I'd say @nntaleb's bitcoin paper is directionally correct, even if it's not 100% mechanically accurate. 1/n
Source: fooledbyrandomness.com/BTC-QF.pdf
Source: fooledbyrandomness.com/BTC-QF.pdf
https://twitter.com/nntaleb/status/1408687019161800704
In other words, despite some errors and not getting all the way to the bottom of things, if you continue in the direction of inquiry which he's laying out, you will find the black swans. 2/
Shortlist of bitcoin's systemic risks:
- Long-term security vs. double-spending (instability of mining incentives)
- 21m supply cap not holding
- Any-term security vs. govt shutdown
- Monopoly mining = max-profit strategy
- Censorability
🦃——————|——🍗 ?
3/
- Long-term security vs. double-spending (instability of mining incentives)
- 21m supply cap not holding
- Any-term security vs. govt shutdown
- Monopoly mining = max-profit strategy
- Censorability
🦃——————|——🍗 ?
3/
From the paper:
> "It proved to not even be a currency at all."
Bit of an overstatement. It's proved so far to be a really bad currency, but a currency. And it could - in theory - become more stable in future under the right conditions (unlikely as those conditions are). 4/
> "It proved to not even be a currency at all."
Bit of an overstatement. It's proved so far to be a really bad currency, but a currency. And it could - in theory - become more stable in future under the right conditions (unlikely as those conditions are). 4/
> "Its expected value is no higher than 0."
Also an overstatement. You can't say "BTC is worth exactly 0" based on the contents of this box. We don't know if there will be sufficient hash rate in future - seems unlikely but can't know for sure. 5/
Also an overstatement. You can't say "BTC is worth exactly 0" based on the contents of this box. We don't know if there will be sufficient hash rate in future - seems unlikely but can't know for sure. 5/
The distinction made between bitcoin and gold is a good one though: If in future the global hash rate falls below a certain threshold, then the system becomes vulnerable to double-spending - a catastrophic loss of function for all (locally held) BTC. 6/
By contrast, no such thing can happen with gold. Gold's "protocol" is physics, you can't destroy it, unless you throw it into a nearby star, and there isn't a central all-of-gold ledger with an update/reward mechanism that can be remotely exploited to stop it functioning. 7/
In short, there are no meaningful conditions under which a the "gold network" breaks down and locally held pieces of gold stop working, and that isn't true for bitcoin. The risk profiles are not comparable. 8/
Quick reminder that Bitcoin's difficulty adjustment has nothing to do with security. All it does is speed up or slow blocks down in response to changes in hash rate. 9/
In other words difficulty is to hash rate as thermometer is to temperature. It's just a measure. So connecting it to security is sort of like saying, "The temperature mustn't fall below 10°C for the system to remain secure. But don't worry, the thermometer will adjust." 10/
NB: Technically what the difficulty adjustment does is make the supply of BTC unresponsive to changes in demand. So as hash rate goes up or down over time (in response to changes in demand) the supply curve isn't affected. 12/
The "law of iterated expectations" is part of the General Theory of Detroyment of Interest in Money (diagrammed below) and the govt shutdown black swan, which involves proactively exploiting the LIE. 13/
Read: joekelly100.medium.com/how-to-kill-bi…
Read: joekelly100.medium.com/how-to-kill-bi…
Bitcoin's vulnerability to adversarial action by govt actors is a more important black swan than the question of sufficient hash rate / unstable incentives in future, imo. 14/
https://twitter.com/joekelly100/status/1406723483149668354
Not mentioning the Lightning Network, however unproven it may be as a technology, or other scaling suggestions like @Truthcoin's BIP300, seems unfair. These are old arguments and it's widely acknowledged that bitcoin must be used differently in future in order to scale. 15/
It could be an intractable problem of course, like trying to build a perpetual motion machine, but no-one's proved that yet. 16/
https://twitter.com/joekelly100/status/1353711930314256384
Disagree with this. It's clearly an offshoot of anti-state ideology, whether you call it libertarianism or not. I would say Bitcoin is the most cunning Rothbardian contrivance to date. 17/
More:
More:
https://twitter.com/joekelly100/status/1400120177283510280
Disagree with this too. The traceability of the blockchain won't last. More advanced crypto will make it (for most intents and purposes) opaque. In other words, the goal of being untraceable is being worked towards incrementally, even if it hasn't been fully achieved yet. 18/
Upgrades like taproot and Schnorr signatures are moves towards making traceability-defeating usage the most economic way of transacting on-chain, so that it becomes the norm over time. 19/
Being traceable today arguably works to bitcoin's advantage, because it makes it much less likely to be banned. The plan is effectively to execute a privacy rug pull on regulators and law enforcement in due time. 20/
Conclusion is good. The #1 use case for blockchain technology remains speculating on whether there are real use cases for blockchain technology. 21/21
• • •
Missing some Tweet in this thread? You can try to
force a refresh
