Thread by @Justin_Bons

1/38) 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 would exceed global GDP within decades

Therefore, BTC security is doomed! 🧵

2/38) Each halvening exponentially lowers the security budget; until it is gone!

These halvenings continue after exceeding global GDP for atleast 70 years before running out completely

If you understand exponentials & economics, you should know that this is entirely impossible!

3/38) 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 free market

When fees spike, users leave, all due to the unnecessary addition of the block size limit!

4/38) 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 4-12 years from now! (1-3 halvenings)

5/38) 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 3 years ago!

This chart shows the BTC miner revenue (block reward), not hash rate, is going down:

@saylor 6/38) 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!

@saylor 7/38) 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

@saylor 8/38) 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 very realistic attack vector

@saylor 9/38) Putting the lowest threshold of attack at a few million per day

Which we will reach within this 4-12-year timeframe, 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

@saylor 10/38) 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

@saylor 11/38) 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!

@saylor 12/38) 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:

@saylor 13/38) Both @ercwl & @gametheorizing agreed on the dilemma 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

@saylor @ercwl @gametheorizing @peterktodd 14/38) 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

@saylor @ercwl @gametheorizing @peterktodd 15/38) 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!

@saylor @ercwl @gametheorizing @peterktodd 16/38) 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!

@saylor @ercwl @gametheorizing @peterktodd 17/38) The most likely outcome in 4-12 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

@saylor @ercwl @gametheorizing @peterktodd 18/38) 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:

@saylor @ercwl @gametheorizing @peterktodd 19/38) 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

@saylor @ercwl @gametheorizing @peterktodd 20/38) Currently, more than 98% 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

@saylor @ercwl @gametheorizing @peterktodd 21/38) 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!

@saylor @ercwl @gametheorizing @peterktodd 22/38) 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 @gavinandresen, Mike Hearn & @jgarzik

@saylor @ercwl @gametheorizing @peterktodd @gavinandresen @jgarzik 23/38) 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 in my "theory on Bitcoin governance" on Medium:

@saylor @ercwl @gametheorizing @peterktodd @gavinandresen @jgarzik 24/38) The roots of this major flaw go back to the historic block-size debates

BTCs original & intended design was not this incredibly flawed & broken

The truth is that BTC pivoted its purpose, economics & vision during the block-size debates

Contrary to popular belief:

@saylor @ercwl @gametheorizing @peterktodd @gavinandresen @jgarzik 25/38) Not increasing the blocksize limit was a major departure from the original vision & purpose of Bitcoin

Conceivable servicing a huge number of TXs, each paying a small fee, is a far more realistic path to sustainability

As opposed to a few TXs paying an extremely high fee

@saylor @ercwl @gametheorizing @peterktodd @gavinandresen @jgarzik 26/38) 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

@saylor @ercwl @gametheorizing @peterktodd @gavinandresen @jgarzik 27/38) 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!

@saylor @ercwl @gametheorizing @peterktodd @gavinandresen @jgarzik 28/38) 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 technically impossible!

@saylor @ercwl @gametheorizing @peterktodd @gavinandresen @jgarzik 29/38) 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

@saylor @ercwl @gametheorizing @peterktodd @gavinandresen @jgarzik 30/38) A political analysis of the status quo reveals they are entirely unwilling to increase the limit before it is too late

Some core developers are even on record saying that they favor an inflation increase instead

The blocksize debates have now entrenched this limitation!

@saylor @ercwl @gametheorizing @peterktodd @gavinandresen @jgarzik 31/38) 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

@saylor @ercwl @gametheorizing @peterktodd @gavinandresen @jgarzik 32/38) Drive chains might be added one day, but that also comes with very long exit periods

The truth is "L2 scaling," in general, is a flawed methodology for scaling any L1

I wrote a critique of ETH's "L2 scaling" that can easily be applied to BTC too:

https://x.com/Justin_Bons/status/1791519793230626928

@saylor @ercwl @gametheorizing @peterktodd @gavinandresen @jgarzik 33/38) 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

@saylor @ercwl @gametheorizing @peterktodd @gavinandresen @jgarzik 34/38) 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

@saylor @ercwl @gametheorizing @peterktodd @gavinandresen @jgarzik 35/38) 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!

@saylor @ercwl @gametheorizing @peterktodd @gavinandresen @jgarzik 36/38) 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!

@saylor @ercwl @gametheorizing @peterktodd @gavinandresen @jgarzik 37/38) 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!

@saylor @ercwl @gametheorizing @peterktodd @gavinandresen @jgarzik 38/38) In conclusion: BTC security is broken & will fail within 4-12 years!

Leaving more inflation as the only solution left, breaking the 21M promise!

BTC governance prevents other solutions before it is too late

Our beautiful experiment is now teaching us through its failure