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So, that's an interesting pair of ideas, in that it gets me thinking that any Bitcoin-style cryptocurrency might ultimately be doomed by its own design. Shooti

So, that's an interesting pair of ideas, in that it gets me thinking that any Bitcoin-style cryptocurrency might ultimately be doomed by its own design. Shooting from the hip: They've go this 51% vulnerability that is well known and hypothetically cannot be truly closed. Instead, we rely on the idea that mounting such an attack would be "too expensive". But at the same time, the cost/benefit of mounting such an attack is fairly easy to estimate using public data - all you really need to know is the cost to get to 51% and stay there for a given amount of time, which you can infer by monitoring mining activity, and the current price of the currency you'd want to attack. And you have to assume that whenever the cost of mounting such an attack dips below the benefit, such a thing _will_ happen. So then, I think that implies that the only other feature you'd need to throw into the mix to ensure a cryptocurrency is ultimately doomed is to make the rate at which new coin can be mined asymptotically approach zero. Such a feature would mean that, in the long term, miners' revenue would ultimately be dominated by transaction fees, which, this being a supremely commodity service, market forces will presumably tend to keep relatively low. That would, in turn, limit the number of miners the economy can support, which would serve to limit the cost of mounting a 51% attack. Meanwhile, what with a money supply that can't grow being inherently deflationary, the benefit of mounting such an attack would be constantly growing, for as long as said cryptocurrency remains in use.

drexlspivey 8y ago
> They've go this 51% vulnerability that is well known and hypothetically cannot be truly closed. Instead, we rely on the idea that mounting such an attack would be "too expensive". But at the same time, the cost/benefit of mounting such an attack is fairly easy to estimate using public data - all you really need to know is the cost to get to 51% and stay there for a given amount of time, which you can infer by monitoring mining activity, and the current price of the currency you'd want to attack. And you have to assume that whenever the cost of mounting such an attack dips below the benefit, such a thing _will_ happen. Or, to turn this around, if X is the amount of money needed to sustain a 51% attack for 1 block, then you have to wait for 1 confirmation for every X amount of coins received.
- Taek 8y ago
  Attacks can hit multiple parties simultaneously. So you need to account for that as well and make sure an attacker doing a sweeping attack that includes you is still not incentivized. Luckily, there are deeper incentives protecting large asic mined chains such as bitcoin.
ajross 8y ago
> all you really need to know is the cost to get to 51% and stay there for a given amount of time That's actually, if anything, underestimating the likelihood of a 51% attack. It seems that the more likely path to that situation is collusion between segments of the existing mining community. For such a cartel, the "cost" is zero, it's just a matter of trust.
- Jommi 8y ago
  The cost of creating and upholding a cartel is not zero at all. It can actually be quite high.
acoma 8y ago
Decred appears to have solved the PoW 51% attack via a hybrid PoW/PoS consensus mechanism. It's practically unfeasable to attack at this point.
nemo1618 8y ago
On the other hand, there will be people who have a vested interest in preventing such attacks. If you own a lot of BTC, a successful attack can drastically lower the value of your assets, so it makes sense to deploy some of that capital to secure the network. And of course this goes even more so for business in the crypto space that rely on BTC remaining secure. One example of this sort of behavior is in mining. We tend to think of miners as being selfish to a fault, and to some degree, that's true. But sometimes miners have the opportunity to mine empty blocks (a form of attack), and refrain from doing so, because it would harm the ecosystem as a whole and jeopardize their long-term profitability.
- dbt00 8y ago
  Spending capital to build hash capacity to protect an existing holding in BTC is inherently deflationary. Instead of "you need to spend money to make money" aka inflation/interest/growth, you have to spend money to keep money, which always reduces your holdings over time and turns the entire network over to companies that produce hashing capacity (hardware manufacturers, power companies).
  - hackinthebochs 8y ago
    But the initial assumption was that of an efficient market for hash power, which means the cost to hash is equal to the block rewards. And so deploying some capital to secure the network is nets zero loss.
- manigandham 8y ago
  That's a great way to lose all your capital, or force someone else to. You will probably not outspend a focused attacker or nation-state.

drexlspivey 8y ago

> They've go this 51% vulnerability that is well known and hypothetically cannot be truly closed. Instead, we rely on the idea that mounting such an attack would be "too expensive". But at the same time, the cost/benefit of mounting such an attack is fairly easy to estimate using public data - all you really need to know is the cost to get to 51% and stay there for a given amount of time, which you can infer by monitoring mining activity, and the current price of the currency you'd want to attack. And you have to assume that whenever the cost of mounting such an attack dips below the benefit, such a thing _will_ happen. Or, to turn this around, if X is the amount of money needed to sustain a 51% attack for 1 block, then you have to wait for 1 confirmation for every X amount of coins received.

Taek 8y ago
Attacks can hit multiple parties simultaneously. So you need to account for that as well and make sure an attacker doing a sweeping attack that includes you is still not incentivized. Luckily, there are deeper incentives protecting large asic mined chains such as bitcoin.

ajross 8y ago

> all you really need to know is the cost to get to 51% and stay there for a given amount of time That's actually, if anything, underestimating the likelihood of a 51% attack. It seems that the more likely path to that situation is collusion between segments of the existing mining community. For such a cartel, the "cost" is zero, it's just a matter of trust.

Jommi 8y ago
The cost of creating and upholding a cartel is not zero at all. It can actually be quite high.

acoma 8y ago

Decred appears to have solved the PoW 51% attack via a hybrid PoW/PoS consensus mechanism. It's practically unfeasable to attack at this point.

nemo1618 8y ago

On the other hand, there will be people who have a vested interest in preventing such attacks. If you own a lot of BTC, a successful attack can drastically lower the value of your assets, so it makes sense to deploy some of that capital to secure the network. And of course this goes even more so for business in the crypto space that rely on BTC remaining secure. One example of this sort of behavior is in mining. We tend to think of miners as being selfish to a fault, and to some degree, that's true. But sometimes miners have the opportunity to mine empty blocks (a form of attack), and refrain from doing so, because it would harm the ecosystem as a whole and jeopardize their long-term profitability.

dbt00 8y ago
Spending capital to build hash capacity to protect an existing holding in BTC is inherently deflationary. Instead of "you need to spend money to make money" aka inflation/interest/growth, you have to spend money to keep money, which always reduces your holdings over time and turns the entire network over to companies that produce hashing capacity (hardware manufacturers, power companies).
- hackinthebochs 8y ago
  But the initial assumption was that of an efficient market for hash power, which means the cost to hash is equal to the block rewards. And so deploying some capital to secure the network is nets zero loss.
manigandham 8y ago
That's a great way to lose all your capital, or force someone else to. You will probably not outspend a focused attacker or nation-state.