[Cryptography] Robust Linked Timestamps without Proof of Work.

Peter Todd pete at petertodd.org
Sat Aug 20 18:55:50 EDT 2016


On Sat, Aug 20, 2016 at 01:22:01PM -0400, Phillip Hallam-Baker wrote:
> And lets just get real for a minute. People are always claiming how secure
> BitCoin is and how it doesn't need any trusted parties. How many bitCoins
> have been created to date? How many biTcoinS have been stolen in frauds at
> exchanges? If you ignore the Bitcoins that Hal probably dumped into the bit
> bucket in the early years and have never been available to spend, the
> typical Bitcoin in circulation has been stolen twice or so.

The major bitcoin thefts that have happened to date have nothing to do with
Bitcoin's way of achieving consensus and could have happened just as easily if
Bitcoin's consensus was based your proposed "100 OpenPGP KeyServers".

The reason why bitcoin thefts keep happening is simple:

1) Computer security sucks.

2) Bitcoin transactions are irreversible.

Unsurprisingly centralized banking systems see widespread theft all the time
through the same type of computer hacks - and many other exploits - as have
affected bitcoin-holding institutions. For example, look at the recent $951
million Bangladesh Bank theft, perpetrated by hackers possibly aided by
insiders:

https://en.wikipedia.org/wiki/2016_Bangladesh_Bank_heist

Most of the funds were recovered by reversing transactions after the fact, but
in the end $81 million was still lost in transactions that couldn't be reversed
for various reasons.

Similarly, for credit cards here's an estimate of $16 billion lost in 2015
globally - $0.056 per every $100 transacted:

http://www.businesswire.com/news/home/20150804007054/en/Global-Card-Fraud-Losses-Reach-16.31-Billion

If credit card payments were strictly irreversible that figure would probably
be far higher, and losses would be paid by credit card holders rather than
merchants.

Bitcoin chooses to make that trade-off, giving its users the option of an
irreversible payment system. This is a good thing, because for some use-cases
the downsides of reversible payments are worse than the benefits (for many
merchants a significant amount of fraud happens due to reversibility).

-- 
https://petertodd.org 'peter'[:-1]@petertodd.org
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