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ELI5: Lots of cyptocurrencies use the same mining algorithm, i.e. they require the same type of puzzle to be solved to make money creating blocks. In recent ye

by drcode 7y ago

ELI5: Lots of cyptocurrencies use the same mining algorithm, i.e. they require the same type of puzzle to be solved to make money creating blocks. In recent years, lots of online services have sprung up to offer cloud mining, which people usually use to mine blocks on the bigger cryptocurrencies, like Bitcoin Core or Bitcoin Cash. However, since the smaller cryptocurrencies, like Bitcoin Gold, have less users/miners, they also require easier "puzzles" to be solved, which opens an opportunity for any random person to pay some $$$ to hire a bunch of these cloud servers for a limited time and point them at these easier puzzles, which can cause such a smaller blockchain to get confused about account balances. The attacker can then re-spend the same currency multiple times to make a profit. AFAIK there aren't really any good solutions to prevent this problem- For complex game-theoretic reasons, simply changing the mining algorithm to something different doesn't really offer much protection. (Some folks believe if these smaller currencies were to move to "proof of stake" it could help solve this problem, but this is an extremely contentious topic.)

makotech222 7y ago
The good solution is to not use such a dumb technology to represent money.
3pt14159 7y ago
And it isn't like this problem wasn't foreseen ahead of time. I repeatedly tried to convince people that it was a real issue back seven or so years ago only to be met with (apparent[0]) scepticism that it's a real attack vector. [0] Lots of millionaires came out of the cryptocurrency era. Sock puppets are cheap in comparison.
- spir 7y ago
  > cryptocurrency era Cryptocurrencies and their associated boom-bust market cycles are here to stay. 95% of blockchain development happens on Ethereum, and Ethereum is growing well, https://medium.com/@jjmstark/the-year-in-ethereum-2019-242012e4276d https://medium.com/@jjmstark/the-year-in-ethereum-2019-24201..., so the idea that there was a cryptocurrency era that's ended is not true.
  - astrodust 7y ago
    Bitcoin is the three card monte of the tech world. It's going to be around a long time, but not because it's a good thing.
    - Priem19 7y ago
      https://en.wikipedia.org/wiki/Not_even_wrong https://en.wikipedia.org/wiki/Not_even_wrong "Not even wrong" describes an argument or explanation that purports to be scientific but is based on invalid reasoning or speculative premises that can neither be proven correct nor falsified and thus cannot be discussed in a rigorous and scientific sense. Bitcoin is money. It's as simple as that.
- drcode 7y ago
  Thanks for helping me to buy lots of inexpensive cryptocurrency back in 2013, by keeping the prices low with your skepticism!
  - 3pt14159 7y ago
    You misunderstand what I'm saying. They were skeptical of the attack vector I highlighted.
- gfodor 7y ago
  Given that the number of 51% attacks has been quite rare and relatively low impact so far, I'd argue that your skeptics are still winning the argument. Far more problems have come from security failures outside of the cryptocurrency itself or predatory practices.
antsoul 7y ago
I trust this guy : https://media.ccc.de/v/thms-26-cryptography-of-killing-proof-of-work https://media.ccc.de/v/thms-26-cryptography-of-killing-proof... And he's behind the crypto of GNU Taler and Polkadot
zionic 7y ago
IMO proof of stake is a lot less contentious than you imply. ETH2's slashing algo should make these types of attacks very hard. For the curious a simple breakdown Ethereum 2.0's Proof of Stake (PoS) plan is: -Minimum 32 ETH to stake -Staking locks the currency in the staking pool -Your node votes on the validity of the transactions (this is super light weight and fast, can run on a rPi instead of huge mining nodes). -If the network agrees you was acting maliciously your locked stake begins to be slashed/burnt. -Voting with the majority gives you a % of the block reward. This means a 51% attack on the chain requires 51% of the currency staked which would be extremely hard to get without skyrocking the price (making 51% exponentially harder to achieve). They've also done some spooky proofs I don't understand that make the actual number to take over the network >51% (70% or so IIRC). So it's green, fast, and harder to attack successfully. And unlike PoW, if you fail your "attack money" gets nuked.
- StavrosK 7y ago
  > And unlike PoW, if you fail your "attack money" gets nuked. To be fair, in PoW your "attack energy" (and thus money) gets nuked too.
  - zaarn 7y ago
    Your spent attack energy is nuked. But you still have the miners and can run another attack at reduced cost (since you don't have to buy them anymore). If your money is nuked, you don't get to try again at reduced cost but at increased cost.
    - StavrosK 7y ago
      That's not the cost of the attack, though, any more than buying a house to put the miners in is. The cost of the attack is miner time + power (ie what you paid to rent the miners, more or less).
      - zaarn 7y ago
        Even then, the initial cost of the miners will be a significant part of the attack's cost the first time. Any subsequent attack will then be cheaper.
spir 7y ago
> AFAIK there aren't really any good solutions to prevent this problem https://blog.coinbase.com/how-coinbase-views-proof-of-work-security-f4ba1a139da0 https://blog.coinbase.com/how-coinbase-views-proof-of-work-s... > Coins at the greatest risk of 51% attack are the ones where there exists large amounts of hashpower not actively mining the coin that could begin mining and disrupt the coin’s blockchain. Also, Ethereum's upcoming transition to Proof of Stake is not contentious, it's a large-scale project years in the planning and execution.
- drcode 7y ago
  If you disagree, please post a proposed solution, instead of sharing a quote that describes the existing problem.
  - spir 7y ago
    I don't disagree :) There's no silver bullet for 51% attacks, and proof of work uses unconscionable amounts of electricity, which is why Ethereum is transitioning to proof of stake.
    - drcode 7y ago
      Sorry, misinterpreted your comment.
    - uoylj 7y ago
      The "unconscionable amounts of electricity" is exactly what prevents 51% attacks.
snarf21 7y ago
I don't think this is even a problem. Most of these so-called "sh!tcoins" have no business existing at all. This just shows how risky they are to hold and people should move on. I know people love proof of stake as a "solution" but you give up decentralization for "security". If that is what you want, use a bank.
- Erlich_Bachman 7y ago
  This is really the best way of looking at it. We are discussing these problems and how to solve them, but they aren't even problems of cryptocurrencies in general, they are only problems of these shitty forks that have added nothing to the field, that exist only because use managed to bamboozle a small number of poorly educated users into thinking that they offer some real value...
- robcohen 7y ago
  Most of the coins do not have merit, but there are PoS coins that are legit. PoS will likely result in more decentralization, not less. Cardano is aiming for 1000 stakepools, which is far more than the 5 or so pools that exist in bitcoin right now.
- root_axis 7y ago
  They have just as much intrinsic merit as bitcoin, just less popular.
witweb 7y ago
There is no Bitcoin Core! There is only one Bitcoin using Bitcoin Core as one of its clients used to connect to the Bitcoin blockchain. The rest are just irrelevant forks.
paulmd 7y ago
Proof of work only reaches Nakamoto consensus if the average value transacted per block is less than twice the amount paid to miners. Otherwise it potentially becomes viable to 51% attack - it becomes cheaper to buy miner time to reverse my purchase of internet heroin than to buy the heroin. Thus, there is a limit to the amount of economic activity that can be "safely" transacted by a proof of work chain per unit time, based on the amount of inflation/fees of that particular network. The more fees and inflation, the higher the economic value that can be transacted safely. The actual real-world limit will be somewhat less than 2x because of options trading and other off-blockchain transactions. Yes, this poses problems for smaller currencies where the average amount transacted per block is quite small. Bitcoin has not just a "network effect" of adoption resulting in places to spend it, but also a network security effect, where the vast amount of spending makes it much more economically difficult to justify a 51% attack. (That or you need to wait increasingly long periods on these shitcoin chains before accepting them as "final" and transferring goods. Eventually all chains should reach consensus, as long as you wait long enough that it would be economically unviable to And note that this is actually a parameter that cryptocurrencies can set themselves. When (eg) Ethereum cuts the block rewards, that results in network hashpower going down, and thus reduces the economic throughput that is possible before nakamoto consensus falls apart. Same for Bitcoin's block halvening.
qes 7y ago
> AFAIK there aren't really any good solutions to prevent this problem- For complex game-theoretic reasons, simply changing the mining algorithm to something different doesn't really offer much protection. (Some folks believe if these smaller currencies were to move to "proof of stake" it could help solve this problem, but this is an extremely contentious topic.) Decred's mixed PoW/PoS would be extremely expensive to 51% attack, and would require a large amount of funds to be locked up in voting tickets for random amounts of time ranging from a few days to several months - so if you successfully attacked it, you'd presumably reduce the value of Decred and the many millions of dollars worth of Decred you had frozen in tickets.
Priem19 7y ago
You meant Bitcoin; Bitcoin Core is the name of the software to run a Bitcoin node.

by drcode 7y ago

makotech222 7y ago

The good solution is to not use such a dumb technology to represent money.

3pt14159 7y ago

And it isn't like this problem wasn't foreseen ahead of time. I repeatedly tried to convince people that it was a real issue back seven or so years ago only to be met with (apparent[0]) scepticism that it's a real attack vector. [0] Lots of millionaires came out of the cryptocurrency era. Sock puppets are cheap in comparison.

spir 7y ago
> cryptocurrency era Cryptocurrencies and their associated boom-bust market cycles are here to stay. 95% of blockchain development happens on Ethereum, and Ethereum is growing well, https://medium.com/@jjmstark/the-year-in-ethereum-2019-242012e4276d https://medium.com/@jjmstark/the-year-in-ethereum-2019-24201..., so the idea that there was a cryptocurrency era that's ended is not true.
- astrodust 7y ago
  Bitcoin is the three card monte of the tech world. It's going to be around a long time, but not because it's a good thing.
  - Priem19 7y ago
    https://en.wikipedia.org/wiki/Not_even_wrong https://en.wikipedia.org/wiki/Not_even_wrong "Not even wrong" describes an argument or explanation that purports to be scientific but is based on invalid reasoning or speculative premises that can neither be proven correct nor falsified and thus cannot be discussed in a rigorous and scientific sense. Bitcoin is money. It's as simple as that.
drcode 7y ago
Thanks for helping me to buy lots of inexpensive cryptocurrency back in 2013, by keeping the prices low with your skepticism!
- 3pt14159 7y ago
  You misunderstand what I'm saying. They were skeptical of the attack vector I highlighted.
gfodor 7y ago
Given that the number of 51% attacks has been quite rare and relatively low impact so far, I'd argue that your skeptics are still winning the argument. Far more problems have come from security failures outside of the cryptocurrency itself or predatory practices.

antsoul 7y ago

I trust this guy : https://media.ccc.de/v/thms-26-cryptography-of-killing-proof-of-work https://media.ccc.de/v/thms-26-cryptography-of-killing-proof... And he's behind the crypto of GNU Taler and Polkadot

zionic 7y ago

IMO proof of stake is a lot less contentious than you imply. ETH2's slashing algo should make these types of attacks very hard. For the curious a simple breakdown Ethereum 2.0's Proof of Stake (PoS) plan is: -Minimum 32 ETH to stake -Staking locks the currency in the staking pool -Your node votes on the validity of the transactions (this is super light weight and fast, can run on a rPi instead of huge mining nodes). -If the network agrees you was acting maliciously your locked stake begins to be slashed/burnt. -Voting with the majority gives you a % of the block reward. This means a 51% attack on the chain requires 51% of the currency staked which would be extremely hard to get without skyrocking the price (making 51% exponentially harder to achieve). They've also done some spooky proofs I don't understand that make the actual number to take over the network >51% (70% or so IIRC). So it's green, fast, and harder to attack successfully. And unlike PoW, if you fail your "attack money" gets nuked.

StavrosK 7y ago
> And unlike PoW, if you fail your "attack money" gets nuked. To be fair, in PoW your "attack energy" (and thus money) gets nuked too.
- zaarn 7y ago
  Your spent attack energy is nuked. But you still have the miners and can run another attack at reduced cost (since you don't have to buy them anymore). If your money is nuked, you don't get to try again at reduced cost but at increased cost.
  - StavrosK 7y ago
    That's not the cost of the attack, though, any more than buying a house to put the miners in is. The cost of the attack is miner time + power (ie what you paid to rent the miners, more or less).
    - zaarn 7y ago
      Even then, the initial cost of the miners will be a significant part of the attack's cost the first time. Any subsequent attack will then be cheaper.

spir 7y ago

> AFAIK there aren't really any good solutions to prevent this problem https://blog.coinbase.com/how-coinbase-views-proof-of-work-security-f4ba1a139da0 https://blog.coinbase.com/how-coinbase-views-proof-of-work-s... > Coins at the greatest risk of 51% attack are the ones where there exists large amounts of hashpower not actively mining the coin that could begin mining and disrupt the coin’s blockchain. Also, Ethereum's upcoming transition to Proof of Stake is not contentious, it's a large-scale project years in the planning and execution.

drcode 7y ago
If you disagree, please post a proposed solution, instead of sharing a quote that describes the existing problem.
- spir 7y ago
  I don't disagree :) There's no silver bullet for 51% attacks, and proof of work uses unconscionable amounts of electricity, which is why Ethereum is transitioning to proof of stake.
  - drcode 7y ago
    Sorry, misinterpreted your comment.
  - uoylj 7y ago
    The "unconscionable amounts of electricity" is exactly what prevents 51% attacks.

snarf21 7y ago

I don't think this is even a problem. Most of these so-called "sh!tcoins" have no business existing at all. This just shows how risky they are to hold and people should move on. I know people love proof of stake as a "solution" but you give up decentralization for "security". If that is what you want, use a bank.

Erlich_Bachman 7y ago
This is really the best way of looking at it. We are discussing these problems and how to solve them, but they aren't even problems of cryptocurrencies in general, they are only problems of these shitty forks that have added nothing to the field, that exist only because use managed to bamboozle a small number of poorly educated users into thinking that they offer some real value...
robcohen 7y ago
Most of the coins do not have merit, but there are PoS coins that are legit. PoS will likely result in more decentralization, not less. Cardano is aiming for 1000 stakepools, which is far more than the 5 or so pools that exist in bitcoin right now.
root_axis 7y ago
They have just as much intrinsic merit as bitcoin, just less popular.

witweb 7y ago

There is no Bitcoin Core! There is only one Bitcoin using Bitcoin Core as one of its clients used to connect to the Bitcoin blockchain. The rest are just irrelevant forks.

paulmd 7y ago

Proof of work only reaches Nakamoto consensus if the average value transacted per block is less than twice the amount paid to miners. Otherwise it potentially becomes viable to 51% attack - it becomes cheaper to buy miner time to reverse my purchase of internet heroin than to buy the heroin. Thus, there is a limit to the amount of economic activity that can be "safely" transacted by a proof of work chain per unit time, based on the amount of inflation/fees of that particular network. The more fees and inflation, the higher the economic value that can be transacted safely. The actual real-world limit will be somewhat less than 2x because of options trading and other off-blockchain transactions. Yes, this poses problems for smaller currencies where the average amount transacted per block is quite small. Bitcoin has not just a "network effect" of adoption resulting in places to spend it, but also a network security effect, where the vast amount of spending makes it much more economically difficult to justify a 51% attack. (That or you need to wait increasingly long periods on these shitcoin chains before accepting them as "final" and transferring goods. Eventually all chains should reach consensus, as long as you wait long enough that it would be economically unviable to And note that this is actually a parameter that cryptocurrencies can set themselves. When (eg) Ethereum cuts the block rewards, that results in network hashpower going down, and thus reduces the economic throughput that is possible before nakamoto consensus falls apart. Same for Bitcoin's block halvening.

qes 7y ago

> AFAIK there aren't really any good solutions to prevent this problem- For complex game-theoretic reasons, simply changing the mining algorithm to something different doesn't really offer much protection. (Some folks believe if these smaller currencies were to move to "proof of stake" it could help solve this problem, but this is an extremely contentious topic.) Decred's mixed PoW/PoS would be extremely expensive to 51% attack, and would require a large amount of funds to be locked up in voting tickets for random amounts of time ranging from a few days to several months - so if you successfully attacked it, you'd presumably reduce the value of Decred and the many millions of dollars worth of Decred you had frozen in tickets.

Priem19 7y ago

You meant Bitcoin; Bitcoin Core is the name of the software to run a Bitcoin node.