How To Kill Bitcoin with Ethereum
In Joe Kelly’s piece “How to Kill Bitcoin”, he describes a front door take-down of Bitcoin. Ultimately this requires powerful people physically seizing or otherwise acquiring a ton of mining equipment. “All nations physically seize and take control of all of the biggest mining operations within their jurisdiction.”
This is much easier said than done, for a number of reasons. In the US, people use guns to protect a business defying COVID restrictions or protect their weed farms, or their cattle grazing land. I can’t imagine what they would do if you came for their mining equipment. I wouldn’t want to be the Fed sent to find out.
What we need is a lighter touch, and this isn’t so hard. We just pay them. After all, they’re in the business for money, and if they believe they have an opportunity to cash out before the game goes away for good, they’re going to take it.
Step 1. Do all the regulatory fun stuff, mark-to-market capital gains, annoy people with KYC-AML, maybe tax it a little extra as its own asset class. This is just to bring the price down a bit.
Step 2. Acquire some mining equipment. You can buy this with money from those who bought it, so that they make a profit and go away happy. You don’t need 80% of the hashrate, just a small amount that is reasonable. Certainly if you are Uncle Sam you can get your hands on 5–10%.
Now for the attack. In How to Kill Bitcoin, the game is to massively overwhelm the network by dominating the hashrate. Seizing mining equipment is a two-score swing — you are taking it from the others while giving it to yourself. This is the strongest move but this requires a lot of boots in a lot of unhospitable places. A fairly simple approach is just to weaken the hashrate by paying them to waste cycles. This doesn’t give you extra hashes, but it can weaken security. A slightly more complicated approach would allow you to pay them to create the empty blocks for you.
Step 3. Get together an Ethereum dev team (or Cardano, or whatever your favorite and most efficient smart contract platform is.) Implement a contract that does the following. The contract listens for a message containing the following message: The sender’s ethereum address, hashed via SHA-256 to obtain an extremely small number< ε. The contract then pays out some reward R, perhaps denominated in DAI, perhaps Ether, or perhaps Wrapped Bitcoin. The value ε is chosen so that such a message would require a few zetahashes on average to be satisfied. You are just repeating Proof of Work and have all the mathematics of Poisson processes underpinning the incentives. You can deploy copies of this contract every week, altering R and ε to entice miners away from the Bitcoin block reward. Because there is no particular order or blockchain you’re building, you can make ε large instead of making R large, for example you could give 1/30 of the block reward but for 1/100 of the difficulty, paying out on average every six seconds.
The point of this exercise is to incentivize all of the rational miners with ASICs capable of exohash production to waste their production on activity that doesn’t add to the Bitcoin chain. Yes, this is wasteful and contributes to global warming in the short term. But the end justifies the means.
Now, you hope that you can get a critical mass of miners making money doing this. This is where you bank on Prisoners Dilemma. If a rational miner can have an expectation of 3 times higher by burning cycles for you, they do this. Perhaps the payoff is even with much higher certainty because much more rewards mean the miner may not need to join a pool. Maybe they don’t tell anybody, but they do this and take the profit. After all, certainly that particular miner is not going to be the deciding vote in the fate of Bitcoin. And if Bitcoin is being attacked, you might want to get some profit while you can.
Now once you’ve brought the hashrate down, you start to build your own. If you have above 51% of the remaining hashrate you can build up a store of unannounced empty blocks ready to fire off, as described in How to Kill Bitcoin.
The above method relies on bringing the hashrate down to your own level, so if you’re having trouble requisitioning all the hardware you might want to consider buying the hashes instead. This won’t allow you to build up the warehouse of blocks, but you can still grief the network long enough until miners begin to capitulate and sell you their equipment.
There’s a number of ways to do, I imagine, but here’s one outline for a contract. The contract starts with the latest Bitcoin block B_0 and then pays 2 times the block reward for empty blocks that append to the latest Bitcoin block B_0, and then you continue to pay for more blocks to be appended to this fork. This fork would be automatically be pushed to the Bitcoin blockchain as it becomes longer. You can have this run until you terminate it, with more blocks being appended. If you fall far behind and some transactions get through, you redeploy a new contract, starting with a new bitcoin block, or a new contract that massively ups the reward. The game theory now is that any given miner can produce empty blocks for twice the reward, so why wouldn’t they? Eventually, you hope to win a war of attrition, but as described in How to Kill Bitcoin money is not a problem, and it’s all about signaling, anways. Eventually miners capitulate.
You can do a hybrid, play with the parameters. In the end, the miners have no reason to stick together.
Of course, now Ethereum is a competitor. But these guys are actually trying to build something and not running around trying to overthrow the US Dollar while becoming quadrillionaires and they might actually care about things like global warming. So you should be able to coexist with them, especially considering that they know what happens when someone gets too big for their britches and crosses you. If they do give you trouble, repeat the process with Cardano, or whomever — You’re the alpha, you get to say who wins and loses.