1/5 On this week's @UnhashedPodcast we talked to @hasufl about his paper on mining security, and it was incredibly insightful. In this thread I will summarize the core of the argument, which will hopefully show you why the full interview (linked at the bottom) is a must-listen!
2/5 The key finding is that the sunk cost of mining -- which is currently about 50% of the expected revenue over a 2 year period -- is what incentivizes miners to behave honestly. They have essentially pre-bought half the BTC they will mine during this period.
3/5 This financially ties miners to the future price of BTC. If malicious miners cause a permanent 10% price drop, they also lose 10% of the value of their pre-bought BTC. This is equivalent to all miners losing a massive 65k BTC (10% of half the BTC that'll be mined in 2 years).
4/5 Regardless of whether miners attack via reorgs or censorship, they have to gain more from the attack than they lose from the subsequent price drop in order to be profitable. The higher the sunk cost, the harder this is to achieve. This is the core of what keeps miners honest!
5/5 What determines the sunk cost for miners? How does it affect block confirmation security? Will the sunk cost continue to be high? How will the transition from block reward to fees affect it? Listen to the full @UnhashedPodcast interview to find out!🎧:
unhashedpodcast.com/episodes/hasu-…
unhashedpodcast.com/episodes/hasu-…
