The distant future of Bitcoin miner defection.

For posterity : i

mircea_popescu: You know how bond yields work right ?
punkman: Not really.

mircea_popescu: Let’s start with an example from the 1800s, on Trilema : “Că d-l Grigorescu, șeful direcției contabilității din Ministerul de Finanțe, va pleca la Berlin, Viena și Frankfurt în scopul de-a plasa rentă 5 la sută română pe prețul de 75 suta ?” So, the guy went to place, ie. sell, Romanian bonds paying 5% for 75 cents to the dollar. Now, if you put in 75 cents to buy a dollar of this, at the end of the year you will be paid either nothing or 105, which means that your yield will have been (105-75)/75 ie. just about 50%. Conversely, if for whatever reason (such as horrible insecurity everywhere else in Europe, while Romania’s sterling cannons guarantee it’ll be fine), you decide to pay 106 cents for the dollar, your yield will be. (105-106)/105 = -1%
punkman: Why does guy decide to pay 106 cents for 105 cents a year later?

mircea_popescu: Because gold has a cost of carrying. Unlike bitcoin, strong money of any other kind decays over time. (Bitcoin unintelligently transformed its already minor cost into a disasters of commons situation, due to the fact that Satoshi had about as much financial experience as a Hollywood star. But anyway.)
asciilifeform: What did mircea_popescu mean by this? I bet there is a whole article buried in this observation, and I would like to read it.

mircea_popescu: Consider the situation : with gold, the responsibility for keeping gold secure indivisibly rests with its owner. Either you build a vault and pay guards, or else you don’t own it. Consequently, depending on your efficiency, you’ll be spending a coin every X interval off the hoard. With bitcoin, the responsibility for keeping everyone’s gold secure rests not with the owners, but with the…. miners! What happens to gold when no more mining is possible ? (As you know, gold is finite in the universe). Not much. What happens to Bitcoin should reward halving run into an impossibility to finance further mining ? Poof. At some certain future point it becomes more lucrative for the owner of mining gear to “Start a new Bitcoin” than to continue adding to this chain.
asciilifeform: And what of the asymptote ?

mircea_popescu: Asymptotes are what idiots think of the world. Hence my comment re: Satoshi. There are no asymptotes in nature. Just phase transitions.
asciilifeform: Did somebody settle the proton decay thing while I was asleep ?

mircea_popescu: Phase. Transition.
asciilifeform: Where is the logical flaw in ‘Classic BTC is Schelling pointii for carve-of-all-value’ –> asymptote ?

mircea_popescu: In that “At some certain future point it becomes more lucrative for the owner of mining gear to “start a new bitcoin” than to continue adding to this chain.”
asciilifeform: Then the predicate does not hold ? BTC is not Schelling point ?

mircea_popescu: The USGtards like to act as if that future point is here, because they’re too enamoured of the swamp they inhabit, which is why all the VC bullshitiii that keeps missing Bitcoin by a mile. Nevertheless, the fact they’re dumb doesn’t mean the bait ain’t there. What’s your definition of “Schelling point” ? Doesn’t have to be immutable, does it?
asciilifeform: I still don’t see how an altcoin could ever be an appealing thing other than to idiots and looters, assuming a still-functioning (if asymptotically-rewardless) classic BTC.

pete_d: ‘Ever’ is a long time.iv
mircea_popescu: But these are looters. By definition. As they aren’t owners, the only thing they can be is looters.

*asciilifeform suddenly grasps where mircea_popescu was going. Eventually the miners – defect.
mircea_popescu: Aha. You aware of what “disaster of commons” means ?

asciilifeform: Aha. I’m not even entirely convinced that this has not already happened
mircea_popescu: It just reproduces the same generational conflict that’s present in society ever since forever.

*pete_d hopes he is long since dead when miners defect.
mircea_popescu: Kinda proof that it’s a realistic system. It necessarily can’t happen yet. It will happen like the collapse of the US happened : once everyone agrees it’s not possibru.v Even you. That’s the sign.

___ ___ ___

  1. And in the vein of Down to the last satoshi.
  2. A Schelling (focal) point, in a game theoretic situation, is a solution that users will select in the absence of inter-player communication because the solution itself seems natural, special, or relevant to each of them. Seeing as how Bitcoin has essentially solved the question of “What should I invest my savings in?” for the foreseeable future, this comparison seems particularly apt.

    From a similar but related angle, the existence of a single blockchain (Bitcoin’s) could also be said to be a Nash equilibrium situation.

  3. Eg. BitAngels, Y Combinator, etc. etc.
  4. Though, in the interim, altcoins, be the v1.0 or v2.0, are doomed to failure.
  5. No one could’ve predicted !!1

12 thoughts on “The distant future of Bitcoin miner defection.

  1. hoki says:

    This post made me sad.

  2. Prolly why buried treasure became associated with pirates. More cost effective.

    • Pete D. says:

      Burying your treasure is definitely less expensive than building a castle to protect it and commanding an army to defend it. Burying treasure also has the additional benefit of supplying a reasonable-sounding excuse to your financiers, should a pirate have any. “We lost it!” or “We stole it and then another pirate stole it from us!” or perhaps even “We couldn’t find it!” are all provided for with treasure that “haz accident” on a desert island only the pirate knows of.

  3. […] the world is going to adapt to the new reality that Bitcoin exists and will continue to exist for some time to come. Trying to “improve” Bitcoin isn’t materially different from trying to […]

  4. […] a Schelling Point in every city in my experience, meaning that one or the other has >90% market share in North […]

  5. osias says:

    Since last year I was thinking about this post. I believe the point where mining rewards will become insignificant compared to fees will arrive some decades earlier than the point where it’s zero.

    Then, miners could start to save on electricity by tuning off rigs the first minutes after a block is found, turning them on only after the fee amount from the block candidate pays off. If we consider most of electricity are due heat dissipation, on those first minutes the chips could cool off, increasing savings.

    The block interval will then increasingly be close to actual 10 minutes, once most of the hash power will focus around peaks of “there are many unmined txs”.

    That would increase a 51% attack risk.

    Not sure if I’m explaining this clearly.

    • osias says:

      “That would increase the risk of a 51% attack” must be proper English.

    • Pete D. says:

      I sorta see what you’re getting at but you still display a deep misunderstanding of both hardware efficiency maximisation, the strength of human laziness, and most importantly, Bitcoin. You do realise that the “10 minute interval” is just an average, that the network automatically adjusts its difficulty every 2016 blocks, and that blocks can always be found seconds apart, right ?

      Try again next year.

    • osias says:

      Yes, I do.

      What I’m describing – less irregular block interval – would only happen in the distant future as a consequence of people not mining 100% of time.

      See you next year then.

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