My Response to Ben Laurie’s ‘Last Word’ on Bitcoin

[amincd]

http://amincd.tumblr.com/post/7191580728/my-response-to-ben-lauries-last-word-on-bitcoin

Ben Laurie wrote a paper that he described on twitter as his ‘last word’ on bitcoin, which explains his view on why bitcoin is either not a decentralized system, or that if it is, how it could be a more efficient one.
The paper is linked to in the blog post here: Decentralised Currencies Are Probably Impossible (But Let’s At Least Make Them Efficient).

Laurie’s basic point is that since bitcoin’s development team uses ‘checkpoints’, which are hard-coded points in the block-chain that cannot be changed through the protocol’s usual method of establishing an authoritative chain, to make transactions that occurred at or before the checkpoint safe from a > 50% attack, bitcoin is either not decentralized, if one considers the insertion of these checkpoints as centrally coordinated, or that there is a more resource efficient means of achieving decentralized consensus in the method used to insert the checkpoints.

His conclusion is that a decentralized currency using the method of arriving at consensus that is used to agree on the inclusion of the checkpoints in bitcoin’s block chain, as its sole means of establishing an authoritative block-chain, would be far more energy efficient than the bitcoin protocol’s mining method.

I believe Laurie’s paper is missing a key element in bitcoin’s reliance on hashing power as the primary means of achieving consensus: it can survive attacks by governments.

If bitcoin relied solely on a core development team to establish the authoritative block chain, then the currency would have a Single Point of Failure, that governments could easily target if they wanted to take bitcoin down. As it is, every one in the bitcoin community knows that if governments started coming after bitcoin’s development team, the insertion of checkpoints might be disrupted, but the block chain could go on.

Checkpoints are just an added security measure, that are not essential to bitcoin’s operation and that are used as long as the option exists. It is important for the credibility of a decentralized currency that it be possible for it to function without such a relatively easy to disrupt method of establishing consensus, and bitcoin, by relying on hashing power, can.

[cypherdoc]

i think the checkpoints are just as you say; insurance lock downs of the block chain.  Bitcoin is safe.

[FreeMoney]

So if I take out the checkpoints that means it's suddenly decentralized. 

I can't believe the weird shit people fixate on when they hear about bitcoin.

[Stevie1024]

About one month ago, I wrote a little paper

http://www.newbitcoin.org/documents/newbitcoin.pdf

in which I stated that ‘Bitcoins are not truly decentralized’ and that developers should refrain from hard coding ’correct block hashes’ in a reference implementation.

At that time I didn’t fully realize the implications of what Ben Laurie now stated more formally. So the rest of the paper is an attempt to establish an improved decentralized currency, based on a ‘block-chain’ created by 50% or more cpu-power.

Meanwhile I have come to the conclusion that it can be easily proved that as soon as bitcoins would become truly valuable, it would be lucrative to ‘fraud’ the system by gaining more than 50% of that cpu-power.

1) Gain 50%+ of the computing power.
2) Generate transactions favouring you and have them included into the block chain.
3) In the mean-time, with your 50%+ power, start creating a forked chain, with your coins double-spended in different transactions.
4) Publish the fork when your original transactions are accepted and collect the benefits of your new transactions.

At the moment each block generates 50 new bitcoins, and it would take a huge investment already to gain 50%+ of the cpu-power involved.

In the long run however, blocks will only be rewarded with transaction fees and (a market equilibrium will form where) the cost of producing the hashing power needed to find a block will be equivalent to the total of transaction fees in that block.

Assuming transaction fees are much lower than the value of transactions in a block, the cost of forking a block are then much lower than the rewards of the double-spended coins.

[mouse]

I tend to agree with the sentiment, if not the details, of lauries objection, i.e. that bitcoin should be made more efficient.

What I wish were possible is if proof-of-work could based on furthering some scientific endeavour – searching for life in space, folding protein chains, etc. I have NO idea how this could work technically, however. Perhaps something like, you chose which project you wish to support, and the open market trades that work into a fair amount of coins that you can then spend. Or something. I really haven’t though this through, it’s just a sentiment.

[kjj]

I tend to agree with the sentiment, if not the details, of lauries objection, i.e. that bitcoin should be made more efficient.

What I wish were possible is if proof-of-work could based on furthering some scientific endeavour – searching for life in space, folding protein chains, etc. I have NO idea how this could work technically, however. Perhaps something like, you chose which project you wish to support, and the open market trades that work into a fair amount of coins that you can then spend. Or something. I really haven’t though this through, it’s just a sentiment.

The reason you have no idea how it could work is because it can't work.  We hash the chain directly because it is impossible to fake the effort.  Using anything else opens the door for forgery.

[flug]

I can't believe the weird shit people fixate on when they hear about bitcoin.

love this phrase.. that really does sum up so much of the bitcoin criticism that I've heard.. fixation!

[flug]

What I wish were possible is if proof-of-work could based on furthering some scientific endeavour..

I like the idea of proof-of-existence, where you plug yourself into your computer, and one Satoshi is distributed for every heartbeat.

[amincd]

Meanwhile I have come to the conclusion that it can be easily proved that as soon as bitcoins would become truly valuable, it would be lucrative to ‘fraud’ the system by gaining more than 50% of that cpu-power.

When they become truly valuable, transaction fees will be worth far more than they are now, which will increase difficulty, meaning the cost of attaining 50%+ of the hashing power will be far higher than it is now.

It would also never be lucrative to fraud the system through a 50%+ attack because it would reduce the value of the bitcoins you have.

In the long run however, blocks will only be rewarded with transaction fees and (a market equilibrium will form where) the cost of producing the hashing power needed to find a block will be equivalent to the total of transaction fees in that block.

The cost of producing hashs is not a short term cost. It requires a long term investment in the hardware that produces them, so unless there's a way to double spend for hundreds of blocks without crashing the value of bitcoins, it would not be worth it. It would be more lucrative to just be honest.

[misterbigg]

Decentralised Currencies Are Probably Impossible (But Let’s At Least Make Them Efficient)

This article, thinly masquerading as a scholarly work, is full of crap. It is a clear example of what happens when a non-programmer, non-technical person combines a word processor with a PDF creation tool.

[misterbigg]

http://www.newbitcoin.org/documents/newbitcoin.pdf

This PDF is also rubbish. Every point in section #3 is incorrect, and demonstrates the author's lack of understanding of the system. For example:

Once most nodes have forgotten about a payment, the payer might double-
spend the bitcoins, depriving the payee of a chance ever to get the original
payment.

Wrong...the payee saves a copy of the transaction. Just one of the numerous errors in the paper.

[kjj]

Oh, and Steve's paper has been refuted many times in many of the threads that he has posted it into.  Perhaps ridiculed would be a better word.

I wasted some time on it a couple of weeks ago.

[Stevie1024]

Meanwhile I have come to the conclusion that it can be easily proved that as soon as bitcoins would become truly valuable, it would be lucrative to ‘fraud’ the system by gaining more than 50% of that cpu-power.

When they become truly valuable, transaction fees will be worth far more than they are now, which will increase difficulty, meaning the cost of attaining 50%+ of the hashing power will be far higher than it is now.

With 'truly valuable' I mean value that can be depended on, no matter what that value is. I certainly don't want to speculate about whether that value be higher or lower, but if it were higher, transaction fees would be worth more than now. But if I do a rough guess of the transaction fees (by inspecting a few blocks on the blockexplorer), they're now about 0.05 - 0.20 bitcoins per block.

That means, if exchange rates wouldn't change, a ROI of 0.2% of what it is now and with that an expected difficulty of 0.2% of what it is now. A not so huge investment is necessary for that.

I know, fees could rise, the exchange rates could rise, the number of transactions per block could rise. However, it's always safe to assume fees will be much less than total transaction value in a block, and therefore it's lucrative to calculate hashes of an forked block-chain with double-spent transactions.

[Stevie1024]

Oh, and Steve's paper has been refuted many times in many of the threads that he has posted it into.  Perhaps ridiculed would be a better word.

I wasted some time on it a couple of weeks ago.

'Ridiculed' is exactly the right word. And the reason I choose to waste my time on such reactions.

[misterbigg]

Oh, and Steve's paper has been refuted many times in many of the threads that he has posted it into.  Perhaps ridiculed would be a better word.

I wasted some time on it a couple of weeks ago.

Oh...haha, ok. So pretty much all of my thoughts that came to mind as I read the original paper have already been expressed times ten by other people.

[misterbigg]

'Ridiculed' is exactly the right word. And the reason I choose to waste my time on such reactions.

I think the reason that PDFs like this evoke so much anger is that since they are camouflaged as peer reviewed research papers,
intelligent readers are expecting high quality. Reading the original Satoshi paper was VERY exciting and stimulating to the imagination! But when we go in with high expectations and then find drivel, we are understandably upset.

[kjj]

Oh, and Steve's paper has been refuted many times in many of the threads that he has posted it into.  Perhaps ridiculed would be a better word.

I wasted some time on it a couple of weeks ago.

'Ridiculed' is exactly the right word. And the reason I choose to waste my time on such reactions.

You didn't waste any time on mine.  I'm still waiting for you to respond to any of my criticisms.

[Stevie1024]

Oh, and Steve's paper has been refuted many times in many of the threads that he has posted it into.  Perhaps ridiculed would be a better word.

I wasted some time on it a couple of weeks ago.

'Ridiculed' is exactly the right word. And the reason I choose to waste my time on such reactions.

You didn't waste any time on mine.  I'm still waiting for you to respond to any of my criticisms.

Actually I did respond:

http://forum.bitcoin.org/index.php?topic=14693.msg215507#msg215507

[kjj]

Actually I did respond:

http://forum.bitcoin.org/index.php?topic=14693.msg215507#msg215507

That's not actually a response.  Just a statement about your intention not to respond.

[Stevie1024]

Actually I did respond:

http://forum.bitcoin.org/index.php?topic=14693.msg215507#msg215507

That's not actually a response.  Just a statement about your intention not to respond.

It's a response stating the conditions on which I will respond with respect to content.

I see now your motto is 'Usually right, but not polite.', and I'm wondering how far that'll get you. My motto would be: I'm happy to be proven wrong and I thank those who spend their time and effort to do so. But if you want me to return the favour, you'll have to ask nicely.