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1/36) BTC's security model is broken
It has to double in price every 4 years for a century or sustain extremely high fees!
Just to maintain the present level of security...
Which is impossible, as it exceeds global GDP within 31 years
Therefore, BTC security is doomed!🧵
It has to double in price every 4 years for a century or sustain extremely high fees!
Just to maintain the present level of security...
Which is impossible, as it exceeds global GDP within 31 years
Therefore, BTC security is doomed!🧵
2/36) Each halvening exponentially lowers the security budget; until it is gone!
These halvenings continue after exceeding global GDP for another 80 years before running out completely
If you understand exponentials & economics, you should know that this is entirely impossible!
These halvenings continue after exceeding global GDP for another 80 years before running out completely
If you understand exponentials & economics, you should know that this is entirely impossible!
3/36) Fees will also never reach sustained extremes due to the ratcheting effect of the fee market
Paying hundreds of dollars for a single TX is not realistic in a competitive market
When fees spike, users leave, all due to the unnecessary addition of the block size limit!
Paying hundreds of dollars for a single TX is not realistic in a competitive market
When fees spike, users leave, all due to the unnecessary addition of the block size limit!
4/36) This all means that BTC's long-term security is unsustainable without extremely high TX fees in the future!
The security of BTC will inevitably continue to decrease until it becomes profitable to attack
I predict this will happen in 5-9 years from now! (2-3 halvenings)
The security of BTC will inevitably continue to decrease until it becomes profitable to attack
I predict this will happen in 5-9 years from now! (2-3 halvenings)
5/36) Hashrate does not equal security; bitcoiners like @saylor do not understand PoW
This chart of miner revenue proves that BTC's security is actually lower now than it was 2 years ago!
This chart shows the BTC miner revenue (block reward), not hashrate, is going down:
This chart of miner revenue proves that BTC's security is actually lower now than it was 2 years ago!
This chart shows the BTC miner revenue (block reward), not hashrate, is going down:
6/36) Hashrate is a mostly meaningless metric in regard to calculating security
As miner revenue can go down while hashrate goes up
This is because as hardware improves, it costs less to produce these hashes
That is why we can't count hashes to determine the security budget!
As miner revenue can go down while hashrate goes up
This is because as hardware improves, it costs less to produce these hashes
That is why we can't count hashes to determine the security budget!
7/36) Because it is not these hashes that secure BTC:
It is the cost that goes into producing these hashes that secure BTC!
In other words; what matters is the cost of attacking BTC, which is not determined by hashrate!
It is determined by an attacker's cost/reward calculation
It is the cost that goes into producing these hashes that secure BTC!
In other words; what matters is the cost of attacking BTC, which is not determined by hashrate!
It is determined by an attacker's cost/reward calculation
8/36) Crypto-economic game theory relies on punishment & reward; carrots & sticks
This is why miner revenue determines the cost of attack
When it comes to the reward side of the calculation:
Double spending with 51% attacks targeting exchanges is a realistic attack vector:
This is why miner revenue determines the cost of attack
When it comes to the reward side of the calculation:
Double spending with 51% attacks targeting exchanges is a realistic attack vector:
9/36) Putting the lowest threshold of attack at a few million per day
Which we will reach within the 5-9-year prediction, assuming there is no more massive price appreciation
Censorship is also likely when the security budget falls too low, as nefarious actors gain a majority
Which we will reach within the 5-9-year prediction, assuming there is no more massive price appreciation
Censorship is also likely when the security budget falls too low, as nefarious actors gain a majority
10/36) A common but demonstrably false counter-argument to this; is that nodes secure the network
This is a ridiculous proposition, as there is no Sybil resistance to non-mining nodes!
As security comes from block production incentives, which mere "full nodes" do not share in
This is a ridiculous proposition, as there is no Sybil resistance to non-mining nodes!
As security comes from block production incentives, which mere "full nodes" do not share in
11/36) So what does this all mean?
This means that BTC's long-term security is in deep trouble
Without extremely high TX fees, the security of BTC will inevitably continue to decrease
Until it drops so low that the network becomes profitable to attack, rendering BTC insecure!
This means that BTC's long-term security is in deep trouble
Without extremely high TX fees, the security of BTC will inevitably continue to decrease
Until it drops so low that the network becomes profitable to attack, rendering BTC insecure!
12/36) At which point there would only be two choices left:
1. Increase BTC's supply inflation beyond 21M!
2. Allow the network to come under attack by double spends & censorship
BTC is between a pet rock & a hard place; think about it & also consider who else is saying this:
1. Increase BTC's supply inflation beyond 21M!
2. Allow the network to come under attack by double spends & censorship
BTC is between a pet rock & a hard place; think about it & also consider who else is saying this:
13/36) Both @ercwl & @gametheorizing agreed with me on this in our debates on this topic
Even top Core developers, such as @peterktodd, agree
The writing is on the wall:
Bitcoiners will have to make this hard choice or watch BTC's security fall right before their very own eyes
Even top Core developers, such as @peterktodd, agree
The writing is on the wall:
Bitcoiners will have to make this hard choice or watch BTC's security fall right before their very own eyes
14/36) As a BTC critic, I do not think BTC will be able to solve this dilemma in time
As it aims to overturn its primary touted benefits
The Bitcoiners who support a supply increase do not think this obviously
I have the utmost respect for the Bitcoiners who speak this truth
As it aims to overturn its primary touted benefits
The Bitcoiners who support a supply increase do not think this obviously
I have the utmost respect for the Bitcoiners who speak this truth
15/36) As they are doing all they can to preserve BTC's provenance
The bitcoiners who deny this only make the situation worse
Promising people that BTC will always have a 21M limit
Damages trust; setting them up for disappointment, a feeling of betrayal & rightfully so!
The bitcoiners who deny this only make the situation worse
Promising people that BTC will always have a 21M limit
Damages trust; setting them up for disappointment, a feeling of betrayal & rightfully so!
16/36) As they are misleading people into supporting BTC based on false pretenses!
BTC is not a good or competitive SoV
A choice between security or scarcity is not a good choice to have
Especially when competitors can offer security, scarcity & capacity; all, unlike BTC!
BTC is not a good or competitive SoV
A choice between security or scarcity is not a good choice to have
Especially when competitors can offer security, scarcity & capacity; all, unlike BTC!
17/36) The most likely outcome in 5-9 years, is that both options occur simultaneously
Splitting the network in half again & causing even more chaos in the process
One with inflation, the other without & both even more vulnerable to attack
Price drops further worsen security
Splitting the network in half again & causing even more chaos in the process
One with inflation, the other without & both even more vulnerable to attack
Price drops further worsen security
18/36) All because BTC's governance is incapable of resolving such a dilemma without division
My original 2013 thesis for investing in BTC was destroyed by the very people we trusted to maintain it
There also laid the problem; what we witnessed was a failure of governance:
My original 2013 thesis for investing in BTC was destroyed by the very people we trusted to maintain it
There also laid the problem; what we witnessed was a failure of governance:
19/36) BTC's history of power struggles & civil wars is a symptom of this failure
The truth is that the dominant client, “Bitcoin Core”
Has effectively achieved centralized control over BTC development
Turning it into a one-party system, with Core as a gatekeeper of all change
The truth is that the dominant client, “Bitcoin Core”
Has effectively achieved centralized control over BTC development
Turning it into a one-party system, with Core as a gatekeeper of all change
20/36) Currently, more than 99% of the full nodes are using Bitcoin Core
An extreme degree of centralization!
There is literally only one lead maintainer who has the final say over all decisions, making it a dictatorship
Like all dictatorships, there are limits to their power
An extreme degree of centralization!
There is literally only one lead maintainer who has the final say over all decisions, making it a dictatorship
Like all dictatorships, there are limits to their power
21/36) This is still a total perversion of the very idea of decentralization that BTC was supposed to represent
Another consequence of the block-size debates, which suppressed competing clients in favor of Core
This is what prevents all efforts to solve the security dilemma
Another consequence of the block-size debates, which suppressed competing clients in favor of Core
This is what prevents all efforts to solve the security dilemma
22/36) The myth of BTC; is that of a decentralized meritocracy
This could not be further from the truth; Bitcoin Core has disproportionate power to make any changes, such as RBF
While kicking out anyone who disagrees with them, such as Gavin Andresen, Mike Hearn & Jeff Garzik
This could not be further from the truth; Bitcoin Core has disproportionate power to make any changes, such as RBF
While kicking out anyone who disagrees with them, such as Gavin Andresen, Mike Hearn & Jeff Garzik
23/36) This is why a diversity of competing client implementations is so important for true decentralization
BTC has effectively been captured, a clear failure of decentralized governance
A subject I explored in far more depth, you can find that here:
medium.com/cyber-capital/…
BTC has effectively been captured, a clear failure of decentralized governance
A subject I explored in far more depth, you can find that here:
medium.com/cyber-capital/…
24/36) The roots of this major flaw go back to the historic block-size debates
BTCs original & intended design was not this incredibly flawed
The truth is that BTC pivoted its purpose, economics & vision during the block-size debates
Contrary to popular belief:
BTCs original & intended design was not this incredibly flawed
The truth is that BTC pivoted its purpose, economics & vision during the block-size debates
Contrary to popular belief:
25/36) Not increasing the blocksize limit is a major departure from the original vision & purpose of Bitcoin
Conceivable servicing a large number of TXs each paying a small fee is a far more realistic path to sustainability
As opposed to a small number of TXs paying a high fee
Conceivable servicing a large number of TXs each paying a small fee is a far more realistic path to sustainability
As opposed to a small number of TXs paying a high fee
26/36) As in the former case BTC would be providing invaluable utility to billions of people
This is clearly what BTC was always intended to do, as was even clearly stated in the Bitcoin whitepaper
Allowing BTC to actually be money was taken away from us by the powers that be
This is clearly what BTC was always intended to do, as was even clearly stated in the Bitcoin whitepaper
Allowing BTC to actually be money was taken away from us by the powers that be
27/36) To make this all even more tragic:
BTC is capable of achieving massive scale while preserving decentralization
If it only borrowed some of BCH's code, it would be able to support VISA scale on a decade-old laptop!
The threat of supporting bigger blocks is exaggerated!
BTC is capable of achieving massive scale while preserving decentralization
If it only borrowed some of BCH's code, it would be able to support VISA scale on a decade-old laptop!
The threat of supporting bigger blocks is exaggerated!
28/36) The block size limit now limits BTC's throughput to between 7-22 Transaction Per Second
This means it would take more than seventy years for everyone in the world just to do a single transaction!
Rendering widespread & significant usage of BTC is totally impossible!
This means it would take more than seventy years for everyone in the world just to do a single transaction!
Rendering widespread & significant usage of BTC is totally impossible!
29/36) Because from a technical perspective usage has literally been capped
Therefore, it cannot & will not ever be the “future of money”.
Congestion also renders transacting over BTC unreliable as it is impossible to predict fees perfectly, leading to failed transactions
Therefore, it cannot & will not ever be the “future of money”.
Congestion also renders transacting over BTC unreliable as it is impossible to predict fees perfectly, leading to failed transactions
30/36) Some have proposed the Lightning Network as a solution to this problem
However, onboarding people onto LN in a non-custodial manner actually requires several on-chain transactions
High fees are also passed to LN users during times of congestion, forcing channel shutdowns
However, onboarding people onto LN in a non-custodial manner actually requires several on-chain transactions
High fees are also passed to LN users during times of congestion, forcing channel shutdowns
31/36) The block size limit destroys all potential use cases for BTC, as any significant amount of usage is impossible
Whenever a real use case does take off, it only leads to fee spikes and congestion
Which eventually drives people away; this is why BTC has no utility
Whenever a real use case does take off, it only leads to fee spikes and congestion
Which eventually drives people away; this is why BTC has no utility
32/36) It is this lack of utility that is at the heart of BTC being unable to generate sufficient fee revenue to sustain its security model
Transforming BTC from a useful Medium of Exchange & Store of Value to restricting it to a purely speculative Store of Value is its downfall
Transforming BTC from a useful Medium of Exchange & Store of Value to restricting it to a purely speculative Store of Value is its downfall
33/36) Bad actors are misleading people by downplaying this threat
Leading them into this waiting disaster
You can verify this yourself with a full node!
BTC is not impossible to fix;
By increasing the block size limit & building apps that people want to use & pay fees for!
Leading them into this waiting disaster
You can verify this yourself with a full node!
BTC is not impossible to fix;
By increasing the block size limit & building apps that people want to use & pay fees for!
34/36) No matter how unlikely I think that is after the utility was driven out after the block size debates
If you are a bitcoiner & you want to fight for BTC
That is how to do it; by allowing utility & actual use cases to flourish over BTC, as it did in ETH
It is your choice!
If you are a bitcoiner & you want to fight for BTC
That is how to do it; by allowing utility & actual use cases to flourish over BTC, as it did in ETH
It is your choice!
35/36) I fought to preserve Bitcoin & its original vision
We lost & BTC is now a hollow shell of its former self, perverted & captured
Now we get to warn people of the impending failure, as I do believe in this movement
Even if BTC's security model will fail within the decade!
We lost & BTC is now a hollow shell of its former self, perverted & captured
Now we get to warn people of the impending failure, as I do believe in this movement
Even if BTC's security model will fail within the decade!
36/36) In conclusion
BTC security is broken & will likely fail in 5-9 years
Leaving inflation as the only solution left, breaking the 21M supply limit!
BTC governance prevents any solutions before it is too late
Our beautiful experiment is now teaching us through its failure!
BTC security is broken & will likely fail in 5-9 years
Leaving inflation as the only solution left, breaking the 21M supply limit!
BTC governance prevents any solutions before it is too late
Our beautiful experiment is now teaching us through its failure!
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