will bitcoin become less secure over time?

[hugolp]

Security is a canonical example of a public good. You need to have a serious analysis of the incentives to demand and supply security services before you entrust provision to the market. The normal case is that security is greatly under-supplied because no one in the user base has an incentive to purchase it. If you were to give one person a legal monopoly of mining, (i.e. centralize transaction processing), the incentive situation would improve considerably. Supply-side competition in this case is harmful, it leads to a competitive "race to the bottom" in which security is severely under-supplied.

The only possible (costless) way out of this quagmire is if security isn't really necessary after all. For example, if you can't make mischief with say 75% of hashing power, then the future collapse in security is not a problem. Views on this issue are conflicting and my professional expertise is in economic analysis not the workings of the algorithm.

I dont agree at all. In fact people pay for security to private firms in the present system where there is a monopolly on security and apparently it should not be necesary.

And the private security agencies have not gone away, even in the face of a monpolly, so they are working. Sorry, what you say is not true.

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[wareen]

Where does the fund come from to pay for the clusters in case of attack? Voluntarism?

Everybody using Bitcoin as a form of payment or as a store of value has an interest that the system stays secure. If Bitcoin goes mainstream then large merchants or financial institutes would probably be more than willing to fund a Bitcoin network security insurance.

For the same reasons, merchants and banks invest in electronic scanning equipment to check for counterfeit banknotes, they would be willing to pay some money to insure against counterfeited (ie. double-spent) Bitcoins, no?

Besides, such a Bitcoin insurance would probably be rather cheap in comparison.

My main point is (and please refute that if you disagree): the security of the Bitcoin network does not need permanently high hashrate - it can be just as secure at a fraction of the cost with a very high standby hashrate available on demand (in case of an attack).

[cunicula]

You are basically saying that competition is a tragedy of the commons, which is basically nonsense.

A monopolist miner has some incentive to protect the asset in order to preserve his monopoly rents from txn processing.
Competitive miners lack any incentive to protect the asset because they don't earn monopoly rents. None of the client users have sufficient incentives to buy
security because of the free rider problem. However, they should voluntarily purchase an extremely small amount.
As you can see, monopoly power is the only potential source of strong incentives to protect the asset. Increasing competition decreases security.

Monopoly is not sustainable without restrictions on who is allowed to mine, however. People will enter to capture rents.

Without intervention the free market equilibrium is a) extremely tiny txn fees, b) extremely low difficulty, and c) a large number of atomistic miners.

You better either a) hope that the protocol is changed, b) hope that security isn't necessary after all, or c) wait for a currency project with a sustainable design to come along.

[cunicula]

Security is a canonical example of a public good. You need to have a serious analysis of the incentives to demand and supply security services before you entrust provision to the market. The normal case is that security is greatly under-supplied because no one in the user base has an incentive to purchase it. If you were to give one person a legal monopoly of mining, (i.e. centralize transaction processing), the incentive situation would improve considerably. Supply-side competition in this case is harmful, it leads to a competitive "race to the bottom" in which security is severely under-supplied.

The only possible (costless) way out of this quagmire is if security isn't really necessary after all. For example, if you can't make mischief with say 75% of hashing power, then the future collapse in security is not a problem. Views on this issue are conflicting and my professional expertise is in economic analysis not the workings of the algorithm.

I dont agree at all. In fact people pay for security to private firms in the present system where there is a monopolly on security and apparently it should not be necesary.

And the private security agencies have not gone away, even in the face of a monpolly, so they are working. Sorry, what you say is not true.

The private security agencies are hired to protect public networks? Very interesting. Could you give me an example?

[hugolp]

Security is a canonical example of a public good. You need to have a serious analysis of the incentives to demand and supply security services before you entrust provision to the market. The normal case is that security is greatly under-supplied because no one in the user base has an incentive to purchase it. If you were to give one person a legal monopoly of mining, (i.e. centralize transaction processing), the incentive situation would improve considerably. Supply-side competition in this case is harmful, it leads to a competitive "race to the bottom" in which security is severely under-supplied.

The only possible (costless) way out of this quagmire is if security isn't really necessary after all. For example, if you can't make mischief with say 75% of hashing power, then the future collapse in security is not a problem. Views on this issue are conflicting and my professional expertise is in economic analysis not the workings of the algorithm.

I dont agree at all. In fact people pay for security to private firms in the present system where there is a monopolly on security and apparently it should not be necesary.

And the private security agencies have not gone away, even in the face of a monpolly, so they are working. Sorry, what you say is not true.

The private security agencies are hired to protect public networks? Very interesting. Could you give me an example?

Stop trolling.

Honestly when I though you could have an honest debate, you start trolling again. Sad.

EDIT: Search Suffolk bank.

[cunicula]

Where does the fund come from to pay for the clusters in case of attack? Voluntarism?

My main point is (and please refute that if you disagree): the security of the Bitcoin network does not need permanently high hashrate - it can be just as secure at a fraction of the cost with a very high standby hashrate available on demand (in case of an attack).

(not my area of expertise) I basically agree with the main point, though there are lingering questions about how quickly the attack needs to be detected and how expensive it would be to have standby hashing capacity. It may or may not be practical.

Of course this is a red herring because it doesn't have anything to do with the incentive issue.

[cunicula]

Suffolk bank is irrelevant. Of course a monopoly transaction verifier has an incentive to tell the truth. We have been over the ability of a mining monopoly to solve the problem. In the current system entry into mining or pool operation is very cheap. A monopoly can't capture rents without altering the protocol to forestall free entry. I agree that establishing a mining monopoly is one possible solution. Would the new coin be any better than paypal?

[hugolp]

Suffolk bank is irrelevant. Of course a monopoly transaction verifier has an incentive to tell the truth. We have been over the ability of a mining monopoly to solve the problem. In the current system entry into mining or pool operation is very cheap. A monopoly can't capture rents without altering the protocol to forestall free entry. I agree that establishing a mining monopoly is one possible solution. Would the new coin be any better than paypal?

Suffolk bank was not a monopolly. It was a private entitity that at its peak had asociated around 60% of the banks of the state (from memory though, the % could be different). And during some periods it had competition. The prove that it was not a monopolly is the fact that a competiting bank appeared and Suffolk was forced to close its clearing house operations in one year.

The point is:

1. Contrary to what you said, security is not best handled as a monopolly, or at least its not impossible and not profitable to handle by private firms, as real life shows.
2. With all your chaning subject any time you are proven wrong, I even forget what you are trying to prove about Bitcoin.

[cunicula]

Suffolk bank is irrelevant. Of course a monopoly transaction verifier has an incentive to tell the truth. We have been over the ability of a mining monopoly to solve the problem. In the current system entry into mining or pool operation is very cheap. A monopoly can't capture rents without altering the protocol to forestall free entry. I agree that establishing a mining monopoly is one possible solution. Would the new coin be any better than paypal?

Suffolk bank was not a monopolly. It was a private entitity that at its peak had asociated around 60% of the banks of the state (from memory though, the % could be different). And during some periods it had competition. The prove that it was not a monopolly is the fact that a competiting bank appeared and Suffolk was forced to close its clearing house operations in one year.

The point is:

1. Contrary to what you said, security is not best handled as a monopolly, or at least its not impossible and not profitable to handle by private firms, as real life shows.
2. With all your chaning subject any time you are proven wrong, I even forget what you are trying to prove about Bitcoin.

60% huh. Sounds like they had some market power doesn't it. During some periods it had competition... 

Of course there is a continuum from monopoly to perfect competition. Less security would be provided at every step.

You are right,  ' this discussion is far afield.

Main point is that network security is designed to decrease over time to near zero in the current protocol. This is a serious issue.

[hugolp]

Main point is that network security is designed to decrease over time to near zero in the current protocol. This is a serious issue.

Bullshit. The serious issue is why do you keep trolling this forum.

[cunicula]

Main point is that network security is designed to decrease over time to near zero in the current protocol. This is a serious issue.

Bullshit. The serious issue is why do you keep trolling this forum.

Okay. I'll ignore your posts and would appreciate it if yould ignore topics started by me. If you cannot do this, I will still ignore your posts.

The forum should be big enough for the both of us.