Once Bitcoins become a serious threat ...

[Frizz23]

Once Bitcoins become a serious threat to the "banking industry", wouldn't it be easy for them to kill Bitcoins? E.g. spend some peanuts (e.g 20 million $), design some advanced ASICS - and take over 51% of the network.

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[ElectricMucus]

long story short: Once BTC is considered a serious threat it won't be peanuts anymore to kill it. For now we are under the radar and probably for a while longer.

[Stephen Gornick]

Once Bitcoins become a serious threat to the "banking industry", wouldn't it be easy for them to kill Bitcoins? E.g. spend some peanuts (e.g 20 million $), design some advanced ASICS - and take over 51% of the network.

Well,right now at 17.67 Thash/s capacity (per BitcoinWatch.com) that means about 700 of the BFL BitForce FPGA mini rigs are all that are needed to achieve 51%.  If that much equipment was available (except it isn't), at $15,295 each only a little over $10 million would be needed to achieve 51%.

But what they can do with 51%?  Not much.

They can omit transactions from the blocks and they can go back some blocks and double spend transactions sent to them.  That's the extent of it.  They can't spend my coins.

So who can they double spend against?  Orders placed with online merchants for physical delivery requires a physical address.  It is not good for business if you are a bank and get caught doing something like this, so that's out.  So what businesses that are left for double spending against are the exchanges.  But exchanges have AML limits that cap the per-day withdrawal, even for trusted accounts.  

So for the attack to do damage would require the control of a lot of non-verified accounts.  I suspect the bigger exchanges would sense something is up if all of a sudden a lot of non-verified accounts were to suddenly request withdraws all at once.

A double spend attack might do damage to some exchanges and possibly harm those who had funds held at certain exchanges if those exchanges become insolvent as a result.  So the exchanges would learn and implement better detection to impose stricter withdrawal limits when the hash rate rises rapidly.  Or whatever.  But the banking industry wouldn't "kill bitcoin" as a result.

Now if they gain 51% and are not accepting new transactions in any blocks, then that would be disruptive.  It would be a shame if they went through all that work and an economic majority of the Bitcoin economy decided to hard fork and the algorithm was made to include one extra step, such as adding one more operation  e.g., sha256(LShift(sha256())) and that rendered those ASICs completely useless.

This is a temporary vulnerability anyway.  ASIC designs from more than one vendor are being worked on.  Once we get past wide distribution of ASICs, then there is no longer the risk of some vastly more powerful technology available to an aggressor attempting to thump what the free market has achieved.  (at least not until quantum computers arrive).

[Frizz23]

But what they can do with 51%?  Not much.

They can destroy trust.

Basically it's: "currency = trust".

Without trust, there's no currency.

When trust is gone, this happens (beer becomes pretty expensive *g*):


(Zimbabwe Dollar)

[DeathAndTaxes]

Well two counter points.

You say ONCE Bitcoin becomes a serious threat.  If/when that happens tx volume and thus revenue for miners will likely be significantly higher.

This illustrates why ASICs are necessary.  The banks can only kill bitcoin "on the cheap" using a more efficient technology.  Once the "good miners" have that there is no cheap option just pure brute force.

The combination of those factors means if Bitcoin is every successful enough that banks need to attack it (hint: banks haven't attacked PayPal) the costs would likely be in the billions. 

[Etlase2]

Anyone who says 51% "can't do much" is delusional or anti-FUDing. Anyone with 51% can refuse to add blocks from other miners which will cause other miners to drop out and give them even more than 51%. They can either create an effective monopoly to control the price of transactions or they can decide to drop transactions for whatever reason (and perhaps all of them, making the network useless). And of course they can double spend at will, though anyone doing this is probably a lot more interested in breaking bitcoin than making a few bucks.

lol @ "banks haven't attacked paypal"

[Frizz23]

... (hint: banks haven't attacked PayPal) ... 

Of course not - since PayPal is part of the banking empire. Part of the Dark Side.

[Gabi]

But what they can do with 51%?  Not much.

They can omit transactions from the blocks and they can go back some blocks and double spend transactions sent to them.  That's the extent of it.  They can't spend my coins.

Wrong, wrong, wrong.

With 51% they can destroy bitcoin, they can happily stop bitcoin with that. They control everything. They can go back months in the blockchain, rewrite all that and yes, they CAN spend your coins, if your coins were mined in the blocks that they reverted.

[midnight]

Why would banks see bitcoin as a threat? Coudnt they just accept it as a new currency, and incorporate it into the system like any other currency? Why try to destroy it when there could be money to be made?

[Gabi]

Why would banks see bitcoin as a threat? Coudnt they just accept it as a new currency, and incorporate it into the system like any other currency? Why try to destroy it when there could be money to be made?

Do you realize that central banks just PRINT money at will? You can't do that with bitcoin

when there could be money to be made

As i said, central banks literally MAKE money. With bitcoin, you can't. You can't go and be "ok let's print 2 billions bitcoin"

[Frizz23]

Why would banks see bitcoin as a threat? Coudnt they just accept it as a new currency, ...

You could as well ask the Mafia to stop taking protection money. Or wolfs stop eating sheep.

[ElectricMucus]

Why would banks see bitcoin as a threat? Coudnt they just accept it as a new currency, ...

You could as well ask the Mafia to stop taking protection money. Or wolfs stop eating sheep.

You can't generalize that. If you mean Governments will never support it by referring to the power structures ruling over nation states right, as with the entities controlling the fiat system.
But both regional Governments and  community Banks might support it and in time when everything goes right probably will.

[melikeit]

I hope banks won't destroy BTC

[DeathAndTaxes]

But what they can do with 51%?  Not much.

They can omit transactions from the blocks and they can go back some blocks and double spend transactions sent to them.  That's the extent of it.  They can't spend my coins.

Wrong, wrong, wrong.

With 51% they can destroy bitcoin, they can happily stop bitcoin with that. They control everything. They can go back months in the blockchain, rewrite all that and yes, they CAN spend your coins, if your coins were mined in the blocks that they reverted.

Not really.  In time layer defenses will make 51% less effective.  Bitcoin is what the consensus of users say it is.  One option would be checkpointing more frequently.   Anything prior to a checkpoint can never be double spent.    Another option would be to change the hashing algorithm.   Given the lowest cost method of performing a 51% attack is ASICs that cost would be utterly wasted.  Tens or maybe hundreds of millions spent would be wiped out and worthless by a small change to the algorithm.

Finally it is possible that an entity could kill Bitcoin but they won't kill cryptocurrency.   Bitcoin is like napster.  Smart entities would realize then spending a huge sum to kill it would only spawn dozens of replacements which are even harder to kill.   Now this doesn't mean users won't lose money, it doesn't mean cryptocurrency won't be set back years (maybe even a decade) but eventually some future alt-chain will become the "bittorrent" equivalent and will be far harder to kill.

If hypothetically Bitcoin was killed by a 51% attack (or more likely never ending sequence of 51% attacks) I would imagine the next cryptocurrency could implement two major countermeasures
1) Use a variety of hashing algorithms.   i.e. from a pool of 20 algorithms, the algorithm used is rotated every block.
2) Use a "proof of history" system to dynamically checkpoint the primary chain once it is more than say older than 7 days.

[DannyHamilton]

Why would banks see bitcoin as a threat? Coudnt they just accept it as a new currency, and incorporate it into the system like any other currency? Why try to destroy it when there could be money to be made?

Do you realize that central banks just PRINT money at will? You can't do that with bitcoin

when there could be money to be made

As i said, central banks literally MAKE money. With bitcoin, you can't. You can't go and be "ok let's print 2 billions bitcoin"

Banks existed and were profitable before fiat became popular, banks will continue to exist and be profitable long after fiat is gone.

[mrvision]

If a bank tries that i suppose THEIR system will be somehow hacked and corrupted in hours. I wouldn't start a war.

[flatiron]

Nah, Banks can't bring down bitcoin. we got satoshi on our side .

[midnight]

Why would banks see bitcoin as a threat? Coudnt they just accept it as a new currency, and incorporate it into the system like any other currency? Why try to destroy it when there could be money to be made?

Do you realize that central banks just PRINT money at will? You can't do that with bitcoin

when there could be money to be made

As i said, central banks literally MAKE money. With bitcoin, you can't. You can't go and be "ok let's print 2 billions bitcoin"

So that helps me understand why bitcoin is revolutionary and valuable. Thats why we should be protective of it. Should the little people be concerned of a 51% attack or centralization, is there anything they can do to help secure the network?

[goodlord666]

The banks will love Bitcoin. Has anyone ever thought of that possibility?

[nbnBokayUH]

Banks "make" money by printing it while Bitcoins and gold can only be made by mining them.  No politician can decree it into existence to fix the problems they've created.