Meanwhile there is a paper available dealing with econiomic limits of PoW blockchains. The problem of majority attacks combined with short positions is also mentioned.

http://faculty.chicagobooth.edu/eric.budish/research/Economic-Limits-Bitcoin-Blockchain.pdf

@rexter: You have quoted parts of the question I asked on stack exchange. But why? Is this just spaming the thread?

There is still much interest in reading this threat, but not in answering.

Yes, there are some answers, but not to the main point, which asks about (leveraged) shorts used in PoW-currency attacks.

Is it quite clear and discussed many times before, then please just give a small hint or a link and everything is done.

I know only one threat where short are already discussed as a possible danger and this was years ago in
https://bitcoin.stackexchange.com/questions/32432/profit-possibility-for-colluding-with-51-attacker?noredirect=1&lq=1
and also there is no answer which keeps me calm.

There is still one essential point without an answer: Can high leverage short positions and security of a decentralized PoW-coin go together.

In an majority-attack scenario, aimed to decrease value of a PoW-coin maybe -10% and get profit from a short position we hold during attack, we can leverage profits by leveraging the short.

Of course there are risks and costs in an attack, but to hold security of a decentralized PoW-coin we must be able to leverage risks and costs when there's an attacker who can leverage his profits.

So are there defending lines for such an attack, which can be leveraged? The usual defending lines I know and which where suggested years ago are mentioned in
https://www.cryptocoinsnews.com/4-lines-defence-51-attack/

But could they really prevent decreasing value -10%? If the defending lines are used they also decrease trust I currency, because they are like doing big things like "Distributed Denial of service attack" or "coding changes at the protocol level". And how can you leverage these defending lines?

One defending line - maybe the strongest - is the "coding changes at the protocol level" you find in
http://gavintech.blogspot.de/2012/05/neutralizing-51-attack.html

is something like doing a PoW-PoS hybrid suddenly. Are these "code changes" already done?

Is the moment when you can first time hold high leverage short position very simple (which is in a view weeks) not the time to do this coding change and so bitcoin goes from PoW to some kind of PoW-PoS hybrid?

Maybe I understand now the argument of many here, the problem is that even with majority mining power we can't realise double-spending profit in every scenario. There is no automatism of trust in the longest chain, when it's obvious that cheaters have build it. So honest miners stay on the shorter "real" chain and users too and they aren't interested in the whale chain. We have just created a "new coin" with the whale chain but nobody besides us is interested in it. Is this the point I didn't see?

After sleeping for a while I think I see your point. There is no factor 2. Using the short only bring down risks.
If we lend X coins worth 10 billion $ to use in a majority attack as value of our double spending, we have double spend benefit of 10 billion $ if the attack is sucessful. We still hold the coins after the attack, because we have double spended them, and so we can give them back to the one who has offered the us the lending of the coins. So argumentation is independent from the worth of the coin after the attack. But we get the profit only ones and there is no factor 2.

In argumention line of croraf, we use our own coins worth 10 billion $ for double spending in the majority attack. So if currency is down afterwards our double spended coins are worthless and so there is no profit. But if currency isn't completely down, say it has half the value from before, we still hold coins worth 5 billion $ and so we have a profit of 5 billion $.

Do I see it correct now? Than I would cancel factor 2 from calculation. But there is still a huge profit from the attack and the profit is for free without any risk because majority attack is always sucessful if you really have majority of mining power and as I showed above profit is independent from worth of the coin after attacking.

Ok, but what is the question there? Yes, bribed miners, which are a majority, mine on the whale-chain, and when community notices that they are sucessful, the currency goes down. If currency isn't totally down after sucessful double spending, they use their mining power to do other strange things and when community notices there is a masacre now and you can trust nobody, they will all leave the coin and so the access is sucessful.

Why can't we do double spending and holding the short together? Is there a wrong assumption in scenario?

I've done some calculation in the other post, yes you need billions. But if argumentation is correct the big mining pools would be the first to try the attack together and so they have as costs only the fees of the short position, they own the hardware already. I estimated the cost for the fee of the short as about 2 billion. But big mining pools own hardware worth about 10 billion, so they should have possibilities to get the cash.

Sorry, if I haven't understood your comment.

I want to do double spending while holding a short position. I want the miners to destroy the coin. I think this version of the attack is stronger as the version of croraf. So I want that the coin isn't worth much.
Profits are from the short and the double spending, so you get a factor 2 in calculation and we mustn't care about some comparable low fees that are somewhere around.

EDIT: Maybe I don't understand your comment till now. What is called the "whale-coin"? Is it the coin which stays after whale attack, as I interpreted it?

For profit, the bribe should be high enough. I've they are bribed with shorts they are interested in a low value of currency


I've written some numbers in the other post.


You can do many medium large transactions instead of one very big. In my version of argumentation in the other post you can do this over a long time (as long as you hold the short), so nobody sees very high transactions.

croraf is no sockpuppet account but a user of stackoverflow I don't know. I think there's no easy way to proof this, but just look at the discussion between my "sockpuppet" and me in
https://bitcoin.stackexchange.com/questions/63914/egoistic-miners-combined-with-large-transactions-destroy-pow
a make you your own picture.

There is a reason for the two posts beside to get more attention. I wasn't clear if we have the same points in argumentation and his argumentation is more humble, I can't say thinks so simple. Also I think call a real person sockpuppet isn't fine... I think both threads contain argumentation so it's not a good idea to lock one.

Also you don't know how much I know about bitcoin, maybe I'm Satoshi, oh no my Enlish is to bad... But I've read and maybe understood the whitepaper and some other things...

Possibly there is a simple fault in my argumentation, but then somebody can show it and the thing is done. Coming from math background, I don't like historical argumentation, you can't do a new step if you use this argumentation line. Thousands of years people don't know about sheafs and geometry, but this doesn't show that Grothendieck was a fool doing such new concepts.

It would be very kind, if you take a look on argumentation line, when you are not too busy.

Sorry for doing discussion in two posts, it was my idea that croraf could ask with the simpler formulation because I had the hope for more understanding and there was only one post to my question till then. Maybe there's an moderator who can do the posts together.

Yes, in usual whale attack you bribe with fees, but why shouldn't you bribe them in real life? I think it's even better - and this is addition in my post - to do things together with shorts. So you can also bribe miners with shorts and so they are interested in destroying the coin. Maybe this is an old attack scenario, but maybe not. The question is how to realize the big short positions and this is much easier today, because with the hype on coins financial institutes start to offer shorts even leveraged 25x.

In the "MANY ways" to profit from majority attack, often the argument is, that miners wouldn't do this because they don't profit from the attack. But why wouldn't miners profit in my scenario? I think shorts on financial products can be very dangerous especially leveraged shorts. They aren't very easy to get till now, but with the current hype many financial institutes are going to offer such products, so situation has maybe changed.

But if there is no logical reason against majority attack, just empirical data from 9 years, why do the owners trust bitcoin?

I think, I'm the one with the "crazy" attack construction, so I think I should answer...

If it is crazy, why can't everybody give an easy logical reason, why it doesn't work. By the way, this here is less crazy than my construction and there are also papers dealing with this so called whale attack, look for example in https://www.cs.umd.edu/~gasarch/reupapers/bitcoin.pdf (suggested by Pieter Wuille on stackexchange)

If it's obvious till "day 1" that we can do this attack, why isn't there anybody who does it?

To make calculation even better. I've just seen that it seems to be very easy to go short on cryptos. You find 25x leverage short options on some coin, also on PoW coins minable with usual GPUS. Just do this facts in our calculation so you get with 0 hardware cost (you can use hardware later for everything you want) you can earn something like 20x market cap of of the currency, and by the way you destroy maybe destroy the financial institute who offers the leverage ... There must be a fault... Is there anyone from financial industry here? How can they offer a 25 leverage short on a PoW crypto?

For those who want to do some maths just start with doing some calcuations and estimations for costs and benefits in worst case scenario :

Costs: Fees for the short position, energy during attack, worthless hardware after attack (this point is only relevant, if there aren't any alt-coins to mine with this hardware)

Profits: Double spending benefit, benefit from the short position.

How big can costs be?
Fees for the short position.
There are already short positions on the market, so you can look there. Also you can ask yourself, how many fees do I want if somebody wants to lend bitcoins from me for one day? I think 10 % of the short is realistic.

Energy during attack, and worthless hardware
In worst case scenario we have worthless hardware and this is the main point, so forget one day energy costs. To calculate costs of hardware you must ask, how long can I use the hardware for mining till I must buy better hardware? I think optimistic is one year. So costs of worthless hardware are less then one year mining profit, which is about 10 billion $ if we trust  https://digiconomist.net/bitcoin-energy-consumption

How big are profits?
The only question is, how big can the short option be? This depends on how much does owners trust in the coins. If they think the coin will have nearly the same value one hour later they will give you a short option with the 10% fees. I think there are many owners with this trust, then if you haven't this trust, why do you own any coin? So I think short position with 10% of market cap is possible, that's about 19 billion $ today.

So lets do the calculation:
Profits - Costs = 19 billion $ - 1,9 billion $ -10 billion $ = 7,1 billion $

How do we prevent this type of attack?
We can do mining profits higher, but then the coin gets even more inefficient than it is today. We can sell short positions only with a fee as big as the position? Then the short is unattractiv and currencies which don't allow to lend money are inefficient.

So what should be done?

To do a realistic attack scenario, the big four mining pools can start today, if they have done their work before.

The big four hold a big short position on PoW currency, that's what I mean by the work before. What do you think will bring PoW currency down? Rewriting 10 blocks of blockchain history? 100? No problem for the big four. So they do this destroying attack and maybe all of their hardware is worthless afterwards, I think that's about one year mining income, say 10 billion $. A loss of 10 billion $!!! But market cap of bitcoin is much higher and maybe the short position is worth 50% of market cap!!! What tells this story to you? Mining costs are too high today, you throw away too much energy, but mining costs are too low to get real security, so you can't have cheaper transactions in future. But than the coin is inefficient. Market cap must be about one year mining income,what's about one year transaction fees in the future, but this makes the coin inefficient.

If there is any interest I could do discussion in a formal way. To be honest, my background is pure maths and not programming or hardware and so I would prefer this way, too, but I thought there would be more interest when we start in a simple way. By the way, I think the problem isn't deeply connected with game theory and encryption, it's more fundamental. I don't see the "many conditions around", we can do the attack quite open.

How can I reach the "forum gurus" to get an answer? Is there a better place on the internet to do discussions like this? Is there any interest in a more detailed explanation of my attack scenario?

Everything I heard till now are technical arguments, but isn't that a little bit less for an important question. I ask the question if PoW currencies are efficient coins, and everyone who owns any PoW coin should say, this is obvious, because... Where are the PoW coin owners?