It is still a double spend, and it is even more obvious if you spend on the main chain first and then try to reverse it. Check your debug log. The node already flags chain reversions and double spends. Sites that wait for multiple confirmations can (should) be watching.
Yes, but the evil pool would not release the "bad" block chain until the first spend already had 6 confirmations, got sold, and sent to dwolla. Then the new block chain would roll it all back.
In that case:
Step 10: A few minutes later, the legitimate block chain becomes longer than my forked chain, which invalidates the 500 BTC I transferred to TradeHill/Bitcoin7/MtGox. The 500 BTC automatically "reappears" in my original wallet. The exchange is short on BTC and is screwed. An investigation later in the day reveal that Tycho's pool was compromised. Tycho's reputation is ruined. People switch to another pool, which gains 50% of the hashrate. The attacker repeats the same attack on this other pool
This step won't work for two reasons.
First, if the exchange sees your chain as legitimate, you need to assume that every miner also sees it that way. They will be working on the next block to extend your chain, not the old reverted chain. Your 500 BTC spend to the exchange will not be overturned on those grounds.
Second, if you manage to somehow time your chain transmission so that it forces a race and gives the other chain a chance to get back on top, if it does take back over, every node on the network will instantly put your 500 BTC spend in their transaction list. Your recovery attempt will be seen as a double spend.
So, you've spent 2 hours to get an instant transfer into an exchange when you could have just waited an hour.
The OP set up his attack wrong. But it is still possible in a slightly different way, and he has since updated the original post to reflect the correct attack. This attack _would_ work, make no mistake. It is possible that the miners would all get together and roll back to the "original" chain, and then you wouldn't have any gains. But this would probably involve a lot of pain and suffering and could take days to get sorted, all the while the bitcoin network would be essentially down. There might be a whole lot of confusion over which transfers are real and which aren't and so on... Most likely, to avoid all of that, we would be forced to continue on the compromised block chain.
And I really doubt anyone would notice in only two hours. Sometimes deepbit doesn't hit a block for a full hour and a half. And their stats are delayed by an hour to prevent pay-per-share manipulation. No one checks the shares they produce to see if they have a block. I don't even know of a mining application that tells you. Two hours is well within the time-frame for an attack. If Tycho doesn't notice, no one will.
But still, I find it unlikely that anyone would be able to pull this off. It is more complex then just robbing the pool, for less gain. I don't feel threatened by the possibility. But let me make it clear, it is a possibility. And the odds are 50%, you don't need 6 consecutive blocks, because you are just holding all your block, waiting to release them later. It they are longer than the other chain, then all clients will accept them. That is a bitcoin rule. The longest blockchain is the "real" blockchain.
