sipa changed the topic of #bitcoin-wizards to: This channel is for discussing theoretical ideas with regard to cryptocurrencies, not about short-term Bitcoin development | http://bitcoin.ninja/ | This channel is logged. | For logs and more information, visit http://bitcoin.ninja
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<yanmaani>
What secures bitcoin against cartel formation? Why can't a 51% cartel of miners conspire to fix the hashrate?
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<yanmaani>
"We have to mine 70% of blocks and we will do it at X H/s, the rest of you get 30%; if you breach your quotas we'll orphan your blocks"
<sipa>
yanmaani: the fact that anyone can add hashrate
<sipa>
it's weak protection, but it's literally why mining exists in the first place (as opposed to some fixed voting power to fixed actors, BFT style)
<yanmaani>
Yeah, but what prevents established miners from just ignoring it?
<yanmaani>
This was very close to happening in Bitcoin Cash. "Pay 25% of block rewards into our fund or we'll orphan your blocks."
<pinheadmz>
a 51% cartel would probably only mine 51% of the blocks. I don't know if they could enforce this rule.
<sipa>
yanmaani: the rest of the world can add more hashrate than the cartel
<sipa>
in theory
<yanmaani>
Well, what if the cartel is sufficiently large?
<yanmaani>
I mean the only reason this didn't happen in BCH was because it looked atrocious and people complained.
<sipa>
if sufficiently disliked, the full node ecosystem can also resort to last resort measures like changing the PoW function
<sipa>
i don't think that's a solution to this problem per se
<sipa>
but it may act as a disincentive to do completely crazy things as cartel
<yanmaani>
Sure, using PoW functions which are elastic, like CPU-bound, alleviates it to some degree.
<midnight>
There's no such thing as a CPU-bound algorithm.
<yanmaani>
what, what's the nice name for it then
<midnight>
"Temporary setback in hashrate efficiency"?
<midnight>
:-)
<aj>
i think it's also easy for members of the cartel to anonymously defect, if the remaining cartel controls 40% of hashpower, they won't regain control but will waste some time before realising they're not just unlucky, while the defector potentially gains at their expense
<yanmaani>
"algorithms for which it does not offer a sufficiently significant so as for it to be profitable profit to furnish for the construction of application-specific integrated circuits in order to complete the algorithm"
<yanmaani>
aj: What if the cartel pays itself?
<yanmaani>
So you say that people who aren't members of the cartel can mine, but they have to give 50% of their rewards to the cartel.
<yanmaani>
or get orphaned.
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<aj>
yanmaani: if the cartel can't enforce what they say, it doesn't matter what they say
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<yanmaani>
If they have 51%, I mean.
<yanmaani>
Then why would you defect?
<midnight>
yanmaani: No, seriously. There's no such thing.
<yanmaani>
You can either be part of the cartel and earn block reward + non-cartel*haircut*block reward, or defect and earn block reward*(1-haircut)
<yanmaani>
midnight: What about randomX and friends?
<aj>
yanmaani: the cartel's made up of alice, bob, carol and dave, each with 15% hashpower, for a total of 60%. carol defects, leaving the cartel with 45% of hashpower, eg
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<yanmaani>
For such algorithms, the optimal ASIC (in theory) is a CPU.
<yanmaani>
aj: Why would Carol defect?
<yanmaani>
(.15/.60) * .4 * haircut + .15 > .15
<aj>
.15/60 < .15/55 though
<yanmaani>
Yeah, the cartel has to be as small as possible. It's sort of funny.
<yanmaani>
If everyone is in on it, no profit.
<yanmaani>
If 49% are in on it, no profit
<yanmaani>
If 51% are in, max profit
<yanmaani>
and it's just declining from there
<yanmaani>
So it's very unstable: you might imagine a scenario where it devolves into a pyramid scheme
<pinheadmz>
again a 51% cartel maybe finds every other block. They'd be attempting to orphan the 49% of blocks all the time. wouldnt it be more profitable just to extend the chain?
<pinheadmz>
Not to mention, keep Bitcoin valuable so they can pay their electric bill
<yanmaani>
70% agree to steal 50% from 30%. Then 4/7 (40% of tot, 57% of cartel) steal 50% of 50% of 30% from them.
<yanmaani>
pinheadmz: No, because they demand the non-cartel members pay them half their rewards.
<yanmaani>
Miners can't affect the price in any meaningful manner; if they could they could just front-run themselves.
<yanmaani>
So short at 100x, make announcement, collect profits.
<midnight>
yanmaani: All ASIC-resistance is a temporary measure that will basically instantly fail at any significant scale, even if it's just a reliance on Intel's crushing economies of scale and stuffing their CPUs into machines that end-users will never be able to acquire at any scale; but this theoretical Universe doesn't exist.
<midnight>
Ehh.. this isn't really the place for this. Recommend you redirect to #bitcoin.
<yanmaani>
What do you mean midnight? If Intel makes nice Xeons for mining, those are roughly the same as buying a lot of retail CPUs.
<yanmaani>
Well it's generally about blockchain incentives no?
<sipa>
i think things like proofs of space&time have a better chance of being ASIC-resistance
<yanmaani>
Is the cartel talk off-topic?
<yanmaani>
like the haircut cartel
<sipa>
*ASIC-resistant
<yanmaani>
(and I don't mean barbers meeting in smoke-filled rooms)
* midnight
pictures endless DIMM banks
* midnight
shudders
<sipa>
midnight: is that a comment on proofs of space&time?
<yanmaani>
midnight: Depending on how it's structured, it's no problem.
<yanmaani>
schematically, you could imagine the following
<yanmaani>
RAM is 200x faster than SSDs and 200x more expensive on a $/GB basis
<yanmaani>
SSD is 10x faster and 10x more expensive
<midnight>
sipa: Are you talking about weird crystal structures and materials physics again?
<yanmaani>
ergo, ASICs will not be much better than retail
<sipa>
midnight: no
<sipa>
midnight: chia's consensus mechanism
<midnight>
Ah, Bram's thing.
<sipa>
yeah
<sipa>
it just needs disk space - not bandwidth or I/O to it
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<sipa>
there are certainly non-trivial trade-offs in it possible
<sipa>
but i'm not sure those favor asics much
* midnight
pictures endless banks of hard drives
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* midnight
still shudders
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<yanmaani>
Whatever happened with colored coins? Did any clients implement them or anything?
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<sipa>
yanmaani: my (potentially controversial) opinion: colored coins are parasitic, as they compete with the blockchain's native currency, but don't contribute to its value (which is what indirectly leads to its security, as long as subsidy is nonzero)
<sipa>
as a result, native coin holders are incentivized to censor colored coins
<sipa>
and they were implemented in systems like omni
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<waxwing>
Chris_Stewart_5, 'did the podle stuff get implemented in secp256k1' - no, you can use it for the underlying tweak (add, mult) operations. but the 'sig' part you have to do in steps outside that.
<waxwing>
consider, in particular, the hash you construct is something like e=H(kG||kJ||P1||P2), where J is some NUMS point, so it's not like you can leverage any existing Schnorr implementation.
<waxwing>
but i guess a DLEQ construction could be a nice addition to a library like that.
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<yanmaani>
sipa: Don't they pay by txn fees?
<yanmaani>
I want to send 1 X-coin to someone else, and even if it's just 1 sat that fee still has to be paid in bitcoins and not X-coin. So I still have to cough up bitcoins.
<yanmaani>
I don't intend to make an insulting comparison here, but it is vaguely reminiscent of the situation with Ethereum and 'gas'
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<sipa>
yanmaani: i'm very skeptical about that
<sipa>
perhaps if fees are very substantial
<sipa>
but there is also no inherent reason why miners would only accept fees in BTC
<sipa>
(you could pay fees by making anyone-can-spend outputs with a recognizable structure too)
<sipa>
and at least for some types of other assets, there shouldn't really be a need for a public blockchain
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<sipa>
most of the useful ones are just digitized tokens backed by some real-world asset held in reserve by the issuer; such a setup inherently requires trust in the issuer to honor the peg
<sipa>
no reason why in that case the issuer can't run their own private (but publicly auditable) "blockchain" and use cross-chain atomic swaps for trading
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<bsm117532>
It uses petertodd's single-use-seals to create off-chain issuance and trading, using Lightning-like channels.
<bsm117532>
I think this direction is technically interesting, but I don't think sipa's "opinion" should be considered controversial...
<bsm117532>
It's a straight up fact that if you can interfere with consensus by bribing miners, it's a problem and changes the game theory of the system.
<bsm117532>
You could also bribe them with dollars, but that's not a problem since consensus on ownership of dollars is not decided by the output of mining.
<bsm117532>
It's when mining games can result in ownership or not-ownership of additional tokens that creates consensus-incompatibility.
<bsm117532>
Numerous such mining games have been observed, in the wild, on Ethereum.
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<bsm117532>
IMHO assets should separate concerns, and probably, launch their own chain. Most assets (e.g. equities) are centrally controlled anyway by the issuer.
<sipa>
someone once made the comment that the incentive-incompatibility argument doesn't really apply to assets that have no real world backing like cryptokitties... which may be the case, but i'm not sure that there is a reason those should have value in the first place
<yanmaani>
But how is this any less incentive-compatible than normal bitcoins?
<yanmaani>
A malicious miner can censor transactions. And?
<sipa>
bitcoin's subsidy is expressed in BTC; that BTC needs to have value for the subsidy to add security
<yanmaani>
Yeah, but if we assume coloured coins do not decrease its valu.
<yanmaani>
value*
<sipa>
they compete with BTC on chain
<yanmaani>
Even if everyone were to start transacting in magical tokens, Bitcoin would still have intrinsic use for paying miners.
<yanmaani>
Do they?
<sipa>
i don't see why you think that
<yanmaani>
Say I am a company, and I want to borrow money, so I issue zero-coupon bonds.
<sipa>
BTC's value can be anything for that to hold
<yanmaani>
I say, "I'll pay X XBT to the holder of this coloured coin on date D"
<yanmaani>
how exactly does this threaten bitcoin's value?
<yanmaani>
Wherein lies the comparison?
<yanmaani>
competition*
<sipa>
block space
<yanmaani>
What is the incentive problem? Different kinds of Bitcoin transactions compete with one another too.
<sipa>
they all contribute to BTC's ability to function as a currency - which at at a very long timescale hopefully contributes to its value
<yanmaani>
Don't my Bitcoin bonds also do this?
<sipa>
sure
<bsm117532>
yanmaani: sub-assets give you numerous ways to short, making a reorg or censorship attack profitable.
<sipa>
i don't claim that on-chain capacity for BTC transactions is the only thing that gives them value
<sipa>
but i believe it is necessity, and if BTC risks being outcompeted by another asset on its own blockchain, i believe that its ecosystem wilk be incentivized to censor those transactions
<yanmaani>
bsm117532: What, unlike the existing exchanges which do not allow you to short?
<yanmaani>
Or do you mean something else?
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<bsm117532>
yanmaani: consider what would happen if a dollarcoin were issued on top of bitcoin, and the market cap of that dollarcoin was larger than bitcoin.
<bsm117532>
If the ratio of the two market caps is large enough, shorts on the sub-assets are much larger than the mining reward.
<yanmaani>
So people would short dollarcoin and bribe bitcoin miners to vandalize it?
<bsm117532>
In general this is an expected outcome: look at the market cap of major stock markets (74 trillion, if memory serves) compared to e.g. gold
<sipa>
i think a better argument is that it's simply cheaper and not a reduction in security if dollarcoins were on their own issuer-controlled chain rather than bitcoin's
<bsm117532>
yanmaani: short dollarcoin. Do a mining attack to prevent the short from settling.
<yanmaani>
bsm117532: Well, is it? It's not like everyone is going to use StockCoin instead of stocks
<sipa>
the only reason it doesn't happen is because of lack of technology standard to enable this - and perhaps some misconceptions about what bitcojn's blockchain adds
<yanmaani>
but sure I get your point
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<yanmaani>
sipa: Didn't Tether have their own blockchain?
<yanmaani>
bsm117532: What, you mean like an OTC short?
<sipa>
yanmaani: they used omni
<bsm117532>
yanmaani: StockCoin instead of stocks is the value prop and direction of NUMEROUS projects in this space, including Ethereum, Liquid, etc.
<yanmaani>
with credit and all
<sipa>
omni being parasitically using bitcoin blockspace
<yanmaani>
bsm117532: Right, but even if they succeed, it's not obvious that it will come to dwarf non-blockchain stock
<yanmaani>
in fact I am willing to bet dollars to doughnuts it will not
<sipa>
then they moved to thereum i think, and also blockstream's liquid (not sure what is currently being actually used)
<bsm117532>
It won't, for scalability reasons. But that's one thing that makes RGB interesting -- it moves all that off chain.
<yanmaani>
bsm117532: Well, it still could. You issue stock depository note tokens on the blockchain, and then you trade them on a centralized exchange.
<sipa>
even liquid is overkill for tether i think, but it's certainly a much better match than any public chain
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<bsm117532>
yanmaani: yes, blockchains can handle global net settlement, but not trading. Having trading cryptographically committed to a blockchain is very interesting though. It makes naked shorts, fractional reserve, and other misbehavior impossible.
<yanmaani>
bsm117532: The exchanges can still do it. Naked shorts are a good thing.
<yanmaani>
And you can just do it in the OTC market or whatever
<bsm117532>
No, they're not. And they're illegal.
<yanmaani>
bsm117532: in the US, sure
<yanmaani>
but there would be no law here
<bsm117532>
And I'm not going to have that conversation.
<yanmaani>
most of the blockchain shares stuff is heavily illegal otherwise
<yanmaani>
I mean isn't that the point? Allowing insider trading etc
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<yanmaani>
about naked shorting or US law?
<bsm117532>
Naked shorting. If you want to defraud people by selling things you don't have...that's straight up fraud and not debatable.
<bsm117532>
Anyway, it can be made cryptographically impossible, in principle.
<bsm117532>
(and that's interesting)
<yanmaani>
naked shorting aids price discovery and liquidity. It is very debatable
<yanmaani>
so I mean it seems like the only upside of this is to free the markets of regulation
<bsm117532>
I'm gonna pull a sipa now and walk away from a ridiculous conversation. Have a good night.
<yanmaani>
like, you have MNPI, you want to trade on it