[Cryptography] Bitcoin is a disaster.

[iang]

I may be late to Bear's party, but I'll Bull it in anyway.

On 29/12/2020 02:07, Ray Dillinger wrote:
> Okay, this may be just my depressive side talking, or it may be the
> stress of the last year just boiling over.  But I'm inclined to think
> it's not and it isn't.
>
> It is my opinion that Bitcoin is a failure.  Worse than that, it's a
> disaster.
>
> The pseudonymity of coins being owned by the bearer of some
> cryptographic key is a failure;  People have been eavesdropping and
> aggressively analyzing the block chain from day 1.  And the block chain
> will always be there, it will always be public, and it will always be
> subject to further analysis.  And we are learning that analysis of that
> record is sufficient to destroy any pretense of anonymity or
> pseudonymity.


So, my personal anecodote on psuedonymity, for the lulz.  Back in '95 
Gary Howland and I intended to buy a licence from DC (David Chaum or 
DigiCash, you pick) so we could build our financial asset trading 
system. But DC refused to sell such, for which story another day.

Anyway, as I'm won't to be evil, I said to Gary, give us another system. 
After much wailing and gnashing (literally bc it was a hard problem) he 
came up with psuedonyms. Which he said was the only other way to do it.

Psuedonyms without identity meant you knew WHAT someone was doing but 
not WHO.  Blinded cash was the reverse - you knew WHO was doing it, but 
not WHAT they were doing.  Ofc, in those days, blinded cash was never 
issued without binding the account to an actual identity, bc otherwise 
you'd lose both the WHO & WHAT and that would be just crazy...

I used to describe this as diamond privacy with psuedonyms on the left 
and blinding on the right... but I discovered nobody gave 2 hoots.  
Everyone wanted the A-grade authentic blinded cash, and that psuedonym 
sheeet was just false paper with smudged ink work. No matter that we 
were able to show quite clearly that blinded cash was terribly flawed on 
several (3) bases.



So, whatever, nobody respected psuedonyms.  Until ... BITCOIN! and 
suddenly psuedonyms were god and chocolate and karma all in one handy 
wrapped bar.  Even tho... oh never mind.

What I concluded is that the vast majority of the talkative people in 
the space - the "influencers" if you like - had little clue about the 
detail. Memes mattered and science scrambled to keep up.  Privacy was 
fashion.  Users were agricultural product. Factories and marketing was 
king, feed the man meat, get those coins a ka-chingling, cash meet 
register, meat meet man.

(We added blinding to psuedonyms in 2001 but that was too late. 
"Also-ran" awards go to ZEC and Monero, who tried to put some privacy 
mojo back into crypto, but again, too little, too late or too out 
there.  But that's another story.)

Summary?  Crypto is an information insufficient space, so memes rule and 
details crawl


> The scarcity of block chain space has led people to re-invent every
> last feature of the banks they thought they were going to be escaping.
> Including debt brokering (lightning network) and fractional-reserve
> banking, starting with the case of Mt.Gox and continuing to ventures
> today by "responsible" businesspeople who just don't get, or don't
> care, or both, that the entire reason the system existed, as far as the
> early adopters were concerned, was to get away from exactly that.  They
> have made Bitcoin into a debt-based system like any other; as long as
> the "exchange" holds your keys for you, there is no obligation for them
> to maintain assets equal to the deposits.  You can't prove that they
> are, or aren't, maintaining sufficient assets until after those assets
> are spent and the evidence appears in the block chain.


I think this is a little bit of projection, which we are all wont to 
do.  "Bitcoin exists because..."

If we go back to the 2000s, the message of history is a little clearer, 
at least from my krystal bowl, as I was soaking in it. e-gold collapsed 
when men in black came and turned the founder into a man in orange.  Out 
of the carnage of that, the gold-age dudes in New York ran from MiB to 
create Liberty dollar with a decentralised team across 30 countries and 
so forth and so on. Lovely!  But, in the end, decentralised men in 30 
black countries centralised the perps back into orange.  A related 
colour love-in was happening to the world's gambling sites and their 
access to payment systems.

Satoshi, praise their socks, realised that *if we wanted a system to 
survive*, they had to take the humans out of the equation.  As single 
points of failure, black 'n orange 'n all others on the rainbow.  The 
operators, and any quasi operators that purported to rock up in black 
bearing orange paint.  And, only _a system that survived_ would let us 
then move on to the next level - all the fun & games & trade that we all 
talked about back in the halcyon 1990s.  Or, just reliable payments for 
casinos, who knows.

Satoshi designed a system of machines not persons.

It wasn't for "banking" or "payments" or "trade" or "black market" or 
"democracy" or any of those aspirational things.  It was for survival.  
A system of survival, with a coin.  Done, figured it out, over to you.

Which is to say - TL;DR - Bitcoin succeeded if it survived, and doubly 
so if it allowed you to build your goal.  Whether it met one person's 
goals as a payment system or bank or anti-bank or censor-resistant 
thingummybob or other libertarian wet dream was not its failure;  if it 
survived and it met some random set of those goals, it was a success.

Check your projection.


> And it's useless for small transactions.  Had it been deployed to a
> market the size of, say, a college campus it could bear the load and
> the bidding for block space wouldn't exceed the value of most
> transactions.  But had it been deployed to a market the size of a
> college campus, the small pool of miners available would make mining
> bursty and unstable, and the block chain therefore not well protected
> from tampering.  Same could have happened to Bitcoin early on, which is
> why Satoshi was mining like crazy and jumping on when needed to prop up
> the block rate and back off again when the blocks were coming too fast.


(I'm pretty sure others will drown this one out with big blocks and 
lightning bolts :)


> And that brings us to mining.  Bitcoin mining has encouraged corruption
> (Because it's often done using electricity which is effectively stolen
> from taxpayers with the help of government officials), wasted enormous
> resources of energy, fostered botnets, centralized mining activity in a
> country where centralization means it's effectively owned by exactly
> the kind of government most people thought they *DIDN'T* want looking
> up their butts and where the people who that government allows to "own"
> this whole business work together as a cartel.


(Philipp Guering and I wrote the paper on that in 2011 and earned the 
hatred of early fanbois.)  There are a couple of things that overturned 
this particular view.  Firstly, ASICs in about 2012-13 made stolen 
electricity inefficient.  And economies of scale in collecting mass 
ASICs together made for high electric bills which surfaced all these 
businesses to the attention of .. well, anyone who cared.  Mining became 
a regularised, regulated business, to the extent that anyone cared.


> There's a pretense of monitoring the network to guard against a 51%
> attack, but to me it seems pretty clear that what they're guarding
> against is merely the mistake of the cartel failing to give the latest
> warehouse full of miners a distinct network identity.  The whole idea
> of proof-of-work mining is broken the instant hardware comes out which
> is specialized for mining and useless for general computation because
> at that point the need to have compute power for other purposes is
> absolutely irrelevant in having any effect on mining, and there ceases
> to be any force that causes mining to be distributed around the world.
> It becomes a "race to the bottom" to find where people can get the
> cheapest electricity, and then mining anywhere else - anywhere the
> government tries to make sure ordinary people actually get the benefit
> from electricity bought for tax money, for example - becomes first
> pointless, then a net loss.


Yes.  ASICs destroyed the easy decentralisation argument bc specialised 
computing became "investment" and therefore commitment to mine.  Once 
you'd bought an ASIC the only thing you could do was mine;  meanwhile no 
amount of ordinary CPU could easily outpace the ASICs, so you were out.

But - PoW doesn't care about the narrative that people layered on top of 
it.  What it cares for is the economics of assembling hash power.  
That's pure operations, costs, power, regulation, ... same old game that 
all the big IT shops know and love.


> Mining is f***ng broken, and ASICs make it actively work against a
> significant number of its design goals.


Of its imposed memes.  As long as it survives, Bitcoin is happy with 
ASICs, IMHO.  Proof of meme belongs on another chain.


> So, Bitcoin was a good effort, it deployed some new ideas and
> technology, and showed that at some scale the "block chain" idea
> worked, but ultimately, although a successful proof of concept, failed
> to deliver.  It doesn't scale, except by becoming the very thing it was
> supposed to replace.
>
> The more scalable the network becomes, the more centralized it becomes,
> until ultimately a "scalable" cryptocurrency would be doing things
> exactly the same way as a credit card processor.


"Prototype" might well be the historical verdict.  But it's also a rule 
of evolution.  All new challengers are measured in their success to the 
extent that they survive, and become the incumbents.  All hail the 
incumbent, all hail the new challenger, all hail the incumbent.

Meet the new boss...



On a personal note - I want to thank Bear for having dived in when he 
did.  Many of us did not - including me.  Yes, Bear took a lot of flak 
later on when the innovators were replaced by the early adopters <cof> 
and those early adopters carry a black mark of shame to this day.  Ray 
was there, and did what he could, and the prototype or whatever you call 
it grew.  And survived. Without him and Hal and others, who knows, the 
story could have ended right there.

We salute you.



iang


ps; I haven't read the engaging responses :)