Who is intimidated by Bitcoin?

BTC recovered slightly overnight to around 97k. Market sentiment has been low recently, and on-chain activity is also quite low.

At the time, the article said, “ In the long run, if block rewards continue to halve and transaction fees cannot fill the revenue gap, the issue of miner incentive model may become one of the focuses of community debate. ”

As expected, Justin Drake, a researcher at the Ethereum Foundation, took the opportunity to write an article, arguing that the total upper limit of BTC issuance of 21 million would become a threat to future security.

He cited data, saying that in the past 7 days, only 1% of miners' income came from BTC fees, and 99% came from BTC issuance (block rewards).

Further estimates say that a sustained 51% attack on BTC would require approximately $10 billion and 10G watts of electricity, which is a negligible cost for a nation-state.

The current total market value of BTC is about 2 trillion US dollars. Therefore, BTC is an asset with a total value of 2 trillion US dollars, with 10 billion US dollars as economic security. The so-called safety ratio of BTC is 200:1.

Therefore, he believes that any short-selling tool related to BTC mining will encourage 51% attacks. For example, mining company stocks worth $20 billion, BTC open interest exposure worth $40 billion, BTC ETFs worth $100 billion, and potential short-selling exposure generated by MicroStrategy stocks worth $100 billion.

From this, if BTC rises 10 times from around $100,000 and exceeds the total market value of gold, can BTC still guarantee its security? He believes that in the next 10 years, after three halvings, the security ratio will exceed 1000:1. In particular, as BTC becomes more institutionalized, more liquid, and easier to short, the security model will collapse.

So does BTC have a chance to fix this problem in the next 10 years - if this is really a problem? Obviously, he believes that BTC has become rigid, that is, the economic model cannot be changed to increase by 1% every year, and it is unlikely to switch to PoS. Changing the PoW algorithm is useless. Expanding large blocks to sell block space on a large scale has triggered community wars, which seems to prove that this is a dead end...

In the end, his conclusion is obvious: BTC will be eliminated in 10-20 years.

Is it really so?

The basic rule of the financial market is that if the expected future price of an asset is 0, then its present value should be 0. Obviously, the present value of BTC is not 0. Not only is it not 0, it is also the highest level in the past 16 years.

Isn’t this obvious contradiction enough to illustrate the absurdity of all the above arguments?

Whether it is using 10 billion US dollars to protect a total value of 2 trillion US dollars, or using 10 billion US dollars to protect a total value of 10 trillion US dollars, the so-called safety ratio is nonsense in Jiaolian's opinion.

After all, no one is going to transfer $2 trillion or $10 trillion of BTC in one BTC transfer transaction, right?

What can a 51% attack do? Reading Satoshi Nakamoto's white paper will show that this bluff-sounding thing can only do so-called double-spending fraud. In simple terms, it is a fake top-up or fake transfer to cancel a transaction that has just been completed.

That's all.

It’s not some cosmic killer. It doesn’t allow an attacker to steal anyone’s BTC on-chain.

If a 51% attack were to occur, the psychological panic and price collapse in the secondary market it would cause would likely far exceed the transaction value of the attacked on-chain.

In fact, the BTC system often undergoes natural forks, resulting in the cancellation of some transactions that have been written into the blocks.

If someone, such as the nation-state mentioned by the Ethereum researcher in the previous article, secretly controlled a large amount of underlying computing power and launched a 51% attack on BTC, resulting in a fork and block revocation, perhaps most people in the world would not notice that such a thing happened, and it would even be difficult to distinguish whether it was a man-made attack or a natural fork.

Large-scale, small-value (no more than hundreds of millions of dollars) BTC on-chain transactions are difficult to be locked and targeted by attackers. In addition, BTC addresses have a certain degree of anonymity, which further increases the possibility of being attacked in secret.

A 51% attack can only attack the BTC in circulation, but cannot threaten the BTC that is stored. National reserves are usually immobile and can be stored in separate pieces, so they are not easily targeted.

Satoshi Nakamoto’s 1.1 million BTC is the largest known BTC reserve. This huge, glaring target stands there to laugh at those fools who think it is easy to attack national reserves.

The so-called 10 billion US dollar security guarantee does not protect the total market value of 2 trillion US dollars, but the BTC transfer transactions with a value of less than hundreds of millions of US dollars or even far below the level of "100 million US dollars".

Using the underlying computing power costing up to 10 billion US dollars to launch a 51% attack on the BTC system in order to cancel a fraudulent transaction worth millions or tens of millions of US dollars on the BTC chain is not only uneconomical, but also stupid and crazy.

The beauty of the BTC system is that it is not perfect, but has several fatal "loopholes":

The first is the algorithm "vulnerability" - quantum computing attack. If quantum computers or more advanced computing technologies suddenly mature and break the ECDSA or SHA256 algorithm, then BTC will be finished.

The second is an economic "loophole" - the 51% attack. If a country mobilizes resources to launch a 51% computing power attack on the BTC system, then BTC will be finished.

The third is the governance loophole - hard fork. If the BTC community splits due to ideological differences and hard forks into multiple BTCs, then BTC will be finished.

Satoshi Nakamoto never promised people that BTC is a “paradise on earth.” History has repeatedly proven that the promise of a paradise on earth is often a trap leading to slavery.

These so-called fatal vulnerabilities are more like BTC selling a flaw. In Jiaolian’s view, they should actually be called fatal deterrents.

Who is deterring whom?

BTC is a deterrent to humanity.

The algorithmic "deterrence" forces people to always ensure that the best technical talents are responsible for the development of BTC system codes, and to ensure that the system's security level is always at the forefront of humanity. This deterrence has effectively deterred users who want to make direct democratic decisions and miners who are eager to seize power, forcing them to respect elite developers and accept the developers' technical leadership.

Economic "deterrence" restricts the motivation of a few people and institutions to implement monopoly through large-scale bribery, strikes against the tendency of centralization and centralization, and forces people to pay attention to and carefully maintain the decentralization and consensus balance of BTC, and not to dominate by one party. If everyone holds an equal amount of BTC and benefits from it, then there will be no motivation to attack. If anyone dares to dominate by himself and holds a large amount of coins exceeding one or even several Satoshis, then he may induce his opponents to attack. The prediction of the consequences of this game will force countries and institutions to pull others together if they want to reserve, which is equivalent to helping BTC complete the work of further promotion, diffusion and decentralization.

Governance "deterrence" puts a tight rein on elite developers, forcing them to practice elitism but in line with the wishes of the majority of community users. If they dare not be so cautious, a hard fork can abandon them.

Direct democratic decision-making cannot be implemented on the most cutting-edge, advanced and groundbreaking products. This is because direct democratic decision-making allows the public to directly express their wishes and act accordingly. Ford once said that if you ask people what they need for transportation, they will tell you that they need a faster carriage. Only geniuses like Ford or Jobs can see that what people need is not a carriage, but a car, and not a point-and-shoot phone, but a smartphone.

The most effective democracy is to allow elites and geniuses to lead the masses, while at the same time imposing reaction and restraint from the masses on them to ensure that they always put the needs and interests of the masses first.

Lethal deterrence actually means living towards death.

Just as you would not dare to challenge this deterrent force unless you know that a strategic nuclear missile could destroy the world.

It is precisely because of these deadly deterrents that BTC has prevented those with ambitious intentions from overstepping their boundaries, forcing humans to crawl at its feet, accepting the constraints of algorithms and computing power, and no longer able to expand currency as recklessly as in the fiat currency era.