Crypto Market Commentary
26 September 2019
Doc's Daily Commentary
The 9/26 ReadySetLive Update with Mav is listed below.
Mind Of Mav
Why You Should Trust Bitcoin (And Continue To Do So)
Exactly a year ago a bug was discovered in the Bitcoin software affecting many different software implementations including Bitcoin Cash & Litecoin. Some have held this bug up as prime evidence that you can’t trust Bitcoin. This is exactly wrong, and I’m going to explain why.
It was reported that when the bug was found in Bitcoin’s code, it could have led to the network being temporarily shut down, which is a big deal. However, the news ended up being much worse than this, when it was revealed that there were other potential consequences from this bug, which could have led to an expansion of the Bitcoin supply, beyond the 21 million “hard” limit.
Social media was abuzz with the news, especially Twitter.
The event was further exacerbated by the fact that developers tried to “cover up” the full extent of the bug, and instead chose to focus on getting network participants such as miners and exchanges to upgrade ASAP.
In order to encourage rapid upgrades, the decision was made to immediately patch and disclose the less serious denial of service vulnerability, concurrently with reaching out to miners, businesses and other affected systems, while delaying publication of the full issue to give time for systems to upgrade.
– Source: Coindesk.com
The bug details can be found here, but the end result was that the vulnerability was not exploited and currently more than half of the network has upgraded, so the threat is essentially mitigated now.
What was the worst case scenario?
Bitcoin’s value is firmly rooted in having a functional network and a hard limit on the number of bitcoins that will circulate. So, it’s worth exploring what the fallout might have been, if a malicious actor had found and exploited this bug before the developers were able to patch it.
Initially, it would have been chaos. The price of Bitcoin could have plunged overnight as the supply was suddenly expanded ad infinitum. The network itself could have even ground to a halt, causing the network uptime to plummet until a solution was found (fortunately the fix was a single line of code, so this wouldn’t have taken that long).
The market price would have plunged, exchanges would have panicked, and Bitcoin would have been declared dead, again.
Sounds pretty bad… but let’s explore what would have happened next.
Aftermath of the Worse Case Scenario
In the aftermath of the worst case scenario, there would have likely been a hard fork of the network. On one side would be every transaction that occurred before the exploit occurred, and on the other side would be the chain with unlimited bitcoin.
The overwhelming majority of miners, developers, exchanges and users would choose the fork that did not contain the exploit as the “legitimate” fork, which would drive the second chain into obscurity or oblivion.
The price would then stabilize, as the value of the legitimate blockchain rose above that of the exploited chain, and this would drive the rest of the miners back onto the main chain, since there would be no value in mining on the exploited blockchain.
Eventually, the exploit chain would simply vanish, with the only long-term reference to it being in a Wikipedia article somewhere, and a small comment on the date where the price of Bitcoin dropped suddenly and then recovered.
Software as an organism
I’ve written about this idea many times. There are many parallels between software systems and organic systems. Consider the evolution of email spam filters (a primitive form of AI) and their eternal war against email spam.
Remember the story about Bubble Boy and the Sewer Rat?
If you don’t have an hour to watch that talk, it’s OK. I can summarize.
It would be folly to think that the best way to protect our children would be to put them in a sealed bubble and never let them come into contact with the germs of the outside world. We need exposure to the environment in order to become adapted to it. And yet, this “walled garden approach” is exactly how most software security systems work today. They wall themselves off from the outside world, control access using concentric circles and then if they get hacked they just file an insurance claim. Bitcoin doesn’t work like that.
In the sewers of the internet, Bitcoin faces constant assault. But, because of this, it has the strongest immune system imaginable, developed from years of bombardment by viruses, germs, chemicals, and anything that might wash down the drain (hackers, terrorists, rogue nation states with cyber armies).
Why you can trust Bitcoin
Bitcoin is a brilliant system based on advanced cryptography, a new class of data structure, and a new way to think about trust itself. But, beyond this, you can trust Bitcoin because of the community.
We believe that there will only be 21 million Bitcoin, and therefore; even if someone did manage to exploit a bug and create more; the network would simply fork away from that blockchain, understanding that it was invalid.
Because of the economic incentives in play (game theory), this would cause exchanges and miners to follow suit; effectively killing or relegating the secondary chain to the sidelines.
In fact, this already has happened:
Theymos continued, saying that rollback would be much like what happened during the so-called “value overflow incident” in 2010 when 187 billion bitcoins were created out of thin air but, ultimately, were destroyed.
– Source: Coindesk
You can trust that even though the Bitcoin software isn’t perfect, it has some of the best and brightest working on it. If a bug is found, it will be fixed. After all, there’s real money on the line.
Bugs have been found in Bitcoin’s software in the past, and there will be bugs in the future. It would be crazy to think that any system is perfect and never needs to be updated. Bitcoin is no different, and it’s exactly this kind of situation that highlights what’s really going on here.
Bitcoin’s development team is one of the most active in the world for any kind of project, let alone blockchain. It’s not magic but hard work and innovative thinking that have kept people coming back to the Bitcoin project. It has value because of the community, in much the same way that Facebook (FB) and Twitter have value because of their communities.
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An Update Regarding Our Portfolio
We are pleased to share with you our Community Portfolio V3!
Add your own voice to our portfolio by clicking here.
We intend on this portfolio being balanced between the Three Pillars of the Token Economy & Interchain:
Crypto, STOs, and DeFi projects
We will also make a concerted effort to draw from community involvement and make this portfolio community driven.
Here’s our past portfolios for reference:
RSC Managed Portfolio (V2)
RSC Unmanaged Altcoin Portfolio (V2)
RSC Managed Portfolio (V1)