Topic: How to destroy Bitcoin with a 10% attack: Roadmap for a Central Bank Takeover - page 2. (Read 3132 times)

Does this means that the bank is going to unlimited inflationate its currency?

This will make the price of Bitcoin going higher and higher.

Maybe your roadmap doesn't work very well...

worse yet combine both the op's tactic's and your idea  in a good cop bad cop method.

Switching from one method to another

Another way an entity could destroy Bitcoin could be to broadcast a sufficient number of transactions to bid up the cost of getting a transaction confirmed to be uneconomical. The entity could first broadcast 1 MB worth of transactions every 10 minutes with fees averaging 70 sat/byte, then increase this average to 80 sat/byte, and so on.

This attack could have little to no cost to an attacker with a small minority of the network hashpower (or even be net profitable).

I find it very unrealistic that some group would attack bitcoin by only accepting no fee txs inorder to increase the fees. If they went back to accepting the highest fees then the price of fees would go down.

Well 10% less of those with fees. If the attacker here is only mining transactions without fee there is no reliable way to secure a spot in these blocks. Maybe they use priority. Whatever they do, it would reduce the available space in blocks for those paying a fee. If demand stays the same, this attack would increase the price of fees needed to secure a spot in the 9/10 blocks left.

10% control leaves 90% of the blocks being mines left to be filled with higher fee transactions. I doubt this would make much of a difference. It would just reflect in 10% less transactions being processed.

This scenario doesn't make too much sense in my opinion. Controlling 10% of the hashpower in 7.5 years might be much harder than controlling 50% today, because the difficulty may be 100x or 1000x times higher than what it is today. The number of big mining operations will certainly increase in the coming years.

If Central Banks wanted to control the network, they could still do it now for chump change (related to their asset dimensions). But maybe the question is not about money alone. It could also be one of technical expertise. The officials at Central Banks don't know how to set up a mining operation.

Whilst I agree that 10% is probably not going to be enough to make a huge dent if the percentage starts to get a lot more than that (i.e. approaching 25-30%) and the block size has managed to vastly increase in size (as many supporters of BU seemingly are fine with) then this scenario does end up becoming a possibility.

In short a "fee market" needs to exist in order to ensure that a large enough number of different mining operations continue to confirm transactions.

Also the fact that a shit-load of non-fee paying txs (or too low fee paying) are flooding the network at the moment (as has happened a few times before) is perhaps proof that those wanting to do exactly what the @OP fears they are trying to do are pushing hard at that (by trying to convince people that we need much bigger blocks).

Actually, full or not, miners usually prioritize the highest fees/kb first. The higher fees paid per kb, the more interested the miner would be in including your transaction. Due to the transaction spam, many miners do not include fees that are too low and that's it. As long as you pay some fee that is more or less reasonable, miners will include them.
If you control 10% of the hashrate, you would, in theory, be only able to generate 10% of the blocks in the period. In every 10 blocks, you get 1 block. Users will still be inclined to pay fees since they would have to wait for a long time for their transaction to confirm if they don't.

Reference nodes do have a policy in which they require the transaction to have at least 0.00005BTC/KB by default to relay the transaction if it does not qualify for free transaction.

Recently the ECB (European Central Bank) officially warned about the dangers of bitcoin: http://www.zerohedge.com/news/2016-10-19/ecb-wants-curb-bitcoin-use-over-fears-it-may-lose-control-over-money-supply

So lets imagine that a central bank wanted to take control of the bitcoin network..

Note that the following attack only works if the blocks are not full.

To understand this, we must first focus on the economics in the fee market:

If the blocks are full = the price is set by users:
Miners are simply filling blocks based on the fees that are payed by users.
Users are competing for blockspace, and the price of blockspace is determined by how much the users are willing to pay to send a transaction.

If blocks are not full = the price is set by miners:
Miners are competing to offer the lowest possible price for blockspace. They try to include as many transactions as possible while at the same time excluding those that pays too little in fees.
The price of blockspace is determined by how little the miners are willing to demand in fees.

So lets say that the block size is increased and that the blocks are no longer full...

As a result “The 5 Step Roadmap To Destruction” becomes possible:

Step 1:
Wait 7.5 years, by then the block reward will have dropped to only 3.125 bitcoin per block.
At this point the miners have become dependent on fees as their main source of income.

Step 2:
Get control of 10% of the total hash-power in the network.

Step 3:
Start processing all transactions for free.
This will have a global effect on the fee marked. The price of blockspace will simply collapse. Users are no longer required to pay to get their transactions into a valid block.
The result is that all miners loose their main source of income. 

Step 4:
Since the attacker is a central bank, they have access to unlimited resources.
The attack is continued until all other miners are bankrupt due to the lack of income from fees.

Step 5:
The central bank becomes the central processing entity of bitcoin. All other miners are now out of business since they are no longer able to collect fees.

Conclusion:
To avoid this attack we must keep the blocks full so that the price of blockspace is set by the users and not by the miners.

Please let me know what you think about my attack scenario. Thank you for reading this post!