Bitcoin topic on Quora.com

[Nefario]

In answer to issue 2, it is almost certain that a large number of governments would ban everything bitcoin related( some governments, not all ). And the effect of this will be the same as the government and recording industries efforts to prevent file sharing, that is, almost no effect at all.

The weakest points of entry and exit into the bitcoin economy are the currency exchangers and these will be the first targets. Already hidden, anonymous currency exchanges are begining or being developed in for example, China that would allow continued entry and exit into the bitcoin economy despite being entirely illegal.

Secondly because of the financial motivation as long as there is money to make from using bitcoin people will use it, as long as the internet has not been turned off completely bitcoin will continue to work unaffected.

QQ coin was easily targeted by the Chinese government as it was a currency based on the servers of a Chinese company, the government only had to ask and Tencent(QQ's owners) had to take action. Bitcoin is entirely p2p and short of turning off the internet there is nothing that can be done to stop it.

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[ShadowOfHarbringer]

It might be profitable if the $10,000/hour figure is correct. The attacker could clean out every Bitcoin-accepting site in existence, which is enough to make even several hours of attack time profitable.

We forget about one thing.
It does not have to be profittable at all.

It can be used by FEDs/Governments to attack bitcoin. Millions of dollars is not much when it comes to eleminate the threat to all known fiat currencies. Banksters will be mad about this. And they will surely try everything - It's only matter of time.


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Also, i see on weakness in the proposed attack scenario. Bitcoin clients by default only connect to every 1 of 16 bitcoin nodes IPs (or was it 1/8 ?).
So if I am correct, the attacker would also have to set up a lot of different bitcoin clients in different IP ranges to successfuly broadcast his fake double spent transactions. Otherwise, when using nodes in a small IP range, the double spent transactions will be rejected by most honest nodes (which will not connect to many nodes in the small IP range, and choose some other nodes instead), thus rejected by the whole network.

I don't know if I am reasoning correctly here, somebody correct me if not.

[FreeMoney]

I have a few thoughts. An attacker isn't likely to want a bunch of services, those can't usually be resold easily. Goods will usually not ship until the next day so the attacker has to overcome the whole network for ~12 or more. Even if he pulls this off people will notice and many will be warned not to ship goods ordered after X time. Gambling sites don't make a great target, because you win bitcoins, which will be devalued if you are successful. The exchanges are probably the most fertile ground, but major
exchanges (where the most money will be available) will have the best detection of funny business.

In addition to all the power that the attacker will have to buy or rent there will be a lot of planning involved. They need to search out what goods will ship fast enough to go out during their attack, if they can't hold on to the network for over a day this will only be certain parts of the world. They need to set up a place or places for delivery, and a way to resell the goods unless they are doing this for their own consumption. They need to find all the little exchanges and make accounts and set up bank accounts to send the money to, under different names I guess. LR makes this pretty easy though.

Yes, it is reasonable to assume that the price of BTC will plummet. Unfortunately goods and services are already in the hands of the attacker. This means that the attacker looses nothing, while every BTC owner sees the value earned true labour or mining evaporate before his very eyes.

Do you mean that after an attack people will stop using bitcoin? Some probably would, I think most would move to safer arrangements. Certain types of business would be unaffected, live sex shows, programming work, donations, etc. People using bitcoin for these purposes would presumably buy on the cheap driving the price back up somewhat, granted not all the way.

In short, I don't think a for-profit attack is likely. Government attacks are where the risk is imo, damaging stuff is a lot more viable when you are using other peoples money. We have some advantages though, government is slow to act and difficulty is growing exponentially at least for now. When government does act it isn't likely to be all at once and decisive. The publicity of "Bitcoin is worrying world governments and bankers" will be pretty huge. The greatest thing about bitcoin is that they have to outmatch all of us combined at once. Sure it looks really easy right now, but there are like 4 users in Japan and 3 in China. We can easily grow by a factor of a hundred thousand.

I don't even think that it is forgone that every government would want to break bitcoin, if a few realize the value in embracing it first there won't be a chance at breaking it.

[FreeMoney]

It might be profitable if the $10,000/hour figure is correct. The attacker could clean out every Bitcoin-accepting site in existence, which is enough to make even several hours of attack time profitable.

We forget about one thing.
It does not have to be profittable at all.

It can be used by FEDs/Governments to attack bitcoin. Millions of dollars is not much when it comes to eleminate the threat to all known fiat currencies. Banksters will be mad about this. And they will surely try everything - It's only matter of time.


---------
Also, i see on weakness in the proposed attack scenario. Bitcoin clients by default only connect to every 1 of 16 bitcoin nodes IPs (or was it 1/8 ?).
So if I am correct, the attacker would also have to set up a lot of different bitcoin clients in different IP ranges to successfuly broadcast his fake double spent transactions. Otherwise, when using nodes in a small IP range, the double spent transactions will be rejected by most honest nodes (which will not connect to many nodes in the small IP range, and choose some other nodes instead), thus rejected by the whole network.

I don't know if I am reasoning correctly here, somebody correct me if not.

Lying nodes is a different attack which I think would be focused on just one target. The double spend attack spends a coin legitimately and then rewrites history and spends it "legitimately" again.

I didn't think of this when I was writing my last post, but doesn't this make it difficult for even someone with ~60% to double spend and make it look good for a whole day? Going all the way back a whole day would take about 5 days if you were writing 6 blocks for every 5. Am I thinking correctly?

edit to add: Actually I think that's wrong. The first spend batch is totally legit, at the moment the attacker starts making blocks keeping up with the real chain, but not publishing, if he is even a little faster he can publish at any point pulling back his coins. So a 24 hour later pull back only requires 24 hours of matching the speed of the whole network.

[FreeMoney]

We forget about one thing.
It does not have to be profittable at all.

It can be used by FEDs/Governments to attack bitcoin. Millions of dollars is not much when it comes to eleminate the threat to all known fiat currencies. Banksters will be mad about this. And they will surely try everything - It's only matter of time.

I don't think fiats are going to last much longer with or without bitcoin. They are inherently just the overvaluing of paper, the price has to come back down eventually.

Another thing to consider is that the people who run fiat are deluded, king of the world types, they can print dollars: United States of American Dollars. Nothing is better, no way something called Bitcoin eliminates the dollar, to even suggest spending millions to squash a little play money internet currency will get you laughed at, not funded. They are going to wait way way too long to act.

There will be a smear campaign about how we torture children and eat puppies, of course the puppy eaters aren't involved yet and when they hear about the perfect way to pay for a steady supply of puppies they'll get them some coins, the price will go up and the follow up report will be about how all the puppy eaters are getting rich and other people will want in on that, etc.

[riggasconi]

I have a few thoughts. An attacker isn't likely to want a bunch of services, those can't usually be resold easily. Goods will usually not ship until the next day so the attacker has to overcome the whole network for ~12 or more. Even if he pulls this off people will notice and many will be warned not to ship goods ordered after X time. Gambling sites don't make a great target, because you win bitcoins, which will be devalued if you are successful. The exchanges are probably the most fertile ground, but major
exchanges (where the most money will be available) will have the best detection of funny business.

In addition to all the power that the attacker will have to buy or rent there will be a lot of planning involved. They need to search out what goods will ship fast enough to go out during their attack, if they can't hold on to the network for over a day this will only be certain parts of the world. They need to set up a place or places for delivery, and a way to resell the goods unless they are doing this for their own consumption. They need to find all the little exchanges and make accounts and set up bank accounts to send the money to, under different names I guess. LR makes this pretty easy though.

You can have a fast attack scenario targeting fast-shipping goods and services, and a slow-attack scenario targeting slow-shipping goods and services.

Do you mean that after an attack people will stop using bitcoin?

No. I mean the FRN/BTC exchange ratio would plummet, therefore goods and service providers will ask for more BTCs for the same goods and services, therefore the purchasing power in the hands of a BTC owner evaporates.

[riggasconi]

I didn't think of this when I was writing my last post, but doesn't this make it difficult for even someone with ~60% to double spend and make it look good for a whole day? Going all the way back a whole day would take about 5 days if you were writing 6 blocks for every 5. Am I thinking correctly?

The attacker is spending BTCs, and then creating a fake payback from the recipient to himself with his malicious subnet closing blocks faster than the honest subnet, therefore the malicious block chain is regarded by every client as the best one.

[riggasconi]

In short, I don't think a for-profit attack is likely.

Why, if the ROI of such an attack is positive ?

Government attacks are where the risk is imo, damaging stuff is a lot more viable when you are using other peoples money. We have some advantages though, government is slow to act and difficulty is growing exponentially at least for now.

If the ROI of an attack is positive now, it will be positive at any given time, since minting is not involved in such an attack scenario. Instead, given the FRN/BTC ratio is growing exponentially, the likelihood of such an attack would grow exponentially with time.

[FreeMoney]

I didn't think of this when I was writing my last post, but doesn't this make it difficult for even someone with ~60% to double spend and make it look good for a whole day? Going all the way back a whole day would take about 5 days if you were writing 6 blocks for every 5. Am I thinking correctly?

The attacker is spending BTCs, and then creating a fake payback from the recipient to himself with his malicious subnet closing blocks faster than the honest subnet, therefore the malicious block chain is regarded by every client as the best one.

That cannot be done. The transaction will not look valid to any clients no matter if it is in the longest chain or not. The attacker cannot send coins from a public address that he does not have the private key for. The way this attack works is that a legitament spend happens in, say, block 105000. After the merchant acknowledges it the attacker releases a new 105000 and as many blocks after it as needed to make it the longest chain. Now the network knows the attacker holds the coin because there is no record of the transaction.  

[davout]

Why, if the ROI of such an attack is positive ?

I don't really see how you'd get a positive ROI if you factor in the previous assertion "the price would plummet"

[FreeMoney]

Why, if the ROI of such an attack is positive ?
 

I don't think it is positive.

The rest of my post gave a bunch of reasons why the return is lower than at first glance. Many types of merchants would be immune, many would be warned, etc. Shops are not going to mindlessly ship their entire stock without making sure nothing weird is going on. Even if they aren't savvy they are likely to know other bitcoin merchants. "Huh, all of your stuff was just bought too? Cool, I guess we're rich now."

Bitcoin price is up about 6x since I got here and difficulty is up over 90x.

The value of attack calculation is hard, but you aren't even looking at the right numbers. The attacker doesn't just get to turn bitcoins into cash via magic. He's going to flood exchanges and tip people off by buying to many sneakers. A lot of what you can do with bitcoin doesn't help him at all, so he can get a lot of credits at A Tale in the Desert, so what, doesn't help him at all. He can bet at bitcoinsportsbook, so what? The only thing valuable to him is the exchanges and they are likely to be the most alert to weird stuff.

The point is that you have to match the whole thing, but you only get a subset of a certain type of good. Except for a few exceptions you will get at most the total of bids at all exchanges.

In the future it will be even harder to get a hold of enough goods and money to justify the attack. Many of the goods will be meals and nights in a hotel. How many of those can you get?

 

[caveden]

In short, I don't think a for-profit attack is likely.

Why, if the ROI of such an attack is positive ?

It's not positive... you have to spend a fortune, and what could you accomplish? In the best scenario you would attack some exchanges and get some cash, but then, that would identify you, since cash transfers are not anonymous. You wouldn't manage to make a positive ROI by doing cash-in-the-mail exchanges!

Seriously, I can't see how such an attack would be profitable. I bet that, if you're willing to engage in criminal activities, there are probably much better ROIs you could obtain with such an investment....

[freetx]

Hi guys, I'm glad you're taking time to answer my question on Quora. I just edited it and corrected some details such as the hypothesis of "stealing" BTCs with the hypothesis of double-spending BTCs. Still, I'm very curious about your answer on the first of 4 points, given it looks like the most controversial of all. The other 3 also do concern me, in terms of fluctuations in the value of BTC: how much value will evaporate with government regulation, better forking, community infiltration, etc ? 10%, 30%, 50% ?

Again, the question is here:
http://www.quora.com/Is-Bitcoin-doomed-to-fail

Regarding your 3 other points:

1. Legal: Yes, .gov could make it illegal. However, think through your underlying premise a bit....any currency sufficiently open enough to be a "better" currency than current Central Bank currency would also be pressured via the same tactic. I mean with that premise (.gov will make it illegal), why try at all?

2. Competition: Great, I think competition would be outstanding. I don't think lots of us who support BTC actively think its going to be the "only" currency used. Whats wrong with having 10 active competing currencies? Doesn't that benefit mankind the most anyway? Moreover, due to the nature that BTC is purely electronic, there will always be instantaneous exchanges available to translate between BTC and the new XYZ currency of favor.

3. Infiltration: Again this is a 'so what?' sort of premise. Poor Linus should've never tried to create his own Linux operating system....after all IBM and MSFT may have tried to subjugate the process via its open development process.

[riggasconi]

That cannot be done. The transaction will not look valid to any clients no matter if it is in the longest chain or not. The attacker cannot send coins from a public address that he does not have the private key for. The way this attack works is that a legitament spend happens in, say, block 105000. After the merchant acknowledges it the attacker releases a new 105000 and as many blocks after it as needed to make it the longest chain. Now the network knows the attacker holds the coin because there is no record of the transaction.  

Thanks for explaining this, I've edited my question to correct how BTCs can be double-spent in the attack.

[FreeMoney]

That cannot be done. The transaction will not look valid to any clients no matter if it is in the longest chain or not. The attacker cannot send coins from a public address that he does not have the private key for. The way this attack works is that a legitament spend happens in, say, block 105000. After the merchant acknowledges it the attacker releases a new 105000 and as many blocks after it as needed to make it the longest chain. Now the network knows the attacker holds the coin because there is no record of the transaction.  

Thanks for explaining this.

No problem. Explaining it helps me keep straight how it all works. And lets other people fix any wrong ideas I have.

[riggasconi]

I don't really see how you'd get a positive ROI if you factor in the previous assertion "the price would plummet"

As I wrote above, I'm happy and eager to learn what I don't know about BTC, and I love the spirit of it. Unfortunately, according to the calculations on http://www.quora.com/Is-Bitcoin-doomed-to-fail it looks like the ROI of such attack would be positive.

After such an attack:
-The attacker is happy, because he now owns good and services with intrinsic value.
-The BTCs owners could be very sad, because panic could trigger a drop in the FRN/BTC exchange ratio, triggering evaporation of purchasing power of their BTCs, e.g. their BTCs can buy much less goods and services than before the attack.

[FreeMoney]

The attack sould last 1h, spending those 400 BTC for 80 times instead of just 1, paying attention to pay 80 different not-so-sofisticated providers as mentioned above. At the current value of 1 BTC = 0.40 FRN("USD"), this would mean buying 32,000 FRN ("USD) worth of goods and services. On the other hand the cost of compromising the Bitcoin network for 1h with 4000 malicious CPUs would be, at a current price of FRN("USD") 2.10/CPU/hour (Amazon Quadruple Extra Large Cluster Compute Instances), 8,400 FRN("USD"), plus the initial 160 FRN("USD"), for a total of FRN("USD") 8,560. Considering harvesting FRN("USD") 32,000 worth of goods and services that's a pretty good +220% ROI in just 1h. Pretty good compared to your average investment.

Your calculations are garbage. You cannot spend coins 80 times in an hour. The attacker has the power to rewrite a history that doesn't include him spending the coins, that is all. He can't simultaneously convince 80 people that they have the same coins. In the slow shipping example you need to let the shipper think he has coins until after he ships, then you can pull them back. You can't do this 80 times in 2days. You would need about 40 days if people are shipping same day.

If you try to spend them twice in an hour at, say, MtGox you won't ever get credit and can't get dollars because he waits for 6 confirmations. If you go for 2 hours you can spend them there twice this will not get you double your money because you will be bidding the price down by buying quickly which you will have to do since your cover is blown when you stop paying $8560/hr.

Not to mention that Mtgox (the only site with anywhere near enough bids to get your 'investment' back) has some max withdrawal per day.

Once again, the reason this is not profitable is that you have to match the entire network, but you only get a little tiny slice of the flow, not "everything conceivably for sale for bitcoins"

And this attack does not get more profitable as USD/BTC increases. Difficulty has been increasing faster than price for a long time. It is getting more costly at a faster rate than the payout is growing.

[theymos]

-The BTCs owners could be very sad, because panic could trigger a drop in the FRN/BTC exchange ratio, triggering evaporation of purchasing power of their BTCs, e.g. their BTCs can buy much less goods and services than before the attack.

The attacker must hold a large amount of BTC in order to execute the attack. So he'll also be affected by the lower price. If he brings the price of BTC to 0, then his attack was pointless, since the money that he got back is now worthless.

[FreeMoney]

-The BTCs owners could be very sad, because panic could trigger a drop in the FRN/BTC exchange ratio, triggering evaporation of purchasing power of their BTCs, e.g. their BTCs can buy much less goods and services than before the attack.

The attacker must hold a large amount of BTC in order to execute the attack. So he'll also be affected by the lower price. If he brings the price of BTC to 0, then his attack was pointless, since the money that he got back is now worthless.

The attacker would have the advantage of knowing an attack had happened before all others knew. And a smart attacker wouldn't just trade his coins for different coins he'd try to get stuff. But as I've been explaining it takes a long time to get the stuff and you have to maintain the pullback ability for a long time, not 1 hour, if you want to get a bank transfer or bullion shipped.

[Gavin Andresen]

Your calculations are garbage. You cannot spend coins 80 times in an hour. The attacker has the power to rewrite a history that doesn't include him spending the coins, that is all. He can't simultaneously convince 80 people that they have the same coins.

FreeMoney is absolutely right.

The only way to get 80 people to accept the same 400 bitcoins would be to control all of their bitcoin connections and feed them different versions of the block chain.

And THAT will be impossible, because the people you're trying to rip off (merchants selling stuff) are exactly the people with long-running, well-connected bitcoin nodes.