1/ Great article by @LaurentMT !

The TL;DR is that energy spent per block contributes not just to UTXOs belonging in that block, but retroactively to all global & past UTXOs.

The often-cited “energy spent per Bitcoin tx” number in many economic papers is flawed for this reason.
2/ Another way to put it is that Bitcoin transactions are secured by high stock-to-flow ratio.

I mentioned this recently in terms of mining hardware stock. But economic history is also another kind of stock.
3/ So Bitcoin possesses high stock-to-flow ratio in two dimensions:
- Stock #1: ledger history
- Stock #2: mining hardware
4/ Stock in ledger history is the accumulation of *past* transactions.

Stock in mining hardware is the accumulation of *future* transactions. It is equal to the stream of future rewards, discounted back to the present. Discussed in my article here: medium.com/@hugonguyen/bi…
5/ To revert a tx, an attacker needs to overcome both types of stock. He needs to acquire the necessary hardware, AND spend an amount of energy proportional to the distance from the tip of the UTXO he wants to revert.
6/ Of cos, if he wants to revert the most recent transaction (distance=0), then there’s not much stock in the ledger history for that transaction, but there’s still an enormous amount of stock in the hardware dimension.
7/ The longer a transaction has occurred, the more stock it accumulates in the ledger history, and the harder it is for an attacker to revert.
8/ In terms of hashes, stock in ledger history only goes up, never goes down. In terms of actual economic cost (and @LaurentMT ’s “number of Bitcoin.days secured” metric), it could in theory go down, if say, a Quantum computer is invented & mass-produced tomorrow.
9/ In terms of economic cost, stock in mining hardware could also go up & down. A sustained bear market would likely cause the cost of acquiring ASICs to go down, while a bull market would do the opposite.
10/ Mining centralization reduces the security provided by stock in mining hardware. But mining centralization does *not* reduce the security provided by stock in ledger history. A miner with majority hash rate still needs to spend tons of energy to go back far in history.
11/ To sum it up, Bitcoin is protected by high stock-to-flow ratio in 2 dimensions:
(i) Stock in ledger history - security can be weakened with advances in computing
(ii) Stock in mining hardware - security can be weakened with bear markets & a high level of mining centralization

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More from @hugohanoi

12 Apr
Why S2F has been misapplied in Bitcoin, in mathematical terms:

By using S2F and by restricting ‘flow’ to merely rewards, you are saying Bitcoin supply is an integral function (of changes in supply over time).

But asymptotically changes are zero. There’s nothing to integrate.
Applying S2F to things that are not integrals in nature is a mistake. Math is useful only when it’s applied correctly to phenomenon. It’s mental masturbation otherwise.
Examples of things with true S2F characteristics: population, CO2 concentration, the Bitcoin’s ledger (security strength as an integral of fee flows over time)

Read 6 tweets
28 Jan 19
Last few words on @VladZamfir's poor piece of “work” (or is it propaganda?).

A 18-min rant to express what are some very simple ideas should be enough of a major red flag. But let me point out some tactics/fallacies. They are used elsewhere in this “space” too.
Tactics/fallacies used:
(a) “Call black white, white black”
(b) Deflection
(c) Framing
(d) Ad Hominem
(e) Intentional Vagueness
When someone suggests Zamfir’s idea invites centralized control/reinvents the status quo, note that he doesn’t respond to that point directly.
Read 15 tweets
31 Dec 18
1/ People have asked me to elaborate on the “verification-not-computation” point. And why Ethereum has a flawed architecture from the get-go.

Thread. 👇

*Note: I use “blockchain systems” to refer to Bitcoin-like blockchains that are based on PoW.
2/ First of all, Greg Maxwell explained verification-not-computation concept so well already so I highly recommend reading his full post, linked in @TuurDemeester ’s thread here.
3/ @BobMcElrath also succinctly described the problem here.
Read 32 tweets
29 Sep 18
1/ Emin again with the BS that PoW’s role is merely a “Sybil-controlled mechanism”. (And therefore PoS is a reasonable drop-in replacement.)

It’s the classic mistake domain experts make when analyzing systems purely from their Point-of-View.
2/ Here is Emin’s original “lecture” for reference

I seriously hope Emin is not the only one teaching blockchain at @Cornell. Because he is dead wrong.
3/ Reducing PoW’s role to Sybil control is like an alien looking at cars and conclude that their main purpose is for protecting people from external objects. When they try to create the same thing, they might end up with something like the Flintstones’ car. 🙄
Read 12 tweets
7 Jun 18
1/ Thread on variance.
PoW mining is critical to Bitcoin network security. Mining, in turn, is subject to 3 major sources of variance, from (roughly) easiest to tame to hardest:

i/ Finding blocks via SHA256 hashing
ii/ Market demand (for BTC & transactions)
iii/ Tech innovation
2/ Quick note: contrary to popular belief that miners are bad & evil, they are vital to Bitcoin’s survival. So it’s imperative to foster a healthy mining industry.
3/ The best miners would be the ones who understand the nature of these variances & know how to handle them most effectively.
Read 20 tweets
14 Apr 18
1/ This is an interesting idea. Leaving aside the issue of whether this would actually stop the rise of altcoins, I doubt that in-protocol incentives for future development would be feasible.
2/ The reason Bitcoin’s incentive scheme works is that it’s actually pretty simple.

*Note: this does not imply that the Game Theory aspect of Bitcoin is simple. Complex dynamics could develop from very simple rules (e.g.: think of Go/Chess).
3/ Concretely, in Bitcoin, the goal of mining can be:

(a) mathematically defined - miners get paid for finding a hash that is <= current difficulty target
(b) computationally verifiable - miners’ work is verifiable by *anyone*, cheaply
Read 14 tweets

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