More thinking about Bitcoin security in the long term

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NOTE: Let's get this out of the way for any incoming keyboard warriors... I'm a fan of both Bitcoin and Ethereum. I can be a fan, whilst wanting to be introspective and learning to improve... that doesn't make me anti-anything! (let's keep those tribal ideas in the place where it originated...).

About a month ago, Laura Shin (Unchained podcast) had an Ethereum developer Justin Drake on her show to talk about Ethereum and its transition to become "ultra-sound money". Of course, that term is one of many Twitter fads that go around, and not many serious people jump into the endless twitter faction fights that spring up around it...

... anyway, in that particular interview, Drake touched upon some ideas which crystallised some thoughts that I already had about Bitcoin's long term security model. Basically, what is the incentive for miners to remain committed to being "honest and rational actors" that secure the network. After all, in a decentralised network, all options are on the table... and the network must be designed in a way to incentivise behaviour that beneficial to the network DESPITE the fact that there WILL be bad actors. This is one of the defining characteristics of a decentralised network, you expect bad actors and you make the game difficult for them to play.... in contrast to a centralised network, where you try to keep the bad actors outside the network and UNABLE to play.

Anyway, you can read about my thoughts over here on the post that I wrote after the interview: @bengy/thoughts-about-btc-long-term

Of course, that interview wasn't supposed to be about Bitcoin and so the topic wasn't really covered in depth. Plus, it would be unfair to cover on a single side of that topic... despite that, it touched a nerve in both Bitcoin and non-Bitcoin communities.


So, fast forward to today... a new episode of Unchained in which Vijay Boyapati (writer of "The Bullish Case for Bitcoin) and Justin Drake (Ethereum Foundation) talk on the show about "Can Bitcoin Be Secured Only by Transaction Fees? Two Researchers Sound Off".

Now, just a quick introduction to the Unchained podcast... it is a pretty accessible podcast about cryptocurrencies that has been running for quite a few years. Compared to your regular crypto podcasts and YouTube channels, it is positively boring in a really good way. Laura Shin hails from a traditional journalistic background and she interviews many top people in the crypto and financial regulation space, so you are often getting quite considered long-form interviews that are really quite interesting and get above the meme-tribe heavy Twitter faction wars of "us vs them" debates. These are interviews with people who KNOW their stuff... and it always comes across, as the interviewees are often quite open in their views, acknowledge other viewpoints and are not at all tribal. So, boring stuff if you just want social media fireworks... but these are the real builders and visionaries.

This is an episode that I recommend to all people who even have a passing interest in Bitcoin, so that includes if you are just interested in altcoins. All decentralised networks DO need to consider their long-term security model, even if that is just boring stuff because everyone is more interested in a bull market and long green candles... or just the latest fad that spawns a million copycat projects!

Bitcoin and Ethereum are two heavily-decentralised projects that have been around long enough to seriously consider this, and they do have different views on it. Just as a quick note, other blockchains have opted for more centralisation to solve this problem... not bad, just different.

Bitcoin's model relies on financial incentive to miners through a combination of PoW block rewards and transaction fees. However, as we all know, the block rewards is designed to halve every 4 years until the bulk of miner income will come in the form of transaction fees. So, to keep incentivise AGAINST bad actors, transaction fees will need to rise to a point where it is better to act honestly or at least rationally.

Drake lays out the case that L1 Bitcoin transaction fees will NOT be enough to make this a reality, and that would make the Bitcoin base layer vulnerable to bad actors. On the opposite side, Boyapati makes the case that by the time that this comes to pass (on the order of decades?), Bitcoin will be the reserve currency of the internet/world and transaction fees due to large settlements will be more than enough to secure the network.

At the heart of it, it is the clash between two ideals. Drake prefers a model that can evolve and respond to incoming challenges (like Ethereum and other chains have taken) whilst Boyapati prefers the predictible and set ground rules of Bitcoin Core. There are definite advantages to both, but I think I do find myself resonating more with the ideas of Drake... as great and visionary as Satoshi was, it is a dangerous idea to make your platform incredibly difficult to evolve and adapt.

In the interview/debate, I did find that Drake made the better case, pointing out technical and possible attack vectors that would be difficult to defend against given that Bitcoin has limited ability to adapt. Meanwhile, Boyapati appeared to make some pretty hefty assumptions to bolster his case... in that his starting point was that by the time Bitcoin moved to mostly transaction fee only that it would ALREADY be a base layer for global settlement! That is too much to assume... it is a worthwhile vision, but you shouldn't take it as a starting assumption!

He also brought out other ideas... like the nuclear option of changing the PoW algorithm to defeat a concerted 51% attack. Again, I did think that Drake had a better counterpoint to that.

Anyway it is a good idea to listen this podcast... interesting ideas, and much to mull over. I definitely do agree that Bitcoin needs to start thinking about this coming transition, it isn't that far off in the future... and it needs to do it in a way that doesn't take some hefty assumptions as a starting point! Anyway... that said, I still will hold Bitcoin in addition to other crypto. I'm pragmatic in these things...

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