

Taking Down The Bitcoin Network - kiba
http://bitcoinweekly.com/articles/taking-down-the-bitcoin-network

======
fraserharris
The government does not need to take down the network to cripple Bitcoin, it
just needs to make it difficult to exchange it for other currencies. This will
dry up demand for Bitcoins, and the exchange rate will plummet.

The US government can compel almost any financial institution in the world to
stop exchanging Bitcoins by threatening to sanction them for money
laundering.[1] A private letter from the State Department stating that an
activity is illegal (without specifying any laws) has been enough in the past
for certain significant money transmitters.[2]

Recent reports that Bitcoins are being used in the transaction of illegal
drugs & money laundering make it highly likely there will be government
intervention.[3]

[1] <http://en.wikipedia.org/wiki/Banco_Delta_Asia> [2]
<http://techcrunch.com/2010/12/08/paypal-wikileaks/> [3]
[http://www.theregister.co.uk/2011/06/08/bitcoin_under_attack...](http://www.theregister.co.uk/2011/06/08/bitcoin_under_attack/)

~~~
gst
Yes, the US gov can easily prevent financial institutions from exchanging
Bitcoins: If a bank holds US dollars, those dollars are "stored" in the US
(even if the bank is located outside the US). So the US gov just needs to
threaten that it will freeze the banks dollar deposits in case a bank decides
to exchange Bitcoins.

No, the US government cannot easily block other types of Bitcoin exchanges.
Consider bitmarket.eu: The site itself is hosted outside the US. Money
transfer happens directly between individual users, e.g., by wire transfer.
There's no single entity that you can attack.

And even in case where bank transfers are shut down you can still switch to
cash. If you have a trusted exchange you can send cash via postal mail. Or
your local drug dealer changes his business from dealing drugs to dealing
Bitcoins. Of course, this will prevent many legitimate uses of Bitcoin - but
I'll doubt that it can stop the usage of Bitcoin for "illegal" transactions.

~~~
jerf
I think a lot of people aren't really following this argument correctly. There
is no necessity for the government to completely destroy BitCoin. This isn't
about it being all or nothing, or even the government obtaining satisfaction
in its efforts. The point is that they have very powerful tools to move the
"demand" part of the supply/demand curve determining BitCoin's value in
dollars (and by extension, the greater Global Economy that dollars are a part
of; it is basically impossible for BitCoins to have vastly greater value in
Euros than Dollars because that's just an arbitrage opportunity that will be
immediately exploited and thereby removed). By powerfully dropping demand, the
value of BitCoins will rapidly drop. The fact that they are rapidly dropping
tends to self-reinforce. In minutes or hours, your "$500,000" of BitCoin could
be worth ten cents. Are you going to be motivated to stick around after that?
The True Believers will, but most average folk and most intelligent financial
folk won't.

The end result may be an economy that the US government can't shrink past a
few tens of thousands of dollars any more than it can eliminate drugs. But
even if BitCoin is not "killable", it certain _can_ fail to meet the goals set
out for it, and it is pretty much within the power of the US government, and
for that matter several others, to make that happen. You don't have to destroy
it utterly to make it useless. In fact I'm rather concerned that BitCoin can't
even survive a _non-_ government caused shock once it is being used by more
than just True Believers.

(Also, note that the immediately obvious parallel of the drug war doesn't
apply; government attacked the supply of the drugs but has much less power to
affect demand. Attacking supply causes prices to rise, but then the increased
prices drove increasingly well funded smuggling efforts. If the government
could actually remove the demand for drugs in some magical manner, the War on
Drugs would be over in a matter of weeks.)

------
gst
"Even in a worst case scenario, if a government or some other anti-Bitcoin
faction gets a hold of greater than 50% of the processing power (an extremely
expensive feat, and hardly worth it unless you're really determined to destroy
the network), the rest of the network can be reconfigured to reject that block
chain."

At this point the author shows that he does not have much technical background
in regard to the Bitcoin network. Once an adversary gains >50% of the
processing power you have basically lost. Yes - you can manually blacklist a
single "fork" of the blockchain, but the adversary can fork as often as he
wants and you cannot immediately tell if a new block has been generated by the
adversary.

~~~
gasull
> _Once an adversary gains >50% of the processing power you have basically
> lost._

Wrong. An attacker having more than 50% of the network would just stop
payments until the rest of the network rejects the attacker nodes.

[https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_...](https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_computing_power)

~~~
gst
You can't "reject attacker nodes". There is nothing in the blockchain that
identifies a given miner.

~~~
gasull
I've seen pie charts with the computing power of several mining pools and the
total. I believe you can find the IP of a miner that has a lot of computing
power.

~~~
gst
If there's a public mining pool it's easy to estimate it's computing power.
Just take part in the mining pool and compare your own computing power with
the percentage of the 50 BTC that you get for each block. Or, alternatively,
you can track the BTC that you get from the mining pool back to the block
where they were generated, and so you know that this block must have been
generated by the mining pool (again, allowing you to use the amount of blocks
generated by the mining pool to estimate it's overall computing power).

However, if the attacker does not use a public mining pool, but private
infrastructure, things get more complicated: The only way how Bitcoin clients
can agree on a common view of the block chain is to treat the highest block
number as the authoritative one. A malicious miner can now just generate new
blocks and inject them over Tor to some of the Bitcoin nodes. As Bitcoin nodes
distribute the blockchain amongst each others, those "malicious" blocks will
quickly spread throughout the Bitcoin network.

The only way how you could prevent this problem is some kind of whitelisting
approach, where miners need to be manually approved before their blocks are
accepted. However, this would totally change the current Bitcoin
infrastructure and turn a completely decentralized network into a more
centralized one.

~~~
gasull
This is very interesting. Thank you for the info.

I think a solution to this attack would be a web of trust, like PGP/GnuPG
works for verifying signatures.

------
joshaidan
I believe people have already brought up this argument in the past, but what
are the arguments against why forking new bitcoins won't devalue the currency?
Lets say one day Lady GaGa decides to start her own bitcoin, would that in
anyway devalue the current bitcoin network if everyone instead decides to
start mining Lady GaGa bitcoins?

------
Duff
I guess it's time to prime the pump again. More hype == more investment == $35
bitcoin.

Then in a few weeks, the early adopters start the "dump" phase of pump & dump.
(ie. history repeats itself)

------
danenania
"The likelihood that some government is going to declare Bitcoin illegal and
try to crack down on it is low"

I wish this were true...

------
trotsky
_Bitcoin's greatest strengths [...] that will hardly affect the average user
of Bitcoin [...] avoiding a port blocking attack would be as simple as [...]
The forums and main site would be up in a matter of days [...]_

ad infinitum.

While the article may (or may not) mostly make valid points, there is no
honesty in linking to a site that will always promote the subject and only
give positive spin to the discussion.

Imagine the subject of debate was axes: are axes dangerous? If you only asked
theAxeGuild.com the answer would always be no: axes are useful tools but far
too unwieldy to be used as a weapon. Such a website would fail, of course, to
publish the editorial: "My whole family was killed by an axe murderer".

Clearly this website is simply trying to sell you axes no matter how good or
bad they might actually be.

------
mootothemax
Surely there's an easier, legal and potentially cheaper solution open to any
government that wants to shut down bitcoin: buy up each and every bitcoin they
can lay their hands on.

I would have thought it would wreck havoc with the market (there's no reason
why the government couldn't use multiple fronts rather than buying under the
same wallet), and past a certain point make it impossible to trade in bitcoin
without inducing a headache.

However, I accept that I know next-to-nothing about how money markets _really_
work; please let me know where I might be going wrong :)

~~~
danenania
That scheme would fail due to basic forces of supply and demand. The
government in this case would be a de facto market maker and the price would
naturally get pushed up to the maximum amount the government is willing to
spend as speculators continually test the limit, which if the government has
an 'acquire all bitcoins at any cost' mission, means the limits of its overall
solvency.

It's actually a similar scenario to what's currently going on in the bond
markets. The Fed steps in any time bonds have a weak auction. Traders, knowing
this, buy lots of bonds. It's basically a free roll for them because they know
the Fed will always step in to prevent a major dip in price--and this cycle
will continue until the Fed itself (aka, the dollar) collapses.

So who knows, maybe they are dumb enough to try! :)

~~~
mootothemax
Thanks, your explanation is really helping me to understand! :-D

One potentially embarrassingly stupid question: you mention the government
becoming a market maker. As far as I'm aware, it's not unknown for traders to
spot an opportunity and corner the market. Surely Bitcoin's in an early enough
stage to still do so?

------
mrvc
If anyone wants it I'd be happy to write up a quick how to on how Bitcoin
really could be shut down, I have some expertise in the area if that matters
and no serious bias either way.

~~~
gasull
Go ahead and write a blog post.

~~~
mrvc
Done. Check nerdr front page for the article.

~~~
gasull
Thanks for writing it. Point by point:

\- Bitcoin software: It's open-source. How would anybody compromise it with so
many eyes watching?

\- Bitcoin trail: Solved using Tor and adding noirc='1' to bitcoin.conf file.
Also you need to earn your bitcoins anonymously. Anyway, Bitcoin isn't
supposed to be anonymous. It can be anonymous if you do it right, like you can
browse the web anonymously if you do it right.

\- Bitcoin public data: Same as with bitcoin trail.

\- Bitcoin exchange: Right, but you can buy bitcoins from someone without
revealing him/her your name.

It seems your article analyzes if Bitcoin is good for money laundering. It can
be used for that, but I don't care. It isn't what makes Bitcoin interesting.
Bitcoin is an alternative to payment methods like paypal, to currencies like
the dollar or the euro, to payment transfers like ACH or Western Union, and to
bank accounts. That is what makes it an awesome currency. That is what makes
it disruptive.

It can be used for money laundering just like cash and offshore bank accounts
can be used for money laundering. Way more people are using cash than bitcoins
for money laundering. And that isn't what makes Bitcoin disruptive, because
money laundering already exists.

~~~
mrvc
Open source code tends to give a false sense of security. Many people assume
others will check the code, yet few do. In addition, it is possible to spread
malicious code throughout a code base to prevent detection. (mentioned in
article).

To use TOR you still connect through an ISP. That can be tracked and deep
packet analysis can be done. TOR is not a magic bullet.

Exchange - Correct. That was coming in part 2 of the article covering methods
around each point, but unlikely to find the time to write it up at this point.

I leave the question: Why else would one use an anonymous currency unless they
don't want to be detected? From there, who does not want to be detected?
Usually those doing things they shouldn't. Otherwise, you'd just use a credit
card or normal payment service as an everyday citizen would.

~~~
gasull
_Open source code tends to give a false sense of security. Many people assume
others will check the code, yet few do. In addition, it is possible to spread
malicious code throughout a code base to prevent detection._

Those few who do are usually enough. Closed-source code gives a false sense of
security. There are way more exploits for closed source code and they tend to
take longer to fix.

 _To use TOR you still connect through an ISP. That can be tracked and deep
packet analysis can be done. TOR is not a magic bullet._

Untrue. Deep packet won't see anything besides an encrypted connection. If you
use Tor bridges nobody will know you're connecting to Tor.

 _Why else would one use an anonymous currency unless they don't want to be
detected?_

It isn't an anonymous currency. That's the main misconception about Bitcoin.
Bitcoin can be anonymous using Tor. Just like the web can be anonymous using
Tor. But the web isn't anonymous per se, and so isn't Bitcoin.

Again, the main point of Bitcoin is how disruptive it is for the banking
industry. It makes micropayments easy, it makes transactions among individuals
easy and decentralized, etc. It disrupts their business models based on an
oligopoly.

Why would you use Bitcoin? Because you can:

\- Be anonymous if you want, but you don't have to.

\- Transfer money to someone, overseas, without any fees.

\- Charge money for your business without paying horrendous credit card or
Paypal fees.

\- Stash your money securely in case of Government collapse (think Argentina
10 years ago, Belarus 2 weeks ago, or Greece very soon)

\- Make confiscation impossible if you leave in a corrupt country.

\- Make micropayments (like tips) without fees.

\- Buy stuff online from overseas (people are doing this with a NewEgg proxy
that accept bitcoins)

And there are many more use cases that I'm probably forgetting right now.

~~~
mrvc
1\. Apologies for the misunderstanding. I didn't mean to say the code will be
open to exploits, I meant the code will intentionally contain a backdoor at an
agencies behest. Exploits are another matter entirly and open source has its
pros and cons for that purpose.

2\. Then TOR bridges could be blocked at ISP level or made illegal. We're
starting to see censorship arise on the internet and it's possible.

3\. Many of these use cases are of course valid, But I will add their exist
transaction fees which are paid when bitcoin are transferred, plus exchange
fees when bitcoin is exchanged for real currency. It's not a fee free currency
as suggested. I would add (and this is of course a guess) that most users will
have illegal purposes and intent in mind. If only because they have most to
gain from Bitcoin use. Most average folk don't ever see a 2% Visa fee as
business absorbs this cost, so for a user purchase fees for everyday goods is
not a value driver. I can see it being used for tax avoidance, money
laundering and payment for nefarious purposes. Other use cases do not stand up
to value analysis.

~~~
gasull
1\. If it had a backdoor, other programmers would see it, because it's open
source.

2\. Tor bridges can't be blocked because the ISP won't know the IP of them.
Please inform yourself about what a Tor bridge is.

3\. Have you used Bitcoin? Transaction fees are voluntary. You pay them if you
want the transaction to be faster. Compare that with the fees you pay with
Paypal even for sending money to a friend. Or compare it with the slowness of
an ACH. A Bitcoin transaction without fee still beats an ACH transaction for
several days. About money laundering and illegal activities, Bitcoin is as
anonymous as having an offshore account in a tax haven: it's usually possible
to trace down who the person is. If you dig in the Bitcoin community you'll
see one of the most repeated questions in the forums is how to report to the
IRS the money earned in Bitcoins. Right now most users of Bitcoin are partly
ideological, like GNU/Linux users 10 or 15 years ago. It's about freedom.
About having a currency not manipulated (inflated) by Governments.

I think you're believing the FUD spread by some people about Bitcoin.

