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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."
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.