Bitcoin Protocol Vulnerability Could Lead To a Collapse 256
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?"
The Wild West (Score:5, Insightful)
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...
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Indeed, the built-in deflation ensures an eventual collapse, especially in the presence of alternatives currencies.
Re:The Wild West (Score:5, Interesting)
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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.
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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.
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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.
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The problem is that bitcoins aren't infinitely divisible. With enough deflation, the smallest possible bitcoin value
Actually, they are. The eight-decimal-places thing is pretty much arbitrary and the level of divisibility is open to modification in the future. Such a change would be a hard fork event and thus non-trivial to set up, but it is perfectly doable. If you've got most of the hashing network on board, it's possible to swap out basically any part of the bitcoin protocol. e.g. you could swap out the hashing algorithm in the event that something unfortunate happened to SHA256.
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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
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I could see a slight game-theoretical issue. If I believe that the currency will deflate in the long term (to an extent that beats interest rates in official currencies), then I have a strong incentive to hang onto what I have rather than spending or investing it. If everybody did that, we'd already deflate the currency in the present, which would be self-reinforcing.
Maybe the only thing counteracting this right now is the fear that the currency might collapse entirely before it reaches this point. We can s
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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
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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
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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
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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...
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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]
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Moore's law means that...
You are aware that Moore's Law no longer accuratly describes what it once did, right?
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...and it was never a "law", it was an observation of a trend in computing power.
Re:The Wild West (Score:5, Interesting)
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.
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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.
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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.
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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.
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Re:The Wild West (Score:4, Insightful)
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.
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The nice thing is that all of these currencies have a finite supply! (smirk)
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How can they be exciting?
Volatility, regulation, deregulation, crashes when drug sites get busted, gambling sites... ...what's not to like?
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Not only crashes but rebounds. Hell for someone who found out about it when it was worth pennies its been an amusing ride to watch! Silk road gets popped, boom drop. But it didn't go that far, it slid back...a few months? Then it rebounded, now its even higher.
You look at its potential audience and, the whole bitcoin economy is still on the small side of what it could be....and divisible to 8 decimal places? I wouldn't count it down and out yet, it still has the most momentum and buy-in of any alternatives;
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This is true. However, it's also on the big side of what it could be. It could be lots of things.
Yeah well, if you've already bought in, you have an incentive to say that. Some would call it hoping for a bigger fool to turn up.
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Re:The Wild West (Score:5, Funny)
How can they be exciting? It already costs more in power bills than you make mining and you have to have specialist hardware (unless you're stealing cycles elsewhere or are a retard when it comes to money).
Parents are paying the electricity bills and buying the computers.
Re:The Wild West (Score:4, Insightful)
The point of Bitcoin isn't mining. Complaining that you can't make money mining is like criticizing the dollar because you don't have a dollar printing machine.
I wonder (Score:4, Funny)
Did the "selfish mining pools" us a Greedy algorithm?
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I what you did there...
Temporary problem (Score:2)
There's a finite number of Bitcoins that can be mined.
So this problem will eventually disappear, right?
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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
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No.
You control the block chain, you control all transactions.
And when you control the mail... http://youtu.be/Rg_4z2adv6Q?t=16s [youtu.be]
The "middle manager" attack (Score:5, Insightful)
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.
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Where are my funny mod points when I need them.
NBD (Score:5, Interesting)
Re:NBD (Score:5, Informative)
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For an individual. If the US Government seriously saw BTC as a threat and wanted to use technical means to take it out, all it would need is a massive amount of processing power; the NSA either has that already or could build it out since their budget is essentially unlimited within their operational mandates.
Tinfoil hat (Score:5, Interesting)
So that's what the NSA datacenter is for...
DDoS (Score:2)
At the moment it seems DDoS is a bigger problem for things related to bitcoin, such as coinchat.org, inputs.io, etc.
Is there a way to generate value besides mining? (Score:5, Interesting)
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.
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I don't think you quite understand how prime numbers work. If it's easy to check that a number n (known to be larger than some m, for example 1 trillion) is prime, then it's also easy to find the first prime after m, due to the distribution of primes. For example, you only have to expect to test about 14 odd numbers greater than 1 trillion to find one that is prime. So if t
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Maybe you don't? Proof of work is something you do that requires work and there must be an easy way to check that the work is done.
What sha1 hash salted with ABCDEF ends in the hex: 01234? 01235? 01236? Please show your work, and explain why your average workload to solve this type of problem will not be consistent?
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Of course, the law of large numbers will converge a large enough number of individual poissons (or anythings) onto a normal distribution, but for bitcoin the proof of work is not for "a large enough number of" results, but for a single one. That single tweak - asking for 16 results that are 16 times easier, say - would increase the fairness, and decrease the luck aspect, significantly. L
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Most proof-of-work systems are probabilistic. Can you cite one that isn't?
Anyway, if you're doing a lot of proof-of-works, then the average amount of work is pretty consistent.
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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
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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.
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There has to be another way to establish value for a virtual currency.
Virtual Bernanke
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And yet Japan's been trying to devalue its currency by making it less scarce, but investors keep valuing it higher. I guess your quantity theory of money fails.
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A currency has value only from what people will trade for it. Scarcity is only important in so far as it informs that. The US dollar isn't really scarce any more, as the Fed has established what amounts to an infinite pool, but that's a slow-motion effect and locally it still works.
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So the more wikipedia readers there are, the less valuable wikipedia gets?
It's true and that pool is BTC Guild (Score:2)
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?
Wow. A really really unethical headline... (Score:5, Informative)
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.
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Wow, a really unethical anonymous comment. Someone trying to prop up the value of their stash?
See, this works both ways.
Technology can't cure human nature (Score:3)
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.
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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.
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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
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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.
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That's a good idea. I hope that it succeeds.
FUD (Score:2)
Sounds like the author wants to buy some cheap BTC.
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You think that a Slashdot article is going to impact the price of bitcoins?
Seriously?
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And movies used to cost a nickle. This ghost town couldn't move the price of warm piss.
I prefer currency 1.0 (Score:3)
AKA Gold.
If someone has found a way to hack gold, they have had the good sense to keep quiet about it.
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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
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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?
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Sure, Tungsten and Gold have the same density, but that could be expected. Of course, there is this gold hack [wikipedia.org]. >:)
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Gold-pressed tungsten? Sounds like something from Star Trek if you ask me.
Re:I prefer currency 1.0 (Score:4, Informative)
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.
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An alchemist never reveals their tricks
It's pretty straightforward if you have access to a particle accelerator and some lead...
ZOI violation (Score:2)
Why 25%? This appears to be a violation of the Zero-One-Infinity Rule [wikipedia.org].
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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
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No, it's about arbitrary limits. And the origin of the term is unrelated to software; therefore, it isn't only about software.
Money, Power... Women (Score:2)
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.
Thank you Slashdot. (Score:2)
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.
Ridiculously Over-Hyped (Score:4, Informative)
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.
Comment removed (Score:5, Interesting)
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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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because it's an underground currency that doesn't have any reliable defining body
What do you mean by "defining body"? I googled it, but all I got was cosmetics. Your shampoo has "defining body".
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What he means is actually rather simple, though he didn't phrase it very well.
When you have a traditional currency like US Dollars, you have a built in demand for said currency. You must pay US taxes in US dollars and so every entity subject to US taxes requires at least some US dollars. In the case of something like BitCoin there's no built in demand for it. Even places like SilkRoad still eventually have to turn BitCoin back into currency they can actually buy something with, and at the moment the only re
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Only reason is the black market uses it. but that is falling apart as the cops found ways of snagging drug dealers and other criminals bitcoins so they will be switching to another way.
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You would have to reject blocks with timestamps that are around 10 minutes wrong. Many legitimate nodes' clocks on the network are further apart than that, so that wouldn't work.
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The entire point of Bitcoin's mining process is to establish a decentralized trustless timestamping service, and to avoid the need for a trusted timestamping server. If you add a trusted timestamping server, you make most of Bitcoin's design redundant, and vulnerable to abuse by the trusted server.
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There is already some timestamping in the Bitcoin protocol, and this kind of attack was at least considered once upon a time by Satoshi before he went and disappeared.
The time stamp process within the Bitcoin protocol is more or less an average of what most of the clients say is the current time, and that protocol could be further refined in terms of eliminating outliers (one client or a small group of clients could in theory be rejected). At the very least you can program your own packet sniffer to flag c
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Except that the time stamp is built into the hash that generated the block in the first place. In other words, if you say the block was mined just one second later (which BTW sometimes does happen.... some blocks are generated very quickly after the previous block), the time stamp much also include the hash "proof" where the time code is being used as a part of the verification that the "winning" hash has in fact been achieved.
Unfortunately the current Bitcoin protocol doesn't really care when the blocks w
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Bitcoin isn't intended to be a money-making investment tool.
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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.