As the encryption community has been eagerly discussing the new taxation of the cryptocurrency field in the US Infrastructure Act, regardless of whether the infrastructure bill is passed or not, the taxation of encrypted transactions itself has announced this to some extent. The legality of technology or assets, and the tax regulatory frameworks of various countries will become more and more mature, prompting the encryption industry to move in a more rational direction, and the currency circle is more likely to go mainstream.
The author watched and learned videos of several professors/doctors’ views on the encryption industry and Bitcoin yesterday, and summarized them in the following articles.
Bitcoin must embrace the rule of law
Who: Nouriel Roubini, chief economist and professor at New York Universitys Stern School of Business, is dubbed Dr. Doom by the economics community.
The economist is known as Dr. Doom because of his gloomy forecasts for the economy, including in 2008, when he accurately predicted the collapse of the housing bubble. But when it comes to bitcoin, he doesn’t think it’s all doom and gloom — he thinks legal institutions will help bring reliability to cryptocurrencies.
Anti-money laundering (AML) and know-your-customer (KYC) legislation is critical for the traditional financial system to accept bitcoin, Nouriel said. You need regulation, you need that credibility, but you can build it by building institutions, he said.
He and Bitcoin SV founder Dr. Craig Wright agree on the importance of the rule of law to the future of digital currencies.
In a keynote speech, Nouriel argued that digital currencies are weakened by a lack of regulation. He mentioned the need for an international agreement on the regulation of digital currencies to ensure we don’t end up in the “law of the jungle.”
He pointed to Commodity Futures Trading Commissioner (CFTC) Dan Berkovitz’s statement last week that decentralized finance (DeFi) is an unregulated financial market that competes directly with regulated markets. “Whether you’re a traditional bank or a fintech financial institution, or cryptocurrency or blockchain, you have to have the same regulation,” he said.
Nouriel also agrees with Dr. Craig Wright about the legal benefits of Bitcoin as an anonymous currency rather than an anonymous currency, saying that “law enforcement prefers that people use Bitcoin rather than offshore financial centers for various criminal activities.”
Thats because every bitcoin transaction is recorded on the blockchain, a permanent public distributed ledger accessible to anyone. This means transactions are traceable, public keys can be identified, and criminals can connect to digital wallets to gain ill-gotten gains.
This is evidenced by the hacker extortion incident some time ago, when the FBI tracked down $2.3 million worth of BTC that was extorted by a criminal hacking group called DarkSide. The money, a ransom paid by Colonial Pipeline, was not only discovered by federal investigators, but seized.
This would help to justify the digital currency and change Bitcoins image as the currency of choice for criminals, especially when combined with regulation.
Bitcoin and the blockchain system are very genius designs, but there are inherent limitations in the economic sense
Who: Eric Budish, professor at the University of Chicago Graduate School of Business
Professor Budish first gave a brief background information about Bitcoin. Bitcoin is an electronic payment system. It relies on cryptographic tools and a large number of anonymous, decentralized participants called miners to verify the legitimacy of transactions without any trusted third-party organization.
After omitting a lot of details, he believes that the working process of Bitcoin is as follows: 1) Users who own Bitcoin can initiate transfers to other users by broadcasting transactions, which are guaranteed unforgeable and verifiable by digital signature technology. 2) The most creative point of Bitcoin is that all transactions are publicly recorded. Transactions in each time period are recorded in a block, and the blocks are connected to form a public ledger, which is called a blockchain. In each time period, all miners will participate in a computing power competition. This competition asks miners to solve a difficult computational problem based on previous blocks and existing blocks. The miner who gets the result first publishes a new block and gets the corresponding block reward. Bitcoin generates blocks through the calculation of miners and maintains a public ledger.
It is easy to see that if the block reward is higher than the cost of mining, the miners are profitable, and more people will be attracted to join the ranks of mining. And more computing resources invested in mining will dilute the probability of obtaining block rewards with the same computing resources and increase mining costs. If the Bitcoin mining industry is free to enter, then the total cost of mining a block equals the block reward. Professor Budish believes that this describes a kind of rent-seeking competition: the higher the value of Bitcoin, the higher the block reward, and the corresponding power consumption for mining is greater; more efficient equipment or more Cheap electricity bills will not solve this problem, but will increase the consumption of electricity.
In addition to being based on cryptography, the security of Bitcoin also relies on an honest majority assumption: that is, the computing power of honest miners who abide by the protocol must account for the majority (>50%) of the total computing power. If a malicious party occupies a majority of computing power, it can perform double-spend attacks and so on to maliciously profit. Therefore, Professor Budish analyzed the honest incentive compatibility of Bitcoin. He believes that the attackers attack cost is greater than the attack benefit, so there is no motivation to attack. It is worth noting here: From an economic point of view, the cost of attacking Bitcoin is related to the cost of maintaining the flow of the blockchain system (that is, the reward for each block). Conversely, when two parties in a profitable relationship or a trusted brand seek to profit from fraud, the cost is related to the total value of their relationship or brand, not to maintaining the relationship. Or brand value is cost-related. From a computer science perspective, the attack cost is only linearly related to the flow cost, which is inconsistent with the common security in cryptography that increases exponentially with the size.
Then this means that in order to maintain the blockchain system and provide block rewards to ensure that Bitcoin is not attacked by the majority, then under equilibrium conditions, the block rewards provided to miners to maintain the blockchain system cannot compare with the profits of attacking the system. too little. In other words, this cost is like a kind of security tax that blockchain systems charge users. From an economic point of view, this shows that the cost of maintaining the blockchain system is very high. In other words, the cost of maintaining a distributed and anonymous credit system such as the blockchain is compared to the traditional use of interpersonal relationships, brand reputation , or legal means to maintain trust is much more costly. This is not an economical approach. From the perspective of security, since the security limit is linearly related to computing power, a considerable cost needs to be paid for a higher amount of security. In contrast, the cost of using violent agencies or laws may be lower.
Professor Budish specifically discussed two possible attacks, namely the double-spend attack and the destruction attack. The analysis of the former is the concretization of the previous three formulas, and a similar conclusion is drawn. The latter is based on more realistic assumptions. The previous discussion was based on the assumption that the value of Bitcoin is relatively stable. The assumption of the destruction attack is that once the attacker implements the attack, the user may lose confidence in Bitcoin after discovering it, and the value of the Bitcoin held by the attacker will also drop significantly. Although this does increase the cost of attack, considering this assumption is just another poison, that is, the Bitcoin system may indeed collapse. So this is actually a choice between two poisons, either choose high maintenance costs (security tax) or bear the risk of collapse, either of which is a fatal limitation for Bitcoin.
Professor Budish analyzed the fact that Bitcoin is applicable to various situations analyzed before from the perspective of the specificity of computing equipment, and discussed why Bitcoin is not currently under attack. He finally concluded that Bitcoin and the blockchain system are very genius designs, but there are inherent limitations in the economic sense that prevent it from becoming very important (similar to replacing golds current status). Once the importance of Bitcoin exceeds a certain limit, it will definitely be attacked.
Bitcoin can give us access to all the data of human beings in the whole process
Who: Liz Louw, Digital Marketing and Content Strategist
How do you explain Bitcoin to the average person?
Liz is not the first person to have this problem. Quoting Satoshi Nakamoto himself, she found that it is very difficult to write an account of this event for a general audience. There is nothing to relate to it. So she decided to address the complexities of the subject by finding a narrative . So, to help readers understand how Bitcoin works, she goes back to the story of Dr. Craig Wright (Bitcoin SV founder) who previously worked for a casino.
How does he solve the problem of making games in an online casino auditable and reassuring players that the system is fair? Bitcoins principles aim to answer these questions. Overall, designing an open, public system is key to the solution: its simplicity - thats the breakthrough.
When it comes to maintaining the computer network behind Bitcoin, its the same principle of honesty that makes Satoshis system work: The miracle Satoshi created was that it enforced honesty through an incentive scheme that made playing by the rules more rewarding than playing dirty. .”
After examining the origins of Bitcoin and how it works, Lizs book ends with thoughts for the future. She writes that Bitcoin has enabled the fourth industrial revolution—the other three, in that order, machines powered by water and steam, electricity, electronics, and information technology.
In particular, Liz described the grand vision of what Bitcoins data-recording capabilities will achieve: Sooner or later, were going to get to a stage where we can interact with computers and have access to all the data that humans have sent out throughout. The entire history of humanity. Human creation Everything will be documented for us to interact with.
Liz hinted that Bitstocks would make some big announcements that would build on this idea — seemingly a pivot from money to data. “We started calling Gravity [Bitstock’s app] a database.” Bitcoin buying and trading, “It’s our first product,” she said, “but there’s a lot more behind the scenes.”
A blockchain solution to the construction industrys woes
Who: Maximilian Korkmaz, Ph.D., civil engineer, founder of Stabilwerk Bau, a construction company based in Frankfurt, Germany.
Dr. Korkmaz discusses some of the obstacles facing the construction industry today and how blockchain can provide a solution.
Dr. Korkmaz first came across Bitcoin in 2010 as part of his Ph.D., but it wasnt until 2017 that he fell in love with it, specifically the Bitcoin SV blockchain. I chose Bitcoin SV because its promise is all about industry, applications and business, so I think its the right one for me.
The construction industry lacks digitization. Problems, he argues, often stem from communication issues among those involved in construction projects. To solve these problems, Dr. Korkmaz found a solution in the blockchain. I think I can use blockchain to make these processes more efficient.
Dr. Korkmaz said that Stabilwerk Bau is the first construction company in the world to accept credit tokens as payment for services. As he explained, Stabilwerk Credits, which runs on the BSV blockchain, offers his clients the opportunity to pay companies in fiat currency in exchange for credit tokens. The incentive for those who choose this payment method is to reduce costs by 10%. Furthermore, Dr. Korkmaz said that Stabilwerk Bau plans to “tokenize the entire relationship between construction project participants” to provide a smoother, faster and more efficient communication process.
A P2P software company he founded is also in the pipeline to provide blockchain solutions for the construction industry and other industries. Dr. Korkmaz plans to develop an app that will connect customers with general contractors and general contractors with subcontractors in the area. The app will be used exclusively with Bitcoin SV and will be available to users worldwide.
Bitcoin is a more secure system
Who: Dr. Craig Wright, chief scientist at nChain, a London-based blockchain and bitcoin research firm, and founder of Bitcoin SV.
Dr. Craig Wright explained that Bitcoin’s peer-to-peer node design addresses security issues. Even if more than half of the nodes were compromised - which would be difficult - the network could still recover: If there is one uncompromised node, it provides a legal evidence thread. So when people say 51% attack, it Its actually more resilient than that. If you have 1% of the network providing actual valid information instead of an attack, you now have a legally verifiable trail of evidence that can be reconstructed.
Whats more, the incentivized design behind the node system means that its size self-regulates as individual nodes join or leave: If you have 100 distributed global nodes in large corporations and data centers... .imagine what would happen if something happened to one of the nodes - they were suddenly knocked out in a disaster or a hack or something like that... Profitability overall stayed the same. So those other remaining nodes earned more. This Its a miracle of economics. So people see the profit, and once the profit is distributed, noticed and seen, then other people say, Oh, its time to turn on my node ... the network will self Fix, because people will see the money, see the sudden increase in profit margins mining the area, and there will be idle machines turned on.”
After discussing Bitcoin’s security design, Dr. Wright went on to explain how, by comparison, private blockchains are a far cry from what he built with Bitcoin: “Private blockchains are a curse. Its anti-security ... which just means youre grossly misunderstanding the whole technology and just using jargon to make up some crap because the whole security of the system is [based on] widespread distribution.
Source: Frontier Computing Research Center of Peking University, Coingeek
