I ended up not investing, because of the possibility of a double-spend attack. I think that cryptocurrency enthusiasts are seriously underestimating the importance of double-spending attacks to the economics of bitcoin and other cryptocurrencies.
A few points that convinced me not to put my money into this system:
If hash capacity were traded on a perfectly competitive market, then it would always make sense to rent 51% of the capacity at market rates, earn the transaction fees, and also perform a double-spending attack. There is no equilibrium point for transaction fees where this attack becomes uneconomical. The only defense is that the market for hash capacity is imperfect.
The market for hash capacity is going to become more efficient over time. ASIC miners will be commoditized, so that hardware investment becomes a much smaller factor in hash cost versus energy. This might be even worse during a bitcoin downturn, because there could be a glut of ASIC miners.
Miners will coordinate with market prices, turning off capacity when the price dips (for example, because someone is underbidding to create a 51% attack). If mining becomes more decentralized, it will be harder for miners to act in their common interest (fending off 51% attacks) and against their immediate interest (selling their hashrate to the highest bidder, or taking it off the market during an underbidding attack).
High transaction volume is not necessarily any help - the more transaction volume, the higher the cost of the attack, but the greater the rewards. The semi-anonymous nature of bitcoin means that one could easily flood the network with double-spend transactions. Attacking a huge network like bitcoin would be an audacious and expensive act, but there are certainly organizations with the resources to do it, e.g. intelligence agencies, organized crime. The massive rewards to such an attack also offset fixed costs such as writing and testing the software to carry out the attack.
If you look at the original paper, it's pretty clear that Bitcoin was meant to be peer-to-peer electronic cash: https://bitcoin.org/bitcoin.pdf
In practice, it has failed at this aim. I don't think that was necessarily so; plenty of things start out rough and become more useful over time. But the mechanics-adorers I've talked with seemed willfully blind to all the practical issues. We can't fix problems we refuse to see, so Bitcoin has preserved its machinery at the expense of fulfilling its vision.
They succeeded by expanding the mechanism to support actual discovered user needs. Which is what Bitcoin signally failed to do.
Besides, AirBnb didnt even fail in providing accommodation for conference goers with included breakfast. It still works perfectly in its original intended use.
Bitcoin was a political experiment before it was a technological one. You don't pivot political beliefs the way you pivot a business. The technological experiment is still ongoing, but the political experiment has failed its goals.
Really, though, I think the closest financial match is a private currency: https://en.wikipedia.org/wiki/Private_currency
These are illegal in most places because they historically have caused a lot of problems without much in the way of redeeming value: https://en.wikipedia.org/wiki/Banking_in_the_United_States#1...
Digital currencies can be used via computers and networks while physical currencies such as banknotes and gold requires sneakernet.
I use technology to solve problems for people. The few niches Bitcoin has found (e.g., speculation, money laundering, ransoms, light drug crime) are not really what I would call solving problems for people.
Bitcoin has property similar to cash to many extend. It was not technically possible before its invention and as such as it is a real intrinsect value (dont ask me to quantify it)
Regardless, your point doesn't make a lot of sense, because many Germans surveyed on this say they use cash because it gives them better control over spending and more clarity as to where their money goes. Bitcoin is in no way superior to a debit card in that regard.
The value of new possibility isn't really intrinsic; you measure it through seeing if people actually use it. With Bitcoin they mostly don't, which suggests that it is at best more useful to a small slice of people.
There would seem to be organizations (states?) that can wield tremendous resources to mine Bitcoins. I would think this would devalue the currency and, as is so often the case in life, fuck over the little people.
Never mind the insane amount of actual energy resources needed for this virtual currency. It almost seems immoral.
And with exploits like the one in this article, how can anyone continue to have confidence in it? It feels more akin to Confederate money printed during the U.S. Civil War.
Then it hits the real world, and suddenly what people actually do with it and its valuation is dependent on how the exchanges operate (are exchanges even mentioned in the original paper?), energy prices in China, media coverage, interactions with alt-coins, etc.
I'm asking what the long game is? You haven't helped.
Hostility toward a community in which the target currency is particularly popular.
“Some men just want to watch the world burn.”
Mind you, I say this as a crypto currency outsider.
That's true as long as cryptocurrency itself is seen as fringe; it's less true if cryptocurrency becomes generally accepted.
Of course, a nation-state or other actor interested in preserving the role of fiat and keeping cryptocurrency on the fringes is also a possibility.
They have an underlying value/utility. People have a real, tangible need _outside of the use of those products_ to get them fixed. Can you say the same for a cryptocurrency?
Edit: any crypto-currency you can exploit gives you option to print yourself money.
It’s more like being able to write two checks for your whole bank balance
and having them both clear.
So very relevant are:
- whatever goods you bought with the checks need to be impossible to recall. So, like you need to find (two) someone’s who will effectively cash your check. You can’t buy a house because the police will come take the house back.
- you need to do it fast. The second you make are the first transaction you need fork and start mining hard. 51% gives you a speed advantage, but it’s very small. It still takes time to get the network to follow you.
Double spend is a very specific heist. Even if someone did it, it wouldn’t mean Bitcoin is valueless, it would just mean a certain class of heist is somewhat more probably and people need to adjust their security practices accordingly.
Tricks like waiting for extra confirmations, requiring identification before accepting payment, etc, are easy remediations.
First of all, the value of a currency that could be printer on any printer might not actually be even 0.
Secondly, cryptocurrencies do not operate in vacuum. Its not as simple as "printing yourself money".
Second, if I went to a store spent 199 dollars and those 199 dollars magically reappeared in my hand, didn't I create money out of nothing and reduce dollar value? Yes I did. Even if I never cloned any money I reduce the expectations of future stores that their money won't magically disappear.
And yes, I am aware banks do this, but they are regulated and when they abuse it, you get a financial crisis.
Also, all systems that pay taxes are negative sum as well! Utility is not measured in money.
You're also wrong about taxes. Consider my local taqueria. They buy raw materials and create value by making ready-to-eat food just when people are hungry. They receive cash in exchange, a portion of which they pay in taxes to fund the infrastructure their business depends upon.
That is positive sum for all participants. It has to be. If taxes tipped it into the negative sum category, they'd eventually close down.
If you buy 50 dollars of taco materials, then taco materials seller makes likes than 50 dollars ,because the state will charge a tax on him. If he didnt sell 50 dollars worth of raw materials, he would have 50 dollars of raw materials to consume, instead of less than 50 dollars.
On the other side, making the taco, you have the same issue: if you sell 100 dollars of tacos, and someone pays you 100 dollars for them, you then pay taxes.
You earn less than 100 dollars, and someone else lost 100 dollars. Repeat the proces ad-infinitum and your holdings go to 0. (assuming for simplification, any rate of positive taxation on income).
Most economic activity is positive sum. When I'm hungry and on the go, a taco is more valuable to me than raw taco materials, so I pay more for it. Value has been created. The taqueria owner takes money in, pays their expenses, and is left with a profit. Taxes are paid out of that profit, and you could just as well model it as another kind of expense, a societal infrastructure fee.
Many countries use value creation as an explicit taxation model: https://en.wikipedia.org/wiki/Value-added_tax
Those are still positive-sum interactions in the economic sense: https://www.tutor2u.net/economics/blog/qa-what-is-a-positive...
But not dollars, which is what you are using to classify gambling as negative-sum.
> Many countries use value creation as an explicit taxation model: https://en.wikipedia.org/wiki/Value-added_tax
If the gobernment collected that tax but didnt spend or issued money, even VAT ends up capturing all the money supply.
This is an unnecessary long argumentation. Gambling is not negative sum because they provider entertainment that has utility.
I understand you are claiming the entertainment value outweighs the harm of exploitation and addiction. I strongly disagree.
You earn less than 100 dollars, and someone else lost 100 dollars. Repeat the proces ad-infinitum and your holdings go to 0.
Expected value is not the only thing to consider. Higher moments matter.
Insurance typically has negative expected value but it’s rational to buy it (in conjunction with owning the insured object) to reduce one’s variance.
Gambling will increase the variance of one’s portfolio at the cost of expected value, which can be rational depending on one’s situation.
Apart from weird edge cases where an actor needs to double their money overnight to return to solvency in order to have a chance of benefiting from an income stream in future, there aren't many cases where it makes sense from a portfolio allocation basis given the existence of non-negative expectation bets in other markets with a wide range of possible variances. The insurance and investment management industries are built on the principle that economic rationality works in exactly the opposite way to gambling: that inherent value exists in reducing risk.
It's a useful currency.
Amazon alone probably handles more transactions over the course of a couple of weeks.
Even prominent Bitcoin advocates agree it's not effective as a currency: http://avc.com/2017/08/store-of-value-vs-payment-system/
I have a shift card, bought tacobell with bitcoin.
And that's not even considering the transactions fees it costs to get the Bitcoin to your account.
Then there are the transaction fees for using the card, which coinbase says is free "for now".
Sure, transactions are intermediated through some consensus denomination for exchange. So?
He still lost bitcoin and gained tacos. Just as someone else might lose a portion of a credit balance and gain tacos. You get just as full either way.
If you insist that the guy paid his beer with USD, it is going to be very difficult to discuss about anything as the meanings of the concepts are so twisted.
It is quite obvious that using a credit card that then accepts BTCfrom you does not mean that you use BTC to pay for anything but your credit card bill.
Credit and debit cards are just a way of shifting dollars around. Bitcoin is more a commodity than a currency. Yes, you can convert gold or oil to dollars and buy things, but you can't walk into a store and give them some gold flake or a quart of Texas crude in exchange for a candy bar.
A credit card is shifting a line of credit, an intangible promise to pay, a form of trust, that happens to be denominated in dollars.
We can pretend it's just a balance of dollars, even though it technically isn't, because it makes conversations easier, and in practical fact that's how it appears to work. But that's just a shorthand.
We can use the same shorthand to say someone bought something with bitcoin.
There's no reason to demand perfect technical precision with bitcoin and no similar pedantic precision with lines of credit.
> you can't walk into a store and give them some gold flake or a quart of Texas crude in exchange for a candy bar
I think this is the best test. Here the guy has done that. He walked in with bitcoin and walked out with tacos. When you say that's not really what happened, it feels like a no true scotsman response.
Bitcoin is not a currency. Plenty of other things are true currencies, so there's no fallacy here.
Also, consider ghash.io or the odd OKPAY double spends.
If a bank is critically hit so bad funds become impossible to correctly attribute to people (Fight Club type unrealistic scenario), at least in the US FDIC would probably come in to play. The bank might even have to be treated as a failed bank.
People wouldn't stop using banks, but they would stop using that bank.
I'd really like to live in a world where that's true, but I don't see Equifax going anywhere. PayPal does a form of this as well, except it's the central system and not a rogue actor that locks your money away. Well informed users avoid PayPal, but there appear to be many more uninformed users.
A major hack against Visa would absolutely tank the value of Visa the company however, and if people who believed they were paid weren't made whole somehow then it would also tank the acceptance of Visa.
And it would be an ongoing devaluation without Visa being able to show they'd fixed the underlying flaw - which you can't with a 51% attack.
I think people need to be concerned that Governments, at any point of time, with their incomprehensibly huge computation power, can use it to crush bitcoin. Not only that but they can pass laws that allow them to forcibly seize the fattest wallets. Which ultimately ensure's that the Government can, behind the scenes, kick the scaffolding out from beneath us. All I see right now is state level actors experimenting in this regard, because seriously who single handedly has the computation power to take control of these cryptocurrency's if its not the government or a company like Google?
To the extent there is a legitimate threat to dollar supremacy, it is in the Chinese renminbi. The U.S. dollar is ascendant because of the huge base of American consumers, who buy stuff with dollars others then need to find investment for. Plain and simple network effects.
The US dollar is useful to countries like china is because the US government acts as a debtor of last resort, allowing them to park surpluses in treasuries.
Which ultimately derives from our mammoth consumption. If Chinese consumption eclipses America's and their economy rebalances, they will have lots of Chinese consumers buying goods with renmimbi, leaving sellers offshore with boatloads of the currency to find investments for. (I consider this to be a moderate risk, and not one which would supplant the U.S. dollar but instead cause it to share the world stage.)
TL; DR Bitcoin is not a serious threat to the U.S. dollar. It promises huge profits to banks, which is why they're salivating over it.
The Chinese government is not interested in filling this same role, even if now anemic Chinese consumption somehow picks up, they will probably still want to maintain absolute control over the exchange rate.
But fortunately, these state actors seem to have no interest in attacking crypto.
It seems like the governments that matters IE the 1st world, are perfectly happy to allow people to have access to a censorship resistant method of financial transactions.
This makes a certain amount of sense. The governments of the 1st world claim to care a lot about freedom. And it seems that they are getting us have it.
I don't see any of these privacy coins being banned yet, so.....
But anyways that is besides the point.
The argument that the OP was making was that governments are areal threat to crypto. And MY point was that these governments are NOT actually attacking cryoptocurrencies so I guess things are going to work out fine for cryptocurrencies.
2. Rent 51% and mine a fork in secret for a week
3. Wreak havoc
4. Collect money
Only if you make it public. A 51% attack works at a poker table too, but only if the marks don't know the game is rigged.
A successful double spend makes it public, as well as announcing your intentions to get to 51%. If you're quiet and can pull off a successful 51%, you can create the double spend before anyone knows.
If renting asic miners becomes vogue (and it might because it makes the computing market more efficient) then it might be possible just to rent asic miners for nearly free, since you'd be acquiring bitcoins while you were amassing the 51% computing power.
So why the pow? Is this stabilizing the actors somehow? It seems like an explicitly managed network would be no less centralized, way more efficient, and way more user friendly.
> Any non-colluding ecosystem should have centralized.
Not exactly. There's real laws and borders and market realities that prevent the ultimate centralization of hashpower but what's clear is that centralization is works, centralization is extremely profitable, it's happening and it will continue . Centralization, I would suggest, is the true goal of bitcoin and is the inevitable conclusion.
> So why the pow?
I see what you're getting at but it should be obvious. The miners are paid very, very handsomely not to collude. Bitcoin miners charge fees that are effectively far greater than any centralized authority. They reap billions in profit each year  for turning on a bunch of computers and plugging them in. A cynic might say the "proof of work" is a marketing tool to disguise what is really just the mass transfer of wealth to the miners. Certainly, bitcoin holders believe that miners have somehow "earned" these outrageous profits.
In addition to this you have to do it on margin, and most exchanges have a history of dubious liquidation of margin positions.
Large miners don't want to see Bitcoin get attacked because it destroys their income and de-values their incredibly expensive hardware. This is also why miners won't just let you borrow their hashrate for a while - it's a big issue if you use that hashrate to undermine their cash cow.
In 2013, the network forked unexpectedly  and the Bitcoin network had 2 chains for about 4 hours. During those 4 hours, it is entirely possible that people sent BTC to exchanges they knew were going to be on the chain that ended up being orphaned.
A conniving team of centralized developers can take this a step further and discover or intentionally plant a consensus bug that causes such a fork and because developers ultimately tell everyone which chain contains the "fix" (in 2013, they commanded that the minority chain was the right one), the developers know which chain will be orphaned and thus which exchange they can exploit.
Security in crypto is a very slippery concept, and many conclusions are non-obvious, if not outright counter-intuitive.
There are a lot of problems other than double spend with the Bitcoin. Transactions fees rise very quickly because of the block size limit of about 1MB. You can't really rely on 0-confirmation transactions. The saviour lightning network in my opinion is the wrong solution to the scaling problem. It changes fundamentally how bitcoins are exchanged and steers away from the original white paper by Satoshi. Not that this is wrong... it just becomes another project altogether.
As a cartel must outmine the entire Bitcoin network and thus outspend the entire Bitcoin network for as long as it would remain a cartel, we believe it is very unlikely that a cartel could double-spend enough to recover the cost of the attack...
As described above, a 51% cartel attack is unlikely to generate enough reward within the Bitcoin economy to be worthwhile to the attacker. However, this does not rule out the possibility of a 51% attack that aims to destroy the Bitcoin economy in order to achieve utility outside the Bitcoin economy. We call this the Goldfinger attack after the character in film who tries to undermine U.S. currency by ruining its gold backing ...
In all of these cases, the attacker must achieve enough utility to justify the substantial cost of an attack. We agree with Becker et al. that it is unlikely that a protest movement could muster the resources to launch a successful attack. And at present it does not appear possible to acquire a short position on Bitcoins that is large enough to justify an attack. (2013)
The Economics of Bitcoin Mining, or Bitcoin in the Presence of Adversaries
Joshua A. Kroll, Ian C. Davey, and Edward W. Felten,
But, if we take on step further and continue our experiment, lets compare the actual facts with the assumption.
And what we see? Two cryptocurrencies (Bitcoin Gold and Verge) which were successfully attacked this week, didn't lose in market cap.
How comes? What conclusion should we take from this assumption/fact, if continue being scientific? Do we need a new assumption?
A mid-term (3-7 years) of irrational behaviour in a market in not unusual. Some will benefit from it.
How do you know the current behavior is irrational? We probably just don't know what kind of rationality is behind this.
What if it is not drive by the technical merits of blockchain, but still based on some rationality, we reject to agree with?
It has nothing to do with Bitcoin.
Nation states. Don't forget the large number of sanctioned regimes who would (a) have the resources to execute such an attack and (b) find great profit in doing so.
"Renting 51%" (of any global market) and "at market rates" are mutually exclusive.
> There is no equilibrium point for transaction fees where this attack becomes uneconomical.
The counterforce against doublespending is not transaction fee but cost of ownership of mining equipment.
Some other arguments against your conclusion:
- As mentioned nearby, for big transactions you want to wait longer than 6 confirmations.
- Also, as recipient you might want to distribute huge payments into smaller ones distributed over time.
- It's in the interest of mining capacity lenders to make sure you don't get 51% because it renders their equipment worthless in case you are successful.
- As you correctly stated, low prices will lead to lower hash rates (and higher prices to higher rates). This means actually that bitcoin will be more stable (it's harder to obtain 51%) if prices rise. There's an equilibrium on that side as well! That is, if double spending is what you're worried about.
At this point in time the current hashrate of the bitcoin network is 32.500 PH/s, up from 5.000 PH/s a year ago and 1.400 PH/s two years ago. If you rent 51% of the network it's going to be rather obvious that something is happening, that will however not prevent an attack. Let us assume that you can rent capacity because the miners are greedy, what price would you have to pay? Let's assume that you can buy from miners that want to exit the mining business, so they do not care about deprecating the value of their hardware nor the bitcoin value itself.
So the assumptions are that 51% of the available capacity don't care if bitcoin tank and burn as long as they profit enough, and you're able to buy that. A 0.43% difficulty increase daily (average over last 2 years), bitcoin price of 7.600$, a 4MW powerdraw, and electricity prices of $0.08/KWh
Miners controlling 51% would profit north of $1.000.000.000 yearly, and if they just want to be compensated for that one year, you have to pay $1.000.000.000 to rent 51%. That is a lot of money, and at $20.000 high it would be tripple that value.
However, why would 51% of the capacity suddenly exit? Rather they want to be compensated for multiple years of profit, lets say 5 years and it's not unreasonable to expect bitcoin to reach $70.000 in that time. So we're looking at a $50.000.000.000 cost to coordinate the attack. That's expensive, and with that kind of money there are other ways to make them multiply. Who would pay that to ensure destruction of the thing we know as Bitcoin? After all, the success means it's likely that another *coin takes over, where you cannot 51% as easily.
People like to compare bitcoin to gold, which has an estimated current market cap of $6,000,000,000,000. Will gold ever generate more value than Google or several Big Energy companies combined with more than a factor 10? Or does it hold value simply because it's rare?
Gold is also quite unique and "best" or close-to-best in its collection of properties. Bitcoin is not really rare and many other recent variants are "better" in a number of ways. Would the network effect be sufficient for its valuation to come close to physical gold? Warren Buffett, Robert Shiller, a well-known Nobel prize winner in economics, and several other respected economists say unlikely   . Basic logic says the same.
 ""It has no value at all unless there is some common consensus that it has value. Other things like gold would at least have some value if people didn't see it as an investment," Shiller told CNBC in an interview ahead of the World Economic Forum in Davos, Switzerland, where he will be speaking next week."
I'd argue that jewelry is also a store of value. It doesn't serve a practical purpose, and was traditionally given as a gift for hard times. Industrial applications, fair enough. This also plainly written in your quote from 
> Bitcoin is not really rare and many other recent variants are "better" in a number of ways. Would the network effect be sufficient for its valuation to come close to physical gold? Warren Buffett, Robert Shiller, a well-known Nobel prize winner in economics, and several other respected economists say unlikely.
Bitcoin is exceedingly rare. Only 21 million will be created, and a non trivial portion of them is lost in wallets that no one controls. In  he states that "doesn't know what to make of bitcoin ultimately.". In  one of the main arguments seems to be "Practically no one, outside of computer science departments, can explain how cryptocurrencies work." which is true for the modern banking system too. Besides, it really isn't hard to explain the idea and workings, without going into the technical details.
One of the things that could super charge bitcoin is LN. The potential is enormous if adopted by companies.
The article in  shows a fundamental misunderstanding of bitcoin when it claims
> Bitcoin will be “mined” in diminishing quantities until it is exhausted in 2040, having delivered 21 million digital coins. In other words, there is no elasticity in the currency. This means that long before the mine is exhausted, the currency will run into the same problem as the gold standard: not providing enough money to support a growing economy and population.
Gold is limited by the smallest amount of gold you can reliably trade. Bitcoin have no such restriction. As the value of a whole bitcoin increases, you can trade a smaller and smaller fraction. At the current value 130 "Satoshi", which the name for the current smallest fraction possible to trade, is worth $0.01, so bitcoin can reach a value of $1,000,000 and still have the same monetary "resolution" as the current USD.
The last paragraph might on the face of it seems to contradict my statement about the rarity earlier. But there is a key difference. Because bitcoin is in limited supply, but possible to trade very small fractions of it, and ability to allow smaller fractions if needed, means that the currency is more likely to be deflationary, i.e. the money I save will not automatically be worth less because I do not use them.
Full Casper may have stronger liveness guarantees eventually, I'm not sure. At a minimum it's easier to manually intervene to get the network going again. (You could also do that in PoW by changing the hash algorithm, but you can probably only pull it off once, migrating from ASIC to general purpose hardware.)
For instance, I can decide not to finalize the transaction until I see a chain with 12 new blocks added after the transaction block. So an attacker has to control 51% for 2 hours to successfully scam me. Or I can make it 24 blocks (4 hours), or whatever.
Not sure this can mitigate the attacks and market forces you discuss, but it might. I see Bitcoin moving toward an intermediary system where you have a "Bitcoin balance" with a "Bitcoin bank" that allows you to make immediate transactions and takes on the risk and time delay of settling these transactions on the blockchain over the course of the next day or two.
How would this system differ from an ordinary bank in the system we have now?
Could you expand a bit more on this?
One of these is not like the others
Just wondering if there is some kind of crypto currency where the transactions had a max of some kind. Would the difficulty be able to be much smaller and blocks every minute (since there would be so many more to transact)? This isn't well formed, just off the top.....
I plausibly could have invested a few hundred or thousand in Bitcoin was in the low hundreds, and if I hodl'd to the moon realized a hundredfold gain, which would have been nice.
But once you're at the moon, then what?
The new price predictions are things like "If Bitcoin replaces gold it could be worth $135,000/BTC.". Which is a lot, and a little far fetched, but also only 6x from the last peak.
I'm not interested in a risky investment which takes years to come to fruition and only yields 6x. It's too risk for a safe investment and too low-yield for a risky investment. Boat missed.
The dominant form of mining would be utility companies and individuals redirecting excess electricity generated from their renewable electric power generators, during off-peak hours and spikes in generation, to mining, and the constituents would be both numerous and globally distributed, owing to the wide geography areas across which renewable energy resources are found.
You're killing your goose with the golden eggs. That is, if a currencies remains in use.
How do you propose they would go about doing this? Would they jam up the whole worlds chip production to source the ASICs at above market rates? How could this be profitable?
Perhaps by taking over existing mining operations, but then you’d need to somehow perform the attack before you’re detected.
It seems you're too focused on a specific decentralized consensus solution, while there are already much better ones out there, e.g. Iota with a tangle, skycoin with a web of trust or Elastos that are immune to 51% attacks.
Right now what would minimum amount of power would be necessary? How many homes/neighborhood worth? How many Amazon data centers?
* bitcoin is not mandated as the sole accepted currency for settling tax in any sovereign state, therefore it can go to zero
Also tell people in Venezuela how their Bolivar is not going to zero, because they have to pay their taxes with it.
How bitcoin transacting work is not that the miners publish their price and someone accepts that price and thus sends the transaction to that miner. How it works is that you publish your transaction with the fee you're willing to pay and if your fee is high enough, it will get included in the next block.
Someone could rent the local courts for a week, pillage everyone, and leave.
Or just come with a larger army.
Yes, but only if mining the coins via renting is cheaper than buying them outright.
If you're a miner, it makes sense to rent out your gear, because you get a guaranteed payment higher than you could make via mining.
For any purchase, there's a trail that leads to you through however you paid for it; for mining, the mined coins are totally disconnected from the hardware that mined the block and how you bought it.
Examples like Delegated Proof-of-Stake or "eusocial oligarchy like consensus" systems like Byteball?
Lenin was right: "When it comes time to hang the capitalists, they will vie with each other for the rope contract."
That makes no sense. If there are no confirmations, there is no cost, because nothing happened. This comment is a 0-conf transaction on BTC...
These double-spend attacks are only successful if the receiving party doesn't wait long enough.
Also, could't find any sources from exchanges if they were actually successful? The article didn't mention which exchanges.
"Blockchain data indicates that the attacker successfully reversed transactions as far back as 22 blocks, leading developers to advise raising confirmation requirements to 50 blocks."
So as long as exchanges wait 50 blocks before crediting, they should be all right.
The problem with mining centralization is that sufficiently powerful miners can attack the network by rewriting blocks. This opens the door to double spending.
This was exactly the attack the article described.
It appears that Bitcoin Gold's decision to use Equihash led to this mess. The algorithm is used by several other coins. Hardware optimized for this algorithm can therefore be used with equal ease to mine on a network or attack it.
Bitcoin Cash may be headed for a similar fate. It retains SHA-256, but is a minority chain in terms of hash power. A powerful Bitcoin miner deciding to perform double spends on Bitcoin Cash would have everything needed to do repeat the Bitcoin Gold attack.
BTW, a similar attack recently occured on Verge:
It's possible that any altcoin that becomes sufficiently valuable will suffer similar attacks to the ones that have now taken place on Verge and Bitcoin Gold.
Normally the non-51% attack argument is that anyone who invests enough in 51% of the infrastructure and has sufficient coins to profit from double-spending, is very unlikely to do so because it would render the coins and mining equipment worthless or at least worth less than the investment had cost.
That'd be true for bitcoin, but not for a GPU-mined 26th largest cryptocurrency. You can completely destroy it, cash out and use your equipment elsewhere on coins in which people still have faith.
So you can exchange it to BTC or ETH and withdraw. Or you can just deposit it and withdraw it after. Most exchanges just mix customer funds together, so as long as the exchange has enough BTG balance minus the double spent deposit, they will send you real BTG.
The trust in these systems seems to be based on proving a negative.
The lack of an attack is neither a proof of robustness nor proof that one or more zero days aren’t already known. We can only “know” it’s safe when the temptation to use an exploit is far too high to resist.
I think there are a lot of people who imagine “an attack” as a ready-aim-fire affair. There’s a juicy target, someone concocts a plan and then uses it.
But as you illustrate, maybe there is already a plan and someone is waiting for the target to get juicy enough. Aim, ready, fire.
I would also point out that Bitcoin cash is the 4th largest crypto currency in the world, by market cap. If IT is in danger.... Well I fear for everyone else even more.
The whole point of crypto is that you are relying on the fact that 50% of the network is honest.
So yes, you are correct that it relies on half the network being "benevolent". That's how ALL cryptos work.
Specifically, the fraction is 51/100, or 51 percent of the network. This is for the main Bitcoin network.
The fraction for Bitcoin cash would be around 15%, or 15/100, expressed as a fraction.
The Bitcoin cash network would require a smaller fraction, yes. But this still isn't a huge concern.
If it is 3 times easier to attack bitcoin cash, that is still extremely difficult.
Fractional hashpower attacks, (51% attacks) are all explained quite clearly in the white paper.