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SalonCast002 ::: The Indifference Engine

We held a 0x Salon conversation under Chatham House Rule on our ‘Indifference Engine’ critique of Bitcoin’s proof-of-work. This is an audio report based on that discussion.

Published onNov 07, 2021
SalonCast002 ::: The Indifference Engine

We held a 0x Salon conversation under Chatham House Rule on our ‘Indifference Engine’ critique of Bitcoin’s proof-of-work. This is an audio report based on that discussion.

Hosts: Wassim Alsindi, Sarah Friend, Valentin Golev and Daniel Shinbaum.

Stream (via Soundcloud) or download as mp3 // are.na research archive

Saloncast002 - The Indifference Engine by 0x Salon

download (right click “Save As…“)



Introduction

Start – 1min

Permissionless Entry

1min – 4min

To some extent, whether or not a network is permissionless gives an approximation of how equally tokens are distributed.

Anybody can attempt to mine a block using basic equipment available to them. But in practice, it’s almost essential for miners to use expensive specialised hardware to mine Bitcoin.

Mining in POS does not require specialised hardware. The only way to initially acquire tokens in a proof-of-stake system is through purchase on a market.

Both POW and POS favor wealthy miners in different ways.

Staking pools and mining pools are like cooperatives where users pool their resources together. If a member of the pool mines a block, the reward gets divided up and distribute to other members. This offers less wealthy members an avenue to earn tokens for participating in the consensus protocol.

POW…….

4min – 5min

  • Bitcoins POW accomplishes several functions:

    • coin distribution

    • randomness

    • security

Any POS must meet all these functions.

Specialised hardware in POS - VDFs

Ramsey definition for measuring Bitcoin in terms of time

5min – 7min

Value of 1 BTC = Value of 96 seconds of computational resources directed at securing the blockchain against thermodynamic attacks

600 seconds (target interval between mined blocks) / 6.25 BTC (mining reward per block) = 96 seconds

MEV and Selfish Mining

7min – 17mins

Mining as it’s presented in the Bitcoin whitepaper was egalitarian: “one CPU = 1 vote”. Selfish mining and MEV present less egalitarian methods of mining.

Selfish mining pits the miner’s interests against the interest of the rest of the network. Unlike honest mining, selfish miners can receive outsized rewards while depriving the network of security.

“Miner extract is a term [for] when the miner is trying to extract value from the network in ways beyond just mining.” (9:41)

Miners on Ethereum are seeking other revenue streams because their profits are threatened by the planned switch to POS and other protocol changes like EIP-1559 which reduced miner fees.

MEV poses an existential threat to blockchain networks. It shatters the promise that anybody can have their transactions added to the blockchain if they pay a fair fee. Instead, a miner can execute other user’s transactions as if the miner made the transaction themself.

From a legal regulatory perspective, MEV makes miners look like financial intermediaries.

MEV, flashbots, and the Binance hack of 2019 point to the horizon where reorganizing the supposedly-immutable transaction history of a blockchain becomes a market commodity.

Reorganizing the blockchain after 100 blocks (the delay before mining rewards become spendable) is a line in the sand for Bitcoin. A reorg after 100 blocks would destabalise the miner’s profits.

Blockchains & Time

17mins – 22mins

Cryptocurrency may have some use cases outside of finance. Blockchains is a censorship-resistant time stamping system.

Clock glitches

  • 2038 Problem: In the year 2038, Bitcoin runs out of 32-bit linux-based timestamps

  • Fake timestamps: Miners can generate fake timestamps to attempt to reduce randomness or speed up the clock

Integer Overflow & Clocks

22min – 28min

Seemingly simple numerical tasks, like representing amounts of money or reliably keeping time, become surprisingly complex in digital systems with limited disk space for storing an integer.

Unlike other modern programming languages, the smart contract programming language Solidity does not protect against integer overflows.

Bitcoin is a clock with its own internal logic. Like the arrow of time, Bitcoin’s blockchain increments in one direction and cannot be reversed.

As more computational resources become available for mining, Bitcoin’s difficulty adjustment algorithm keeps the rate of block production relatively consistent, with a new block mined on average every 10 minutes..

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