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Bitcoin Protocol Vulnerability Could Lead To a Collapse 256

Posted by Unknown Lamer
from the prepare-for-the-bitcoin-baron dept.
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?"
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Bitcoin Protocol Vulnerability Could Lead To a Collapse

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  • The Wild West (Score:5, Insightful)

    by mythosaz (572040) on Monday November 04, 2013 @07:54PM (#45331551)

    Bitcoins are the wild west...and that's why they're so exciting.

    I missed the gold rush, but there's still money to be made selling shovels and pans to those who think they didn't...

    • Re: (Score:2, Insightful)

      by Aighearach (97333)

      Indeed, the built-in deflation ensures an eventual collapse, especially in the presence of alternatives currencies.

      • Re:The Wild West (Score:5, Interesting)

        by TsuruchiBrian (2731979) on Monday November 04, 2013 @09:04PM (#45332059)
        bitcoin doesn't have built in deflation. The deflation is caused by the influx of people due to increasing popularity. It is true that the problems that are solved to successfully mine bitcoin get harder over time, computers also get faster and more energy efficient over time. The upperbound of bitcoin value is kept in check by the electricity cost of mining bitcoins. This limits the size of bitcoin bubbles. The value of bitcoin is not purely speculative. There is a real world limit to how valuable they can be at any time.
        • Well, the loss of a wallet's private key removes its contents from circulation forever. Since the number of bitcoins is limited, any level of attrition will lead to long-term deflation.

          • yes people losing private keys will eventually lead to deflation when we actually get close to the 21 million cap. Until then, the fact that bitcoins are disappearing due to lost wallets only has an effect if the cost of mining is significantly higher than the current price. Otherwise, it's cheaper to mine new bitcoins than it is to buy existing bitcoins in an environment when low supply compared to high demand.

            So yes bitcoin does have some deflation built in, but it is insignificant at the current time.

            • by Eskarel (565631)

              Well it is and it isn't.

              If you work on the premise that BitCoin is a viable currency then yes you're right, the level of deflation is insignificant. If you instead look at the future when the level of deflation will not be insignificant and then decide BitCoin is not a viable currency it matters very much.

              • Re: (Score:2, Informative)

                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
        • The upperbound of bitcoin value is kept in check by the electricity cost of mining bitcoins. This limits the size of bitcoin bubbles

          Or, it pushes mining into the realm of botnets where they get all the cash and someone else pays for the electricity... like what already happens a lot.

          • Botnets can steal computing power to do anything not just mine bitcoins. The cost of electricity is still an upper bound on bitcoin. There will always be thieves. The price of a Ferrari is not $0 because someone can use a botnet to mine (i.e. steal) $200,000 in bitcoins.
            • by N1AK (864906)
              You've got it backwards (you're responding to a post about keeping the upper value in check not the lower value). Some people claim bitcoin value is limited by power cost because if the value exceeds the cost of mining then more coins will be mined. Tha t's flawed on two levels:
              1/ Bitcoins can be produced for free by anyone using computing power without permission (botnets etc).
              2/ If a bitcoin is worth $100 then the fact that a machine designed for mining can create them for $90 won't magically make the p
        • Seriously? No, you're totally and utterly wrong.

          Firstly, there is a limit to the rate of newly mined bitcoins. The total number of created bitcoins will approach an upper limit and never pass it. If more people want to buy them, they have to be willing to offer more value than anyone else to get them. Since the supply is limited, if the demand goes up, so should the exchange value.

          Secondly, bitcoins have absolutely no inherent value. You can't create anything with them directly. You might say that their i

          • Since the supply is limited, if the demand goes up, so should the exchange value.

            The supply is not currently limited, in the sense that anyone can mine more of them if they are willing to spend money on electricity. There is just not an advantage to mining over buying them, because the costs are always relatively equal. This will change in the future, but it has no effect now.

            Secondly, bitcoins have absolutely no inherent value. You can't create anything with them directly. You might say that their implicit scarcity gives them some value in the same way that gold, silver and platinum are considered to be valuable, but at least those metals have some utility value as well.

            The value of gold and platinum due to their utility other than as currency is insignificant. In fact part of what makes them such good currency candidates is their lack of utility.

            But the production cost of bitcoins has no direct impact on the exchange value of existing coins. Instead I'd suggest that the relationship is the other way around.

            This is wrong. Why on earth wo

      • by ultranova (717540)

        Indeed, the built-in deflation ensures an eventual collapse, especially in the presence of alternatives currencies.

        Of course it does. Never mind that deflation hasn't crashed sales of computer equipment - Moore's law means that you get better equipment with the same money or the same equipment with less if you just wait - but this time claims based on absurdly oversimplified economic models will surely give the correct prediction. Any year now...

        • When you say "money" you mean the dollar, right, which has been increasing exponentially in supply? http://commons.wikimedia.org/wiki/File:Components_of_US_Money_supply.svg [wikimedia.org]

        • Moore's law means that...

          You are aware that Moore's Law no longer accuratly describes what it once did, right?

        • Re:The Wild West (Score:5, Interesting)

          by Aighearach (97333) on Tuesday November 05, 2013 @12:30AM (#45333357) Homepage

          Computer sales use currency, but they are not themselves currency. A market segment can grow or shrink and supply and demand balance. People still need computers, and so there will still be a market.

          A currency with built-in deflation has perverse incentives. Your money will be worth more if you don't spend it; investment is discouraged. By not engaging in commerce with your money, you enrich yourself.

          Compare that to all the real currencies, which have inflation; it will be worth less in the future. If you want to save it, you need to put it to some sort of use; for example an interest-bearing savings account where your money is actually be loaned out to other parties. And if you want better gain than that, you invest in something with either a higher risk level, or a more specific purpose.

          If there was widespread adoption of a guaranteed-deflation currency, an early adopter who was heavily invested could set up trust accounts where their ancestors would have growing spending power, without the money in the trust even being invested in anything. A future where the world is controlled by the grandchildren of the current rich, a class of aristocrats who don't have to work, but rule the world. And the more new economic activity happens, the higher percentage the old money controls! New wealth will always be worth less than the old wealth for the same activity.

          • If there was widespread adoption of a guaranteed-deflation currency, an early adopter who was heavily invested could set up trust accounts where their ancestors would have growing spending power, without the money in the trust even being invested in anything. A future where the world is controlled by the grandchildren of the current rich, a class of aristocrats who don't have to work, but rule the world. And the more new economic activity happens, the higher percentage the old money controls! New wealth will always be worth less than the old wealth for the same activity.

            Having a guaranteed-inflation currency around doens't seem to be doing much to prevent this: if you are wealthy, it's likely you were born wealthy. The problem is, that the currency we use, is just currency, it has no real use. And all the actually usable things, natural resources, have guaranteed deflation built in (assuming continuing population growth and no off-planet resource import). So owning natural resources is a bit like owning Bitcoin. It is always a good time to invest in gold.

          • Re: (Score:3, Insightful)

            by ultranova (717540)

            Computer sales use currency, but they are not themselves currency. A market segment can grow or shrink and supply and demand balance. People still need computers, and so there will still be a market.

            Computers sales use currency, and that currency will get more computing power the longer you wait; in effect, your money will be worth more tomorrow than today, which is by definition deflation. And yes, people need or at least want computers today - and that goes for anything else they might buy.

            A currency wit

    • who is selling the shovels and pans?
      • by mysidia (191772)

        who is selling the shovels and pans?

        You can pre-order your excavator from Butterfly labs. You will be lucky, if they fill your order within 24 months, by which time: the network hash rate will have increased so high, that you will have a net loss on your hands.

    • Re:The Wild West (Score:4, Insightful)

      by mysidia (191772) on Monday November 04, 2013 @09:07PM (#45332081)

      I missed the gold rush, but there's still money to be made selling shovels and pans to those who think they didn't...

      *Cough* Excuse me, while I move over and start mining Litecoin.

  • I wonder (Score:4, Funny)

    by cold fjord (826450) on Monday November 04, 2013 @07:55PM (#45331557)

    Did the "selfish mining pools" us a Greedy algorithm?

  • There's a finite number of Bitcoins that can be mined.
    So this problem will eventually disappear, right?

    • by gox (1595435)

      Bitcoin mining is not invented to extract bitcoins, it's to ensure the security of the network. Adding an extra reward was a clever way to distribute the coins initially, but it has nothing to do with how the network functions. It was also an incentive for early adoption. While the "extra" reward diminishes in time, miners will be increasingly incentivized by the transaction fees. As the number of transactions increase and as the miners stop processing transactions with low fees, this system should converge

  • by slew (2918) on Monday November 04, 2013 @07:57PM (#45331583)

    Start with an intense desire to building your own private empire that you control.
    Hiding information from others to gain a competitive advantage.
    Populating other groups with spys to see what progress they are making.
    Eventually giving rational people no choice but to join your team or be crushed.

    I propose to call this the middle manager attack.

  • NBD (Score:5, Interesting)

    by hawkeyeMI (412577) <brock&brocktice,com> on Monday November 04, 2013 @07:58PM (#45331589) Homepage
    This attack would be very, very difficult to achieve. Doesn't seem very worrying and I'm sure it'll be fixed well before it becomes an issue. There are already some pretty good discussions on /r/Bitcoin/ covering why it's not as big a deal as the sensational headline here makes it out to be.
  • Tinfoil hat (Score:5, Interesting)

    by guruevi (827432) <<evi> <at> <smokingcube.be>> on Monday November 04, 2013 @08:02PM (#45331619) Homepage

    So that's what the NSA datacenter is for...

  • At the moment it seems DDoS is a bigger problem for things related to bitcoin, such as coinchat.org, inputs.io, etc.

  • by deathcloset (626704) on Monday November 04, 2013 @08:03PM (#45331633) Journal

    I fairly understand that for there to be value in bitcoin there must be scarcity and that this scarcity is created via the mining mechanisms. But what I wonder is if there be any other way to create value for a virtual currency?

    I ask because to me the most interesting thing about virtual currencies and specifically bitcoin is NOT the mining aspect, but rather the distributed database. The fact the hosting or provision of the database is fundamentally bound to the value-creation process seems to be the problem here. The problem seems not to necessarily be virtual currency or distributed databases themselves. The problem seems to be that value creation is based on artificial scarcity which can be manipulated through collusion.

    There has to be another way to establish value for a virtual currency.

    • Re: (Score:2, Interesting)

      by hawkeyeMI (412577)
      You can't establish value in a distributed fashion any better than with proof of work (that we know of right now). For a stupid alternative, look at ppcoin, which plans to eventually rely on "proof of stake" but currently relies primarily on proof of work.
    • Fundamentally, I can't think of anything aside from bitcoin that would serve its purpose.

      Real mining creates the scarcity by the fact that mining gold or silver is work and fairly rare. That said, it is pretty wasteful and costly to the environment... all to create a currency of scarcity.

      Fiat currency are essentially virtual currency with the 'database' controlled by central bankers / government. They control the scarcity. Basically though, whoever is in charge gets to manipulate the currency directly. Th

      • by lgw (121541)

        Do you believe the supply of US$ has any but the weakest connection to the amount of paper money? Do you believe bitcoins any different if banks ever care about it?

        If banks ever start offering BTC-denominated savings accounts and loans (I supposed we'd call them euro-bitcoins at that point) then scarcity is right out.

    • by tlhIngan (30335)

      I fairly understand that for there to be value in bitcoin there must be scarcity and that this scarcity is created via the mining mechanisms. But what I wonder is if there be any other way to create value for a virtual currency?

      I ask because to me the most interesting thing about virtual currencies and specifically bitcoin is NOT the mining aspect, but rather the distributed database. The fact the hosting or provision of the database is fundamentally bound to the value-creation process seems to be the probl

    • by Bob_Who (926234)

      There has to be another way to establish value for a virtual currency.

      Virtual Bernanke

  • Well it could be BTC Guild anyway.

    All it would do is result in a new proof of work for Bitcoin which is probably a good thing anyway.
    The real question is whether or not it will effect Mastercoin?

  • by Anonymous Coward on Monday November 04, 2013 @08:15PM (#45331723)

    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.

  • Gold, salt, silver, greenbacks, plastic, bitcoin. Take your pick, None of it cures society of thieves, bank robbers, or scoundrels. And anyone who guarantees your money is secure is probably complicit in its theft. There will always be ways to steal your coin. Bitcoin just limits who might steal it.

    • by Lumpy (12016)

      If SHTF ever came to be the rich man will be the guy that has the horde of Peppercorns. They were worth more than gold at one point, and if SHTF happens in a very short time they would because as valuable in the states because we dont have an easy way to grow them. Like Cinnamon and other spices, their value would utterly skyrocket.

    • ...and here I was thinking that money is the representation of a man's value and a unit of trade. ...without trade, and guns to back the money, then everything would devolve into theft, chaos, war and anarchy.
      • by Bob_Who (926234)

        Then I think we agree.

        Its like the serpent eating its tail: "Don't tread on me" creates a fortress out of its physical configuration.

        Its the territory of circular logic; like moats, vaults, gun barrels, and even coin. Its an attempt to take a stand.

        Its becomes anarchy when you lose control of what you say is yours. Its all a sense of entitlement no matter how you slice it. It works if there is mutual consent to honor the rules. And like I said before, technology can't fix human nature, yet. When people

    • The idea is to decrease the motivation to steal. The purpose of an economy is to produce goods and services. When everyone has enough money to buy what goods and services they want, there is no motivation for theft. Even if someone is perverse and steals, you can just replace it.

  • by Ryanrule (1657199)

    Sounds like the author wants to buy some cheap BTC.

  • by Crashmarik (635988) on Monday November 04, 2013 @08:39PM (#45331883)

    AKA Gold.

    If someone has found a way to hack gold, they have had the good sense to keep quiet about it.

    • Can you buy a sandwich with gold shavings? Can you accurately and efficiently measure 1/10millionth of an ounce of gold to make small purchases? Can you send gold electronically?

      People have hacked gold in a way that bitcoin has not yet been hacked. I can send bitcoins to people electronically or printed on a piece of paper via snail mail, and non of the servers or postal workers that handle the packages can steal the bitcoins. If you send 20 lbs of gold through the usps or fedex, anybody handling the pa

      • by J'raxis (248192)

        1/10,000,000 of an ounce of gold is currently worth 0.01335 cents. (That's cents, not dollars.) Where is a hundredth of a cent worth anything? What can I buy that's denominated in such small amounts?

    • by Svartormr (692822)

      Sure, Tungsten and Gold have the same density, but that could be expected. Of course, there is this gold hack [wikipedia.org]. >:)

  • The authors propose a patch to the protocol that would protect the system from selfish mining pools smaller than 25% of the system.

    Why 25%? This appears to be a violation of the Zero-One-Infinity Rule [wikipedia.org].

    • by Todd Knarr (15451)

      That rule doesn't apply here. It's a rule about the design of software, specifically hard-coded limits. Basically, don't hard-code in arbitrary limits. In this case it isn't a hard-coded arbitrary limit. The mathematics behind how bitcoins work essentially prevents any fix from working if more than 25% of the system is participating in a single selfish mining pool. You can't change that by changing the fix, you have to change the mathematics. Which would instantly break the entire Bitcoin system itself, sin

      • by Ichijo (607641)

        It's a rule about the design of software, specifically hard-coded limits.

        No, it's about arbitrary limits. And the origin of the term is unrelated to software; therefore, it isn't only about software.

  • You gotta get the miner first. Then when you get the miner, you need the power. Then when you get the power, then you get the bitcoin.

  • On June the 12th I got myself 2 bitcoins. More to see how it works with the vendors than anything else. I understand the crypto side of it. I had forgotten all about it.

    Then along comes this article. It reminded me that I had a couple. So I check the bitcoins and they've doubled in value, look peaky and there's a story of impending collapse.

    So I just sold them and I'll wait patiently for the collapse.

    Yay for unstable currencies.

  • by mathimus1863 (1120437) on Monday November 04, 2013 @10:42PM (#45332667)
    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.
  • by deego (587575) on Monday November 04, 2013 @11:19PM (#45332927)

    .. Way for researchers to present what's always been well known as their own discovery..

    Every *academic* research article I have seen so far on bitcoin has been dishonest. I understand that "if it's not published," it's not research for them. But, would it hurt them to mention in the passing: "BTW, this mindblowing fact we have uncovered: The entire bitcoin community knows it, starting with the founder himself... And, that the bitcoin community had somehow magically peaked into the future to see what we had discovered, and were taking actively countermeasures against millienia bitcoin-years (== 1 calendar year) ago...

    Remember when a year ago two academics proudly announced their "discovery" with much fanfare: "Bitcoin transactions, unlike what bitcoiners believe, are not anonymous." Of course, the developers and bitcoiners have repeatedly warned of that. Their presentation video is sickening. Not once did they see it fit to mention /that./ The very point of bitcoin is that it is a *very public* ledger.

    I have seen that in other fields.. If it is not published, it is free game for you to lift when creating your academic article. As if lifting is not bad enough, you don't bother to mention in the passing: "btw, So and so community has believed for a long time, following precisely this reasoning and data ... "

    • Oh, the bitcoin community is perfectly OK with misconceptions (bitcoin is anonymous, you need to control 50% of the mining pool to cheat) as long as they prop up the price.

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