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Researchers Find Problems With Rules of Bitcoin 301

holy_calamity (872269) writes "Using game theory to analyze the rules of cryptocurrency Bitcoin suggests some changes are needed to make the currency sustainable in the long term, reports MIT Technology Review. Studies from Princeton and Cornell found that current rules governing the mining of bitcoins leave room for cheats or encourage behavior that could destabilize the currency. Such changes could be difficult to implement, given the fact Bitcoin — by design — lacks any central authority." The main problem discovered is that transaction fees do not provide enough incentive to continue operating as "miner" after there are no more bitcoins left to be mined.
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Researchers Find Problems With Rules of Bitcoin

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  • Firstly, there already is a "tax" of the sort they say is needed. Currently the bitcoin relays don't accept transactions containing a tip of less than 0.6cents per kilobyte.

    Secondly, there is nothing to force a miner to pick up a transaction, now. Right now, if a transaction doesn't contain a fee there is no incentive for the miner to include it in the block they are working on. Regardless of whether the miner includes transactions or not, they still get the mining reward.

    Transaction fees are like an auction. The customer puts in a bid at the lowest price he thinks the miners will accept, each miner decides whether that fee makes it worth his while to include the block. If the customer wants the transaction processed quickly he will put a comparatively high fee on it so every miner will be interested. If not, they put a low fee on it.

    This is called a market. It is how bitcoin is supposed to work.

  • by retep (108840) on Monday March 24, 2014 @10:18PM (#46570671)

    Ignoring game theory, it's easy to see how the model of mining being only paid by transaction fees doesn't make sense. After all, mining security is something that benefits all holders of Bitcoin, regardless of whether or not they perform transactions, so surely all Bitcoin holders should be contributing to that security.

    How do you do that? Make everyone pay equally. Currently that is how Bitcoin works due to the inflation subsidy. (about ~10% per year right now, leading to a per transaction cost of about $50) Just keeping that subsidy indefinitely at some sane level, say 1%, is perfectly reasonable. There's other options too, but fundamentally people like a free lunch.

    -Peter Todd, Bitcoin developer

  • except the problem of criminals leveraging other peoples resources. When you can utilise bots to farm for you you can effectively undercut other peoples market making any legitimate miner completely unprofitable.

    Said like a person who doesn't have a clue about the shear amount of resources being thrown at bitcoin mining.

    Currently, the bitcoin mining network is doing 6,549,663,840,000,000 SHA-256 hashes per second []. Lets say you have a botnet of 1 million Haswell's. The fastest Intel CPU there is, a Xeon, and it can't do more than 20M hashes per second []. So your 1 million Haswell botnet will manage to capture 0.3% of the bitcoin networks mining power.

    Yes, people have speculated in the past that bitcoin might be susceptible to botnets. Even if was true the vulnerability window has well and truly closed.

  • by compro01 (777531) on Monday March 24, 2014 @11:24PM (#46571093)

    The minimum fee set by default on the client the Bitcoin Foundation maintains (Now called "Bitcoin-core") was changed.

    Any other clients or anyone who feels like doing their own compiling can set the minimum fee to anything they like, including 0, but there's no guarantee their transaction will ever get included in a block if they set it very small.

  • Most of the problems people describe seem to be directly related to its use as a pump and dump, actually.

    No. **maybe** we'll see a viable "crypto-currency" but we have not yet.

    BTC's main issue is that **whoever** controls a BTC exchange and mining operation can manipulate the currency at will, especially at the pinch points like when BTC values decrease by half at intervals. It's not just that someone could game the system, its that there is absolutely nothing preventing them, systemically and externally.

    BTC has **built in** feedback loops [], from a system science perspective. Areas where problems cannot be corrected if they arise given certain conditions.

    The system doesn't have a fix for certain problems **by design** because...and everyone just needs to accept this: BITCOIN IS A SCAM

  • Re:Bullshit (Score:4, Informative)

    by Laxori666 (748529) on Tuesday March 25, 2014 @12:29AM (#46571355) Homepage

    They're saying that the fee wont be enough to keep people in. Really, but bother to read their counter argument before you spout off about it.

    I RTFA. I countered this point in each of my replies. Here it is again. I'll even bold the important parts:

    As miners pull out, it will get easier to mine blocks. There will never be a shortage of computation power to run the network, because if half the miners pull out, it'll get twice as easy to mine blocks. If 75% of the miners pull out, it'll be 4x easier to mine blocks. If 90% of the miners pull out, it'll become 10x easier to mine blocks.

    Get it? Whatever the number of miners, transactions will continue to be verified at exactly the same rate. Look at the hashrate chart []. The network was chugging along just fine in July when there were < 1,000 terahashes/second. Now there are over 40,000 terahashes/second. So if 97.5% of the miners drop out, the network will run just as well as it did in July, that is, perfectly fine.

    So when you reply, tell me again why it is a problem if some miners decide to pull out? Please don't just repeat once again that the article says that the fees will be too low and thus the miners will pull out. I get that that's what the article says. Why is this an issue, given the above?

  • and you really think all that effort in mining is going to be maintained once the coin pool is exhausted and they are only competing for transaction fees?

    Just about all mining is done using ASIC now, and ASIC's are in an unenviable position. Unlike CPU's and GPU's or even FPGA's, they are utterly useless outside of bitcoin. So they will remain deployed until they cost more in power to run than they get in mining fees. This means the current mining power isn't going away any time soon.

    Botnet's can earn a return from a variety of sources, not just mining. So the question becomes "is it worth competing against the ASIC's"? In terms of power cost a top end Intel CPU's is roughly 100,000 worse than an ASIC. So even if some miners drop out Botnet's are unlikely to win more than a minor percentage. If the rewards of mining have dropped so much that ASIC's are dropping out, then it's a minor percentage of a small number. Add to that mining's soaking up 100% of CPU time makes an infection by the bot stand out, which decreases the half life of your botnet ... and yeah, I expect it will continue even when there are only transaction fees.

    Then there is the whole other question of "does it matter?" If a botnet does take over the mining pool, there is the little issue that bitcoin is intrinsically worth nothing. It's not like they have taken over a pot of gold. Bitcoin is only worth something if people trust it. So if they don't undermine it, they have something that will pay out forever. If they do undermine it, they have got control of 2^51 bits that no one in the right mind would buy and their source of transaction fees has dried up.

    It's weird actually. Claiming bitcoin can never succeed because it is worth nothing has to be one of the more popular meme's. The reality is being worth nothing is one of bitcoin's core defences. So far all currencies that have been based on something tangible (like e-Gold) have lacked that defence, and have failed.