Last week (around June 14, 2023), John Reed Stark (@johnreedstark) and Mark Cuban (@mcuban) got into a discussion on blockchain on twitter. John Reed Stark is a consultant, lecturer, and former chief with the SEC Office of Internet Enforcement. He’s a smart guy with impeccable credentials. Mark Cuban is a billionaire tech entrepreneur and from many accounts is a laid-back really nice guy.
They banter about for several long tweets about blockchain (never mentioning Bitcoin). Mark Cuban seems to be a fan of blockchain (my words, not his), while John Reed Stark is not.
And I agree with John Reed Stark. For simplicity, I’ll refer to him as JRS going forward.
JRS makes the point that:
He’s not wrong (just misguided as to why).
And yes Bitcoin is built on a blockchain. And I am a super-fan of Bitcoin. Let’s explore the dichotomy…
JRS mentions sluggishness. Bitcoin is built on a clunky, slow blockchain on purpose. It is meant to be slow on its layer 1 level as part of its consensus mechanism to get all of the network of computers to agree at regular intervals (every ~ten minutes) about the true state of its distributed ledger. This is a feature to enable final settlement of transactions. Every computer has to agree a transaction was made – this takes a little bit of time (from 10 minutes to get its first confirmation after being broadcast to perhaps 40 minutes or longer depending on network congestion). Every computer has to add the current winning block to the previous chain. Every computer has to protect a transactions integrity to defend from double-spending the same value (anti-counterfeiting). Every computer has to agree on a UTXO (the mechanism that stores value) has X value in Bitcoin, ie 50,000 sats). This all takes time. Being slow and clunky on its layer 1 protocol is a design feature, not a design flaw. If you want speed of transaction (while still maintaining layer 1 security and integrity protocols), then you would use a Bitcoin layer 2 tool such as Lightning Payments. If you think a layer is just adding extra baggage to Bitcoin as a fix or stop-gap (it’s not, it’s a feature), read Nik Bhatia‘s book, Layered Money, to see the myriad of layers in the current fiat currency system we use today (at least 7 layers).
JRS mentions security issues. He conflates hackers defrauding various blockchains in broad general strokes. Again, he is not wrong (mostly). But Bitcoin core software has never been hacked once it was on enough computers to make the endeavor of hacking it to be too expensive in terms of energy and hardware costs needed to hack it with a 51% Attack. Bad actors (bad governments) would need to control 51% of the mining computers in order to take over the network. This would be an amazingly expensive endeavor, and just not feasible as Bitcoin ASIC mining machines are spread throughout the world.
JRS mentions costliness. Again, this is a security feature of Bitcoin. Just to expend the energy to try to 51% attack Bitcoin, would cost $1,000,000 an hour to rent the hashrate that might attempt the attack, but the availability of Bitcoin hashrate to rent is listed as 0% as it is close to negligible. Miners aren’t renting out their Bitcoin hashrate – it’s just not profitable. Braiins.com has an excellent write-up on why 51% attacks are not feasible (even for state actors). In order to attack Bitcoin with cloud computing ASICS or physical ASICS (ASIC is a specialized computer to mine Bitcoin), you must lease the cloud hardware, or buy the hardware; and you must also buy the electricity to run these ASICS. This requires 1.364 million state of the art ASICS and 4.4 GW of electricity. This limits the nation-state actors that might do this endeavor. Keep in mind, getting 1 million ASICS is near impossible with current logistics of ASICS deliverables being spread out around the globe. Also, the Bitcoin ecosystem is always in flux developing new defense strategies thereby making attack vectors less relevant.
Wrap-up. Yes, blockchain for most endeavors is a clunky, slow, costly as a poor investment of resources of time, energy and money. But Bitcoin embraces those “flaws” as a feature that provides security, consensus, finality, and integrity of the network. I like JRS a lot. His writings embrace a lot of what Bitcoin stands for. He may not know it yet, but he’s meant to be a Bitcoiner, as are most of us.
Bitcoin, not blockchain.
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