Topic: How much to protect the network? - page 2. (Read 3268 times)

Wrong, he never said that.

No? Not even governments? Banks? Any entity with BILLIONS of $ wich see bitcoin as a danger? If bitcoin succeed that would mean billion of losses for them. Spending 10 million now is much cheaper!

I dont understand. I agree that spending 100 btc to protect 100 btc is dumb. Do you acknowledge that "bitcoin adversaries" may have other motives than to gather and use bitcoins? In other words there are ways to gain advantages from 51ing bitcoin other than counterfeiting them. The question is what percent of the bitcoin market cap should be devoted towards this. For example, according to official figures the US Defense Department was funded with $700 billion in 2011 (wikipedia). US GDP is reported to be about $15.5 trillion, so that sets a lower bound of 4.5% set on protecting that currency. I don't want to argue whether those numbers are valid or whatever, but you do need to protect your wealth and this cost will scale according to how valuable it really is.

No. I'm basing that on the OP implying an attack would only be worthwhile if profitable. He says if he had $10 in his pocket he would spend up to $9.99 to protect it. By the same reasoning no one would spend $10 mil to attack if they weren't going to make more in return. People don't usually spend 99.9% of some value to protect itself.

You are assuming the attacker is motivated by desire to trade with bitcoins.

You completely negate your own idea in your first post. If you were to buy $10-30 mil of hardware and actually pull off a 51% attack - where would you get your money back from? I mean who's going to buy the coins you were able to double spend? Having attacked the chain and won do you suppose you'd be able to sell your coins and pay for your hardware? Yikes.

Pre-order those 1TH/s mini rigs @ $30k :p

Well, I tried.

I'm pretty sure I know what the 51% attack entails. It would cause more distrust in Bitcoin than every other bad incident combined.

Okay, fine. Let's assumed the attacker uses slightly less efficient equipment or builds their own fucking mini rigs. And let's say it costs them $30 million to pull off the attack. It's still easily doable. Hell, Oprah Winfrey could destroy Bitcoin right now and not notice a dent in her bank account.

Go read about what a so called "51% attack" actually entails. It's been beaten to death.

Also, your scenario depends on assumptions about BFL order time and availability that are false.

I'm having a hard time wrapping my head around how much money it will cost to protect the network long-term.

Let me first give you an example.

Let's say I have $10 in my pocket. How much would I be willing to spend to protect that $10? The answer has to be $9.99 or lower. It wouldn't make any sense to spend $10 or more to protect the $10.

In the case of Bitcoin, the current(at the time of this writing) market cap of Bitcoin is about $134 million.

Math: $13.798 * 9.714M = $134 million

Now if I mosey on over to Butterfly Labs

http://www.butterflylabs.com/products/

and assume for simplicity's sake that everyone is using the most efficient mining equipment we see that there is a total of $10.1 million worth of mining equipment protecting that $134 market cap.

Math: [16,642 Giga Hash/s / 25.2 Giga Hash/s] * $15,295 = $10.1 million

So, really, if an attacker were willing to spend more than $10.1 million right now, they could pull off the 51% attack, which would, at the very least cause serious upheaval in the Bitcoin network.

The question then becomes, is a 10:1 ratio enough? Do we need a near 1:1 ratio for Bitcoin to be protected against wealthy and powerful enemies? Could the bitcoin economy be sustainable if so much of its resources were wasted on protecting the network?

This is a brutal scenario, because unlike gold or silver, if a successful attack happens, all Bitcoins and all users within the network suffer. Whereas if a bank with gold gets robbed, the gold in my home safe or silver buried in my back yard is still secure and my value has not been lost.

Can somebody please explain to me how this is not a fatal flaw in Bitcoin?