Topic: 50% attack for ~800 BTC after block reward halving - page 2. (Read 5296 times)

EDIT: inefficient -> efficient, whoops

This is interesting, and gets more interesting if there is an efficient rental market for cloud hashing.

The attacker doesn't need to actually buy the hardware, they just need to rent it for a few hours or a day or whatever - just long enough to launch a 51% attack and steal money from a major exchange.

1. Rent enough hardware to create a temporary 51% pool.
2. start mining a private fork that gets ahead
3. Send in $X worth of currency A to the exchange (darkcoin say)
4. sell all of the A-coin for $X worth of B-coin (BTC)
5. withdraw all of the B-coin and wait for that to clear on the B-network
6. reveal your private fork to roll back the transactions and get all of your A-coin back

The attacker nets: $X + mining_revenue - mining_rental

In an efficient market, the mining rental cost becomes the same as mining revenue, so this scheme almost doubles the attacker's money.

The somewhat good news for bitcoin is that this attack is still easier for smaller market-cap coins, which would presumably start suffering from it first.

The gist of it is that if someone has too many miners, he can chargeback(reverse) his own transactions, plus other unsuspecting people's transactions too. Only if he's a bad guy/woman though

Here is one explanation:
https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_computing_power

I've always wondered what is a 50 or 51% attack?

The major flaw I see with this is the fact that being able to hold 3 or more blocks before someone else solves them is pretty unlikely. This would work for a p2p trade if you were able to hold a block and get away before someone else solved it

[not sure if this is technical enough, but I find this subforum more sensible. If the mods find it too light, please feel free to move to the general discussion]

Assume that, close to the block reward halving, the following conditions hold:
1) mining technology is saturated, so that no significantly improvement in efficiency happens nor is expected to happen soon
2) the price is relatively "stable" and no major jumps are expected soon
3) tx fees make for but a small part of the block reward


As a consequence, miners operate on a very small margin, spending most  of the reward on electricity.

Then after the block halving, mining profitability nearly halves, and many miners have to switch off their equipment. The equilibrium is reached when half the miners switch off.

The market of mining equipment is over-supplied, the prices drop to almost zero. Thus one can buy all those switch-off miners - that represent half the network hash power-  for a very small cost.
I don't know what's "very small" (there are always at least shipping or acquisition  expenses to consider), but
let's just call it N for now.

Assume an attacker acquires all this equipment. Now that he  has 50%  hashing power, what's the cost of running the attack?

Let's say he wants to mine k consecutive blocks. With 50% power he should
expect to wait 2^k blocks before he gets these.  Running half the network for that long costs (since we assumed miners operated on low margin before the halving)  1/2 2^k BR in electricity where BR is the block
reward before halving.   Since during this time he also gets half of the new block rewards,  the total  cost is 3/4 2^(k-1) BR + N

Putting some numbers here: current BR=25 BTC;  we can take k=6 (now some big exchanges accept as little as 3 confirmations, I guess all the big ones accept less than 6), we get 3/4 * 800 BTC + N.   Now given the discussion above I think it's not unreasonable to assume N<200BTC, bringing the total to 800BTC.

Note that the last time the block reward halved, assumptions 1 and 2 were not satisfied, while 3 was.
Next time 1 and 2  are quite likely to be satisfied, and 3 is satisfied currenlty. One can also calculate waht is the effect of the tx fees; but it's easy to see that for it has to be of the same order as block reward to be significant.


what do you guys think? Did I make any major mistake in this calculation? Has this been discussed and dismissed before?