Bitcoin Forum

Lets play the game again.  If some one/organization wanted to destroy bitcoin, how could they do it and how can we protect against it?  I'll kick it off.  Whats *really* protecting Bitcoin from a 51% attacker?  Yes the big hashrate, but according to the stats all this hash is coming from a few miner pools. 

Couldn't someone just DDoS them --> 51% Attack --> ?? --> Profit!

Profit from what exactly?

Pool membership is dynamic. A pool that goes down gets smaller because people like money.

Accomplish the mission.  At some point there has got to be a "hit" launched against Bitcoin.  Do you think the central bankers will sit on their hands and let BTC erode their powerbase.  I want to know if Bitcoin survives through obscurity or not.   Because if it does, it can't succeed.  As soon as adoption and price take off significantly, that would be the cue to cash out.

What mission. You need to speak completely and concretely. Give the series of steps that will be performed and what the harms or profits are.

Otherwise you're just waving your arms, spreading FUD, and really just forcing the people trying to correct your FUD to spend the time inventing hypothetical attacks which you might mean but haven't even invested enough time or thought into to come up on your own.

Admittedly this IS exactly what I'm doing.  Its in the OP.  I"m asking for some brainstorming to take down bitcoin.  Thats the point.  

1)  Construct an attack that greatly reduces the hash rate.  I suggested DDoS all the miners simultaneously.
2)  Use opportunity to make changes to the block chain (2x spend, whatever)
3) ????
4) Profit

You see, i am talking about a malicious attacker.  One who wants to destroy Bitcoin and has a budget.

As per FUD, ENOUGH accusing every one of doing something wrong when they question the system.   Its becoming standard practice on message board to declare a post a FUD post as soon as the poster touches a nerve.  No one has answered what happens if this attack were launched yet, we need to think about all this and thats the point of my post.  Stop with the black helicopter stuff, i'm not some double agent.  I'm just doing my due diligence before i commit more of MY money to BTC.  Why is that so hard to get?

What about another attack vector, such as leaning on Gox.  What if they got raided, had their domain seized and their accounts frozen.  What then?  We go back to OTC?  Doesn't sound like a good thing.

Could be the profit is just to destroy it.

Let me scratch a scenario out of the box:
A large organisation can put some effort in developing fpga miners and thus easily overpower all gpu miners.
But why would they?
Well .. oil traded with btc would drive usd in hyperinflation.

Yes and of cause a bit too much thinking out of the box.

My point is: Yes, it is possible. But why would they?
The solution is to grow slowly but steadily and be always ready to approach the dangers in sight.

I made similar observations :) and suggest an explanation. Most people here have already decided that Bitcoin is their hobby or investment - wouldn't you be afraid to see your hobby fall apart and much more your investment?

In https://bitcointalk.org/index.php?topic=78374.0 I have been pursuing similar thoughts, though not with the intent of attacking the block chain or modifying the protocol. The discussion there might be of interest for you as well, since I am presenting some possible, though highly unrealistic attacks, which could lead to similar effects than those you are studying here.

Agree completely.

Assume, Amazon or Google would want to disrupt the Bitcoin network...if they joined forces in their cloud and produced some 10 or 20 new blocks Bitcoin could be severely damaged within a few hours...depending on the transactions they would place into the block, of course. 

Thanks for providing (2).  You did not provide that before.  The attack you're suggesting doesn't work.

Difficulty adjustments require 2016 blocks and can only change the difficulty by a factor of 4 per cycle of 2016 blocks.  Your DOS attack, if effective, would slow down block creation while in effect but it would not substantially change the computational power required to rewrite any of the existing chain.

(It's perhaps also worth pointing out that pools are constantly under DOS attack— and many have have been successful DOSed before without much impact, most miners now autoswitch to backup pools... — and the rise of p2pool closes that particular issue ::shrugs:: )

Not so sure. People are greedy. I think the attack would work (although I guess we will not see such an attack in the near future).

For example: Upload a modified Bitcoin client which accepts a bounty of 500000 BTC per block starting from a specific block. Rent Amazon and Google hashing power and produce some 20 blocks faster than the Bitcoin community does. During this time, produce 500000 BTC per fresh block and pay a large number of bitcoin addresses some extra Bitcoins (as a kind of bribery...). Then reduce the bounty again to 100 BTC per block (or, different approach, 50 BTC) and distribute the information on what you just have done to many forums.

Now there is this interesting dilemma: If a user/miner adopts your software and the new block chain...he gets a share of the extra coins. If he does not...he will not get a share of the extra coins. Of course you will also get a big share of extra coins. I am not so sure how many users will stick with the old block chain and not be tempted by the extra share they might get ... if they switch. (Of course, getting the modified software to accept the modified blocks is not a trivial engineering task - but it can be done).

This ignores both economics and network effects.

Economically speaking, as long as your blockchain fork doesn't cause the technical death of Bitcoin, few people will accept your inflationary coins. Sure, free money is nice but would you give someone a silver or gold coin in exchange for currency designed to hyperinflate?

As far as network effects, obviously this has no effect on Bitcoin other than as an attempt to siphon users to your blockchain fork and away from the main chain. That hasn't worked so well for most of the alt currencies and there's no reason to believe it would work for an inflationary fork of Bitcoin based on the paragraph above this one.

That's certainly true for one version of the attack (the one which continues with 100BTC). It is not true for the version which continues with the 50BTC. And: I trust more in the greed of the people than in their rationality. No, I am not happy about this. 


The alternative chains we saw thus far were based, to the degree I know and IMHO, on changes which did not produce visible benefits to the user and thus were not able to activate the greed reflex.

You are confusing this thread with your thread. Is this confusion intentional?

What you're talking about is getting people to replace their Bitcoin software with software the validates some other rules.  This is totally orthogonal to attacks involving large amounts of hash power.


They have _all_ been 'beneficial' to their users in that by participating in them you're one of a much smaller set of miners, and thus getting a far larger percentage of the total produced coin than in Bitcoin. This is more extreme in some chains than others— for example LQC had block rewards starting at 1000 coins and then  dropping 4% every 1000 blocks or so, while Litecoin has payout's much more similar to Bitcoin but a single person could pretty easily be 1% of litecoin's total hashrate.



I have intentionally not responded to your thread because other clueful people have responded and you just keep continuing the boring debate. Please don't spread it to other threads.

1. Study the source code.

2. Find a buffer overrun.

3. Destroy everybodies wallet.

alternatively in case wallet backups were made:

4. Send all bitcoins to non-existing accounts.

for maximum effect do it slowly so the block chain slowly gets corrupted so it cannot be reverted back easily.

Its not that easy. Most *sane* people have wallets both backed up and encrypted, so without the passphrase you cannot send any BTC out.

I suggest if Bitcoin will be attacked, it would be this way:

1. Put it out of law in major countries (US, EU, etc.)
2. Actively ban all financial services allowing to supply fiat money into exchanges
3. As result, most exchanges will dry out (no way how to get USD in or out of MtGox)
4. The price of BTC will plumet
5. The miners will slowly stop mining, as they have no guarantee they will be able to cover mining expenses
6. The Bitcoin network gets weak
7. Put large pools out of work (Megaupload style)
8. Do some doublespends to put final nail into the BTC coffin

The "brainstorming" is simple: stop adding any transactions to blocks once you have 51% of the hash power, and ignore any other validly mined blocks. If you can't even move BTC, it is effectively toast.

inane arguments as to why this is impossible: lol there aren't enough gpus, lol everyone would know when some government or bank bought lots of gpus, lol early adopters would lead the way and mine unprofitably for the first time in their lives even though they did not invest anything into gpu hardware, and the best one: lol nobody would do this it's more profitable to play nice


Well if they don't call you out for spreading FUD and try to marginalize your points, it would make it harder for newbies to throw cash into the bitcoin black hole.

The biggest threat would be closing down mtgox. It would not stop bitcoin but cripple trading and the price. We need more exchange sites to open.
The whole 51% attack seems a bit silly to me. It would take a huge investment to even do it. It's never going to be done with regular servers. I would take something like the worlds top 5 servers farms working together to do it.

I do not see a confusion and it is not intentional. The OP asked about how bitcoin could be destroyed and how we could protect it against it; attacks involving large amounts of hash power IMHO are only one of the possibilities; I see others, which is the reason I contribute to this thread.


This is true when you measure payoff in number of coins. The argument probably does not apply when you measure it in USD or EURO, since the coins of the other chains have much lower exchange rates or smaller acceptance or less trust due to smaller community and so on.


Sorry. Is this your thread? Did the OP ask me to leave? Where? Should I be violating some rule of the board, I apologize. Please point out the rule, so I can follow it. Part of my interaction here is exactly the attempt to reach your level of expertise so that my contributions are less boring ;-) Why are you making it more difficult to learn?

This is a very interesting attack and similar to scenarios I had in mind as well. May I brainstorm on a defense?

We open up a second block chain with a fresh genesis block. We build the genesis block with lots of coinbase transactions which restore the account values as they were in the old block chain. Now we have a copy of the block chain. If the good guys have 49% and the attacker has 51% of hash power on ONE chain, the attacker wins. With two chains and hash power switching back and forth between two chains, there probably once in a while will be the chance to be head on at least in one of the chains for the good guys. However, I am not sure whether a disrupting attacker still is in the same situation as with a single block chain.

Now assume we have a large number of parallel chains, competing with each other (if we use chain identification codes, this could even be done as part of the same software and the same data structure). I have some hope that there are scenarios where an attacker cannot stop all chains from progressing.

Let me compare this to PirateBay and email. Stopping filesharing in the PirateBay model is easy, in the email model it cannot be stopped. So: Could a world with a large number of parallel Bitcoin chains be more resilient than a world with a single Bitcoin chain?


Never saw it that way. It could be a valid point.

Who is we?
The block chain knows about ones and zeros but it has no concept of good and bad.

Of cause you can start several btc chains. But this weakens the system.
Each chain can be attacked individually, being smaller drowning it is much easier.

I meant the party which in the above scenario wants to defend Bitcoin against the mentioned attack.


I do not know. Maybe it depends on the exact attack and defense modes and all the remaining assumptions we make on the attacks.

For example: Let us assume we have 100 different chains and a centralized attacker (let's say the Fed) owning 51% of the hash and attempting an attack where he never adds transactions to the chain. Initially, the chains are all exact copies. With 49% of the hash and with 100 different chains there is a non-negligible chance that the good guys might at least in 1 or 2 of these chains win the block earlier than the attacker. So - under these assumptions - I am not sure if this claim is correct. I would agree, if attack modes also comprise double spending attacks (but still, I do not know - for lack of an appropriate model).

AFAIK we do not have the proper abstract models in place yet to be able to calculate and derive all the answers...

Just to make sure you got the idea right:

In order to get the difficulty lower (to make a 51% attack easier), you need to make sure it takes longer than 2 weeks for 2016 blocks to be assembled. Difficulty can change max. by a factor of 4 (so it can grow to max. 4 times current diff. and shrink to >=1/4th).

This means you need to DDoS a lot of pools over the course of 1-2 months to manipulate the difficulty and then still DDoS them while 51% attacking the network. It might be cheaper/more feasible to hack them or some people on the pool's staff, upload some evil stuff (depending on your legislation: child porn or music) and call the police. Or simply dig a bit beyond the forum pseudonyms or forum identity - see Bruce Wagner.

The easiest thing to attack is neither the blockchain nor the code itself - it's the people using it.

If a 51% attacker stopped including all broadcast transactions in blocks "we" would quickly figure out a rule or rules to reject their blocks.

Something like "ignore a longer chain orphaning the current best chain if the sum(priorities of transactions included in new chain) is much less than sum(priorities of transactions in the part of the current best chain that would be orphaned)" would mean a 51% attacker would have to have both lots of hashing power AND lots of old, high-priority bitcoins to keep up a transaction-denial-of-service attack. And they'd pretty quickly run out of old, high-priority bitcoins and would be forced to either include other people's transactions or have their chain rejected.

I'm tempted to code that up and run some tests on a testnet-in-a-box, but there are much higher priority things on my TODO list; I don't think a 51% attack is likely. You'd spend a lot of time and money on an attack that "we" would neuter within a day or two.

Gavin, your solution would need a change in protocol though and would mean every user in the network has to update their (potentially 3rd party) client, right?

For my taste, there are way too many "what if"-s in this thread. What if there was a working attack on bitcoin and something to win by doing so, etc...

At this point, many countries' jurisdictions don't even recognize bitcoins as finance, so if anyone would find a solution for all these "what if"-s, it would be rather straightforward (in addition to being interesting and maybe even profitable) to start a venture somewhere with the goal to take down bitcoin.

So, if this thread is to be regarded as more than fiction, it should probably be moved to "Project Development"...

Gavin, I am sure that there are MANY more important things on the TODO list. My personal understanding of this (and several similar) threads is about theoretical aspects. The block chain is now running for some time...that's the best proof of its success. But until we have better formal and simulation tools for discussing all the if's could's and probably's some of the community will keep trying to work on Bitcoin theory. :-)

Given that the network is ~11 TH, you'll need 12TH to over power it, equivalent to 480 Mini-Rigs. At $16000 each, that's $7,680,000

So as of this writing, an attack on the network would cost as little as $7,680,000

This is assuming you could get 480 MiniRigs delivered (which BFL wont/cant do), and do it before anyone else gets to power theirs up which would raise the "legit" network hashing power.

good thing it'll only take you about 3,500 radeons at less than 1 mil

I have not tried out the encrypted version yet, but I imagine a passphrase must be entered when trying to send something.

So further refinements to attack:

0. Upload modified bitcoin client executable to blockchain. (Could also be a small binary patch/difference to keep size down).
2.5 Exploit for buffer overrun reconstructs client from blockchain.
3.5 Modified client waits patiently for user to send coins and intercepts passphrase and stores it.
5. To avoid early detection the user gets false information, the non existing account number could also be used by the modified client to display fake information from blockchain for other infected users to make them believe all is well.
6. After some set time, this false information is stopped, suddenly showing the true nature of the blockchain to the horrors of all infected :)

Pardon my ignorance, but if the attacker has stable 51%, even if we all change our clients to support the new suggested rules, all our blocks will be still rejected, won't they?

1) Slowly start buying up all the bitcoins
2a) At some point there'll be so little liquidity left because the attacker and everyone else would be hoarding
and / or:
2b) The price would have been pushed so high compared to the size of the market / number of users, it would be folly to buy any.
   (especially considering the risk of the attacker suddenly dumping)
3) The usage of bitcoins outside of speculation would drop to make it virtually dead.
4) Possibly causing a collapse in price, allowing the attacker to get a commanding share of the 21 mill bitcoins.

And no, 21 mill times 5$ or even 10$ or 20$ is not a lot for, say, any government or bank or corporation or billionaire wanting it dead.

Why all the effort to take bitcoin down when fear mongering works just fine for 99% of the people.

Not all, no.  Just enough, which is tricky to define.  If the bulk of the exchanges (which really means just Mtgox right now, but that is an accident of history and not a rule) were on the new rules, that fork would be the most useful fork.  Nodes would gravitate to it, as users that wanted to cash out, or pay people that wanted to cash out, or pay people that wanted to pay people that wanted to cash out, etc, etc, would have a strong incentive to get on.

The nice thing about doing it early would be that it would make a whole class of potential 51% attacks pointless.

Perhaps that should be a little bit less far down on the TODO list after all.


No, because the attack blocks would be invalid, and thus not in competition for the regular blocks, at least with the nodes that have adopted the new rules.

But, if such nodes will be less than half of network, the prevailing (so considered true) blockchain will skip our blocks. As a result, the blockchain will be hard forked with all our "sane" blocks scheduled soon or less to be completely overwritten.

I still suppose that the rules are the same for all, regardless for bad or good boys. There are just majority or minority boys left. (No pun intended).

But our fork would never be overwritten by their fork, because we consider their blocks to be invalid regardless of the embedded difficulty.

It's worth remembering that a 51% attack with different rules isn't sufficient to bring down bitcoin.  Miners are not the only bitcoin clients in the network.

The goal of miners is not to get transactions into a block chain, it's to get them into a block chain that bitcoin clients of intended receivers will accept.

Let's say I am a merchant, and you use your nefarious powers to subvert 99% of the mining power.  You still cannot force my client to accept your block with bad rules and therefore my client will never say "received 1000 coins from..." so you can't spend them even if you do get them in a chain.

51% attacks only work if the bitcoin rules that the non-miners look for are still obeyed.

In my understanding of system security, trust in a system is increased with the number of (virtual ie. thought experiment, as well as real) attacks on a system which the system successfully survives (either by a good counterargument or by real life defense). So all this effort is increasing the security of Bitcoin.

This is an interesting issue. However, I do not yet fully understand your line of reasoning.

Assume I subvert 99% of the mining power and use it to mine an incompatible block chain. The effect is that the "old" chain speed will drop to 1% (rendering it essentially useless - and staying useless during at least several difficulty adjustment periods) whereas "my" chain will continue mining at more or less full speed.

Now a social effect kicks in. Numerous other users will notice that their clients cannot get any transaction done (since chain speed is too slow). On my website they will read this dossier about the Bitcoin 2.0 protocol. They will checkout Bitcoin 2.0 block explorer and will witness how the new chain is working (remember, I have 99% of hash performance, so I will of course also generate a lot of transactional traffic between all kinds of new bitcoin addresses). Quite soon users will be convinced that Bitcoin 2.0 is the arena where the show goes on and that "old" chain no longer is attractive nor active. So, more and more users will use my Bitcoin 2.0 client and will be happy.

You are, of course, perfectly free to stay with your Bitoin 1.0 client and with a chain, which not only lacks hashing power but also rapidly uses users. You also can fight back by writing forum articles that I am a bad guy and all kinds of stuff - and of course you will be right with that. However: I will claim that you are just trying to ruin Bitcoin 2.0 - and my proof will be a nicely working block chain 2.0 with lots of transactions going on.

Maybe there is a flaw in my thoughts. I would be happy if you pointed it out.

Forp, you are making an assumption that is impossible to suspend disbelief. Even if you manage to subvert 99% of the mining power to another chain, there is absolutely no way in hell you will be able to keep that a secret. Miners are going to notice. And they are going to find another pool that isn't subverted, or use P2Pool which isn't possible to subvert. Why would they just stick around?

In the logic of the attack I would not mind when they notice. Since I have 99% percent of mining power I do not care what the remaining 1% of the mining power does.

I suppose we have a misunderstanding with regard to the phrase "subvert 99% of the mining power" as it was used in an earlier posting. I understand it as "I own 99% of the mining power". It looks like you understand it as "99% of the miners are in my pool and they might also leave my pool".

I agree completely: If "my" 99% of mining power just is derived from miners in "my" pool - the miners might notice and might leave my pool. And still, even in this situation: Would they do so if they realize that their payoffs are larger in my version of the algorithm? They are getting 51 BTC (or 500 BTC) in my version. Is it tempting to move from a 500 BTC per block operation to a 50 BTC per block operation? ;-)

Yeah well that's probably because "subvert" doesn't mean anything close to "own." Now you only need 99x the current mining power to pull off this attack.


The payoffs are 0 when nobody accepts those BTC. This is getting silly.

Plus electricity during the attack, plus manpower to set up all those rigs and defend against any retaliations.

Why would nobody accept those BTC?

The new block chain honors all BTCs mined in the old block chain. However, it offers more attractive conditions to every miner which adopts the new block chain. Therefore there is a clear incentive to switch to the new block chain. Even worse: If you stay in the old chain, under the assumptions of the attack made above, the old chain will lose 99% of its hash power and will be V-E-R-Y slow.

I agree, that this will not happen in reality, since (1) the assumptions on which this attack is based are unrealistic and (2) miners will not base their decisions only on maximizing their profit, but also on a social consensus on how Bitcoin should work. This is good news.

The thought experiments of  a theoretician often sound silly from a practical point of view :-).

 

Miners won't switch to a 51% chain if it means they can't cash out the coins they're creating!

The attack we're talking about is "51% attacker refuses to include anybody else's transactions in their blocks."  And newly generated coins are useless to miners if they can't get transactions that spend them into the block chain....

Ok, "nobody" is an overstatement. However, say 1% of businesses love the new chain and decide to switch over. Now you can spend your coins mined on the fake chain somewhere. Not in very many places though, and you will have to go through all the massive adoption pains that bitcoin currently suffers from. So perhaps you'll get a few extra coins for your work (then again, you won't because you control 99x the hash power of the original chain), but they will be worth, as a whole, far, far less as not many people will want them. Not to mention everybody with existing coins will be able to double spend them all on the new network and basically bring the value down to nothing.


No, there isn't, and I'm not going to keep rehashing this.


This can be an attack in and of itself. Probably only likely if someone finds a vulnerability in SHA256 and keeps it to themself. In which case, bitcoin devs can fork it themselves to use a new hash algorithm.

The best way an attacker can take profit from Bitcoin is this:

1. Study the source code.
2. Find a vulnerability
3. Sell the vulnerability in the black market for 100K USD (SolidCoin?)

The fastest way Bitcoin can be taken down is this:

1. Find a vulnerability in the black market.
2. Use it.

See the related thread https://bitcointalk.org/index.php?topic=79830.0

I agree, that THIS attack is probably useless. I understood the OP differently (he only had the 51% part in his question).


Agree again. "They can't cash out the coins they're creating!". Where do you take this assumption from? The 51% miners would, in my version of the attack, switch to a chain, which is more profitable for every participant (eg. they add 1 BTC to every address) - and they would continue to include transactions nto the chain. So there is a monetary incentive to switch to the spawned chain. It may take a while, until all wallet users switch to the new chain, of course. So it is a matter of speed of adoption.

Very strong argument, especially from a methodological point of view.  :o

I'll take a stab at this, although these probably aren't as technical .
a few off the top of my head:

   - collusion among the miners, or a mining cartel forming
   - collusion among the programmers who maintain the satoshi client source code
   - using automated programs to flood the block chain with transactions. thereby making sync up non functional (it takes a good long while to download the block chain the 1st time now)
          this tree seems to be growing rapidly http://blockchain.info/tree/5416502 (http://blockchain.info/tree/5416502)
   - hack the exchanges, and steal BTC, with no criminal prosecutions
   - use bitcoin in a way to threaten national security, feds would shut it down, (like freeze all accounts at the exchanges, w cooperation of other countries of course)
   - bitcoin clients with vulnerabilities not being updated   exampleCVE-2012-2459 (i tried to update to 062 but it failed, so i didn't bother trying again)

look at the # of transactions per block since the bitcoinica incident

http://blockchain.info/charts/n-transactions-per-block (http://blockchain.info/charts/n-transactions-per-block)

You must be one of those something for nothing kind of thinkers huh?

It is by definition IMPOSSIBLE for the new chain to be better for everyone.  Money is just an abstraction.  If every address gains 1 BTC you haven't increased the wealth merely the accounting system and existing holders of wealth will see their wealth reduced by dillution.  There is always a winner and loser when manipulating the financial system.

I mean by your logic I could make a chain which gives every address AND ever future address 11 quadrillion Bitcoins each.  Obviously that will be the best chain.  Don't you want to be a quadrillionaire?  Who doesn't man.

Your new chain would have no value.  1 BTC or 1 quadrillion BTC it only has value if someone wants it.  Nobody will.

Has nothing to do with bitcoinica and everything to do with a crazy gambling site which operates in a way that produces a ton of transactions.

yea, i have discovered satoshidice, even placed a bet myself.  but the result is the same, flooding the block chain with transactions.  that's a lot of overhead.

it looks like the # of transactions, and the # of transactions per block is growing geometrically
but total BTC in circulation is linear
and USD transaction volume & market capitalization is flat

The network has tx rules which make any volume which would be damaging to the network cost prohibitive.

Also 20K tx is hardly "flooding".  It is 0.2 tps.  For the network to even have the volume that Paypal has we are talking something on the order of 300x to 500x higher transaction volume.  If anything SD is merely testing the network and a relatively small and weak test.

 :) Oops. Since I am a non native speaker of English I might not completely catch the subtle context of this remark. But, yes, I am convinced that theory and thinking is fun and pays off (at least it did so far in my life).


Exactly ! I think we now reached the same conceptual framework (the lack of which was the reason for a bit of misunderstanding in some postings).

My issue is the following:

Let's assume we model Bitcoin swarm behavior with game theory. In this case 1 BTC is the payoff and if I increase it to 2 BTC this is a more attractive payoff. If I program a Bitcoin miner to maximize his BTC profits, he will opt for the 2 BTC chain.

Of course, you are completely right that Bitcoin miners do not work that way. They are human beings and not just game theoretical agents. They know about dilusion and inflation and therefore will not readily switch to the 2 BTC or the 11 quadrillion BTC chain. Thus, we cannot model Bitcoin swarm behavior with game theory alone. We must look at human consensus and at economic aspects. So let us do so...

However...we now realize that this provides no final answer as well. Most states, share holders, companies, federal reserve banks know about dilution and inflation, nevertheless they, as human beings, still decide to accept a MINOR form of if...a bit LARGER form...since it worked out...again a bit LARGER...and...ooops...we have a financial crash.

So, wy should Bitcoin be more stable than the dollar, when the Bitcoin system inherently has the same problem (human beings making bad decisions) as the dollar.

I must admit that I get some pleasure from thinking about this theoretical issue and trying to find an answer which Bitcoin mining cannot compensate. I am interested whether this model is correct or my line of reasoning has a flaw. I am interested which mathematical / behavioral mechanism could eventually provide for some ultimate stability in Bitcoin (which, as mentioned above, it does not have in it's current form). Compare with the dollar: It HAD a gold standard - until the president / fed abolished it. What would prevent miners to abolish the current limitation system in BTC...and opt for a 51 BTC per block chain (or, rather, 14 quadrillion in the end).

DoS attacks against large pools wouldn't work IMO. Most miners mine for alternative pools and have fail-over scenarios. If LargePoolA does not respond then all the hash-rate goes towards SmallPoolB that works fine. Even if ALL pools go down, there is always P2Pool :)

I'm not so sure that making it illegal would be a good choice either. Take for example the banning of alcohol in the US many years ago, that effectively made alcohol more popular.

Even if exchanges go down, people would still be able to trade services and trade BTC, although in small quantities. But as more people get into it, the value of BTC will rise.

The value money has, is the value we give it. So the only way to destroy  Bitcoin IMO, would be for people to lose their interest in it.

Miners could "merge mine" both chains at once at no additional cost, assuming their only difference is block subsidy. Some alternative cryptocurrencies already have higher relative block subsidies.

During the P2SH dispute a lot of people got in their heads that miners determine the rules, but it's really more a matter of consensus between users. If some miners started trying to mess with the subsidy, all the clients would reject it and use the original blockchain automatically.

No it wouldn't.  Once again money is an abstraction.  It is possible the chain which pays out less BTC has more buying power.  If BTC 1.0 pays 50 BTC per block and BTC pays 2000 BTC that alone provides no measure of value (buying power).  If the original chain allows me to buy 1 Whooper combo meal w/ 1 BTC and the second chain take 200,000 BTC to buy the same combo meal it would be flawed thinking to switch chains simply because the "number is bigger".



No need your "game theory" answer is already invalid.   The goal of any venture is to maximize wealth not money.  Money is merely an accounting system for wealth.    If you want lots of money I can get you some Zimbabwe dollars.  You can be a trillionaire.  They don't buy anything but they have lots of zeros.  Likewise an alt-chain which simply increases the nominal number of BTC isn't going to increase the purchasing power of miners or users.

You can't create value or wealth via accounting games.  Money is merely arbitrary.  Satoshi could have chosen a block reward of 1 BTC or 1000 BTC.  All it would do is change the nominal amount of the block reward.  The value would remain the same.  With a block reward of 1 there would be 1/50th as many BTC in circulation and the exchange rate would be ~$250 per BTC.

1. Wait and be patient/have patience ;) :)

2. Wait until miners traded all their bitcoins for real dollars.

3. Wait until 50 goes to 25 goes to 12.5 goes to etc until it reaches such a low level that it's not worth it anymore.

4. Wait until miners decide that the transaction fee is not enough for them to continue operation and start attacking the network in hopes of higher payouts by crime.

Thus I do believe that in the future miners will turn against the bitcoin system. So it will auto self-destruct ;) :) All that it requires is some patience lol.

Yes. Agreed. Fine. That's not the point where we lost our communication.  :)

Our discussion starts where your posting ends. If you want to provide some kind of mathematical model for maximizing wealth - you need a unit to measure wealth in. There is none - or, rather, it is arbitrary or dependent on the miner.

You could chose a gold standard, a dollar standard, a whopper standard, whatever. It will always be relative and different from person to person. And this is EXACTLY the problem I see here.

So, let us pick some mathematical model for the behavior of a miner (whoppers or Zimbabwe dollars - your choice). The wealth function (and thus the function the miner wants to maximize) will not only depend on todays conversion rate into your chosen wealth standard but also on his belief how this conversion rate will change during the near future. Again, the concept of "near future" is different from miner to miner.

Coming back to the original example: Some miners will be conservative and considerate of inflation - they will not switch to a 51 BTC per block chain. Others are more greedy - they will not switch to a 80 BTC per block chain but might consider switching to a 55 BTC block chain, giving it a try. So what we are likely to see is an interesting form of random mixture (and the same, as another poster pointed out, will be the case for the non-mining participants in the system).

The question I am interested is no one of structural stability. IF all miners are strictly conservative and refuse to change...the system will be stable. IF all miners are stupid and ignore inflation...the system will drift to chains with higher and higher block bounties. Some where in between these two extremes we will find the "real" Bitcoin network. What can we say about this real Bitcoin network? Right now we are (as we can observe daily) in a stable domain. How far away are we from an unstable area? Or, is the beginning of the instability domain ridiculously far away? I do not know. I probably will set up a simulation on this if a have a bit more time during summer. the ongoing discussion stimulates my curiosity.
 


 

Define crime.  :)

Short of unauthorized login and stealing keys - what could possibly define "criminal" behavior for Bitcoin? Deviation from the official protocol standard? And, btw, what would that be?

The more I think it over, BTC looks to me like an interesting form of speculation on future behavior of other people. At a more close look, every economic endeavor probably is like that  :D

It isn't about inflation.  Your "analysis" seems to suggest that the two chains are "equal" other than their dillution effect.

i.e. 50 BTC chain and 51 BTC have roughly the same value except the 51 BTC has maybe a 5% long term dillution effect.  If that were true you may see miners leave.

The reality is any alt chain (even an exact copy of Bitcoin 50 BTC block reward and all) will have a tiny tiny tiny tiny tiny tiny amount of value.

Say current chain is worth $5 per BTC and a 1 GH/s miner earns ~ $3 per day.  The alt chain likely earns that same miner $0.10 per day.  Why would the miner switch?  The inflation/dillution effect is immaterial compared to the fact that the alt-chain has no value and a miner joining that chain doesn't materially change that value.

We have seen it with other alt-chains.  There is a small amount of hype, a token amount of hashing, a lot of pump and dump and the chain dies off.  NOMINAL AMOUNT OF COINS doesn't create value/wealth.  Switching to an alt-chain any alt-chain decreases the future wealth of the miner.  Miner's won't switch unless the new chain CREATES REAL VALUE in excess of Bitcoin.   

It will require real innovation to make a superior product that attracts real capital, investment, and enterprise.   Merely changing the block reward doesn't do that.

AH. That's a good argument!

I was considering a world with a large number of alt-chains (1000 and more) and a large number of miners (some 100M) and I was studying the theoretical stability. Of course these are unrealistic assumptions. With some 10 alt chains and some 12 guys working on them, social inertia is way large enough to stabilize the system. We'll see down the road if this changes as soon as bounty drops to 1 BTC or lower. Then, probably, new incentives could come up, if Bitcoin does not pick up as fast as most of us hope.