Can Bitcoin be Destroyed? Game Theory and Network Attacks
What is game theory? Simply put, if you are playing any game of strategy, like chess, any move you make in the game will have to be countered by your opponent. The strategic decisions that you and your opponent make will ultimately determine who wins and who loses the game.
So how does this relate to Bitcoin? Bitcoin could be the greatest invention since the Gutenberg press.
The Gutenberg press affected the game theory of how the Church and State worked and how information was shared with the world. When Johannes Gutenberg invented his press, he was essentially moving his chess piece to checkmate the Church.
For the most part, up until the invention of the Gutenberg press, the Church and people in positions of power or education could read, write and spread whatever information they wanted. Before the printing press, there were limited copies of important writings such as the Bible. Any knowledge about the world mostly came from whatever your local town had available for a literate figurehead to read in church or school. Most people were not able to read or write, so they had to depend on others to gain knowledge of the world. People were told what to learn, believe and how to live their lives by the Church. As long as the State and the Church controlled what the people were taught they could control the people's ideologies.
Bitcoin has the same game-theoretic principles as the Gutenberg press, but it is working toward separating the State from money. Now let’s envision a chessboard where the "world’s most powerful players" (WMPPs) — that is, banks, governments and special interest groups — are playing on one side of the chess board and Bitcoin is on the other side. This chess game between Bitcoin and the WMPPs has been the longest chess game to have ever been played, because it has been going on for 13 years.
In the game of chess, there are two possible outcomes: stalemate or checkmate. There is no chance that Bitcoin will face a stalemate in its game against the WMPPs, because a stalemate means that neither player wins or loses. A stalemate results when neither player can make a move that would result in the game progressing any further.
Alternatively, if Bitcoin checkmates the WMPPs (the "king") and wins the game, Bitcoin will have become a store of value and medium of exchange for the whole world. The WMPPs cannot checkmate Bitcoin because even if it were possible for the entire world to ban Bitcoin (as far-fetched as that may sound), Bitcoin would just go underground and be used like the Tor network, aka the dark web.
This year, the WMPPs have made the following chess moves against Bitcoin along with "Bitcoin’s game theoretic countermoves" (BGTC):
- WMPPs Move #1: China banned all bitcoin miners from their country. China represented approximately 65% of the computing power that runs the Bitcoin network.
- BGTC: Bitcoin miners moved to the U.S. and other bitcoin miner-friendly countries. The resilience of the Bitcoin network was greatly tested by this huge move by the second most powerful country in the world. The Bitcoin network, however, can run freely, regardless of China or any other powerful country’s decision about it. It carries the mindset of the “little engine that could” and will soon become a steamroller that all countries will have to get out of the way of or get “steamrolled" by.
- WMPPs Move #2: The United States snuck in a cryptocurrency “provision” within its $1 trillion infrastructure bill so as to get $28 billion worth of taxes to fund the bill. The cryptocurrency “provision” was poorly worded by people in D.C. that did not have proper understanding as to what bitcoin or cryptocurrencies were.
- BGTC: Bitcoiners called all their senators and fought for the cryptocurrency provision to be reworded and less harsh on the Bitcoin industry. This Bitcoin movement sent shockwaves among the halls of Congress and even though the "provision" did not change in favor of cryptocurrencies, the shockwaves that were caused by Bitcoiners have pushed the digital asset to the forefront of legislators' minds. Bitcoin as a protocol remains unaffected by the bill and keeps running seamlessly, producing new blocks every 10 minutes.
- WMPPs Move #3: The Environmental, Social and Governance (ESG) movement puppeteered Elon Musk to come to the "realization" of Bitcoin’s “immense” amount of energy usage and the need to make Bitcoin “greener.”
- BGTC: The Bitcoin Mining Council was created by Michael Saylor. After compiling an immense amount of energy usage data from 23 miners (62% of the mining industry) that freely joined the council, it was found that Bitcoin currently generates more than 50% of its usage from renewable energy. Bitcoin crashed to $29,000 after the Musk and China FUD (fear, uncertainty, doubt) in a span of a few months before later recovering to a new all-time high of $69,000. The Bitcoin Mining Council is serving as a great way to educate the masses about Bitcoin's energy usage.
- WMPPs Move #4: The International Monetary Fund (IMF) tried to strong-arm El Salvador into not passing a law that would allow bitcoin to become legal tender in the country, by threatening that they would not support El Salvador.
- BGTC: The President of El Salvador took things into his own hands and did what he thought was best for his people in passing a bill over a span of one day to allow bitcoin to become legal tender in El Salvador. El Salvador started using bitcoin as legal tender on September 7, 2021. This game theoretic move by Bitcoin could start a chain reaction among other countries to adopt bitcoin, as was already demonstrated to have begun by the Central African Republic, which adopted bitcoin as legal tender in its own country in April 2022.
In conclusion, the Bitcoin network will continue to operate no matter what the WMPPs say, do or think. Some of the greatest, most powerful entities like the IMF, China, United States and ESG movement have tried to attack Bitcoin, but it continues to move its chess pieces on the world's chessboard to counter every move.
Since Bitcoin launched in 2009, Proof of Work has been the mainstream method of securing decentralized cryptocurrencies against double-spend attacks. Proof of Work is intended to make it prohibitively expensive for an attacker to rewrite the blockchain and reverse transactions that are considered settled.
An attacker could double-spend through a '51% attack' in which the attacker amasses a majority of the hashrate on the target cryptocurrency. Satoshi Nakamoto assumed in the Bitcoin whitepaper that acquiring 51% of Bitcoin's hashrate would be impossible and thus did not consider the economic incentives behind a 51% attack.
Recently, theoretical thinking about 51% attacks has evolved. A plethora of alternative cryptocurrencies (altcoins) with wildly differing market capitalizations have launched. This has made 51% attacks against altcoins more realistic because only a small proportion of miners from larger coins need to switch to a smaller coin in order to control 51% of the smaller coin's network hashrate.
This has led to the creation of economic models that consider the incentives behind launching a 51% attack in a world where enough hashrate can be purchased if the attacker is willing to pay. These theories suggest that successful attacks are either break-even or profitable unless miners have large fixed costs associated with their mining hardware that could not be recouped in the case of an attack.
Mining rental services have reduced the fixed costs for an attacker to zero as renters only need to purchase hashrate for the duration of the attack and have no commitment to future returns from the underlying hardware. This effectively allows an attacker to rent hashrate for only its marginal cost. A large number of proof-of-work altcoins have many multiples of their network hashrate available to rent, leading to a number of high-value attacks in the wild.
Until this research arose, the industry has relied on media reports and disclosures from victims (usually exchanges) to learn about attack events. Exchanges are not incentivized to disclose successful attacks due to the risk of being perceived as insolvent and journalists are rarely able to provide detailed data on an attack. Futhermore, 51% attacks are transient events meaning that unless they are observed at the time of attack, it is not possible to detect them later.
1) Nasdaq. Guest post by Jeremy Garcia.
2) MIT Digital Currency Initiative. Researchers: James Lovejoy, Anne Ouyang.