Now that I’ve said what I don’t like about Bitcoin, it’s time to talk about efficient alternatives.
In my previous paper on the subject I amused myself by hypothesizing an efficient alternative to Bitcoin based on whatever mechanism it uses to achieve consensus on checkpoints. Whilst this is fun, it is pretty clear that no such decentralised mechanism exists. Bitcoin enthusiasts believe that I have made an error by discounting proof-of-work as the mechanism, for example
I believe Laurieâ€™s paper is missing a key element in bitcoinâ€™s reliance on hashing power as the primary means of achieving consensus: it can survive attacks by governments.
If bitcoin relied solely on a core development team to establish the authoritative block chain, then the currency would have a Single Point of Failure, that governments could easily target if they wanted to take bitcoin down. As it is, every one in the bitcoin community knows that if governments started coming after bitcoinâ€™s development team, the insertion of checkpoints might be disrupted, but the block chain could go on.
Checkpoints are just an added security measure, that are not essential to bitcoinâ€™s operation and that are used as long as the option exists. It is important for the credibility of a decentralized currency that it be possible for it to function without such a relatively easy to disrupt method of establishing consensus, and bitcoin, by relying on hashing power, can.
Ben, your analysis reads as though you took your well-known and long-standing bias against proof-of-work and reverse engineered that ideology to fit into an ad hoc criticism of bitcoin cryptography. You must know that bitcoin represents an example of Byzantine fault tolerance in use and that the bitcoin proof-of-work chain is the key to solving the Byzantine Generalsâ€™ Problem of synchronising the global view.
My response is simple: yes, I know that proof-of-work, as used in Bitcoin, is intended to give Byzantine fault tolerance, but my contention is that it doesn’t. And, furthermore, that it fails in a spectacularly inefficient way. I can’t believe I have to keepÂ reiterating the core point, but here we go again: the flaw in proof-of-work as used in Bitcoin is that you have to expend 50% of all the computing power in the universe, for the rest of time in order to keep the currency stable (67% if you want to go for the full Byzantine model). There are two problems with this plan. Firstly, there’s no way you can actually expend 50% (67%), in practice. Secondly, even if you could, it’s far, far too high a price to pay.
In any case, in the end, control of computing power is roughly equivalent to control of money – so why not cut out the middleman and simply buy Bitcoins? It would be just as cheap and it would not burn fossil fuels in the process.
Finally, if the hash chain really works so well, why do the Bitcoin developers include checkpoints? The currency isn’t even under attack and yet they have deemed them necessary. Imagine how much more needed they would be if there were deliberate disruption of Bitcoin (which seems quite easy to do to me).
But then the question would arise: how do we efficiently manage a distributed currency? I present an answer in my next preprint: “An Efficient Distributed Currency”.