Bitcoin Protocol Vulnerability Could Lead To a Collapse

First time accepted submitter stanga writes "Cornell researchers unveiled an attack on the Bitcoin mining protocol that enables selfish mining pools to earn more than their fair share. In a technical report the authors explain this attack can be performed by a pool of any size. Rational miners will join this pool to increase their benefits, creating a snowball effect that may end up with a pool commanding a majority of the system's mining power. Such a pool would be able to single-handedly control the blockchain, violating the decentralized nature of the increasingly successful Bitcoin. The authors propose a patch to the protocol that would protect the system from selfish mining pools smaller than 25% of the system. They also show that Bitcoin can never be safe from selfish mining pools larger than 33% of the network, whereas it was previously believed that only groups larger than 50% of the network were a threat to the system. The question is — can the miners operating today adopt the suggested fix and dismantle too-large pools before a selfish mining pool arises?"

Simple Fix

[Anonymous Coward]

Date and Time stamp the creation of the block. If the network notices that blocks have been delayed, this new longer block gets dumped.

No more selfish miners.

Wow. A really really unethical headline...

[Anonymous Coward]

Someone trying to buy some bitcoins for cheap?

Here is the commentary from one of the Bitcoin core developers: https://bitcointalk.org/index.php?topic=324413.msg3476697#msg3476697

This is an old known attack which is boring, made a little more interesting by also assuming that the attacker has sybil attacked the network and inserted itself between every node. The result is that they can mine a disproportionally large share of coins. Academically interesting, but not terribly significant.

Mostly it's just another example that overly large pools are bad for the network, and that preventing sybil attacks (e.g. by miners setting up additional trusted peerings between each other) is useful.

Re:NBD

[hawkeyeMI]

Here, sorry I was a lazy bum before. http://www.reddit.com/r/Bitcoin/comments/1puk1a/arxiv_paper_majority_is_not_enough_bitcoin_mining/ [reddit.com]

Ridiculously Over-Hyped

[mathimus1863]

The headline is just plain FUD. The ideas presented in that paper are merely theoretical. Not only would it be extremely difficult to achieve the right conditions to execute the attack (at the expense of losing money when you fail), but the paper makes vast assumptions about the social response to it working. Basically, the conclusion was "if this works [which it probably won't], then everyone will collectively make decisions that destroy the network because that's the rational thing to do." Obviously, it's not so rational if people don't want to see the system collapse.

This doesn't mean it should be ignored. It's an interesting "attack" that should be kept in mind as the protocol is developed further, but it's not even close to "bitcoin collapse". The headline is perhaps just wishful thinking of the submitter.

Re:The problem here is....

[TechyImmigrant]

Look at the current graph. To me it looks very much like now is not the time to buy.

http://bitcoincharts.com/charts/mtgoxUSD#rg360ztgSzm1g10zm2g25zv [bitcoincharts.com]

But if the chart looks good and you like to speculate on bitcoins, buy what you can afford to lose.

Re:I prefer currency 1.0

[Anubis IV]

Kinda, except that gold was used to encase the highly-valuable latinum in Star Trek because gold was virtually worthless after it became possible to replicate it (unlike latinum, which could not be replicated). In contrast, the situation here is one of gold encasing a less valuable material. I know I'm stating the obvious, but this wouldn't be Slashdot if someone wasn't playing the pedant when it comes to Star Trek.

Re:The Wild West

[TsuruchiBrian]

A very slow loss of bitcoins is not a problem, especially if the level of granularity left in the existing pool is enough to allow for small transactions. Even if half the bitcoins are lost, 10.5 million bitcoins translates to 105 trillion units of currency. This is about 15,000 units of currency per person on the earth. It's not ideal, but still pretty good.

Consider the problem of people losing paper money. It's true that new money is issued to compensate for lost/destroyed money, but it doesn't go to the person that lost it. When bitcoins are lost, more can be mined. When the cap is nearly reached, then lost bitcoins will just make the other coins more valuable. This is equivalent to printing more bitcoins and distributing them proportionally among all bitcoin owners.

You said that new coins should be issued under a majority vote, but what would this accomplish? It would simply cause a waste of more electricity to put more bitcoins in circulation. It doesn't really change anything. When mining actually stops, it will mark a point when resources are no longer wasted for the purpose of proving work.

Re:The Wild West

[TsuruchiBrian]

Why would deflation even be a problem? If everybody destroyed half their dollars, the other half would be worth twice as much and everyone would have the same amount of money relative to eachother. This would be a huge amount of deflation that has no effect. The same is true of inflation. The only time when deflation and inflation are problematic is when you have an asymmetrical reduction or increase of the money supply. This is common with inflation due to governments printing money to spend, but this is not what would happen with random people occasionally losing their wallets. This loss will be basically random and not transfer the money to a single entitiy, it will be proportionally distributed to the other bitcoin owners.