loops back to what is the supposed problem that the big block is supposed to fix

Nonsense. We keep telling you that the problem that needs fixing is the limited transaction volume.

[JayJuanGee]

the whole situation loops back to what is the supposed problem that the big block is supposed to fix

Nonsense. We keep telling you that the problem that needs fixing is the limited transaction volume.

Who's this "we"?    This could be a further sign of weakness in your argument, when you feel some kind of patronizing need to assert the royal we from time to time.

And, you are making up problems when there are no problems?  How long is it taking for transactions to go through?  Less than 2 hours, right?

yeah, you will not admit it, yet your non admission does not mean that there is supposedly a problem of transactions clogging up.

[hv_]

the whole situation loops back to what is the supposed problem that the big block is supposed to fix

Nonsense. We keep telling you that the problem that needs fixing is the limited transaction volume.

Who's this "we"?    This could be a further sign of weakness in your argument, when you feel some kind of patronizing need to assert the royal we from time to time.

And, you are making up problems when there are no problems?  How long is it taking for transactions to go through?  Less than 2 hours, right?

yeah, you will not admit it, yet your non admission does not mean that there is supposedly a problem of transactions clogging up.

I'd say it's all about scaling and the Maximum freedom of ways to achieve it. Block size is just a piece and should be free (un-limited)  as the internet is.

[JayJuanGee]

the whole situation loops back to what is the supposed problem that the big block is supposed to fix

Nonsense. We keep telling you that the problem that needs fixing is the limited transaction volume.

Who's this "we"?    This could be a further sign of weakness in your argument, when you feel some kind of patronizing need to assert the royal we from time to time.

And, you are making up problems when there are no problems?  How long is it taking for transactions to go through?  Less than 2 hours, right?

yeah, you will not admit it, yet your non admission does not mean that there is supposedly a problem of transactions clogging up.

I'd say it's all about scaling and the Maximum freedom of ways to achieve it. Block size is just a piece and should be free (un-limited)  as the internet is.

Apparently, you do not understand the issue if you are spewing out blanket buzz statements without really describing the implications of such.

Ultimately, there is more "freedom" in bitcoin, especially for the unbanked or those who do not have easy access to other low cost ways to store and transmit value, if it is not put at jeopardy towards attacks and/or being taken over or controlled by either banks, governments or other possibly hostile players.

So you can spew out ideas of "unlimited" equalling "freedom", but in reality you are spewing out nonsense.

Currently, there seems to be a very sensible plans and testing in place regarding accommodating growth in transaction volume, including with seg wit.  And, of course, at some time in the future, if there seems to be some kind of actual need to make an actual hard limit increase, then it seems quite likely that there remain abilities to consider those kinds of hard limit increase options if that seems to be a feasible and reasonable way forward in such future circumstances.

[ashman102]

Interested in your thoughts

http://bravenewcoin.com/news/bitcoin-price-analysis-here-comes-the-breakout/

[JayJuanGee]

Interested in your thoughts

http://bravenewcoin.com/news/bitcoin-price-analysis-here-comes-the-breakout/

What about your thoughts, newbie?

I take all short term BTC price predictions with a grain of salt.

[ashman102]

Interested in your thoughts

http://bravenewcoin.com/news/bitcoin-price-analysis-here-comes-the-breakout/

What about your thoughts, newbie?

I take all short term BTC price predictions with a grain of salt.

Well I feel rather skeptical regarding Deutche Bank. Not so sure about the ETF deadline on the 12th Oct, I haven't been following it closely, but its bound to be pushed back again.