Alberto, Thank you again for sharing your insights and opinions.
Despite my appreciation for your writing, it appears that we disagree on a few key points. It may be that you misunderstand my position on how government regulation of Bitcoin mining companies can become a 51% attack. No force is needed beyond a ‘reasonable’ regulation. As you've noted, “Regulation is … sometimes even desirable.” (nonsense in regard to Bitcoin).
Also, we disagree on whether “the U.S. is …a liberal democracy”. Though it is certainly true there is a common perception that the U.S. is some kind of democracy, -the common perception has little to do with reality. However, for the purposes of discussing your original post, the greater issue is how Bitcoin works. In regard to how Bitcoin works, you’ve made these statements.
1. A 51% attack is … not possible even theoretically.
2. to launch a 51% attack a lot more than 51% of the hash power is needed
3. it needs to be done covertly and very quickly in order to avoid any leak that could alert other miners that will rush and support the blockchain in a number of ways
4. it is extremely expensive and not profitable at all
5. it needs a level of organization, cooperation, and consensus we have never seen before by any nation.
None of those statements is correct for the reasons given below.
First, let’s clear up an apparent misunderstanding of my position. Your reply accurately mentioned that “forcing the miners to do a 51% attack on themselves is not realistic.”
Agreed. However, forcing miners to attack Bitcoin is no part of my position. My argument is that Western governments will coordinate a simple and apparently reasonable regulation of the major Bitcoin mining corporations within their jurisdictions. It is one simple regulation that will, in time, result in complete governmental control of all Bitcoin transactions. Most Bitcoin users won’t see a simple regulation as an attack, and many won’t realize that Bitcoin is fundamentally changing even while the changes are occurring.
The coming regulation can be as simple as “Bitcoin miners in our jurisdiction may only process transactions from regulated exchanges.” The Bitcoin mining companies need no further regulation. However, the exchanges are and will be, regulated ever more heavily. Thus, by one simple and apparently reasonable regulation on mining companies, the government will slowly but steadily, and irrevocably, gain complete control of Bitcoin. The reason is major mining corporations control the vast majority of the Bitcoin hash rate. If a majority of the mining hash rate will only process transactions from regulated exchanges, then no other transactions will make it onto the blockchain.
Thereafter, the government can control Bitcoin by simply changing and increasing its regulations on the exchanges. Through a multitude of regulations placed on Bitcoin exchanges, governments will regulate who, when, where, why, and how people can interact with Bitcoin.
Alberto, for you, for Satoshi, and for me, government regulation of Bitcoin mining can be seen as an attack on the very fundamentals of Bitcoin. To most of the world, it will just be a simple and reasonable regulation. Government, control of Bitcoin will be effortless. Have you ever noticed how Michael Saylor, frequently states that regulation of Bitcoin is necessary? He is the largest and most vocal institutional investor of Bitcoin for a reason. Far from being a champion of Satoshi’s vision, Saylor is promoting exactly what is necessary for government control. Unsurprisingly, Michael Saylor and his father’s family have deep longstanding ties with the U.S. Military-industrial complex.
In summary, my claim is that a coalition of Western governments will control all Bitcoin transactions simply by requiring the large Bitcoin miners to only process transactions originating from regulated exchanges. Since the major mining corporations in the West already control a majority of the hash rate, limiting their processing to only transactions originating on regulated exchanges will result in no other transactions ever being verified on the main chain.
The Western governments can control Bitcoin without any force and without any further interaction with miners or the blockchain.
As for how Bitcoin functions, here are my thoughts. You’ve stated:
1. “A 51% attack is … not possible even theoretically.”
Alberto, surely this statement was meant to say something more like “In theory, all 51% attack will eventually fail." No matter, according to research done by the United States Advanced Research Projects Agency, a 51% attack is most likely to succeed. See DARPA's studies done in cooperation with the Computer Science Department of Cornell University.
https://www.cs.cornell.edu/~ie53/publications/btcProcFC.pdf (2013)
https://arxiv.org/ftp/arxiv/papers/1912/1912.07497.pdf (2019)
If you find fault in their research please let me know.
2. “to launch a 51% attack a lot more than 51% of the hash power is needed”
Clearly, that is mathematically wrong. According to the Bitcoin code, only the slightest majority (50.0000001%) is necessary to determine the longest blockchain. However, your point here appears to be that the network of Bitcoin miners will respond rapidly as soon as a 51% attack is recognized. Presumably when the miners respond considerably more hash power will then be needed to control the blockchain. You stated, “other miners that will rush and support the blockchain in a number of ways.” The point is that each action, results in a competing reaction, which changes the dynamics and resources needed to keep the attack successful?
Unfortunately, the majority of the Bitcoin mining network (Institutions) will not defend themselves from regulation. Some miners will not even recognize that Bitcoin (as envisioned by Satoshi) is being attacked. The major mining corporations are Institutional. They will follow and support the existing power structure. The majority of small Bitcoin users do not even understand Bitcoin. The public will be told that government regulation is necessary and helpful. Most of the miners will know what is happening but they are in business for profit, not principle. Complying with regulation is the most profitable move for multi-billion-dollar Bitcoin mining corporations.
3. “it (a 51% attack) needs to be done covertly and very quickly in order to avoid any leak that could alert other miners that will rush and support the blockchain in a number of ways"
This claim is not really relevant to the type of 51% attack that results merely from regulating the companies that control a majority of the Bitcoin hash rate. There is not a great cost to creating new regulations. And it is my position that the major Bitcoin mining companies will comply with governmental regulation, which amounts to their cooperation with the government’s efforts to control Bitcoin, so it is hard to even conceive of the regulation of miners as an attack. Saylor, won’t say Bitcoin is being attacked.
Further, a government effort to control the blockchain is more likely to benefit from being broadcast (publicly announced), rather than keeping it secret. Many miners would not want to go up against a major government or a coalition of governments. Upon hearing the announcement that miners must follow a new rule, most will look for the most profitable way to comply.
See also the excellent analysis of Medium writer Joe Kelly on this point in his article, How To Kill Bitcoin (Part 2): No Can Spend’, in which Kelly discusses Defenses to a 51% attack. Joe accurately points out that if you’re a government;
“You make no secret of what you’re doing. You publicly announce the details of the operation to the world, underscoring the capacity to scale up to (ever greater hash power) if necessary. The President says something like, “We will stop at nothing to ensure the security of the great people of this nation.”
Another Joe Kelly article is similar; “How To Kill Bitcoin (Part 3): No Can Defend”, under the paragraph titled “The General Theory of Destroyment of Interest in Money”
“If an adversarial government or coalition of governments can credibly demonstrate that it has now entered onto a path towards destroying the system and cratering the currency, via an assault on its operating mechanisms, then — like detecting a missile launch — that signal (announcing your intent) causes the system to collapse. It falls apart of its own accord, in a decentralized way, via the decisions and actions of the individuals involved, because it’s in each individual’s interest to abandon ship.'
"There may be some true believers in the cause who stubbornly cling on for ideological reasons, even if it doesn’t make any practical or economic sense, but that doesn’t change the ultimate outcome.”
I would agree that an attack may benefit from being conducted in secret when a private party is attempting the 51% attack. However, my position is that it is the government that will control Bitcoin. The government will act openly. And for the government, it is publicity, -the opposite of secrecy,- which most benefits their purpose.
4. “it (a 51% attack) is extremely expensive and not profitable at all”
This statement is inaccurate. A successful 51% attack can recoup most of the expense -or even turn a profit. But the expense is not material to my position. There is virtually no expense at all for a government that simply controls Bitcoin by regulating which transactions the miners may process -as I’m suggesting Western governments will do.
Even if controlling Bitcoin via a traditional 51% attack is very expensive, the expense is not likely to be the determining factor for governments facing the loss of their monetary monopoly. The goal for the government is to make Bitcoin a lessor competitor to the government’s monetary monopoly. The actions taken against Bitcoin by one or more nation-state agent(s) would be similar to those of a nation on a war footing, Governments would act against Bitcoin for reasons of national defense, and costs would be damned.
However, in regard to the profitability of a 51% attack, I refer again to the work of Joe Kelly, in “How To Kill Bitcoin (Part 3): No Can Defend”, under the paragraph titled, “Example (round numbers)”
“Say the total value of all block rewards is $10 billion per year. If a government-controlled operation were to produce $10.1 billion worth of hashes per year, that would definitively exclude everyone else from entering the market. So in that scenario the price of guaranteeing a monopoly on block production = just $100 million per year.
Realistically, it wouldn’t take the full $10.1 billion. $6–7 billion per year would probably do the job using the aggressive strategy (maybe even less than that) and the operation would make $3–4 billion profit. Plus you’d be in a position to decide which transactions get processed and which don’t across the whole network.”
5. "it (a 51% attack) needs a level of organization, cooperation, and consensus we have never seen before by any nation."
With that statement, you are overstating your case. How about the level of organization, cooperation, and consensus involved in the Manhattan project? In 4 years, 130,000 people, from multiple countries, working at over 30 different sites used novel theoretical physics to develop a new form of energy (atomic) never previously controlled by man. Or consider again the level of organization, cooperation, and consensus involved in the fighting of any multinational war, the invasion of Normandy, the allied invasions of Iraq and Afghanistan, the (alleged) landing of man on the moon. Even convincingly faking a moon landing is a major accomplishment -likely greater than joining forces to take control of Bitcoin.
Finally, it may help to understand that you and I might have fundamentally different views of how the government works. I have described the governing power in the United States as an Oligarchic, Plutocratic, Corporate, Pathocracy.
https://medium.com/what-government-will-do-with-bitcoin/who-will-control-bitcoin-f451d15c9d19
In my view, neither we the people nor our elected representatives are in control of the direction or policies of the United States government. Instead, a small group of ultra-wealthy persons with a personality disorder (psychopathy) controls the government through the political influence of their transnational corporations. The people will not be able to regain control of our government, or of our lives, without a physical and bloody fight. Pathocrats don’t give up power, they must be killed.
Alberto, you write, “Thank God it is a liberal democracy and a union of Federal States meaning power is divided among many actors.” Whereas I see those who direct the policies of the U.S., as a small but powerful group of mass-murdering psychopaths. No wonder we do not agree on what action government is likely to take toward Bitcoin.
Last comment,
“China had 80% of the mining operation under their control. They didn´t launch a 51% attack. Why? Because they knew it would fail.”
This was interesting speculation on your part. China’s 2021 ban on Bitcoin could just as easily indicate that it has a clear understanding of Bitcoin’s future (complete control by the Western powers). Perhaps that is why China chose to focus its people on a Chinese CBDC.
