I was the one who asked the question about the difficulty attack. I'll recap what it looks like here:
A nation state "wakes up" to bitcoin one day, and decides they don't like it. Let's use China as the example, because they have capital controls thus there's a reasonable argument for why they might want bitcoin to go away, and they the resources to perform this kind of attack.
First the attackers try firewalling bitcoin, only to discover that it keeps popping back up as users figure out how to circumvent their censors digitally through technologies like tor, or even physically by trading physical bitcoins.
So then they ask their scientists if there's another way to destroy it, and the scientists do their homework and devise the following plan:
1. Print a massive quantity of asic chips. They're probably mostly going to be manufactured there anyway.
2. Start hashing, driving the difficulty up, say, by a factor of 10000
3. Wait until just after a difficulty adjustment, then
4. Stop hashing all at once
At this point, the bitcoin network fails. It can no longer process transactions because none of the miners can find a single block, therefore no transactions are verified. Furthermore, the downward difficulty adjustment which usually takes about 2 weeks now takes about 20000 weeks, or some 370 years.
Confidence in bitcoin is shaken.
So now what? Undoubtedly the community comes together to try and fix this. (In the case of Terracoin, perhaps this didn't happen simply because there wasn't enough at stake.) The miners, developers, and merchants get together and hard fork the chain in order to manually reset the difficulty. Bitcoin is revived! Briefly.
A few days later, China performs the same attack again, forcing another hard fork. The cat-and-mouse continues. Mainstream users begin walking away from the currency in droves. Price plummets. Eventually, though, Bitcoin's hashing algorithm is changed, rendering the Chinese hardware useless.
The next attack comes weeks or months later, after the Chinese have had time to build the new ASIC (or GPUs for scrypt mining, whatever).
In the meantime, every time the attack happens, transactions are reversed (for those that are unlucky enough to have been relying on the wrong chain), merchants are unable to use bitcoin for periods lasting hours and possibly days after each attack. The devs start seriously considering a whitelist for miners so only known "nice guys" can play, and the days of a truly decentralized currency are numbered. By this time, bitcoins are trading for 10 cents a piece, and even the true believer types have mostly switched to an alt coin, which can survive only by virtue of being too small for China to care..
There, that grim enough for ya? :-D
