Proposal to assert United States Control over the Bitcoin blockchain by 2037 /s

  1. For any miner who has less than 50% of the hashrate, it is always best to mine a block on the longest chain. Attempts to mine a block on a fork chain will usually result in the block being orphaned, that is, forgotten forever as not part of the main chain. Orphaned blocks are worthless, they give the miners no reward.
  2. If a miner or pool miners control over 50% of the hashrate, they can expect to win over 50% of the blocks. This means they can perform what’s called a 51% attack: By deliberately causing a fork and building on the fork until it is longer than the original chain, they can create an alternate block chain that must be accepted as the correct chain, according to the rule.
  3. The “longest-chain” rule is indispensable. Bitcoin would not exist if there was not a single simple rule for determining the correct chain. This is why Bitcoin consumes the quantity of electricity that it does. This elegantly simple innovation is what has allowed Bitcoin to be a global decentralized payment network in the last 12 years.
  4. if a miner or pool of miners controls 50% of the hashrate, they can control the network if they choose to do so. By mining only their own blocks they can deliberately orphan all other blocks. This means the pool gets to keep all block rewards and all fees associated with the network. Once such a pool has established control, they may reduce their costs as their competition attrits.
  1. Bitcoin exists on the promise of censorship-resistant payments but has not been adopted on a wide scale. Miners have a clear incentive to foster the illusion that such an attack is not possible, while Bitcoin grows exponentially in scope and more economic trust is put in Bitcoin. Any syndicated attack would destroy this promise.
  2. Mining is incredibly profitable today. Approximately $300,000 is produced every ten minutes. The market is still immature because Bitcoin is new and the price is volatile. Capital investment in mining equipment involves significant risk, so there are still significant profit margins to be had.
  1. The block reward (the fee paid to miners) is cut in half every four years. So at some point in late 2035 or early 2036, the block reward will be reduced to a mere 6.25% of what it is today. Mining revenue will dwindle and the slack will be picked up by increased transaction fees.
  2. If the price of Bitcoin stabilizes, transaction fees (which are even less sensitive to the volatility of the asset) will also stabilize: Thus the equivalent USD denominated revenue obtained by mining will stabilize. This will incentivize capital investment, attracted to profit margins that will have become less risky. Necessarily, the profit margins will be subsequently diminished.
  3. Eventually, Bitcoin will no longer enjoy absurd exponential growth in price. Thus capital gains on acquired bitcoins will no longer be a major source of revenue: Bitcoins acquired in 2035 cannot be expected to appreciate at the same rate as Bitcoins acquired in 2020.
  1. Lower costs and large profit margins. By eliminating competition, the costs of mining will drop significantly. The fees will still be determined by a shortage of block space, so the revenue will remain high will the costs plummet.
  2. Ability to censor bad actors. If a benevolent entity like the United States were to take control, they could stop ransomware from occurring on the Bitcoin network. Similarly, the United States or our allies could shut down transactions to or from know terrorist organizations, making it impossible for terrorists to run global crowd-funding operations.

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Achim Warner

Achim Warner

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