My thoughts after reading the thread patio11 linked, starting with the tweet:
Ok here’s how the Poly Network hack actually worked. If I’m reading the contracts correctly, it’s pretty genius.
the flaw with poly’s smart contracts is not new or super creative – here is some code I wrote in 2017-18 that handles this case (smart contracts talking to other smart contracts + having limited permissions). (this sorta thing was not hard to know about; there were and are libraries providing this feature.) I guess mb poly didn’t anticipate these contracts talking to each other so didn’t do any permissioning stuff between them, but one contract had admin perms with the other.
i’d like to think poly’s code should have failed an audit (b/c the permissions weren’t granular enough for something complex like cross-chain stuff + operational policies weren’t documented – like what identities would have admin perms in the SC). but TBH IDK if most audits would catch this. there are better strategies anyway.
I disagree with the quoted tweets use of “pretty genius”. It feels like a problem you’d find in a CTF-type challenge (which exist for ethereum).
Not directly about crypto, but Karl Jobst has a new vid about fraud in the retro video game market that’s about market manipulation. Same sort of stuff goes on in crypto (I wonder how much of this has gone on specifically with NFTs).
Bitcoin is not a commodity money. Its value is meant to come from being a medium of exchange and that’s it. That’s bad. See Mises (Theory of Money and Credit) and Reisman (Capitalism) on commodity and fiat money.
I didn’t know this, but both books are freely available online:
Crypto currency is a bad prep.
It’s meant to be independent of e.g. USD, and that’s supposed to be a major advantage. But the main scenario where USD collapses is where the US government (USG) collapses. In a lot of scenarios where the USG collapses, crypto also collapses. Why? Because crypto relies on infrastructure like electricity, computers and internet access. Many collapse scenarios for USG also involve a lot of infrastructure collapse.
Crypto is also vulnerable to EMP scenarios (from solar flare or nuke).
Gold, in addition to being a commodity money, doesn’t rely on advanced parts of civilization like electricity, computers and the internet.
Another issue is that the USG might be able to permanently harm the value of bitcoin (this also applies to any other specific crypto currency) – so that bitcoin has lower value even after the US government is gone (even if computers, electricity and internet still work fine). But I don’t know how USG would permanently harm the value of gold. USG can make anti-gold laws to lower its value, but they will stop mattering if USG is gone.
How might USG permanently harm bitcoin? By e.g. getting control over crypto software – through political pressure, threats, assassinations, democratic voting, working with a coalition of other governments, arresting people involved who don’t cooperate, etc. – and printing a bunch of new bitcoins for themselves. They could potentially cause massive inflation in bitcoin but not in gold. They could also push other damaging changes to crypto software. They could also just make tax policies that are anti-crypto (generally or specific ones, e.g. rivals to the new crypto the USG makes) enough to drive it to zero. I think them driving people away from bitcoin so it never recovers is much more realistic than doing that with gold. It’s much newer and it’s much harder to revive if it dies (particularly if some new crypto alternatives have already replaced it).
What do you mean by “a bad prep”? I’m not familiar with it. Googling didn’t help much. Do you mean, like cryptos prepare badly for working/integrating with the real world?
Ahh, I think I get you now – ‘a bad prep’ meaning that one of the motives for ppl buying/valuing bitcoin is as a contingency for like social collapse, but most of the ways that society could collapse mean that bitcoin would be worthless, anyway. so – for preppers – bitcoin isn’t an effective way of prepping; something like gold is better.
I agree with that. (I remember this sort of thing being brought up like 10-7 yrs ago – EMPs, collapse of society stuff – some ppl tried to argue bitcoin still could work via offline stuff b/c the blockchain would come back when tech did, but mostly the discussion went nowhere. Also, using bitcoin offline like that wouldn’t work without very sophisticated tech – if you had that tech then it wouldn’t be offline anyway)
I think there’s a line of dialog (or more than one) in the big short about betting against the US and that it wasn’t easy. I get the feeling that a decent chunk of the crypto community want govt currencies to fail – like they’re betting against society and that isn’t difficult for them.
It could be argued that bitcoin’s value can’t be permanently destroyed as long as the data of the original blockchain is still around, because at a later date (after civilization comes back) the community could reset the blockchain to the point before all the bad stuff happened. There might be widespread disagreement about precisely what block everyone ought to reset to (e.g. was it directive 312-A-1 that destroyed bitcoin or was it 315-C?), and different choices of reset point among different sub-communities would lead to different branches (different daughter currencies). If you had access to your wallet from the original chain, you’d have access to wallets for each of these daughter currencies, so it’s not clear how much value you’d lose.
All we can say for sure is that an individual bitcoin wallet’s robustness against societal collapse depends acutely on a lot of unknowns about future peoples’ preferences and the precise way in which things collapse, whereas gold doesn’t.
I think Elliot was not arguing that bitcoin’s value could be permanently destroy – just that it could be permanently harmed. IDK if you were adding-to or responding-to but thought it worth mentioning.
(These next paragraphs are based on my recent in-progress reading of Theory of Money and Credit)
I think the idea that USG could do permanent damage is somewhat self-evident, in that bitcoin’s value can be traced back to nothing more than the fact it is (or at least capable of being) an economic good. Given that some initial demand was generated for it during 2009-2010 (it doesn’t matter if that demand was mistaken), it took on some value. While ppl do (currently) judge it to have some subjective value, if this demand were significantly damaged then there’s no reason to expect it to return to some equilibrium (unlike gold). If there was an argument that Bitcoin would return to its top-place-status (or any other equilibrium), then I think it should answer other questions too, like why not just start a new chain? why not use other existing chains?
In TOMAC, Mises says (early on) that money is the common medium of exchange – it’s not a thing that you legislate, it’s a thing that’s adopted. Let’s assume Bitcoin is a common medium of exchange: if it’s harmed by USG (or whomever) then demand for such a medium will move elsewhere. Now let’s remove the source of that harm (e.g. USG’s legislation isn’t enforced, USG collapses, change of administration, w/e) – why should the bitcoin price go back to where it was, especially if an alternative was already adopted as a common medium? ATM it seems to me that bitcoin is the #1 crypto because bitcoin was the #1 crypto because bitcoin was the first crypto. that’s it.
More generally: what’s the difference between that and starting a new chain with a pre-mine that matches the distribution of the old chain?
While it’s possible that ppl might revive a dead bitcoin chain, I don’t see any reason for that to be rational, esp if civilization has gone and come in the mean time. IMO that’s future people creating value (or doing something) as opposed to past value being destroyed.
Note: i presume we’re talking about like the canonical Bitcoin blockchain’s token-unit-thing; like BTC, not the general idea of bitcoin/blockchains/whatever (I think this is consistent with everything we’ve said, but thought it should be stated for clarity).
Edit: I said above “as opposed to past value being destroyed.” – I meant “as opposed to past value being preserved.”
It was meant to be a response. I should have used the words “permanently harmed,” but I think the logic of my argument applies either way (it’s not clear that the USG can permanently harm bitcoin’s value, for the exact same reasons).
I’m glad you clarified this, because I actually was using bitcoin as a stand-in for the general idea of like, a cryptocurrency with a public ledger.
Hmm, I don’t understand your question. What does it mean to match the distribution of the old chain? In such a scenario, who is it that starts out with bitcoin in their wallets?
The reason why (I think?) it’s rational to resurrect an old chain is the reason why it’s rational for them to keep running the main chain tomorrow: The people maintaining it have a vested interest in maintaining it. I guess this could break down if society has collapsed for a very long time and a significant fraction of the original keys are lost.
The exact same addresses are assigned the exact same value of BTC in the genesis block of the new chain. So the exact same keys own the exact same coins (equivalently: the set of unspent transaction outputs is identical). LMK if that doesn’t answer your questions.
In the future, why would everyone else want to resurrect that chain tho? if other ppl don’t buy into it (and make a new chain or w/e) then it’ll just be the old-guard amongst themselves. IMO that wouldn’t end up with much value.
Other ppl do have a reason to buy-in to bitcoin today: it’s the most secure chain. That goes away with a discontinuity. (Not to mention that mining rewards would be super low relative to adoption if you rebooted a dead bitcoin)
Good to know. I have kept my comments just to bitcoin atm – like ether (ETH) can be seen as a commodity, unlike BTC. so WRT the current discussion it seems like other chains should be discussed separately (tho we can make some generalizations like LTC is basically BTC wrt reasoning about its value as money).
Okay, I understand what you mean now. Is there some important technical difference between resurrecting an old chain and “starting a new chain with a pre-mine that matches the distribution of the old chain”? In my mental model these are basically equivalent, but admittedly I only know how the bitcoin specification works on a high level of abstraction.
The answer to that question might not be relevant, because either procedure could restore some part of the value to the owners of the original BTC, which was my essential point.
I think I covered that specific point when I said “The reason why (I think?) it’s rational to resurrect an old chain is the reason why it’s rational for them to keep running the main chain tomorrow: The people maintaining it have a vested interest in maintaining it.”
The security comes from the robustness of the code, and the large volume of miners. I don’t think that the USG has the power to permanently damage either of these.
BTW, I don’t think this is true. ETH doesn’t have value other than as a medium of exchange. Sure you can burn ETH to have a computation performed for you, but when you do that you’re actually paying for services from the miners (albeit indirectly). Unlike commodity money, if no one else valued ETH, then ETH would be completely worthless to you: you couldn’t burn it and have computations performed for you.
Let’s break your self-quote down – this is how I read it:
- “The reason why”
- “it’s rational to resurrect an old chain”
- “the reason why”
- “it’s rational for them to keep running the main chain tomorrow: […]”
- “The reason why”
who is them?
if ‘them’ means the ppl who were miners in 2021 and (after the fall and rise) want to start it back up, well that doesn’t address the ‘old-guard’ criticism.
but more to the point, you claim the reason is the same for both; that is: “The people maintaining it have a vested interest in maintaining it.”
That does not explain why, 2 or 20 or 200 years in the future, a group of ppl would have an interest in continuing something that’s been dead for X yrs – even if those ppl were previously miners/hodlers of bitcoin.
This crit could be summarized as: continuity matters.
(edit: I wanted to note that I have more to say on other things you raised, but this seems like a good point to focus on to start with)
(edit2: I said “a group of ppl would have an interest in continuing something that’s been dead for X yrs” – ‘an interest’ is mb not a good choice of words; I have ‘an interest’ in promoting a scam that benefits me (i.e., I could profit) but I’m also unwilling to do that. A better choice of words mb was like ‘a group of ppl would pursue goal Y over starting a new chain from the same principles as bitcoin’; like the point is that there are better things for them to advocate than reviving old-bitcoin)
btw, as some context: in 2013 I wrote about how bitcoin was a new type of money and thought it was a good thing that bitcoin wasn’t commodity money. I changed my mind on that yesterday.
(edit: I think I changed my mind on a lot yesterday. Example: I now think Mises would be against Bitcoin – yet Mises was (in like 2010-2013) one of the economists held up (by the community) as someone who would support bitcoin. That’s a pretty big error on my (and the community’s) part)
I haven’t explicitly stated it, but I disagree with you on several points. I would like to discuss the things we’ve been talking about.
One reason you might not want to discuss with me is that I am currently reading TOMAC so it’s likely I’ll make mistakes applying things I read (on this first, exploratory reading). On the other hand, I have a lot of experience and a long track record with this stuff, so a discussion could be productive anyway.
For me, this is an opportunity to revisit some long-held ideas of mine and discuss them in a new, more critical light. I know that my knowledge of these sort of foundational matters is lacking, and I’m looking to improve it.
bitcoin et al ↩︎
I wrote my comment
partly because I understand there to be bitcoin fans with significant libertarian leanings, particularly in the earlier community when it was less mainstream. So I thought Mises (a libertarian thought leader) writing a criticism that applies to bitcoin was notable.
I haven’t read TMC for a long time (possibly since before I knew bitcoin existed) but I reviewed a little bit of it a few days ago, and I noticed the implication about bitcoin.