This isn't right either. The answer is somewhere in between. Take an extreme case...

If 50% of the network is on the borderline of dropping out (at the threshold of profitability), then you can look at the current hashing power and do a straight percentage. i.e. if there are 10 TH of miners to start out with and at least 5 TH of miners cannot tolerate any difficulty increase without dropping out, then you will only need 5 TH to 51% the network.

In reality, it is not reasonable to assume that 50% of the network is just at the threshold of quitting. It is also not reasonable to assume that difficulty can double without leading to any exit from incumbent miners. To 51% a 10 TH network, you need to add an amount of hashing power somewhere between 5 and 10 TH.

He is describing an equilibrium effect which significantly decreases the amount of hashing power needed to carry out an attack. For example,  if there are 10 TH currently, you won't need to add another 10 TH to carry out a 51% attack. 7 TH could be enough if increasing difficulty to 14 TH level causes 3 TH of miners (30% of the starting amount) to drop out. That is what he is saying.

The actual numbers are hard to estimate, however it is certain that you won't need to create a full new 10 TH to 51% an existing 10 TH network. True attack costs are less than people naively assume.

Wow, some economic reasoning. I likey!

If the other currency also uses proof-of-work, like bitcoin. It would be a dead letter. Monopolist could control both simultaneously with negligible additional cost.

In that case I will read your paper carefully and try to comment on economic aspects (the technical details are largely beyond me, but security involves economics as well).

The currency of drugs and now lynching! Hmmm. Are there bitcoin lynching services that might boom as a result of this publicity? If not, then I suggest you shelve your marketing idea.

Now that I read your cogent argument, I'm convinced that China will step in to save the network. The network is not in danger at all and never will be. Hats off.

I am sorry. Asshats put me in a very sour mood. It was wrong of me to involve you when you hadn't shown any signs of asshattery. I sincerely apologize. It is true that I am extremely arrogant.

The problem here is that no one has enough coins to have a strong incentive. If an extremely wealthy person owned say 30% of the coins, then they would have an adequate incentive (though still much weaker than all coin holders collectively). Note also that they would have to be wealthy enough to not only own 30% of coins, but also to be able to gamble with them without facing risk of substantial personal loss. In short, they would need to be a billionaire. We would also have to hope that very wealthy person had ambitious plans to develop the currency. These are rather unlikely conditions.

Bitcoin is just for convenience. Insert whatever term you like.

Standard argument about why the corporate model facilitates large-scale, risky, entrepreneurial activity.

One individual owning 100% is clearly impractical [not really a currency anymore], so let's say 90%. If the individual owns 90% of all coins, then he would reap almost all the return from increasing coin value. So far so good. However, he would also face all the risk associated with funding the operation. Unless this individual is extremely wealthy (or the coin is worthless), he will not want to throw coins at risky, entrepreneurial activity. He could lose his shirt. However, throwing coins at risky, entrepreneurial activity is just what is needed to developed bitcoin businesses.

If ownership is divided amongst a large number of people, then each individual does not face significant personal risk. Security from personal risk encourages them to channel funds to high risk - high return activities such as large-scale, professional, semi-legal bitcoin poker. This is the basis for entrepreneurial development.

Finally, people seem to prefer a decentralized model of currency operation. Periodic, decentralized election of a representative could satisfy this desire in my view. Centralized ownership and control could not.

51%-ing the network to capture 100% of profit is a barrier to entry that would produce monopolistic profits. You don't need ASICs, 5970s will do. Txn fees would also be increased under the 51% monopoly. The monopolist is a price-maker and has the luxury of choosing appropriate fees for the user base.

Currently, cost per txn is about US$4-5. Of that, about US$0.000571428571 is txn fees [4 BTC per day in total fees/8000 txns per day; source blockchain.info]. The rest is block reward. That is txn fees make up about 0.01% of the funds supporting network security.

Currently, it would cost roughly $7-8 million to 51% the network. If the network was supported solely by these tiny fees, the cost of 51%-ing the network could be expected to drop to about US$700-800. A couple of 5970s would do the job nicely.

Can you use a proof-of-stake element as a source of txn verification security? Many people, not just me, view stake as a more secure and lower cost method of achieving consensus on txn validity than proof-of-work.

Why would the attacker stop the 51% attack? Say you are Paypal or VISA or a government agency. Destroying the network is like squashing a bug. You built up 51% to destroy the network. It is a pretty fucking trivial investment from your perspective. Maintenance cost of the attack is trivial. There is just the upfront capital cost. In addition, by selling on the way up or postponing the attack date, the investment partially pays for itself.  Why would the attacker allow someone else to recapture 51%?  Why would anyone invest the resources necessary to recapture the network from a determined attacker? It is not likely to work since the attacker can invest resources too. Even if the martyr is successful, then he will still have wasted a large amount of money. I am skeptical that anyone will fuck themselves royally to save the currency.

The network's days are numbered.

I'll bump this because I am eager to hear about it. Can you provide a short summary in the OP of 1) what the issue with the current bitcoin protocol is 2) how your protocol might help resolve this issue.

I think this might help attract more interest.

Well, since everyone is reading antiquated economics... you might try Alfred Marshall, principles of economics (1890). Most modern economists say that it is only useful for the several page mathematical appendix at the end, but I would disagree. The main text provides a nice language-based introduction to microeconomics.

It doesn't really contain much ideology, though. This might make it less interesting to you folks.

I expect some compensation if asked to provide further education for idiots like these that populate the thread.

Yes, bitcoin will get killed by attacks or alternatively by high fees when this happens unless the protocol is changed. Actually, death due to decreasing rewards will likely happen much sooner than when rewards drop to zero. Even with the current maximal reward we are already getting botnets and lone individuals who aspire or have some share of hashing power in the 10-30% range. This is known as the tragedy of the commons problem. Proof-of-stake is the solution.

https://en.bitcoin.it/wiki/Proof_of_Stake

Note that there is a strong desire among many of the bitcoin community to wish this problem away. Demand a logical argument providing an answer to your question. Don't let them get away with hand-waving.

 Ask what will happen to txn fees as well. Will the network be secure? Will txn fees be competitive with paypal? In my view, the current protocol can potentially give a yes answer to only one out of two of these questions (that is pick one). It is impossible to obtain yes answers to both under the current protocol.

Thanks for the tip. In recognition of this, I will point out that this statement written by D&T is wrong:

"Scarcity can drive prices up irregardless of inflation"

Inflation is a change in the price level by definition (the commonly accepted economics textbook version). A oil price shock, for example due to war in the Middle East, will cause inflation.

FYI. The above is asshattery. Consult a macroeconomics textbook like a normal student. Don't
"learn" from poorly informed morons.