Please keep in mind that convincing me isn't less difficult than convincing the whole network. You still need to produce hashes lower than the target, and even if I am only connected to you and perfectly believe you, every block you need to produce needs the same amount of work as the rest of the network.
I don't see how that follows yet. Rolling back transactions or double spending is more than enough to sink everything. I merely need to fool you for long enough to engage in another transaction - perhaps including converting the currency out of bitcoins. Bitcoin's own vulnerability FAQ (which openly discloses several fatal looking flaws I hadn't thought of besides this one) indicates segmentation is not a practical attack because "any leakage" will carry the whole network state. Which I don't understand at all - because in many scenarios it is more work to create segmentation with leakage than without?
The attack presumes I can control your communications with the rest of the world - indeed, for most internet users this is the status quo via several entities, such as their ISP and their repressive government (leaving aside the various other ways it can happen). A split sounds like a good term - splinter, probably more accurate. In such a case, the difficulty of the attack must be reducible, or how can the rest of the world, which we are not communicating with (for long enough for me to defraud you) still be a factor in the CPU spend for the attack? Shannon will wake from his grave to hear the explanation.
Once I have my stolen cash, I'm perfectly happy for the splinter to heal - in fact, I want it to, so I can steal from you again later.
In discussions I am having here today, this is still news to others, I'm afraid. In fact I think it is hardly redundant. For instance, I would like to address your assertion that, If you wish to remain anonymous, trusted 3rd parties have any relevance.
First of all, the concept is enormously troubling on its face - enough so that no one seriously advising others about anonymity should speak of it. But let us say there are really 3rd parties you would like to trust, and you have a desire to perform anonymous transactions.
I think we need to make it clear what we are talking about here: Bitcoin is the least anonymous, most transparent currency ever invented. Nothing else in existence is more law-enforcement-friendly.
Your trusted third party scenario is my dream if I am an FBI agent. As an intermediary for someone else, you buy something with account Y. Associating your real identity with your cryptographic identity is policework - let us admit that it can and will be done. From there on out I can see every transaction you have ever made with Y. You may make multiple identities - so much the better. With surveillance of your net connection (which even in the US I can do without a warrant) I will learn any identity you use to conduct business. That's leaving aside that, soon, wallet Y will be empty and wallet X will be full. What will you do then? It is impossible to indefinitely segment your payables from your receivables, for reasons found in elementary accounting.
You have all the same problems as a traditional money launderer and many new ones that no money launderer has ever had before.
Anyone who wishes to perform anonymous transactions (the right of every hard cash holder since the invention of money) should run screaming from Bitcoin.
Because the transaction data you need isn't in the chain.
If I cannot tell who owns what, then I can double-spend. If I can tell, then I can see transaction data. No amount of complex dressing can hide this simple wound.
In fact the chain is exactly the transaction data I need, unless I have totally misunderstood the chain, and so did the many security researchers that have been creating transaction graphs from it, i.e. http://eprint.iacr.org/2012/584