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> If mining is profitable, as miners claim, we have to add another condition: the net present value of the profits that could be obtained from compromising or s

> If mining is profitable, as miners claim, we have to add another condition: the net present value of the profits that could be obtained from compromising or sabotaging the network would need to exceed the net present value of the profits that could be obtained in perpetuity from behaving honestly. This is really why I don't think that 51% attacks are a problem for Bitcoin (and only Bitcoin). As soon as one is shown, the network's value will be destroyed. And if you're already on the gravy train through cheap power and cheap asics, why would you give that up?

TangoTrotFox 8y ago
It seems that the institutional banking industry is taking note of cryptocurrencies as a potential threat. And so there is an incentive there by some players to want to destroy coins without direct reward. But even this scenario is I think somewhat guarded against. Attacks on networks are completely visible to everybody. In light of an attack, a network could be forked, illicit transactions rolled back, a new proof method adopted if necessary, but otherwise keep the entire ledger intact. And indeed if/when this happens, there will likely be numerous forks that try to become the new standard. And this could actually end up being, in net effect, profitable for holders. Think about Bitcoin vs Bitcoin Cash. Bitcoin Cash was a somewhat controversial fork that some feared would split Bitcoin to unknown effect, but in the end it's only effect was giving all bitcoin holders an additional $754/coin (price as of today). In a time when a network was compromised, there would be a large market incentive to takeup the forks which would send their prices skyrocketing. Coins may end up being like the hydra. You slice off one head only for 10 to take its place. In a way this seems to be true of decentralized systems in general. Each time e.g. a major torrent site is taken offline, a dozen more come to try to fill that vacuum that's been created.
QML 8y ago
> As soon as one is shown, the network's value will be destroyed. I don't believe this to be accurate statement. Looking at two other cryptocurrencies -- Verge and Bitcoin Gold -- which have undergone 51% attacks, neither of them have experienced a collapse in value as a result.
- latchkey 8y ago
  Interestingly, Verge is one of the more profitable coins to mine right now.
ant6n 8y ago
You could make secondary money by first selling all the ASICs that is needed to do the 51% attack, but before delivery you execute the attack, making the ASICs you will deliver next week worthless.

TangoTrotFox 8y ago

It seems that the institutional banking industry is taking note of cryptocurrencies as a potential threat. And so there is an incentive there by some players to want to destroy coins without direct reward. But even this scenario is I think somewhat guarded against. Attacks on networks are completely visible to everybody. In light of an attack, a network could be forked, illicit transactions rolled back, a new proof method adopted if necessary, but otherwise keep the entire ledger intact. And indeed if/when this happens, there will likely be numerous forks that try to become the new standard. And this could actually end up being, in net effect, profitable for holders. Think about Bitcoin vs Bitcoin Cash. Bitcoin Cash was a somewhat controversial fork that some feared would split Bitcoin to unknown effect, but in the end it's only effect was giving all bitcoin holders an additional $754/coin (price as of today). In a time when a network was compromised, there would be a large market incentive to takeup the forks which would send their prices skyrocketing. Coins may end up being like the hydra. You slice off one head only for 10 to take its place. In a way this seems to be true of decentralized systems in general. Each time e.g. a major torrent site is taken offline, a dozen more come to try to fill that vacuum that's been created.

QML 8y ago

> As soon as one is shown, the network's value will be destroyed. I don't believe this to be accurate statement. Looking at two other cryptocurrencies -- Verge and Bitcoin Gold -- which have undergone 51% attacks, neither of them have experienced a collapse in value as a result.

latchkey 8y ago
Interestingly, Verge is one of the more profitable coins to mine right now.

ant6n 8y ago

You could make secondary money by first selling all the ASICs that is needed to do the 51% attack, but before delivery you execute the attack, making the ASICs you will deliver next week worthless.