Bitcoin Protocol Vulnerability Could Lead To a Collapse

First time accepted submitter stanga writes "Cornell researchers unveiled an attack on the Bitcoin mining protocol that enables selfish mining pools to earn more than their fair share. In a technical report the authors explain this attack can be performed by a pool of any size. Rational miners will join this pool to increase their benefits, creating a snowball effect that may end up with a pool commanding a majority of the system's mining power. Such a pool would be able to single-handedly control the blockchain, violating the decentralized nature of the increasingly successful Bitcoin. The authors propose a patch to the protocol that would protect the system from selfish mining pools smaller than 25% of the system. They also show that Bitcoin can never be safe from selfish mining pools larger than 33% of the network, whereas it was previously believed that only groups larger than 50% of the network were a threat to the system. The question is — can the miners operating today adopt the suggested fix and dismantle too-large pools before a selfish mining pool arises?"

Comments

NBD

[hawkeyeMI]

This attack would be very, very difficult to achieve. Doesn't seem very worrying and I'm sure it'll be fixed well before it becomes an issue. There are already some pretty good discussions on /r/Bitcoin/ covering why it's not as big a deal as the sensational headline here makes it out to be.

Tinfoil hat

[guruevi]

So that's what the NSA datacenter is for...

Is there a way to generate value besides mining?

[deathcloset]

I fairly understand that for there to be value in bitcoin there must be scarcity and that this scarcity is created via the mining mechanisms. But what I wonder is if there be any other way to create value for a virtual currency?

I ask because to me the most interesting thing about virtual currencies and specifically bitcoin is NOT the mining aspect, but rather the distributed database. The fact the hosting or provision of the database is fundamentally bound to the value-creation process seems to be the problem here. The problem seems not to necessarily be virtual currency or distributed databases themselves. The problem seems to be that value creation is based on artificial scarcity which can be manipulated through collusion.

There has to be another way to establish value for a virtual currency.

Re:The Wild West

[TsuruchiBrian]

bitcoin doesn't have built in deflation. The deflation is caused by the influx of people due to increasing popularity. It is true that the problems that are solved to successfully mine bitcoin get harder over time, computers also get faster and more energy efficient over time. The upperbound of bitcoin value is kept in check by the electricity cost of mining bitcoins. This limits the size of bitcoin bubbles. The value of bitcoin is not purely speculative. There is a real world limit to how valuable they can be at any time.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Re:The Wild West

[Aighearach]

Computer sales use currency, but they are not themselves currency. A market segment can grow or shrink and supply and demand balance. People still need computers, and so there will still be a market.

A currency with built-in deflation has perverse incentives. Your money will be worth more if you don't spend it; investment is discouraged. By not engaging in commerce with your money, you enrich yourself.

Compare that to all the real currencies, which have inflation; it will be worth less in the future. If you want to save it, you need to put it to some sort of use; for example an interest-bearing savings account where your money is actually be loaned out to other parties. And if you want better gain than that, you invest in something with either a higher risk level, or a more specific purpose.

If there was widespread adoption of a guaranteed-deflation currency, an early adopter who was heavily invested could set up trust accounts where their ancestors would have growing spending power, without the money in the trust even being invested in anything. A future where the world is controlled by the grandchildren of the current rich, a class of aristocrats who don't have to work, but rule the world. And the more new economic activity happens, the higher percentage the old money controls! New wealth will always be worth less than the old wealth for the same activity.