Does Counterparty Add Risk to Bitcoin?
Counterparty adds lots of features to Bitcoin that were previously not present, but do these features have opportunity costs? And more specifically ,do these ...
What's up, party people? Chris Derose here, Community Director of the Counterparty Foundation and today we had a question from Bart Kent. Hi, Bart. Thanks for the question. Bart Kent wants to know, "Is there an increased risk of attack on bitcoin by adding high valued assets through systems like Counterparty or Coinprism?" So, it's a great question. It's actually one of the longstanding questions we've had in this movement, is to whether or not the incentives outside of the immediate bitcoin concerns, add an increased exposure to risk on the blockchain. And this is something we've been talking about for a long time, actually.
This has been going on for, geez, years now. And yeah, you know, the short of it is, it does. It absolutely does. By adding an additional load on the network, by adding weight to the chain, we are, in fact, increasing the incentive to attack. And there are a couple easier ways to visualize this. Right now, at any given block, let's say there's $100,000 or so in transactions that are going through.
Now, if you instead make it $100,000 plus, I don't know, a land title, or 100,000 shares of Microsoft or some greater amount, now you're adding to the network additional incentive for people to attack it, because now they can double spend these high valued assets. Now, so I don't know what that means exactly. We've all been talking about it. I can tell you what I think it means but nobody really knows. Certainly, what I think it means is that, we will probably see the bitcoin blocktrain attract more mining power. I think that more miners will come to the network and, over time, be compensated relative to what they are securing in the long term.
I think that we'll probably even see things like financial actors in the traditional workplace, banks maybe, I could see exchanges. I think we've already seen OKCoin, for example, put money into securing the chain and I wouldn't be surprised if we see that in bitcoin at some level. That's probably gonna happen over time. There's other ancillary reasons why I think that will happen, so it will come together for that reason. But as actors have the incentive to trade these assets, if it provides cost reductions in various forms, they'll be likely to probably or certainly add mining power themselves. But, even more significantly noted in this discussion is not just what the actual mining power is going to be increased but, the point of what an actual double spend or what a 51% attack is needs to be noted.
So, you have to consider that a 51% attack does a lot of things on the network but it doesn't exactly pervert balances. What it does is primarily a denial of service to the network functions by actors. So, if you do a 51% attack on the network, what you're going to end up achieving isn't necessarily a double spend, off the bat. It'll signal to the entire network that there is a 51% ongoing and people who have money on the table are going to stop what they're doing. They're going to wait to let's to see what happens. So, it's not necessarily the case that a 51% attack scenario, by way of this load, is going to immediately cause a double spend.
If you have a million dollars in value on the chain, you're probably going to wait a good number of confirmations before you actually proceed to settle that value in one way or another, outside of the chain. I think that, in general, that's probably consistent with what you're going to see going forward. People like to think that these big transactions are just a flip of a switch and then everybody goes to their hole, but no, what actually happens is, on bigger transactions, we wait a little while, let things settle down until there's enough surety in the actual confirmation that we will know that that value has been transferred to a significant degree of confidence. So, we shall see. I mean, again, the other component of this is, if blockchains work, you're going to see this regardless. There's nothing you can really do to turn off this behavior.
So, if you're going to engage in a blockchain, you're going to probably or certainly choose the blockchain that offers you the most protection for these problems and that's going to be bitcoin. It's really just the way it gonna be. We don't know yet if this bitcoin project is going to succeed. I have a lot of confidence at this point that it will, but that's definitely one of the best criticisms against the project, is that it may end up outgrowing its ability to be secured by way of its usefulness. But hey, if you feel that way about it, I don't know, maybe you've got the long term optimism outlook that I have. So, yeah.
I don't know. Did I miss something? Do you have another angle on this that perhaps I missed? Why don't you leave your comments below or why don't you Tweet me on Twitter? I always love seeing what you have to say and I always love answering your questions. And if you like this video, subscribe. Later, party people. It's just distracting. I wasn't, I was very distracted.
You wanna be in the video? What is the video about was what I was trying-- Oh, we talk about bitcoin and technology and everything. Not really. No? What do you want to talk about?