a 51% attack costs $20,000,000 and is devastating

[aaaxn]

It is technically impossible to "destroy bitcoin" as described. You cannot "change the rules at will," no matter how much hashing power you have. You can change your own rules, but my client will not be relaying nor accepting your transactions and blocks, as they would be invalid. All you can do is not include my transactions in your fork. Whatever. It wouldn't be long before your "attack" is rendered irrelevant by the community action. My coins are perfectly safe. You cannot touch them, you cannot spend them.

One valid point from OP is that taking over >50% of the network really doesn't cost much. Ultimately, it is determined by the value of block reward over the miners' expectations of the RoI period - this is the total investment of the mining industry. There is a catch, though. The value of said coins increases as adoption increases, meaning the cost of attack increases in proportion with the disruption it causes to those old-school institutions thay are stupid enough not to play along, and to try to resist the technological leap and all the opportunities it offers.

Such attacker would be able to do many funny things:
- establish mining monopoly by not allowing any other miners to mine blocks while still operating network normally
- refuse to include any transactions
- make every block full of rubbish transactions just to bloat blockchain
- reverse some transactions from time to time
All of this can hurt bitcoin seriously.

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[niko]

It is technically impossible to "destroy bitcoin" as described. You cannot "change the rules at will," no matter how much hashing power you have. You can change your own rules, but my client will not be relaying nor accepting your transactions and blocks, as they would be invalid. All you can do is not include my transactions in your fork. Whatever. It wouldn't be long before your "attack" is rendered irrelevant by the community action. My coins are perfectly safe. You cannot touch them, you cannot spend them.

It is technically feasible to destroy bitcoin this way. LukeJR has proven this. The attacker can make the block chain look however he pleases and while he can't mess with your coins, he can undo any of your payments and disrupt the market to the point where maintaining his attack costs nothing. Miners will leave. Investors will leave. You will keep your worthless private keys to data nobody cares about.

You contradict yourself. The fact that I am keeping my private keys proves they are not worthless. I am not the only one who sees things this way. Only some fraction of users will fall for the flawed logic and leave.
As long as the "attacker" plays by the rules, there is no attack. As soon as they start disrupting the commerce, the community will act - based on IPs of the attacker's nodes, based on forked chains, based on other things. 

[giszmo]

It is technically impossible to "destroy bitcoin" as described. You cannot "change the rules at will," no matter how much hashing power you have. You can change your own rules, but my client will not be relaying nor accepting your transactions and blocks, as they would be invalid. All you can do is not include my transactions in your fork. Whatever. It wouldn't be long before your "attack" is rendered irrelevant by the community action. My coins are perfectly safe. You cannot touch them, you cannot spend them.

It is technically feasible to destroy bitcoin this way. LukeJR has proven this. The attacker can make the block chain look however he pleases and while he can't mess with your coins, he can undo any of your payments and disrupt the market to the point where maintaining his attack costs nothing. Miners will leave. Investors will leave. You will keep your worthless private keys to data nobody cares about.

You contradict yourself. The fact that I am keeping my private keys proves they are not worthless. I am not the only one who sees things this way. Only some fraction of users will fall for the flawed logic and leave.
As long as the "attacker" plays by the rules, there is no attack. As soon as they start disrupting the commerce, the community will act - based on IPs of the attacker's nodes, based on forked chains, based on other things.  

What if you can't know his IP cause he's mining through TOR? What if you know his name and address? What if he doesn't interfere except for taking all the mined coins (until all miners left)?

Edit:
It's barely illegal to mine faster than the rest of the net, not taking into account the rest's blocks but hiding one's IP might help to avoid counter-measures. As soon as one miner gets excluded based on his IP address, you have hell of a slippery slope.
Taking all the mined coins will essentially drive the protection through mining against the wall. When they all left, he can shut down bitcoin for good.

[Kouye]

I'm not even sure it would take 20m to acheive.
A well designed trojan could infect enough nodes to get to 51% and I'm sure people are working on it right now.
The zombie farms they use to DDOS are quite massive already.

Which is why we need both:
- To ensure people don't get scammed/hacked too easily (by decorating Inaba with a Untrustworthy tag until he clears off his 1000 BTC debt, for example.)
- To actively help increasing the number of BT-QT clients running.

[Bytas]

How the hell are you going to sell 20mil worth of a currency that you just crashed.
No one will be crazy enough to buy any bitcoin after a 51% attack. The price will drop to 1% of it's value in no time and you will have spend 20 mil on killing bitcoin without earning a cent. GJ.

 

[Kouye]

How the hell are you going to sell 20mil worth of a currency that you just crashed.
No one will be crazy enough to buy any bitcoin after a 51% attack. The price will drop to 1% of it's value in no time and you will have spend 20 mil on killing bitcoin without earning a cent. GJ.

Yeah, means bitcoin death.
How many banks, do you think, would be ready to donate a share to a "kill-da-coin" entity ?
Without giving a crap about the bitcoin value once it's dead ?

[spiral_mind]

What if the community created a patch for Bitcoin that makes the number of coins mined and the "confirmation power" of blocks proportionally decline in relation to their concentration of mining power from a single IP?

Set an arbitrary limit under which there is no penalty (meaning that all small-time users and most medium sized miners will not ever be impacted, only someone trying to dominate the blockchain personally):

Ex:

Under 5% of the network = no penalty
5-10+% of network = 20% penalty
10-20% of network = 40% penalty
20-30% of network = 60% penalty
30-40% of network = 80% penalty
40-50% of network = up to 99% penalty

That way the network's main weakness would have a self-protection mechanism.

Blocks mined by people with too significant a share of the network would have to be mixed with those from people with a small stake of the network to be valid. That essentially gives the community at large power over malicious actors trying to acquire 51% that can't be abused but will keep them in check. Pools would shrink down and split up naturally to prevent becoming too large and incurring a penalty.

Interestingly this could also actually benefit the value of Bitcoins.

Mining and running nodes are separate things but the network needs both. Mining is essentially just the "distribution lottery" of Bitcoin.

If we think about the economics of Bitcoin it has value mainly because it has been distributed to so many people across the world. The people who have hoarded it are essentially not boosting the value of the economy right now beyond deciding not to sell them. If these coins were changing hands the BTC economy would really be roaring and expanding much faster.

Making mining even more decentralized might kick things to the next level. Penalties from having too large of a mining operation could be paid to the people who run full nodes thus giving them a reward for keeping things going as well. You could think of this as "node mining". Alternately these coins could be redistributed to everyone who is under the 10% threshold to make mining more economically viable long term.

Of course this could all be done as an alt-coin instead.

I guess the main problem is the ease of creating alternate IP addresses and proxies etc. The real problem would be setting a limit low enough to keep an attacker from just setting up a ton of small pools for their attack but high enough to still allow pools of big enough size that they can be trusted.

[Kouye]

I don't think the major issue lies in mining now.
It is more on the distributed confirmations system (which is great).

Anyone with altered client getting 51% of the network nodes would be able to refuse transaction (or mining) confirmations.
And it could create double-spend issues, since their chain would grow faster than the legit one, and thus be considered as the reference.

Only way to avoid that, as far as I understand, is to make the legit Bitcoin-QT relays pool so big that they cannot acquire 51% when banks realise this is a "kill or be killed" situation.

[giszmo]

What if the community created a patch for Bitcoin that makes the number of coins mined and the "confirmation power" of blocks proportionally decline in relation to their concentration of mining power from a single IP?

an IP address isn't and never can be a reliable attribute of any entity mining in Bitcoin as long as you want it to be anonymous. Mining via TOR, mining connected via thousands of proxies, etc.
If you throw over board the anonymity you could just as well abandon proof of work.

[spiral_mind]

What if the community created a patch for Bitcoin that makes the number of coins mined and the "confirmation power" of blocks proportionally decline in relation to their concentration of mining power from a single IP?

an IP address isn't and never can be a reliable attribute of any entity mining in Bitcoin as long as you want it to be anonymous. Mining via TOR, mining connected via thousands of proxies, etc.
If you throw over board the anonymity you could just as well abandon proof of work.

So would it be possible to still execute a 51% attack if the attacker were forced to use 10 different addresses ? He could just write a script to coordinate the attack across all his machines?

[Kouye]

What if the community created a patch for Bitcoin that makes the number of coins mined and the "confirmation power" of blocks proportionally decline in relation to their concentration of mining power from a single IP?

an IP address isn't and never can be a reliable attribute of any entity mining in Bitcoin as long as you want it to be anonymous. Mining via TOR, mining connected via thousands of proxies, etc.
If you throw over board the anonymity you could just as well abandon proof of work.

So would it be possible to still execute a 51% attack if the attacker were forced to use 10 different addresses ? He could just write a script to coordinate the attack across all his machines?

To sum up:
If a majority of active nodes can fuck your transactions up by refusing them, or confirm false transactions faster than you can, the whole thing is dead.

[CurbsideProphet]

Why spend all the time and money orchestrating a 51% attack?  If you don't care about the money you're wasting, $20 million will more than wipe out the order book on MtGox.  Seeing the price fall to zero will more than likely scare off the majority of investors and wipe out everyone trading on margin. 

[Kouye]

Why spend all the time and money orchestrating a 51% attack?  If you don't care about the money you're wasting, $20 million will more than wipe out the order book on MtGox.  Seeing the price fall to zero will more than likely scare off the majority of investors and wipe out everyone trading on margin. 

Trading on margin is what we need to avoid.
Keep your BTC, ask your boss to pay you with BTC, and spend BTC to buy food and booze.

Fuck the traders, fuck the banks. That's the idea.

[giszmo]

Why spend all the time and money orchestrating a 51% attack?  If you don't care about the money you're wasting, $20 million will more than wipe out the order book on MtGox.  Seeing the price fall to zero will more than likely scare off the majority of investors and wipe out everyone trading on margin. 

What are you talking about? With 20M on MtGox all I can do is buy. That would barely scare anybody.

[inashed]

<tinfoilhat>Maybe we already operate at the mercy of IMF, FED, world bank, etc., we already have full approval and bitcoin is meant to replace the dollar.

Congratulation you found the answer
"Electronic payments initially would all be based on different kinds of credit cards ... these were already in use in 1969 to some extent. Not as much as now. But people would have credit cards with the electronic strip on it and once they got used to that then it would be pointed out the advantage of having all of that combined into a single credit card, serving a single monetary system and then they won't have to carry around all that plastic.

SURVEILLANCE, IMPLANTS, AND TELEVISIONS THAT WATCH YOU
    So the next step would be the single card and then the next step would be to replace the single card with a skin implant. The single card could be lost or stolen, give rise to problems; could be exchanged with somebody else to confuse identify. The skin implant on the other hand would be not losable or counterfeitable or transferrable to another person so you and your accounts would be identified without any possibility of error. And the skin implants would have to be put some place that would be convenient to the skin; for example your right hand or your forehead. At that time when I heard this I was unfamiliar with the statements in the Book of Revelation. The speaker went on to say, "Now some of you people who read the Bible will attach significance to this to the Bible," but he went on to disclaim any Biblical significance at all. This is just common sense of how the system could work and should work and there's no need to read any superstitious Biblical principals into it. As I say, at the time I was not very familiar with the words of Revelations. Shortly after I became familiar with it and the significance of what he said really was striking. I'll never forget it.
"
https://100777.com/nwo/barbarians

PS: I knew digital currency would become this big before I even knew bitcoin existed (that was back at 2012) and never spent a single cent at any digital currency and I am here just for the theoretical side of it. Before you call me a religious nut, I didnt even knew the bible talked about it, before deciding to not using digital currency.