Topic: Taking Down Bitcoin (Read 8574 times)

AH. That's a good argument!

I was considering a world with a large number of alt-chains (1000 and more) and a large number of miners (some 100M) and I was studying the theoretical stability. Of course these are unrealistic assumptions. With some 10 alt chains and some 12 guys working on them, social inertia is way large enough to stabilize the system. We'll see down the road if this changes as soon as bounty drops to 1 BTC or lower. Then, probably, new incentives could come up, if Bitcoin does not pick up as fast as most of us hope.

It isn't about inflation.  Your "analysis" seems to suggest that the two chains are "equal" other than their dillution effect.

i.e. 50 BTC chain and 51 BTC have roughly the same value except the 51 BTC has maybe a 5% long term dillution effect.  If that were true you may see miners leave.

The reality is any alt chain (even an exact copy of Bitcoin 50 BTC block reward and all) will have a tiny tiny tiny tiny tiny tiny amount of value.

Say current chain is worth $5 per BTC and a 1 GH/s miner earns ~ $3 per day.  The alt chain likely earns that same miner $0.10 per day.  Why would the miner switch?  The inflation/dillution effect is immaterial compared to the fact that the alt-chain has no value and a miner joining that chain doesn't materially change that value.

We have seen it with other alt-chains.  There is a small amount of hype, a token amount of hashing, a lot of pump and dump and the chain dies off.  NOMINAL AMOUNT OF COINS doesn't create value/wealth.  Switching to an alt-chain any alt-chain decreases the future wealth of the miner.  Miner's won't switch unless the new chain CREATES REAL VALUE in excess of Bitcoin.   

It will require real innovation to make a superior product that attracts real capital, investment, and enterprise.   Merely changing the block reward doesn't do that.

Define crime. 

Short of unauthorized login and stealing keys - what could possibly define "criminal" behavior for Bitcoin? Deviation from the official protocol standard? And, btw, what would that be?

The more I think it over, BTC looks to me like an interesting form of speculation on future behavior of other people. At a more close look, every economic endeavor probably is like that 

Yes. Agreed. Fine. That's not the point where we lost our communication. 

Our discussion starts where your posting ends. If you want to provide some kind of mathematical model for maximizing wealth - you need a unit to measure wealth in. There is none - or, rather, it is arbitrary or dependent on the miner.

You could chose a gold standard, a dollar standard, a whopper standard, whatever. It will always be relative and different from person to person. And this is EXACTLY the problem I see here.

So, let us pick some mathematical model for the behavior of a miner (whoppers or Zimbabwe dollars - your choice). The wealth function (and thus the function the miner wants to maximize) will not only depend on todays conversion rate into your chosen wealth standard but also on his belief how this conversion rate will change during the near future. Again, the concept of "near future" is different from miner to miner.

Coming back to the original example: Some miners will be conservative and considerate of inflation - they will not switch to a 51 BTC per block chain. Others are more greedy - they will not switch to a 80 BTC per block chain but might consider switching to a 55 BTC block chain, giving it a try. So what we are likely to see is an interesting form of random mixture (and the same, as another poster pointed out, will be the case for the non-mining participants in the system).

The question I am interested is no one of structural stability. IF all miners are strictly conservative and refuse to change...the system will be stable. IF all miners are stupid and ignore inflation...the system will drift to chains with higher and higher block bounties. Some where in between these two extremes we will find the "real" Bitcoin network. What can we say about this real Bitcoin network? Right now we are (as we can observe daily) in a stable domain. How far away are we from an unstable area? Or, is the beginning of the instability domain ridiculously far away? I do not know. I probably will set up a simulation on this if a have a bit more time during summer. the ongoing discussion stimulates my curiosity.
 


 

1. Wait and be patient/have patience

2. Wait until miners traded all their bitcoins for real dollars.

3. Wait until 50 goes to 25 goes to 12.5 goes to etc until it reaches such a low level that it's not worth it anymore.

4. Wait until miners decide that the transaction fee is not enough for them to continue operation and start attacking the network in hopes of higher payouts by crime.

Thus I do believe that in the future miners will turn against the bitcoin system. So it will auto self-destruct All that it requires is some patience lol.

No it wouldn't.  Once again money is an abstraction.  It is possible the chain which pays out less BTC has more buying power.  If BTC 1.0 pays 50 BTC per block and BTC pays 2000 BTC that alone provides no measure of value (buying power).  If the original chain allows me to buy 1 Whooper combo meal w/ 1 BTC and the second chain take 200,000 BTC to buy the same combo meal it would be flawed thinking to switch chains simply because the "number is bigger".



No need your "game theory" answer is already invalid.   The goal of any venture is to maximize wealth not money.  Money is merely an accounting system for wealth.    If you want lots of money I can get you some Zimbabwe dollars.  You can be a trillionaire.  They don't buy anything but they have lots of zeros.  Likewise an alt-chain which simply increases the nominal number of BTC isn't going to increase the purchasing power of miners or users.

You can't create value or wealth via accounting games.  Money is merely arbitrary.  Satoshi could have chosen a block reward of 1 BTC or 1000 BTC.  All it would do is change the nominal amount of the block reward.  The value would remain the same.  With a block reward of 1 there would be 1/50th as many BTC in circulation and the exchange rate would be ~$250 per BTC.

Miners could "merge mine" both chains at once at no additional cost, assuming their only difference is block subsidy. Some alternative cryptocurrencies already have higher relative block subsidies.

During the P2SH dispute a lot of people got in their heads that miners determine the rules, but it's really more a matter of consensus between users. If some miners started trying to mess with the subsidy, all the clients would reject it and use the original blockchain automatically.

DoS attacks against large pools wouldn't work IMO. Most miners mine for alternative pools and have fail-over scenarios. If LargePoolA does not respond then all the hash-rate goes towards SmallPoolB that works fine. Even if ALL pools go down, there is always P2Pool

I'm not so sure that making it illegal would be a good choice either. Take for example the banning of alcohol in the US many years ago, that effectively made alcohol more popular.

Even if exchanges go down, people would still be able to trade services and trade BTC, although in small quantities. But as more people get into it, the value of BTC will rise.

The value money has, is the value we give it. So the only way to destroy  Bitcoin IMO, would be for people to lose their interest in it.

  Oops. Since I am a non native speaker of English I might not completely catch the subtle context of this remark. But, yes, I am convinced that theory and thinking is fun and pays off (at least it did so far in my life).


Exactly ! I think we now reached the same conceptual framework (the lack of which was the reason for a bit of misunderstanding in some postings).

My issue is the following:

Let's assume we model Bitcoin swarm behavior with game theory. In this case 1 BTC is the payoff and if I increase it to 2 BTC this is a more attractive payoff. If I program a Bitcoin miner to maximize his BTC profits, he will opt for the 2 BTC chain.

Of course, you are completely right that Bitcoin miners do not work that way. They are human beings and not just game theoretical agents. They know about dilusion and inflation and therefore will not readily switch to the 2 BTC or the 11 quadrillion BTC chain. Thus, we cannot model Bitcoin swarm behavior with game theory alone. We must look at human consensus and at economic aspects. So let us do so...

However...we now realize that this provides no final answer as well. Most states, share holders, companies, federal reserve banks know about dilution and inflation, nevertheless they, as human beings, still decide to accept a MINOR form of if...a bit LARGER form...since it worked out...again a bit LARGER...and...ooops...we have a financial crash.

So, wy should Bitcoin be more stable than the dollar, when the Bitcoin system inherently has the same problem (human beings making bad decisions) as the dollar.

I must admit that I get some pleasure from thinking about this theoretical issue and trying to find an answer which Bitcoin mining cannot compensate. I am interested whether this model is correct or my line of reasoning has a flaw. I am interested which mathematical / behavioral mechanism could eventually provide for some ultimate stability in Bitcoin (which, as mentioned above, it does not have in it's current form). Compare with the dollar: It HAD a gold standard - until the president / fed abolished it. What would prevent miners to abolish the current limitation system in BTC...and opt for a 51 BTC per block chain (or, rather, 14 quadrillion in the end).

The network has tx rules which make any volume which would be damaging to the network cost prohibitive.

Also 20K tx is hardly "flooding".  It is 0.2 tps.  For the network to even have the volume that Paypal has we are talking something on the order of 300x to 500x higher transaction volume.  If anything SD is merely testing the network and a relatively small and weak test.

yea, i have discovered satoshidice, even placed a bet myself.  but the result is the same, flooding the block chain with transactions.  that's a lot of overhead.

it looks like the # of transactions, and the # of transactions per block is growing geometrically
but total BTC in circulation is linear
and USD transaction volume & market capitalization is flat

Has nothing to do with bitcoinica and everything to do with a crazy gambling site which operates in a way that produces a ton of transactions.

You must be one of those something for nothing kind of thinkers huh?

It is by definition IMPOSSIBLE for the new chain to be better for everyone.  Money is just an abstraction.  If every address gains 1 BTC you haven't increased the wealth merely the accounting system and existing holders of wealth will see their wealth reduced by dillution.  There is always a winner and loser when manipulating the financial system.

I mean by your logic I could make a chain which gives every address AND ever future address 11 quadrillion Bitcoins each.  Obviously that will be the best chain.  Don't you want to be a quadrillionaire?  Who doesn't man.

Your new chain would have no value.  1 BTC or 1 quadrillion BTC it only has value if someone wants it.  Nobody will.

look at the # of transactions per block since the bitcoinica incident

http://blockchain.info/charts/n-transactions-per-block

I'll take a stab at this, although these probably aren't as technical .
a few off the top of my head:

   - collusion among the miners, or a mining cartel forming
   - collusion among the programmers who maintain the satoshi client source code
   - using automated programs to flood the block chain with transactions. thereby making sync up non functional (it takes a good long while to download the block chain the 1st time now)
          this tree seems to be growing rapidly http://blockchain.info/tree/5416502
   - hack the exchanges, and steal BTC, with no criminal prosecutions
   - use bitcoin in a way to threaten national security, feds would shut it down, (like freeze all accounts at the exchanges, w cooperation of other countries of course)
   - bitcoin clients with vulnerabilities not being updated   exampleCVE-2012-2459 (i tried to update to 062 but it failed, so i didn't bother trying again)

Very strong argument, especially from a methodological point of view. 

I agree, that THIS attack is probably useless. I understood the OP differently (he only had the 51% part in his question).


Agree again. "They can't cash out the coins they're creating!". Where do you take this assumption from? The 51% miners would, in my version of the attack, switch to a chain, which is more profitable for every participant (eg. they add 1 BTC to every address) - and they would continue to include transactions nto the chain. So there is a monetary incentive to switch to the spawned chain. It may take a while, until all wallet users switch to the new chain, of course. So it is a matter of speed of adoption.

The best way an attacker can take profit from Bitcoin is this:

1. Study the source code.
2. Find a vulnerability
3. Sell the vulnerability in the black market for 100K USD (SolidCoin?)

The fastest way Bitcoin can be taken down is this:

1. Find a vulnerability in the black market.
2. Use it.

See the related thread https://bitcointalksearch.org/topic/vulnerability-bounties-proposal-79830

Ok, "nobody" is an overstatement. However, say 1% of businesses love the new chain and decide to switch over. Now you can spend your coins mined on the fake chain somewhere. Not in very many places though, and you will have to go through all the massive adoption pains that bitcoin currently suffers from. So perhaps you'll get a few extra coins for your work (then again, you won't because you control 99x the hash power of the original chain), but they will be worth, as a whole, far, far less as not many people will want them. Not to mention everybody with existing coins will be able to double spend them all on the new network and basically bring the value down to nothing.


No, there isn't, and I'm not going to keep rehashing this.


This can be an attack in and of itself. Probably only likely if someone finds a vulnerability in SHA256 and keeps it to themself. In which case, bitcoin devs can fork it themselves to use a new hash algorithm.

Miners won't switch to a 51% chain if it means they can't cash out the coins they're creating!

The attack we're talking about is "51% attacker refuses to include anybody else's transactions in their blocks."  And newly generated coins are useless to miners if they can't get transactions that spend them into the block chain....