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Yes, but the simplistic version of the argument is that any entity with such a large stake would be inherently incentivized to preserve the value of the currenc
by stouset 9y ago
Yes, but the simplistic version of the argument is that any entity with such a large stake would be inherently incentivized to preserve the value of the currency and act in good faith.
My intuition is that this is a risky proposition. If an entity can benefit themselves $x by making a bad-faith transaction, but it only costs them $y such that $y < $x, it’s rational to do it even if the costs to others are orders of magnitude greater. As a concrete example, if Coinbase double-spent a transaction for $10m and had enough stake to make the network accept this, would it necessarily devalue the currency through loss of trust by enough to make this unprofitable? Is this true for all possible actions by a 51% stakeholder?
- konschubert 9y agoIf somebody holds 51% of the capital in bitcoin (In form of 51% of the mining hardware), he can mount a 51% attack as well.
- papermule 9y agoWouldn’t it be much less than 51% in practice since a lot of Bitcoin is in hardware or non-custodial wallets?
- amadeuspzs 9y agoNo, 51% refers to the active mining pool (who package and validate transactions) vs 51% of the currency itself.
- dukeflukem 9y agoHe certainly could, but that'd be stupid right?
- SturgeonsLaw 9y agoDepends on their intent. It would be silly for an actor who wishes to maintain the value of their holdings, but if their goal was to destabilise the currency, it provides an attack vector.
- exclusiv 9y agoExactly. Like anyone with a ton more at stake if it succeeds like the banking system.
- Sir_Substance 9y ago>Yes, but the simplistic version of the argument is that any entity with such a large stake would be inherently incentivized to preserve the value of the currency and act in good faith. This logic is, as you say, simplistic. Anyone with such a large stake can cash out, and then use their former large stake to fabricate an alternative chain in which they did not cash out, forking the blockchain at the block just before they cashed out. Commonly proposed defenses against this (checkpointing) are limited because when new nodes enter the network, they are in a naive state where they do not know who to trust. In a proof of work system, the entire blockchain can be validated by a naive node. Fraudulent blockchains could be constructed and fed to naive nodes, but they would be obvious forgeries because they would have to be constructed at lower network difficulties in order to generate blocks faster than the real network and become the longest chain. In a proof of stake system, people who formerly had stake in the system can simulate fraudulent alternative histories forked at the point before they cashed out, and feed those histories to naive nodes. If enough naive nodes accept the alternative history, it becomes the accepted chain. The possibility exists that these former stakeholders might use some of their cashed out money to start up many nodes in the cloud and feed their alternative chains to those nodes. The only real way to defend against this is to have trusted nodes coded into the protocol provide bootstrapping data to naive nodes. Once you do that, your network is no longer trustless. Read more here: http://www.cs.cornell.edu/~iddo/CoAslides.pdf http://www.cs.cornell.edu/~iddo/CoAslides.pdf
- rrggrr 9y ago> Anyone with such a large stake can cash out, and then use their former large stake to fabricate an alternative chain in which they did not cash out, forking the blockchain at the block just before they cashed out. A trade this large is likely to crater the currency before it can be filled in the absence of trade volume so large its practically impossible for one stakeholder to act in the manner you describe.
- inimino 9y agoBut if the theory allows the attack, even if it seems impractical, there is likely to be a practical attack that is slightly different.