Topic: If JP Morgan and Goldman Sachs owned 80% of the entire Bitcoin mining power.. - page 2. (Read 7723 times)

In my humble opinion, a 51% situation won't be a great thing, it will spell the end of Bitcoin as we know it. Such a case (a single majoritary entity rejecting blocks found by everyone else) will basically nullify half of the Bitcoin network contributors' revenue stream. That means all other miners will suddenly find themselves forcefully pushed out of the game and with no revenue stream from Bitcoin. They will most likely abandon the Bitcoin economy, selling hardware and bitcoins to cut their losses/get whatever money they can out of the ecosystem. Yes, maybe quite a lot of miners also speculate or use Bitcoins for other things, there are also lots of users that don't mine, but when a single entity controls the entire network, Bitcoin ceases to be what it promised to be - a decentralized, uncontrolled means of value exchange. This means the people using it as such will be forced to leave it behind. To assume this won't crash the prices to ridiculous levels is delusional. For all I care the monopolist entity could be Mr. Rogers, it would still make my ass twitch to know my money has to go through somebody that forcefully removed everyone else from the game and they can do whatever the fuck they please with my transaction. Bitcoin was supposed to be better than this...

Unfortunately, I can see where Cunicula is coming from; hashing power being aggregated into larger and larger entities until one reaches the tipping point is something very much possible. When that happens, in order for the network to keep functioning though, we must hope that the 51% entity doesn't abuse it's status. But again, simply the fact that hashing power reached that point will be a major problem.

So if that ever happens bitcoin will effectively flash crash?

Since an attacker can double spend his own coins, he gets to print cash until no one uses bitcoin.

If he is "honest" people might accept him like they do today with the fed despite some casual printing.

With the emergence of all the mining pools having considerable percentages of total hashing power this scenario sounds a bit too likely for my tastes...

No, that will more likely be driven by the chinese underground shadow banking system

51% may be narrow in some sense, but just a few% more and you own with near-certainty. If you discover that you don't actually have 55%, but 49% then you add on a few more % and catch your chain up with the competitive one. Nothing lost.

Moreover, the idea that people would add hashing capacity in the face of a near monopolist is absurd. The opposite would almost certainly occur. The monopolist could probably just sit with 45% and watch as frightened competitors shut down their rigs and handed the field to him.

It's not that simple. You never know if you actually have 49% or 51% and if you choose not to build on others blocks you risk doing work that doesn't end up in the chain later on and doesn't get paid. Monopolistic mining with a narrow margin is a risky game. Also while you might break other miners after a short time you don't know what those with 50-500k bitcoins saved up (and maybe some healthy dollar profits already taken) will do.

+1

JP Morgan and Goldman Sachs probably wouldn't be very good at running a network that actually requires honest hardworking engineers. Lawyers and scam artists wouldn't be very good at defending against DoS attacks.

It is beside the point who the entity is. When you go from 49%->51%, your mining profits effectively double, while your costs increase by about 4% [assuming constant marginal costs of hashing]. It is a no-brainer. If you have sufficient resources, then you should aim to set up an honest mining monopoly. If the hashing rewards go down, this makes the emergence of the monopolist even more likely. Fewer resources will be needed to set up the monopoly, so the pool of candidates will widen and there will be less risk involved.

In about nine months the block reward is going to drop to 25 BTC (about 3,600 per day).  Let's say that for whatever reason, by that time the exchange rate is about double it rises to $10.  Then it stays at that level for a year.

So that is $36K USD "issued" per day.  365 days/year = $13.1 million for the year of gross revenue for mining.  I'm speculating here, but since competition is global and there is a low barrier of entry, mining profitability (margins) won't get much more than 30%.  So you are talking about $3 million of profits occurring for all Bitcoin mining occuring in the entire world.  I really can't imagine a single large entity even letting thoughts wander towards bitcoin mining.  Particularly not either JP Morgue or the squid.

One entity only needs 51% and then they effectively mine as if they have 100%. No one would bother to accumulate 80%. I think this is where bitcoin is headed. It is a great thing.

..would you still use Bitcoin?

I only ask because I foresee a far future where custom ASIC and/or FPGA farms are owned primarily by large entities primarily seeking to profit from minuscule profit margins in the price of coin.

Of course, if they own 40% of the mining power, that's a huge profit.