Anyone who claims that Bitcoin can be a "global settlement layer" doesn't understand Bitcoin.
As is, Bitcoin can be "hacked" by someone who controls a lot of hashpower; by "hacked" I mean that person could cancel the transactions he wants, provided that they're not too old.
This is known as a "51% attack", and the principle is that you perform a big transaction (wire 10,000 BTC to an exchange, sell them & cash out), and use your own hashpower to build an alternative string of blocks, starting with the one containing the block with your transaction.
Once you've cashed out your transaction, you start propagating the blocks you've calculated in secret. If your string of blocks is longer than the string of blocks that has been produced organically by the network in the time it took you to cash out, your "hack" was successful.
This attack is near-impossible in practice:
1) it's very hard to accumulate that amount of hashpower: AntMiners are sold out until August, & it would take years to get the infrastructure going
2) if your attack is successful, the trust in the network will collapse along with $BTC
Point 2) is why everyone trusts the miners themselves won't turn against Bitcoin, or allow anyone to do so (by renting out their own hashpower, for example). If $BTC were to collapse, their infrastructure would become worthless, as the income it generates would disappear.
But what if Bitcoin somehow became this "global settlement layer", what if central banks & corporations decided to use it to settle their transactions?
That kind of framework can't be reneged upon overnight. That's why SWIFT has such a strong grip on international transfers.
Then, in the event of a 51% attack, Bitcoin wouldn't plunge, because central banks and corporations would have no alternative but to continue using it.
The only solution to avoid settlement pirates would be to increase the overall hashpower of the network by orders of magnitude.
Increase it by how much? Today, it would cost around $5 billion in mining rigs to produce the same hash rate as the Bitcoin network. SWIFT processes $300B per day, on average. If Bitcoin were to replace SWIFT, you'd expect a hack to be at least as costly as 1 day of transactions.
I'm only considering here the commercial benefits of a hack - not strategic value like in the event of war between two superpowers, when crippling your enemy's financial system without firing a single shot would be worth much, much more than some canceled transactions.
This was always a feature of Bitcoin: the cost of the network is also an insurance against "hacks". The network needs to cost a lot of money to prevent 51% attacks.
So if we wanted to use Bitcoin as a "global settlement layer", the network would need to cost x100 more than today.
Proof of Work relies of electricity burn to generate the network cost (and the insurance). Currently, Bitcoin uses around 0.5% of global electricity output. To use Bitcoin as a global settlements layer, it would need to use 50% of the world's electricity.
That's just stupid.

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More from @Tr0llyTr0llFace

15 Mar
Chainalysis is doing a tremendous job in convincing everyone crypto isn't being used by criminals.
Their "less than 1% of crypto transactions are criminal" claim has been relayed thousands of times in the crypto & mainstream media.
Of course, this claim is weapons-grade bullshit.
First, their numbers are based on "proprietary methodology". You basically need to trust a company 100% focused on crypto that crypto is legit.
Second, when they say that "x% of transfers are criminal", what they actually mean is "we managed to flag x% of transfers as criminal".
Chainalysis doesn't say what total percentage of transfers they manage to classify. So if they flag 1% as criminal but only manage to classify 2% of all transfers, that's really, really bad.
As a point of reference, in 2019 they classified $20B of transfers as "criminal" - ...
Read 4 tweets
10 Mar
A lot of people, some of them extremely smart and knowledgeable in fields other than finance, believe that there isn’t much difference between Bitcoin and stocks or any other financial asset as an investment because “you need someone to buy it from you” in both cases. A thread.
When you buy a stock, the reasoning goes, you do it because you expect you’ll sell it to someone else at a higher price. It’s exactly the same as for Bitcoin. Hence, it’s the same game, right?
Obviously not.
A stock is a share of ownership of a company. This company has assets.
This company has people working hard to generate profits that compound to its assets. Think of your stocks as a claim on a percentage of a bag in which the company’s employees are putting the money they earned for the company every quarter. The bag gets bigger and more valuable.
Read 11 tweets
9 Mar
I woke up early this morning & stumbled upon Seetee's "letter to shareholders" and oh boy is it an alphabet soup of nonsensical Bitcoin memes.
To quote Wolfgang Pauli, "it's not even wrong"
I guess Nic Carter must have had a strong influence over whoever wrote it.
Let's dive in.
TL;DR: "I've watched Bitcoin go up tenfold in a year and that gave me confidence that it's very valuable so I jumped in".
Of the 19 advisors that were consulted, only one, Mike Green, is a critic, and also the only one who understands finance and doesn't have a vested interest.
Let's start with the "Bitcoin is like the early Internet" meme. The letter references Tim Berners Lee - maybe they should have talked to him. Since Tim said 6 years ago that Bitcoin was getting ahead of itself, the number of daily transactions has barely gone up threefold.
Read 20 tweets
8 Mar
The meme of Bitcoin as a hedge against inflation and central bank money printing is stupid and perfectly tailored to stick in the brains of financially illiterate bagholders.
First, it seems intuitive that inflation should push Bitcoin up, as everything goes up with inflation.
Except Bitcoin isn't bacon or milk, it's a financial construct. Not all assets go up with inflation. Bonds go down with inflation as interest rates rise. Stocks can go down with inflation if input costs exceed the company's pricing power.
Bitcoin's input costs would rise.
Bitcoin costs money to exist - it needs ASICs and electricity, and those will definitely go up with inflation. Of course miners are free to reduce the hash power to counter-balance that, but then the security of the network will decline, so how is that good for the price?
Read 8 tweets
7 Mar
Remember when Paul Tudor Jones invested in Bitcoin, in May 2020? In his letter to investors, he explained that Bitcoin would be a good "hedge against inflation and money printing", without going into much specifics.
But he did one very weird thing. He didn't buy Bitcoin.
Instead, he bought Bitcoin futures. That's very, very weird for one reason - Bitcoin futures have a very negative carry as their term structure is in contango. A Bitcoin future a few months out costs much more than Bitcoin spot, and PTJ was willing to give up that spread. Why?
Some said that it was "easier than buying Bitcoin", but come on - a multibillion dollar hedge fund can figure out how to buy Bitcoin and store it in a wallet.
I can tell you that in funds like those, an army of PhDs spends their days figuring out the best way to make every bet.
Read 11 tweets
6 Mar
Nic Carter still tries to spin Bitcoin's mind-numbingly stupid energy and cash burn as a "debate". It's not a debate: Bitcoin's energy energy and cash burn is mind-numbingly stupid.
Let's dissect the desperation of a hypocrite who's backed into a corner.…
The opening salvo sets the tone.
Nobody's debating if it's worth to spend "any" energy on Bitcoin. Sane people are simply saying that it's stupid to spend 100+ TWh/year because it's an insanely large amount and much more efficient systems could be set up to the same effect.
Then there's the assumption that Bitcoin is, or enables, "a non-state monetary system" and "sound money". It's not, and it doesn't. Bitcoin, in itself, is just a database - a distributed ledger, like tens of thousands of other databases, only much slower and more expensive.
Read 16 tweets

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