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Bitcoin (Probably) Isn't Broken
Trailrunner7 writes "In the wake of the publication of a new academic paper that says there is a fundamental flaw in the Bitcoin protocol that could allow a small cartel of participants to become powerful enough that it could take over the mining process and gather a disproportionate amount of the value in the system, researchers are debating the potential value of the attack and whether it's actually practical in the real world. The paper, published this week by researchers at Cornell University, claims that Bitcoin is broken, but critics say there's a foundational flaw in the paper's assertions. ... The idea of a majority of Bitcoin miners joining together to dominate the system isn't new, but the Cornell researchers say that a smaller pool of one third of the miners could achieve the same result, and that once they have, there would be a snowball effect with other miners joining this cartel to increase their own piece of the pie. However, other researchers have taken issue with this analysis, saying that it wouldn't hold together in the real world. 'The most serious flaw, perhaps, is that, contrary to their claims, a coalition of ES-miners [selfish miners] would not be stable, because members of the coalition would have an incentive to cheat on their coalition partners, by using a strategy that I'll call fair-weather mining,' Ed Felten, a professor of computer science and public affairs at Princeton University and director of the Center for Information Technology Policy, wrote in an analysis of the paper."
Its inventor is anonymous and has holdings of several million bitcoins.
Who knew all you needed to do to beat the ancient alchemists at their own game was make money from nothing instead of lead?
I presume this means that whoever was behind the previous bitcoin story has now finished buying them up and wants their value to go back up.
You should definitely invest in my security product. It's (probably) not a ponzi scheme.
Just to be clear, all this attack accomplishes is a small advantage (or none, depending on how other respond) for mining pools that don't immediately disclose solved blocks, but instead wait until someone else solves one, then release. This causes some miners to mine on each of the competing blocks, wasting effort, while the selfish pool occasionally gets 2 blocks ahead without wasting effort when mining the second block. Its a small gain, that can be better exploited by flooding the the network with tons of nodes to delay/control who finds out about which blocks when.
So, this attack can give one mining pool a slight advantage, and thus encourage others to join it to get a share of the higher profits. This continues and they get some real control of of which transactions are verified, who learns about what, etc. A nearly identical attack could be done by a regular mining pool that simply pays some extra money to bribe people to mine in it.
However, this attack, even if possible and implemented would not let any one steal your bitcoins, nor really do much to regular users, and it would be obvious if someone performed this attack (higher than chance orphaned block rates). If you accept bitcoins, and don't wait for > 1 confirmations, or you are a mining pool operator, this might be worth paying attention to (but not panicking over). Everyone else (which is nearly everyone) wouldn't lose anything to this attack, which might not even be practical.
Confirming what is already known about cartels. Nothing to see, move along...
I'm wondering if this correlates with what I recall about greedy vs generous bacterial colonies, that they tend towards a specific equilibrium regardless of initial conditions. Also similarly the snowdrift dilemma suggests least work is achieved by doing the opposite of other participants.
A system that has a flaw? You! Must! Be! Kidding me!
There is no such thing as a flawless system, never has been, never will be. One could say that a flaw is an intrinsic part of any system.
When AES256 is in place and people use 12345 as a password for example.
Usually the flaw = human failure.
rm -rf --no-preserve-root /
If Bitcoin had no value, people wouldn't be paying for them.
The problem with bitcoin isn't that it has no value. Obviously some people (not many) have a use for it. The problem(s) with bitcoin is that it is HIGHLY illiquid, volatile and risky. Few people even know what bitcoin is, and fewer are willing to accept it as a form of payment. Exchange rates bounce around like a caffeinated border collie on a pogo stick which makes for significant exchange rate risk. Furthermore it depends on encryption and one cannot be certain that said encryption is ultimately secure. And those problems are just the tip of the proverbial iceberg.
In crypto, an academic break is one that weakens the system, but does not transfer to a practically implementable break. The two get confused regularly by people without a clue about crypto, which is the standard. Many of these clueless people feel nonetheless qualified to comment.
Most ACs are not even worth the keystrokes to insult them. Be generically insulted by this and ignored otherwise.
The idea with the paper is if the bitcoin miners start coordinating, they can game some transactions.
If you look at the situation today, the miners are decentralized. But can you mine a bitcoin now on your i7 home PC? Not at all, it will take 3-4 years. Instead those with specialized GPU farms are mining all the coins today.
Next year, it will take better hardware to mine the bitcoins, so only those with the capital and resources invested today will reap the gains tomorrow. A year later, same story. The ones with the most mining capabilities will start to dominate and consolidate.
It is quite possible to reach a point when only a few players with huge data centers will be able to validate bitcoin transactions and mine, and this paper is pointing out a flaw if we get to that scenario.
Maybe we should just rename this site Bitdot.
Instead of this: "Bitcoin protocol that could allow a small cartel of participants to become powerful enough that it could take over the mining process and gather a disproportionate amount of the value in the system,"
It should have read: Federal Reserve/Wall St. protocol that could allow a small cartel of bankers to become powerful enough that it could take over the printing process and gather a disproportionate amount of the value in the system,
They're burying the lead to cover their ass. First of all, this "flaw" is 3 years old and even I've heard of it. That should give you a good insight on the intelligence and research level of the person writing that article. If a pool purposely doesn't submit a solved block, it has zero advanced warning that another block solves it. Since work is non-progressive, they'd have to solve a 2nd block faster than the rest of the network. Probability states that it would happen less than 50% of the time so they'd actually lose money attempting to cheat. Let's say it's a 33% of all volume pool. It has a 33% chance of finding a block solution first. If it doesn't reveal it and holds it until it solves another block so it can double dip for free, that's a 33/100 x 33/100 probability with an extremely high likelihood that in the meantime, the other 67% of the mining power finds an alternative solution to the block and turns it in, getting the cheating pool absolutely zero.
Please don't panic, we need time to get all our money out of the system before it crashes and your coins become worthless.
http://www.scribd.com/doc/182399858/Cunicula-s-game-theory-primer-pdf
Concept is not sound. Authors do not understand game theory or economics. See pdf.
Very funny blog comment by one of the authors' peers working in this area:
>Ah, but if you're going to let parties try to detect others' behavior and respond with >retaliation or shunning, then you have to worry about whether the ordinary miners >will do the same kind of thing to the selfish miners. Once you set off down that road, >you're going to have to make a real game-theory argument.
What is the point of this anyway if the research proceeds without 'real game-theory arguments.'
I don't know what to say. It's just embarrassing.
There are governments and financial institutions that may see an advantage in breaking the system using this weakness, not for gain but just to destroy the reputation of the system.
If I had a bitcoin for every conjecture about bitcoin I'd be rich, or at least hashably wealthy.
Sure, if all the selfish people banded together and worked for the good of their group... oh wait...
Peercoin offers far better protection with it's PoW/PoS:
http://www.coindesk.com/peercoin-vault-of-satoshi-deal/
PPCoin isn't well protected against double-spending because of PoS. To alleviate this, it requires frequent checkpointing from a centralized control - i.e. it has a single point of failure. Maybe the FED could offer to do it...?
Once existence of such cartel is known, the value of bitcoin would plummet right to the bottom.
The cartel would be able to produce disproportionate amounts of worthless currency.
Note wealth in BTC you have is [number of BTC you own] x [price of BTC in USD]. You could cheat the first but as result you'll destroy the second. You'll be stuck with tons of useless hardware that cost millions of real money, and a bunch of useless data signifying you have a lot of worthless currency.
Moreover, the "big players" of the market know this already. Any bets why the manufacturers of BTC ASIC hardware sell it instead of earning BTC on their own farms? The answer is spreading the computing power keeps BTC healthy and exchange rates high. They prefer to get some cash directly, from sale of hardware, than to try to earn that much in BTC, create impression that they dominate the market, and have the prices collapse.
Cheating at this game costs all, but it costs the cheater the most.
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accept that bitcoin is not a scam when ALL of the local businesses accep it as a form of payment. Until then its worthless as a phony $3 dollar bill.