Why should we invest in ASIC?

[nebulus]

Hey, all,

I've been reading peoples' thoughts around the forum quite a lot lately.
I still don't quite understand why investing into ASIC is important for BTC future.
If it's lack of my understanding how Bitcoin network operates then please point it out.

Here is what is clear to me, Bitcoin difficulty scales proportionally to the amount of hashing power there is.
So it seems like the whole point of investing into ASIC is to raise difficulty so there is no competition.
I do not feel that's really the case.

Will someone share what they think is going on here...

Thanks!

[Meni Rosenfeld]

It's an arms race with potential attackers. An attacker needs to have more hashrate than the rest of the network and will invest in ASIC to that end; if we hope to compete we'd better have ASIC as well.

[SgtSpike]

A malicious entity could engineer and produce their own ASIC, build enough of them that they have 90% of the overall hashpower, then put them online.  From that point on, until the Bitcoin community could produce their own ASIC to compete, the malicious entity could do whatever they like, including reversing all blocks mined by others and never including transactions in their blocks.

So, by having our own ASICs, we will increase difficulty a great deal, and the difficulty of a malicious entity pulling off such an attack would greatly increase (along with the cost of doing so).

[nebulus]

Thanks for your answers... So, are we as a community then responsible for bailing out failing MINER enterprises?

[SgtSpike]

Thanks for your answers... So, are we as a community then responsible for bailing out failing MINER enterprises?

No, but we as a community are responsible for making sure a malicious entity doesn't take over the network.

[FLHippy]

I've been reading peoples' thoughts around the forum quite a lot lately.

GET OUT OF MY HEAD!

[flynn]

Huh ?

It's just  a greedy race for money.

If I had a 60GH asic today; I would earn 30 BTC a day i.e. $10,000 a month.

Now wonder why everyone wants one.

[nebulus]

Thanks for your answers... So, are we as a community then responsible for bailing out failing MINER enterprises?

What? This made no sense. I think you should read a bit more.

Yes, it made sense. It just feels like and attacker an community have different objectives (No, doh!)
BUt consider this scenario...

The attacker has enough resources to build a network of the BTC size. To get it this 1% to take over, it compromises a "legit" mining operation.
The owners of the operation do not have enough money to address the issue.

It seems like bail out is needed, or some sort of insurance...

[nebulus]

Huh ?

It's just  a greedy race for money.

If I had a 60GH asic today; I would earn 30 BTC a day i.e. $10,000 a month.

Now wonder why everyone wants one.

Well, if you think it is then consider what I am highlighting is an undesirable side effect. Not sure if it needs to be addressed though. (Basically need help thinking it through)

[SgtSpike]

Huh ?

It's just  a greedy race for money.

If I had a 60GH asic today; I would earn 30 BTC a day i.e. $10,000 a month.

Now wonder why everyone wants one.

What, exactly, is your definition of greed?  Is wanting money a bad thing?

Money is certainly the main incentive for INDIVIDUALS to invest in ASICs, but as a COMMUNITY, the reason we should support investments into ASICs is to further protect the network.

Thanks for your answers... So, are we as a community then responsible for bailing out failing MINER enterprises?

What? This made no sense. I think you should read a bit more.

Yes, it made sense. It just feels like and attacker an community have different objectives (No, doh!)
BUt consider this scenario...

The attacker has enough resources to build a network of the BTC size. To get it this 1% to take over, it compromises a "legit" mining operation.
The owners of the operation do not have enough money to address the issue.

It seems like bail out is needed, or some sort of insurance...

Yes, this would be a risk.  This is also why lots of people start making an outcry when a single pool holds a large percentage of total hashing power.  If the single pool controlled more than 50% of the total hashing power, it would indeed become a central point of failure.

But, at this point, an attacker would have to compromise the top 5 pools to have > 51% of the total hashing power (see the chart here: http://bitcoincharts.com/), which would undoubtedly be an extremely difficult thing to do.  On top of that, as soon as members of the pool knew it was compromised, they'd simply switch to a different pool, leaving the attacker without the hashing power he needs to continue carrying out the attack.

[niko]

I suspect the only reason is a self-centered race for quick profit. All the stories about making the network more secure are either naive or dishonest. A malicious entity willing to spend resources to temporarily disrupt the network could do so today with GPUs or FPGAs, or next year with ASICs. At any point of time it can be done with whatever technology is in use by the miners.
Everybody is racing for a piece of the same, predetermined block reward and for the fees. Nowadays the fees are negligible compared to the block reward, therefore nowadays the total value of mining economy is limited. Anyone willing to spend (waste, more precisely) more than 7200 coins per day (plus the electricity overhead) would become the majority vote.

I don't worry about this, but won't discuss the reasons here.

[nebulus]

On top of that, as soon as members of the pool knew it was compromised, they'd simply switch to a different pool, leaving the attacker without the hashing power he needs to continue carrying out the attack.

Okay, consider the compromise affects the internet connection of the mining enterprise.

[nebulus]

All the stories about making the network more secure are either naive or dishonest.

Maybe, but without a resilient and secure network, bitcoins are pointless.

[niko]

All the stories about making the network more secure are either naive or dishonest.

Maybe, but without a resilient and secure network, bitcoins are pointless.

Try reading my post again. Higher hash rate does not make the network more resilient or secure against the 51% disruption.

[SgtSpike]

I suspect the only reason is a self-centered race for quick profit. All the stories about making the network more secure are either naive or dishonest. A malicious entity willing to spend resources to temporarily disrupt the network could do so today with GPUs or FPGAs, or next year with ASICs. At any point of time it can be done with whatever technology is in use by the miners.
Everybody is racing for a piece of the same, predetermined block reward and for the fees. Nowadays the fees are negligible compared to the block reward, therefore nowadays the total value of mining economy is limited. Anyone willing to spend (waste, more precisely) more than 7200 coins per day (plus the electricity overhead) would become the majority vote.

I don't worry about this, but won't discuss the reasons here.

You're forgetting about the capital costs upfront.  If ASICs are used, then the malicious entity must first spend the capital on developing an ASIC (or somehow purchase as much as the rest of the Bitcoin network combined without being noticed), and have a place to put them all (perhaps a small portion of a datacenter).

If GPU's are used, then the malicious entity must build or rent out a data center to put them all.  The current network hashing power of about 20 TH/s would require around 50,000 video cards to even equal it.  Those 50,000 video cards would draw around 200 watts each, requiring 10 megawatts of power.

Now, I'm not saying it's impossible for someone with lots of money to do this, just that the costs would far exceed the ASIC electric cost equivalent of 7200 BTC/day.

On top of that, as soon as members of the pool knew it was compromised, they'd simply switch to a different pool, leaving the attacker without the hashing power he needs to continue carrying out the attack.

Okay, consider the compromise affects the internet connection of the mining enterprise.

So?  The miners can still move to a different mining pool that is unaffected.  And many of the larger pools have quite the DDOS protection, due to attackers DDOSing them and asking for money in exchange.

[SgtSpike]

All the stories about making the network more secure are either naive or dishonest.

Maybe, but without a resilient and secure network, bitcoins are pointless.

Try reading my post again. Higher hash rate does not make the network more resilient or secure against the 51% disruption.

Yes it does.  It makes it more difficult and expensive for an attacker to stage an attack.

[nebulus]

So?  The miners can still move to a different mining pool that is unaffected.  And many of the larger pools have quite the DDOS protection, due to attackers DDOSing them and asking for money in exchange.

Okay, that is covered. However, I was thinking about ISP policies and perhaps all the way down to the fiber itself.

I am satisfied with your answer to the main question though. Thanks!

[SgtSpike]

So?  The miners can still move to a different mining pool that is unaffected.  And many of the larger pools have quite the DDOS protection, due to attackers DDOSing them and asking for money in exchange.

Okay, that is covered. However, I was thinking about ISP policies and perhaps all the way down to the fiber itself.

I am satisfied with your answer to the main question though. Thanks!

You mean if Bitcoin activity in general was blocked?

This sort of case has been discussed, but more in the context of forced governmental restrictions.  However, the data could still be encrypted to bypass such restrictions, and unless the restricting government planned to block all encrypted data, they would have no way of knowing what is Bitcoin traffic vs what is other traffic - encrypted traffic all looks very much the same.

[niko]

All the stories about making the network more secure are either naive or dishonest.

Maybe, but without a resilient and secure network, bitcoins are pointless.

Try reading my post again. Higher hash rate does not make the network more resilient or secure against the 51% disruption.

Yes it does.  It makes it more difficult and expensive for an attacker to stage an attack.

How exactly does upgrade by the community to a faster hashing hardware make it more difficult for someone to start hashing with that same faster hardware?

Please elaborate how it is more difficult to stage a 51% disruption in the ASIC ecosystem compared to a GPU ecosystem compared to a CPU ecosystem.

[SgtSpike]

All the stories about making the network more secure are either naive or dishonest.

Maybe, but without a resilient and secure network, bitcoins are pointless.

Try reading my post again. Higher hash rate does not make the network more resilient or secure against the 51% disruption.

Yes it does.  It makes it more difficult and expensive for an attacker to stage an attack.

How exactly does upgrade by the community to a faster hashing hardware make it more difficult for someone to start hashing with that same faster hardware?

Please elaborate how it is more difficult to stage a 51% disruption in the ASIC ecosystem compared to a GPU ecosystem compared to a CPU ecosystem.

Right now, someone could develop their own ASIC and EASILY have and hold 90% of the hashrate with a small number of devices (say, 200 devices @ 1 TH/s each).  Once ASICs are in the wild, and the hashrate is pumped up to 500 TH/s (my estimate of where it will be after BFL finishes its current preorders), it would take 5,000 of those same devices @ 1TH/s each to gain the same 90% advantage over the Bitcoin network.

So yes, it would make it more difficult and expensive for an attacker to stage a disruption using ASICs.