Cost of hardware is irrelevant. Amount of energy is also irrelevant. An external irreducible (energy) cost is required for confirmation. Confirmation cost is controlled by demand for confirmation (supply is capped). As in all markets, competition maintains return on investment.
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Replying to @evoskuil @hugohanoi and
A 51% attack is not only possible, it’s inevitable once Bitcoin starts to really matter. Bitcoin doesn’t use hope as a defense. Fees rise on censored txs until the free market can overcome the censor’s ability to subsidize its operations, or it fails to do so.
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> A 51% attack is not only possible, it’s inevitable Let me make sure I understand... So you think 51% attacks are inevitable, and imagine a future where Bitcoin would go back and forth between being 51-percent-attacked (low fees) and censorship-resistant (high fees)?
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Yes - for some definitions of “hi” and “low”. And fees are the *only* thing that defends Bitcoin from censorship.
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Two points: (a) while I agree that fees will have to rise substantially to shoulder the bulk of security cost, surely you cannot ignore the sunk cost in mining equipments altogether?
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Replying to @hugohanoi @evoskuil and
Investment in mining will be a lagging function of fees, true. But that sunk cost will also act as a strong barrier against attacks. Any analysis of majority attacks must consider cost of hardware (stock) - Budish did too. You can’t just look at fees (flow) alone.
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Replying to @hugohanoi @evoskuil and
If you include cost of hardware in your analysis, then IMO 51% attacks are *not* inevitable.
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Replying to @hugohanoi @evoskuil and
(b) If you think 51% attack are inevitable, then surely you must think Bitcoin is already a failed project. It is the only natural conclusion.
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Replying to @hugohanoi @evoskuil and
Reason is no one knows what a “safe” level of fees is. Your marginal user would always try to pay the lowest fee he can get away with. Meaning there is no equilibrium. Bitcoin would fluctuate between being safe & unsafe. Who would want to use an unstable system like that?
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All buyers pay the lowest possible price, and sellers demand the highest possible. If the buyer is willing to pay the seller for sufficient security, then he will produce it and the buyer will have it. This is a praxeological truth.
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Ahh... There is your problem, when it comes to fees, there is no such thing as "sufficient security", at least on a per-transaction level. Neither the buyer nor the seller knows how to calculate this number. Only after you get 51-percent-attacked you'd find out.
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