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Author Topic: Why do you trust the miners?  (Read 2811 times)
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June 05, 2011, 01:42:08 PM

Bitcoin weekly wrote that you can do stuff like double spending when you have 51% networking power. The group of miners can find a way to increase the money supply without doing anything that would get clients to refuse it.
And how?
There are a few simple rules in BTC that all blocks have to obey to be valid:

1) Longest chain of valid blocks = valid
2) In the beginning of each block, some BTC can be sent out of nowhere to somewhere (= BTC creation, currently 50 BTC/block)
3) Additionally, transaction fees in that block can be sent somewhere
4) The "key" to solve each block must be at least of the difficulty X (which is agreed upon in the whole network)

Any block not fulfilling ALL of these criteria is not vaild. You can create blocks that generate 1000 BTC for example, nobody will accept them though.

50% attacks target the rule #1: while the rest of the network thinks they have the longest chain, a malicious miner might create their own part of the chain in the meantime faster than the rest of the network. In the meantime he spends a million coins on carrots and after the deal has been confirmed, he shows his own (longer) blockchain to the world where that transaction is not included.
The other guy (thinking he has received these BTC) has however already shipped the carrots and is now screwed.
If they half the required difficulty they should also double the money creation. Shouldn't they?
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June 05, 2011, 01:50:07 PM

If they half the required difficulty they should also double the money creation. Shouldn't they?
They cannot mess with difficulty, as this is not something under their control. No other "real" Bitcoin client would accept such a block. <-- leveraged trading of BTCUSD, LTCUSD and LTCBTC (long and short) - 10% discount on fees for the first 30 days with this refcode: x5K9YtL3Zb
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June 05, 2011, 01:58:47 PM

If they half the required difficulty they should also double the money creation. Shouldn't they?

The democratic accepted (50% majority rules - maybe it can even be adjusted in future to 95% agreement rules) bitcoin algorithm prevent them from doing so, unless one group attains a majority of more than 50%.

See for explanation on Equation of Exchange.

In essence it would also be to the miners' detriment if they undermine bitcoin's integrity (as bitcoin is worthless without a network with integrity) - if illegitimate transfers are conducted during such a period of majority network hash power which could enable a do as you please, it will show up in the block chain and the culprit will be identified easily as the miner having majority mining hash power - and vested interest holders will quickly pick it up as well.  If it happens - it will be a temporary undermining of the bitcoin network's integrity - which would maybe even be reversible in some instances.  Bitcoin's spirit is a spirit of decentralization - and concentrating to much hash power to one mining pool is counter decentralization - and a step towards centralization - making abuse easier, but not inevitable.

Disclaimer:  Postings of Cloud9 are only individual views of opinion and/or musings and/or hypothesisses.  On a non-authoritative, peer-to-peer public forum, you do not need permission from Cloud9 to derive your own conclusions or opinions, so please do.  Calculations and assumptions to be verified.
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June 05, 2011, 02:13:32 PM

50+% majority only decides which transactions have happens (you can't create invalid transactions but you can prevent valid ones from happening, or given enough computation power reverse existing transactions). Even if miners try to change the block reward, any copy of the software that has not been updated to the same rules will see the blocks and the rewards they assign themselves in these blocks as invalid. The software will not acknowledge the existence of any coins created in or any transaction listed in those blocks.

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June 05, 2011, 02:20:40 PM

After the initial adoption of the currency miners have an incentive to change the protocol in a way where mining produces more coins.

False. Why would they want to turn gold into shit, literally?

This assumes that a large node wants to support the bitcoin network.

Let us consider if a node wants to undermine bitcoin by showing (very publicly) a few large double-spends?

What would happen to the value of the blockchain? What would it do in terms of trust?

Would any serious players ever touch bitcoin again?

So no, we shouldn't need to trust a third party for anything. After all, that's the whole point to bitcoin in the first place!

We need to question trust. ALL THE TIME. If bitcoin requires trust, then it is broken.

For a possible solution, check this thread:

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