How Insurance Works

Comparing Block Assurance Times for various cryptocurrencies


welcome everyone so today I wanted to
talk about the recent paper that IOHK released Sebastien put it on his twitter
and the title of the paper is comparison of block expectation time for various
consensus algorithms and i wanted to talk about this paper in terms of proof
of work versus proof of stake so the proof of work community proof of work is
something like Bitcoin or Ethereum Ethereum is going to move to proof of
stake eventually but it right now it’s a proof of work coin and proof of stake is
something like Cardano the proof of work community often argues that proof of
work is more secure than proof of stake and this has been proven to be untrue Ouroboros is just as provably secure as a proof of work system
and this paper actually leads me to believe that it may be actually more
secure than a proof of work system because the time it takes to confirm
transactions is a lot quicker than in the Bitcoin network or in the Ethereum Network so this paper compared Bitcoin, Ethereum, and Cardano
so they could they compared Ouroboros which is cardano’s protocol they
compared GHOST which is Ethereums protocol and they compared bitcoins protocol one of the things that I thought was very
interesting with this paper was this idea of block confirmation times for
users to get assurance that their transactions will not be reverted so
there’s this whole issue in cryptocurrency called the double spend
problem so basically it means that you are sending coins through the same
address or you’re spending the same money twice so for example if you go to a car
dealership and you purchase a car and you’re sitting with the dealer and
they’re like send me your Bitcoin to this address and then the car is yours
but you have to wait for the confirmation to be 99.9% clear as a car
salesman in order for that transaction to go through without you feeling like
you’ve got shorted so the person if they double spent the transactions within the network basically what that means is
both transactions would appear in that block but eventually when it’s time to
solve that block it would be kicked out both transactions would be kicked out
they would be discarded because you cannot double spend you cannot spend the
same money within the network so how do cryptocurrencies combat this problem
they wait for confirmation times so this paper analyzed the amount of time that
you would have to wait to be 99.9% sure that the transaction would not be
reverted so here’s where we have an issue so for example in the Bitcoin
network it’s advised that you wait six blocks before you’re 99.9% sure
that the transaction will not be reverted and six blocks is 60 minutes
because each block in Bitcoin is around ten minutes and there’s around twelve
point five seconds I believe of latency times so that’s the block regeneration
time after that ten minute period is completed so just about an hour the
the best estimates even under a hyper improved Bitcoin they think that they can
probably bring it down to around thirty minutes for a confirmation time and
that’s some that’s a serious issue because for example you can double spend
in Bitcoin if you control if you do a 51% attack you can double spend in
Bitcoin and that would entail controlling 51% of the hash power that
Bitcoin has to offer and we’re going to go over that later but for Ethereum their GHOST protocol they say that you have to wait around 30 minutes to be
99.9% sure that this transaction is not going to be reverted and under Ouroboros the most the maximum amount of time that you would have to wait is
around five minutes and there’s another paper that says in this paper it says
it’s actually down to 3.6 minutes so you have to wait less than 4 minutes for the
transaction to be confirmed I mean the transactions confirmed immediately as
you can see when you send when you send ADA to someone else or when you send
it to your Daedalus wallet you see low, medium, high transaction assurance
and basically it starts off low then it goes to medium then it goes to high by
the time it hits four minutes by the time it hits three and a half minutes
what we have is we have a very provably secure transaction so think about
going to that same car dealer or making a large ticket purchase where a
double spent attack could highly benefit the user in that situation and saying oh
you know you’re purchasing a car that’s I don’t know worth $50,000 I only have
to wait three four minutes for the money to go through if it’s Bitcoin we’re
going to have to wait an hour what if the network is clogged as
well you’re gonna have to wait even longer than that you made your
transactions may not even fit into that block because there may be so many
unconfirmed transactions that it takes a long time so in the effort of
speeding up transactions for goods products and services you’re going to
want to stick with the provably secure protocol that allows you to
verify with 99.9% accuracy that the transactions that you place on this protocol or that you place on this blockchain are correct so
moving forward I also printed out the proof of work 51% attack cost so this is
how much you would need to basically attack the proof of work network and
create this double spend problem and right now according to the market caps
right now Bitcoin market cap is around 64.44 billion but
it has to deal less with market cap as it has to deal with hash rates so that’s
the amount of mining machines that are being used to attack the network so to
attack the network for one hour Bitcoin network you would need two hundred
eighty one thousand five hundred and twenty four dollars so people often ask
the question is it even worth it to double spend no it may not be worth it
to double spend on Bitcoin because the attack cost is so high but there are
things in life that are worth more than two hundred eighty one thousand five
hundred and twenty four dollars and certain transactions could benefit the
user or benefit the attacker if they actually attack the network and did this
double spend issue and then walked away with I don’t know half a
million dollars or a million dollars or ten million dollars or a billion dollars
you never know but it can be attacked Ethereum the attack cost is eighty five
thousand five hundred and eighty six dollars you have to remember that as the
Bitcoin price goes down more and more people are turning off their ASIC mining
machines and that’s going to decrease the amount of money that it takes to
attack and this happens cyclically I’m not saying that bitcoin is going anywhere bitcoin is here to stay but at the end of the day this is a bear
market so it’s likely what if the price cuts by half again what if the Bitcoin
hits like two thousand or goes under two thousand dollars more and more people
are going to turn off their ASIC mining machines and that’s going to decrease
the amount that you need to attack the network and when Bitcoin
skyrockets again of course it’s going to be very robust and strong but then it’s
going to fall back again it’s very cyclical so when it falls again there’s gonna be
a higher entry point to attack the network Bitcoin Cash takes around nine
thousand dollars to attack Litecoin eighteen thousand five hundred sixty
five dollars Monero five thousand one hundred and forty nine dollars Dash seven thousand six hundred ninety eight so if you have if you’re going in and you’re
purchasing with Monero and you go in to a car dealer and you buy a
hundred thousand dollar car and we don’t know the confirmation time of Monero but
the attack costs you could double spend it’s only five thousand dollars so what
if you walked out with two hundred fifty thousand dollar car or you walked out
with something else there are issues there Z Cash around 12 thousand dollars
Bitcoin Gold $890 Bytecoin $188 Siacoin $0 Electroneum $2000 Monacoin five hundred forty dollars when you go down to like Bitcoin Private 28 dollars
Quantum Resistance Ledger eight dollars eight dollars to one hour attack cost
the cost it would take to attack the network for one hour
eight dollars litecoin cash $49 Z classic 333 dollars very small amounts
so these other coins basically if people are accepting them
at retailers and they’re selling large ticket items you have an issue because
you can attack the network pretty easily Bitcoin is secure I wouldn’t say that
you can attack Bitcoin easily although it can be done and it could be
profitable in certain situations but you don’t want to be a what-if or could be
you want to guarantee you want a 99.9 percent accuracy and with Cardano with Ouroboros it’s going to give you that 99.9%
accuracy in under four minutes with Bitcoin it’s gonna give that to you in
at least 60 minutes and with Ethereum it’s going to give you that in at least 30
minutes we’re talking about financial institutions governments that are
waiting here we need 99.9 percent accuracy as quick
as possible so let me know your thoughts let me know your concerns please like
comment and subscribe and until the next video
thank you


Reader Comments

  1. After Shelley we will never see these prices again thanks for all the super content philpa πŸ‘ŒπŸ‘ŒπŸ‘ŒπŸ‘ŒπŸ‘ŒπŸ‘ŒπŸ‘ŒπŸ‘πŸ‘πŸ‘πŸ‘πŸ‘πŸ‘πŸ‘πŸ‘πŸ‘πŸ‘πŸ‘πŸ‘πŸ‘πŸ‘πŸ‘πŸ‘πŸ‘πŸ‘πŸ‘πŸ‘πŸ‘πŸ‘

  2. Thanks for dealing about this "double spent money" like i asked
    but be careful
    transactions on the new ligthning network are fast
    https://github.com/ElementsProject/lightning
    rusty russell (one of first linus tordval disciple) is behind that
    https://github.com/rustyrussell
    Stats about lightning network
    https://1ml.com/

  3. Occurs people that are mining are going to say pow is better than pos because thay have a lot of money invested in mining equipment thay are scared pos will kill pow and thay will lose there money I realy believe that because nothing going to stop pos its the future no question the sooner thay realized it the better it will be better for them to sell there hardware cut there losses and interest in ada while the price is a steal because when cardano takes off there will be no stopping it no question

  4. Earthlings:
    This little write up talks a bit about the double spend issue and orphan blocks. It's almost at the very bottom, though I recommend reading all of it. Enjoy tahttp://earlz.net/view/2017/07/27/1820/what-is-a-utxo-and-how-does-it.

  5. Great vids, subscribed. Been in ADA from day one, this will be the number one going into the future for me. Great video quality, what camera are you using?

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