100+% PPS mining pools

[Razior]

Intro:
I've been reading the ABCPool thread: https://bitcointalk.org/index.php?topic=33586
Apparently ABCPool has been using hashing power from their miners on other pools, like Goat's pool.
Now some people are angry because they thought they were mining on ABC's pool, but instead ABCPool acted more like a proxy, sending their hashing power to others.
ABC got paid 105% PPS by Goat, this would mean it was more profitable for ABC than mining on a pool of their own.
Actual question:
Why would anyone be interested in paying more than 100% PPS for hashing power? You would be losing money, am I right?
Are they trying to get 51% of the total hashing power, to make an attack on the bitcoin economy?

Could someone please shed some light on this situation? I'm still a newb in the newb-corner trying to understand all this. Thanks in advance.

[runlinux]

the 100%+ pools pay you extra because they buy your hashing power at a low price, and sell it at a higher price to other people.

[Razior]

But they people who buy it at a higher price, why are they paying more than 100%? If they were in it for the bitcoins they would be better of buying already created coins for 100% of the price, right?

[P4man]

Its not entirely clear to me either. 2 obvious possibilities:

1) they use the hashpower to pool hop proportional pools, like deepbit. In that case the losers are the miners of those proportional pool that dont hop. Its surprising how many people are daft enough to do that.

2) someone is bidding on all that hashing power. The only rational reason I can see for that is indeed an attack. The other explanations Ive heard dont convince me. Its easy enough buy bitcoins at an exchange; far easier than setting up a meta pool and paying >5% premium.

[jake262144]

P4 is right. Whatever the explanation might be, rest assured that your hashing power is being used for shady purposes if any entity is paying >100% over an extended period of time.
P4 is right. Whatever the explanation might be, be advised that your hashing power might be employed for shady purposes if any entity is paying >100% over an extended period of time.
...at least until Santa Claus himself starts a pool.

EDIT::wording

[Razior]

Thanks for your replies. I've also thought of another reason for paying more than 100%. Bitcoin laundering; laundering bitcoins at 5% costs.
You'll pay the miners with stolen bitcoins, but you get newly created bitcoins. The wallet with the new clean bitcoins is in no way connected to the bitcoins that were stolen in the first place.
Is this likely in any way?

[P4man]

Seems far fetched. Firstly, you would distributing stolen coins among a lot of (generally knowledgeable) users, increasing the chance of your scheme being exposed. Secondly, there already are bitcoin mixing services that would more than suffice.

[farfiman]

P4 is right. Whatever the explanation might be, rest assured that your hashing power is being used for shady purposes if any entity is paying >100% over an extended period of time.
...at least until Santa Claus himself starts a pool.

so you believe that goat is ( and others) knowingly  using his power for "shady" purposes?

[jake262144]

so you believe that goat is ( and others) knowingly  using his power for "shady" purposes?

Fixed

[P4man]

so you believe that goat is ( and others) knowingly  using his power for "shady" purposes?

I have no idea. Ill give them the benefit of the doubt; they may have customer(s) paying them a margin, without knowing what the hashing power is used for, or they may get some excuse.  In that case its not all that different from any individual miner signing up at gpumax.

Then again, I would hold it against anyone to rent out his hashing power without knowing how its used, whether its a miner, a pseudo pool or meta pool.

You may also be interested in this discussion:
https://bitcointalk.org/index.php?topic=60717.msg722530#msg722530

Its clear to me someone is being dishonest there. Others like Goat are being (to put it mildly), vague. But I dont know if they know what it is they may be doing.

[jake262144]

It' should always raise a red flag when questions are met with excessive vagueness, half-truths and outright lies, or just killed off entirely by invoking "trade secrets".
I'm not setting foot at Eligius or ABCPool ever again, nor am I going to touch any >100% project with a ten foot pole unless detailed and sensible explanation is provided.

We really need more of those next-gen miner-smart pools yesterday.
By miner-smart I mean pools where each miner runs their own bitcoind, does their own block verification, and merely shares the rewards with the pool members without blindly trusting and relying on the centralized pool software.
P2Pool is an outstanding example of this approach guaranteeing that each miner retains full control over how their hashing power is being used.

[P4man]

It' should always raise a red flag when questions are met with excessive vagueness, half-truths and outright lies, or just killed off entirely by invoking "trade secrets".
I'm not setting foot at Eligius or ABCPool ever again, nor am I going to touch any >100% project with a ten foot pole unless detailed and sensible explanation is provided.

We really need more of those next-gen miner-smart pools yesterday.
By miner-smart I mean pools where each miner runs their own bitcoind, does their own block verification, and merely shares the rewards with the pool members without blindly trusting and relying on the centralized pool software.
P2Pool is an outstanding example of this approach guaranteeing that each miner retains full control over how their hashing power is being used.

As much as I agree with you, its not going to happen. Miners are humans, therefore lazy and greedy.  If they can avoid setting up something ilke p2pool and make a 10% gain, most will take it.

Now Id like someone who is more knowledgeable about the technology to shed some light on what the potential ramification of this are, when gpumax, clipse etc would amass a substantial part of the hashing power and a single individual rents it for malicious intent. Do they need 51% or do they have a chance at an attack at less than 51%? What damage can they do or what profit can they extract ?

[jake262144]

Luckily, the percentage of hash rate that can currently be rented at any given time is insignificant but should it grow, we will get uncomfortable faster than most individuals imagine.

Any attacker has a chance of briefly becoming the longest chain by sheer luck (mining a few short blocks) but of they are <50% they will eventually be subverted by the legit network's superior hash rate.
Over 50% of the hash rate is where the attackers can expect their chain to remain dominant indefinitely.

Two most prominent attacks are:
   (1) massive double spend attacks, any entity resourceful enough to mount a successful 51% attack can be expected to have access to a whole damned lot of bitcoins to double-spend, and
   (2) network stoppage: were the attackers to only process their own transactions, Bitcoin would come to a screeching halt.

It is widely known that network growth guarantees Bitcoin's security but not everyone considered the possibility of significant portions of that strength ending up in attackers' hands via various meta-pools and ">100% projects for hire", thus being applied against it.

Until recently, the (simplified) attack model looked a lot like that:
   Let X be the network hash rate, measured in TeraHashes/s.
   Let S be the actual network strength.
   If the adversary is able to perform a denial-of-service attack nullifying a subset of X (let that subset be Y), then S is, obviously, X - Y.
   The adversary needs to be a large pool operator (or a cabal of those) to succeed. Creating and maintaining a large pool is a resource- and labor-intensive task.
   With just a few percent pool fees, a potential adversary might in fact be better off playing by the book and just running a large pool.
With the advent of for-hire projects, another variable is added to the equation:
   Let Z be the amount of hash rate available for hire, even for relatively short periods of time. Z further undermines the actual strength, S = X - Y - Z.
   Z being large enough, the adversary does no longer have to be one of the big dogs (that is, the largest pool operators) to mount a crippling attack.

In both cases, the adversary wants to reach S/2 as fast and as inexpensively as possible, it is therefore desirable to subtract from X as much as possible.
Having access to singificant Z is a very cost-effective way to do that.

[farfiman]

so you believe that goat is ( and others) knowingly  using his power for "shady" purposes?

I have no idea. Ill give them the benefit of the doubt; they may have customer(s) paying them a margin, without knowing what the hashing power is used for, or they may get some excuse.  In that case its not all that different from any individual miner signing up at gpumax.

Then again, I would hold it against anyone to rent out his hashing power without knowing how its used, whether its a miner, a pseudo pool or meta pool.

You may also be interested in this discussion:
https://bitcointalk.org/index.php?topic=60717.msg722530#msg722530

Its clear to me someone is being dishonest there. Others like Goat are being (to put it mildly), vague. But I dont know if they know what it is they may be doing.

This is the state of things when mining has been borderline profitable for a long time .Most miners are not in it for the good of bitcoin ( although we would be happy for the success of it of course) but too make a nice profit.  If the "standard " profit was very good then the extra few % would not be important and a miner would maybe take into consideration the "good of the network" in their calculations.