sorry if I'm a bit slow but I don't get it.
if a 38% miner spends fees that he gets back, how does that help him?
and how does it hurt other miners ? if anything it would seem that the other
miners would pick up extra fees, making them more competitive, not less.
someone please explain this.
Topic: nothing to see here, move along. - page 2. (Read 9349 times)
legendary
Activity: 1302
Merit: 1004
Core dev leaves me neg feedback #abuse #political
but is this really a big issue?
For now this may be a number but this could be a big issue in the future
Either way, paying .0005 as opposed to .0001 per transaction isn't really stressful on the users.
You dont really understand this do you? This isnt about increasing the miners fee anymore as this is another whole level. This is making the spams to be a business and This would possibly create a miners fee cartel in the future if there is a pool that own 38 % atleast of the hashing power because they will get what they spend back and also profit if they keep doing what they are doing right now.
For now this may sounds like a conspricary theories however the simple math is there and if you take a look you would know that this is possible to be done
I understand the sentiments expressed in this post, but is this really a big issue? If this were the case, there is no way that the profits could scale very much. If it gets to a point where the transaction fees are .001 per, it would simply force a blocksize increase, and decrease total number of transactions. Either way, paying .0005 as opposed to .0001 per transaction isn't really stressful on the users.
Let's work the math. If 2/3 of the transactions actually processed are "real", then whoever is maintaining the backlog is paying the tx fees for 1/3 of every block. If this is someone with half the mining power then they get half of their third back, so their average cost per block is the fees for 1/6 of the block. If we are talking about someone with half the mining power, their average return per block is 1/2 the fees for a block. Because 1/2 is greater than 1/3, they are making a profit.
I think you made a mistake here by double counting something.
Assume all miners will only mine tx with fee of 0.01BTC, and a full block could hold 900 txs.
Scenario 1 (No one is artificially maintaining a backlog):
If we have 600 real tx per block, the fee will be 6BTC/block
For a miner with 50% of mining power, the expected income from fee is 3BTC/block
Scenario 2 (A miner with 50% of mining power maintains a backlog):
Since we have 600 real tx/block, the 50% miner has to create bogus tx at a rate of 300 tx/block, that costs 3BTC/block
Now the blocks are full and the fee is 9BTC/block, expected income of the 50% miner is 4.5BTC/block.
The net income of the 50% miner is 4.5-3 = 1.5BTC/block. He loses 3 - 1.5 = 1.5BTC/block
It's a pity that the protocol was not designed to give extra reward to the miners doing the grunt work. {Mining the transactions with little or no miners fee's} You could acctually introduce a second tier, where only miners with a low hash rate, can compete to mine these transactions. {This will bring a lot of solo miners back into Bitcoin mining}
If the above statement were true, this would not have happened. The "little guy" could do the cleanup and prevent spam build up and backlogs.
Everyone wants solo mining in Bitcoin to come back... This in theory, would create a opportunity for this.
The advantage for the community = Lower transaction fee's
If the above statement were true, this would not have happened. The "little guy" could do the cleanup and prevent spam build up and backlogs.
Everyone wants solo mining in Bitcoin to come back... This in theory, would create a opportunity for this.
The advantage for the community = Lower transaction fee's
So a block size limit increase would fix the problem because for this to be profitable, the attacker needs to have at least half of the block be legitimate transactions and that there still be a backlog of transactions, yes? And since there isn't that much real transaction volume, raising the limit to the suggested compromise of 8 Mb would solve this issue for now since it suddenly becomes unprofitable to continue to attack until transaction volume increases.
Good post, totally get the math... all in on the theory...
Looking at the actuals, I'm not convinced that this is actively happening, though I see how you theorize it could.
Checking block shares, and the biggest fish only holds 20%
source: https://chain.so/btc
Though I will concead that it may be possible that the smaller pools are actually the larger holders running "shadow miners" that appear to be anon, but are really wholly owned subsidiaries of the bigger players.
Another problem I see is that blocks are not full by any stretch. Miners (for reasons that are their own) are leaving many blocks 2/3 empty.
source: https://tradeblock.com/blockchain/
So any miner that had less than 38% the share could simply start filling blocks to the brim. Perhaps I'm on a tangent here, but I've never understood why miners running rooms full of ASICs don't devote a few high power CPUs (useless for mining) to doing block stuffing. It seems like getblocktemplate and hashing would be non-intersecting. So pooring $$ into CPU could be independent to pooring money into hashing.
I still have questions tho, like how high can they push transaction fees and dose this mean the end of micro transactions in the long term?
If I followed, the condition they are driving is not the fee price, but rather the spam ratio. As long as they can continue to mine some percentage X of their own spam then they make a profit even if fees go to 1 satoshi. The "canaibalism" ration X would float depending on two factors... what their current share of hash rate is, and how much normal traffic there is.
I posted this on reddit, but figured I would cross-post here.
Quote
I think I understand the concept here, basically a large pool can flood the network with transactions to boost the average txn fee paid by legit users. They can potentially make more than they spend because they get back the fees on the spam transactions they create.
What I don't get is why the large spamming pool has an advantage over a small non-spamming pool in this scenario? The non-spamming pool pays nothing and gets to collect profit on both the spam transactions from the big pool and the normal txn fees from legit users, while the big pool only gets to record a profit on the legit txns, plus they have to pay out the spam txn fees to other miners for any blocks they don't solve. Anyone care to clarify where I am going wrong here?
What I don't get is why the large spamming pool has an advantage over a small non-spamming pool in this scenario? The non-spamming pool pays nothing and gets to collect profit on both the spam transactions from the big pool and the normal txn fees from legit users, while the big pool only gets to record a profit on the legit txns, plus they have to pay out the spam txn fees to other miners for any blocks they don't solve. Anyone care to clarify where I am going wrong here?
(Updated: I said 1/phi, I should have said 1 - 1/phi. The attack works for any miners who controls more than 38% of hashing)
The so-called "stress test" was successful. The attack it was testing is underway.
Any miner who cotrols more than one minus 1/phi of the mining power, makes a profit while paying the fees it takes to maintain a permanent backlog of transactions, for as long as the blocks are more than half full of other transactions.
The mining-expenses market is unstable when there are enough legitimate transactions to fill more than half a block, because such a miner will reap more per yuan invested in mining power than any other miner. This leads to a monopoly.
Well, crap. I have done the math now.
I know exactly what's happening. It's a Golden Ratio Attack. This is serious. It ends with a mining monopoly.
What we have now is no longer a test. The test was apparently successful. What we have here is the new business model that was being tested.
This backlog will probably be sustained FOREVER, because the people doing it make a profit by doing so.
The following assumes expenses roughly equal for miners relative to the amount of hashing power they control. This is not exactly true, because a miner someplace where electricity is subsidized (like China) has substantially lower expenses. In such a place the fraction of mining power required to make it profitable would be even less.
The *initial* "stress test" was a test to see whether the miner controlled sufficient hashing power to make a profit by doing this. We can assume that test was successful, because now this miner is doing it. Probably permanently.
The miner decides how much they want per transaction (anything that the traffic will bear, as long as it keeps blocks more than half full of real transactions), then keeps the backlog sufficiently full with bogus transactions to prevent any tx that pay less than that from going through.
Maintaining the backlog subsidizes other people's mining as well as their own, but means they don't need to compete with miners willing to process transactions for less money in fees because those miners aren't willing to process transactions for less fees when any transactions with more fees are available.
Let's work the math. If 2/3 of the transactions actually processed are "real", then whoever is maintaining the backlog is paying the tx fees for 1/3 of every block. If this is someone with half the mining power then they get half of their third back, so their average cost per block is the fees for 1/6 of the block. If we are talking about someone with half the mining power, their average return per block is 1/2 the fees for a block. Because 1/2 is greater than 1/3, they are making a profit.
The breakeven point for the biggest miner was when his fraction of the mining power plus the fraction of each block devoted to legitimate transactions was equal to one. We can conclude that whoever is doing this, if he started the instant it was profitable, controlled 1 - 2/(1 + sqrt(5)) of the mining power at that time. This happens to be one minus the inverse of the Golden Ratio.
It will continue to be in the financial best interests of any miner controlling more than 1 - 2/(1 + sqrt(5)) of the mining power for as long as blocks are more than half full with legitimate transactions.
This does not affect, and is not influenced by revenue from block subsidies AT ALL.
All miners will see increased fee revenues in the competitive market. They will respond to more revenue by investing more in equipment. Those miners are still competing fairly with each other, though they will make less on their investment than whoever's maintaining the backlog. It is not in their best interests to add bogus transactions to the queue because with a smaller fraction than 38% of the mining power they would lose money on the fees they invest.
But any miner for whom this IS profitable, will make additional revenue that the fair market among miners does not. What percentage more, depends on what fraction of the hashing power he controls. Any such miner is competing at an advantage and will eventually drive all other miners out of the market.
Miners for whom this is profitable must control at least 38% of the mining power. Therefore there can be no more than two miners doing it at a profit. And it's got positive feedback, so those two cannot compete fairly. Assuming there are two, the instant one of them has more hashing power than the other, he has a competitive advantage over the other (gets back as revenue a greater fraction of all fees spent) than the other miner) and will eventually drive him out of the market.
The so-called "stress test" was successful. The attack it was testing is underway.
Any miner who cotrols more than one minus 1/phi of the mining power, makes a profit while paying the fees it takes to maintain a permanent backlog of transactions, for as long as the blocks are more than half full of other transactions.
The mining-expenses market is unstable when there are enough legitimate transactions to fill more than half a block, because such a miner will reap more per yuan invested in mining power than any other miner. This leads to a monopoly.
Well, crap. I have done the math now.
I know exactly what's happening. It's a Golden Ratio Attack. This is serious. It ends with a mining monopoly.
What we have now is no longer a test. The test was apparently successful. What we have here is the new business model that was being tested.
This backlog will probably be sustained FOREVER, because the people doing it make a profit by doing so.
The following assumes expenses roughly equal for miners relative to the amount of hashing power they control. This is not exactly true, because a miner someplace where electricity is subsidized (like China) has substantially lower expenses. In such a place the fraction of mining power required to make it profitable would be even less.
The *initial* "stress test" was a test to see whether the miner controlled sufficient hashing power to make a profit by doing this. We can assume that test was successful, because now this miner is doing it. Probably permanently.
The miner decides how much they want per transaction (anything that the traffic will bear, as long as it keeps blocks more than half full of real transactions), then keeps the backlog sufficiently full with bogus transactions to prevent any tx that pay less than that from going through.
Maintaining the backlog subsidizes other people's mining as well as their own, but means they don't need to compete with miners willing to process transactions for less money in fees because those miners aren't willing to process transactions for less fees when any transactions with more fees are available.
Let's work the math. If 2/3 of the transactions actually processed are "real", then whoever is maintaining the backlog is paying the tx fees for 1/3 of every block. If this is someone with half the mining power then they get half of their third back, so their average cost per block is the fees for 1/6 of the block. If we are talking about someone with half the mining power, their average return per block is 1/2 the fees for a block. Because 1/2 is greater than 1/3, they are making a profit.
The breakeven point for the biggest miner was when his fraction of the mining power plus the fraction of each block devoted to legitimate transactions was equal to one. We can conclude that whoever is doing this, if he started the instant it was profitable, controlled 1 - 2/(1 + sqrt(5)) of the mining power at that time. This happens to be one minus the inverse of the Golden Ratio.
It will continue to be in the financial best interests of any miner controlling more than 1 - 2/(1 + sqrt(5)) of the mining power for as long as blocks are more than half full with legitimate transactions.
This does not affect, and is not influenced by revenue from block subsidies AT ALL.
All miners will see increased fee revenues in the competitive market. They will respond to more revenue by investing more in equipment. Those miners are still competing fairly with each other, though they will make less on their investment than whoever's maintaining the backlog. It is not in their best interests to add bogus transactions to the queue because with a smaller fraction than 38% of the mining power they would lose money on the fees they invest.
But any miner for whom this IS profitable, will make additional revenue that the fair market among miners does not. What percentage more, depends on what fraction of the hashing power he controls. Any such miner is competing at an advantage and will eventually drive all other miners out of the market.
Miners for whom this is profitable must control at least 38% of the mining power. Therefore there can be no more than two miners doing it at a profit. And it's got positive feedback, so those two cannot compete fairly. Assuming there are two, the instant one of them has more hashing power than the other, he has a competitive advantage over the other (gets back as revenue a greater fraction of all fees spent) than the other miner) and will eventually drive him out of the market.
> But any miner for whom this IS profitable, will make additional revenue that the fair market among miners does not.
Um. How on earth do you conclude that?
The miner jacking up fees will have his mining-fee-profits increased by some small amount. Every miner not wasting money on the attack would have their mining-fee-profits increased by several orders of magnitude more since you are talking about small margins. The attacker is making it much much easier for his competition to beat him in mining share.
Stupid as stupid does.
Cant believe forum members fall for this so called "math"
lol....
Cant believe forum members fall for this so called "math"
lol....
I knew it! Let the record show I called it first. (I just couldn't do the math to prove it)
I still have questions tho, like how high can they push transaction fees and dose this mean the end of micro transactions in the long term?
This will cause the blockchain to grow a lot faster, that's a clear downside.
I bet its the top pools working together (in secret), I have no proof just got a feeling.
I for one, welcome our new Mining cartel overlords.
I still have questions tho, like how high can they push transaction fees and dose this mean the end of micro transactions in the long term?
This will cause the blockchain to grow a lot faster, that's a clear downside.
I bet its the top pools working together (in secret), I have no proof just got a feeling.
I for one, welcome our new Mining cartel overlords.
On the facts the above desciption doesn't describe behavior in the network at the moment-- e.g. backlog isn't there, and substantial amounts of the funds that went into the DOS attack paid for outputs, not fees.
The scheme you describe is scale-free; I see you clarified in later messages that you think the "solution" is dyanmic controls rather than a removal of limit but the bold increase blocksize response in your initial is quite confusing-- more than half your text is spent spinning hyperbole, it would have been much more useful to spend that text on describing what you're actually talking about.
Perhaps most importantly, it does not make a case that the attacker produces increased income relative to his hashpower. Consider:
Lets imagine your mine with half hashpower. Lets imagine that a block can contain 6000 transactions. Attacker has 1/2 hashpower. Offered load is 4000 tx/block.
Attacker crafts 2000/tx block at 1coin/tx fee level. Making the rest match him (plus episilon, which we'll disregard).
His average cost for spam is 1000 coin/block (2000 * 1-rate).
His average income is 2000 coin/block (4000 * rate). (He doesn't get income from his spam, he saves its cost however; see prior line)
His net income is 1000 coins/block, on average.
Now consider the consolidation of other miners:
Their average cost for spam is 0.
Their average income is 3000 coin/block (6000 * (1-rate)).
Their net income is 3000 coin/block.
Both groups have 50% hashrate, so the non-attacking miner has a fee income of three times greater the attacking miner per unit hashrate!
Normalized for hashrate thats 2000 vs 6000.
----
Lets instead imagine that there is also a backlog of fees episilon beflow the attackers floor, and he mines those instead of his own and that doing this doesn't somehow eliminate the floor effect:
Attacker average cost for spam is 1000 coin/block (2000*1-rate)
Attacker income is 3000 coin/block (6000 * rate)
Attacker net income is slightly under 2000 coins/block, on average.
Honest miners cost for spam 0.
Honest miners income is 3000 coins/block (6000*(1-rate))
Their net income is 3000 coins/block.
Again doesn't work.
----
We can work this for any other size, say and attacker with 40%:
Attacker cost for spam is 1200 coin/block (2000*(1-rate))
Attacker income is 1600 coin/block (4000*rate)
Attacker net income is 400 coin/block
Honest miners cost for spam is 0 coin/block
Honest miner income is 3600 coin/block (6000*(1-rate))
Honest miner net income is 3600 coin/block.
Normalized for rate, thats 1000 vs 6000.
---
Finally, we already know that the system is not incentive compatible when a single party (or collaborating conspiracy) has more than 1/3rd of the hashrate: http://arxiv.org/abs/1311.0243 (The results below 1/3rd require information asymetry advantages which are handwavy, but at 1/3rd or beyond no such asymetry is required)-- though such attacks are highly conspicious.
The scheme you describe is scale-free; I see you clarified in later messages that you think the "solution" is dyanmic controls rather than a removal of limit but the bold increase blocksize response in your initial is quite confusing-- more than half your text is spent spinning hyperbole, it would have been much more useful to spend that text on describing what you're actually talking about.
Perhaps most importantly, it does not make a case that the attacker produces increased income relative to his hashpower. Consider:
Lets imagine your mine with half hashpower. Lets imagine that a block can contain 6000 transactions. Attacker has 1/2 hashpower. Offered load is 4000 tx/block.
Attacker crafts 2000/tx block at 1coin/tx fee level. Making the rest match him (plus episilon, which we'll disregard).
His average cost for spam is 1000 coin/block (2000 * 1-rate).
His average income is 2000 coin/block (4000 * rate). (He doesn't get income from his spam, he saves its cost however; see prior line)
His net income is 1000 coins/block, on average.
Now consider the consolidation of other miners:
Their average cost for spam is 0.
Their average income is 3000 coin/block (6000 * (1-rate)).
Their net income is 3000 coin/block.
Both groups have 50% hashrate, so the non-attacking miner has a fee income of three times greater the attacking miner per unit hashrate!
Normalized for hashrate thats 2000 vs 6000.
----
Lets instead imagine that there is also a backlog of fees episilon beflow the attackers floor, and he mines those instead of his own and that doing this doesn't somehow eliminate the floor effect:
Attacker average cost for spam is 1000 coin/block (2000*1-rate)
Attacker income is 3000 coin/block (6000 * rate)
Attacker net income is slightly under 2000 coins/block, on average.
Honest miners cost for spam 0.
Honest miners income is 3000 coins/block (6000*(1-rate))
Their net income is 3000 coins/block.
Again doesn't work.
----
We can work this for any other size, say and attacker with 40%:
Attacker cost for spam is 1200 coin/block (2000*(1-rate))
Attacker income is 1600 coin/block (4000*rate)
Attacker net income is 400 coin/block
Honest miners cost for spam is 0 coin/block
Honest miner income is 3600 coin/block (6000*(1-rate))
Honest miner net income is 3600 coin/block.
Normalized for rate, thats 1000 vs 6000.
---
Finally, we already know that the system is not incentive compatible when a single party (or collaborating conspiracy) has more than 1/3rd of the hashrate: http://arxiv.org/abs/1311.0243 (The results below 1/3rd require information asymetry advantages which are handwavy, but at 1/3rd or beyond no such asymetry is required)-- though such attacks are highly conspicious.
At best, this attack allows a sizable minority group of miners to engage in price fixing without running out of money, under the constraint that legitimate transactions are still wiling to pay enough to fill half the block.
Exactly, like anyone they can generate transactions to drive up fees; large miner hashpower gets a discount on fees; but they still lose funds; and everyone else shares the income.
I don't get how this is supposed to work.
It looks like someone with a minimum share of the hashing power can enforce a minimum fee, up to the point where the total fee paid by legitimate transactions willing to accept that minimum drops off. The miner enforcing the minimum fee can flood the network with transactions paying just below that fee, and get back a sufficient portion of their own transaction fees that the fees they pay in spam transactions mined by others are balanced by the fees they earn from legitimate transactions.
I fail to see how this results in that miner achieving a monopoly. The other miners will be enjoying the benefits of the higher minimum fee, and will collect some of the fees from spam transactions, without having to pay for any spam transactions of their own. So whatever profit the attacking miner is making, the other miners will be making more.
At best, this attack allows a sizable minority group of miners to engage in price fixing without running out of money, under the constraint that legitimate transactions are still wiling to pay enough to fill half the block.
It looks like someone with a minimum share of the hashing power can enforce a minimum fee, up to the point where the total fee paid by legitimate transactions willing to accept that minimum drops off. The miner enforcing the minimum fee can flood the network with transactions paying just below that fee, and get back a sufficient portion of their own transaction fees that the fees they pay in spam transactions mined by others are balanced by the fees they earn from legitimate transactions.
I fail to see how this results in that miner achieving a monopoly. The other miners will be enjoying the benefits of the higher minimum fee, and will collect some of the fees from spam transactions, without having to pay for any spam transactions of their own. So whatever profit the attacking miner is making, the other miners will be making more.
At best, this attack allows a sizable minority group of miners to engage in price fixing without running out of money, under the constraint that legitimate transactions are still wiling to pay enough to fill half the block.
This is very interesting and informative... I wouldn't mind seeing more detailed math behind this
Yes, the math would be very nice to see. It's an interesting theory, but it needs evidence (or in math you'd call it a proof I guess) to support it and make it more than a well thought out post.
If "someone" is doing this on purpose than there's less than a handful of someones that could be. That certainly narrows down the suspect list...
One thing that comes to mind, though, is that some of the pools capable of this also mine empty blocks and I'm not sure that helps an attack as described.
This is very interesting and informative... I wouldn't mind seeing more detailed math behind this
This doesn't pass the prisoner's dilemma test.
Creating a backlog to increase fees can be profitable. But while on paper this is the best outcome, it is not the optimal outcome as your investment in the mining capacity and your longer-term ROI will be diminished because you would end up impacting the confidence in the system that you want to profit from.
The most profitable monopolistic and selfish outcome is therefore not the most optimal outcome.
Creating a backlog to increase fees can be profitable. But while on paper this is the best outcome, it is not the optimal outcome as your investment in the mining capacity and your longer-term ROI will be diminished because you would end up impacting the confidence in the system that you want to profit from.
The most profitable monopolistic and selfish outcome is therefore not the most optimal outcome.
So a block size limit increase would fix the problem because for this to be profitable, the attacker needs to have at least half of the block be legitimate transactions and that there still be a backlog of transactions, yes? And since there isn't that much real transaction volume, raising the limit to the suggested compromise of 8 Mb would solve this issue for now since it suddenly becomes unprofitable to continue to attack until transaction volume increases.
So if I'm understand this correctly, a miner's profit using the outlined attack is as follows. Note that currently no transaction fees are "burned" - miners keep all of them.
L=Share of legitimate transactions
H=Share of hashing amount that the attacker controls
B=Share of the fees that must be burned
Profit=(L*H*(1-B))-(1-L)*(1-H)
Suppose there was a change to the Bitcoin protocol as follows: Every newly mined block must send half the transaction fees to a "burn" address. So we'll increase B from 0 (current protocol) to 1/2:
Under the original example L=2/3, H=1/2, B=0 and so Profit=1/6
Under the proposed change L=2/3, H=1/2, B=1/2 and so Profit=0
However, as L approaches 1 it doesn't matter how high you set B to, there is still profit to be extracted from this attack.
Setting B=0.5 protects the network from attacks where L<2/3, whereas before the network was only safe where L<1/2, so it's an improvement, but not the final solution.
Thoughts?
L=Share of legitimate transactions
H=Share of hashing amount that the attacker controls
B=Share of the fees that must be burned
Profit=(L*H*(1-B))-(1-L)*(1-H)
Suppose there was a change to the Bitcoin protocol as follows: Every newly mined block must send half the transaction fees to a "burn" address. So we'll increase B from 0 (current protocol) to 1/2:
Under the original example L=2/3, H=1/2, B=0 and so Profit=1/6
Under the proposed change L=2/3, H=1/2, B=1/2 and so Profit=0
However, as L approaches 1 it doesn't matter how high you set B to, there is still profit to be extracted from this attack.
Setting B=0.5 protects the network from attacks where L<2/3, whereas before the network was only safe where L<1/2, so it's an improvement, but not the final solution.
Thoughts?
The only way I can see to fix this is an emergency fork to dynamically adjust the block size limit and keep it over 1/2 the average "real" transaction rate. I can imagine no way to deploy such a fork.
the only way to "really" fix this problem is to lift the cap entirely.
I had suspicions that something like this was happening. Thank you OP for providing some insight in a topic on a laundry list that needs to be addressed.
Interesting theory. It does sound like what you describe could be profitable.
I don't agree with your conclusion that this will ultimately lead to a monopoly.
I don't agree with your conclusion that this will ultimately lead to a monopoly.
Jump to: