This is an opinion piece by Shinobi, a self-taught educator in the Bitcoin space and host of the tech-oriented Bitcoin podcast.
Since Mining ban to China, there was a massive exodus of Bitcoin hash rate to the United States. There have been many stories and push from pro-American Bitcoiners to continue to attract more hash rate to the US, including the push to create a favorable regulatory environment for miners in North America. This has been done on the basis of the historical strength of American property rights, which is a large part of why the US equity and equity markets are the largest in the world.
This is a huge miscalculation and something that, if successful, will have a huge negative effect on Bitcoin in the long run. The whole game theory around the security of Bitcoin mining is decentralized/distributed. From day one, it was very clearly delineated that the majority (51%) or more of the Bitcoin hash rate could maliciously act in a way that severely degrades or completely breaks the security of Bitcoin. all system. They can orphan blocks from other miners, preventing them from even participating in the system to earn revenue in Bitcoin. They can exclude transactions from parties they don’t want to transact, again separating blocks from any miners that are processing those transactions from the blockchain. They can selectively refuse to handle Lightning channel closure properly, they can prevent pegs or pegs from sidechains. They can completely circumvent the system’s censorship resistance and weaken the security of not only the base layer but any secondary layers built on it to scale the system.
Miners self-determined to act maliciously are not the only form this particular risk accepts. They have to set up their operations somewhere, which means that – unless they can successfully operate off the illegal and invisible grid, which is not realistic at scale – they must comply according to the laws and regulations of the jurisdictions they establish. Too much of a network’s total hash rate in a single jurisdiction poses a security risk to the entire network. Think how many hashrates are currently running in the US and how many of them are public companies, registered co-hosts, easy-to-locate businesses, and people with enough hash rate at home with a power signature easily identified by the service company. All of these hash rates are subject to enforcement action from the US government with varying degrees of difficulty. And I mean different, everything except individual home miners can be dramatically completed in a one week period.
As of December 2021, Cambridge Bitcoin Electricity Consumption Index shows 38% of the network’s hash rate in the US. That’s the minimum required to engage in disruptive cyber activity of 13%. Bitcoin miners should not encourage action and legislation to bring this closer to that inflection point. The US government is the biggest empire in the world, we run the world’s reserve currency literally, which is facing great trouble in the world just because of the political collapse in the world. For decades we engaged in a foreign policy that was almost centered around benefiting America but at the expense of harming countless other nations around the world.
Bitcoin is another existential threat to that reserve currency and the interests of the rest of the world that rely on it. Everything is constantly painted as if America is a bright beacon of freedom in which the world will embrace Bitcoin for that, and in one way America is that beacon, but in another way, it resembles China’s totalitarian state in an uncanny way. of the CCP. The US government has every incentive to attack or seize Bitcoin that China does, even more so in the case of the threat that Bitcoin represents to the US Dollar. Bitcoin is a fundamental threat to the world order that the American Empire has established. If the government sees an opportunity to stop that threat, they will take it.
Carrying out such attacks is not a simple intellectual exercise with the government having no clue or a plan to do anything. In 2016 MIT designed a system called Cable. The whole goal of the system is to perform a literal 51% attack to permanently stop Bitcoin’s censorship resistance:
Read all of that carefully. Now consider Regulations of FATF has been extended and gradually implemented over the past few years. Travel rules. Almost every major exchange in this ecosystem is actively working on protocols to allow them to exchange personally identifiable information with each other, or at least commit to it, whenever they enter into a transaction on behalf of one of their users directly to another exchange. That won’t be opt-in – it’s a quest, even worse than suggested in the Chain Anchor. European politicians have even jumped on the line with public proposals to extend such KYC requirements to non-custodial wallets.
Now consider the current dominance of ESG narratives regarding Bitcoin mining. There are talks about (and regulations literally execute it in several places) preferential treatment exploitation of renewable energy. In general, these incentives involve economic incentives in the form of tax breaks/subsidies for activities. These types of non-Bitcoin economic transactions, and in the future even the possibility of straight payments, are a precise form of bribery by miners. They are incentivizing them to act in a particular way outside of the Bitcoin protocol.
These actions are gradually normalizing the idea of miners operating with such incentives outside of the protocol in mind. Public miners do not receive such transactions without identifying themselves, consumers do not receive rack space at a co-storage facility without KYCing themselves. All of these are required for the Chain Anchor to creep in slowly.
All that remains is the hash rate required to fully enforce whitelisting Bitcoin usage and exclude non-compliant miners from the system, and to tell the truth, Chain Anchor ‘has disabled the effect. results and make Bitcoin a licensed and whitelisted system. At that point, there is no choice but to hope that new miners can be produced and put online to overwhelm this attacking mass, which is a long way to designing. and how centralized ASIC production is in practice.
Also, the only option is to change the PoW algorithm. This, I believe, even in the face of such an attack, is highly unlikely. It calls into question the whole idea of a neutral system and indiscriminately destroys the value of the investments of malicious and non-malicious miners alike. Also, once again looking at the centralization of ASIC production, once this attack has been proven possible there is nothing that can stop it from being implemented again. Compression of the previous generation of ASICs in a fork also discourages honest miners from trying again. What if another fork occurs because the attack is pulled back? They run the risk of once again sinking large amounts of capital into a hardware investment that loses value in response to the attack.
I do not believe that Bitcoin can recover from such an attack. People will either smoke it and judge it simply as a scarce economic asset without real censorship resistance, or it will fail altogether. If a socially coordinated game is necessary to keep it operating in a censorship-resistant fashion, that completely undermines the value of a neutral anti-censorship system that requires no consent. such social coordination to function. It either dies, or it continues as a scarce asset to be neutralized.
For Bitcoin to truly function as an anti-censorship system, it needs to avoid that situation in the first place. Bitcoin miners should not promote such centralization of hashrate in a single jurisdiction and try to further encourage it by industry lobbying and politicians to make things happen. so it is more convenient for miners to concentrate in a single place. Not thinking about patriotism and the intense focus on “Make America Great Again” in that way is not good for Bitcoin – in fact, it is very dangerous for it.
If Bitcoin is to succeed, it needs to succeed as a system that is distributed safely and securely around the world, not heavily centralized in the US because “America is great.”
This is a post by Shinobi. The opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.