6 ms·

Taking Down The Bitcoin Network

15 points by kiba 15y ago

danenania 15y ago
"The likelihood that some government is going to declare Bitcoin illegal and try to crack down on it is low" I wish this were true...
trotsky 15y ago
Bitcoin's greatest strengths [...] that will hardly affect the average user of Bitcoin [...] avoiding a port blocking attack would be as simple as [...] The forums and main site would be up in a matter of days [...] ad infinitum. While the article may (or may not) mostly make valid points, there is no honesty in linking to a site that will always promote the subject and only give positive spin to the discussion. Imagine the subject of debate was axes: are axes dangerous? If you only asked theAxeGuild.com the answer would always be no: axes are useful tools but far too unwieldy to be used as a weapon. Such a website would fail, of course, to publish the editorial: "My whole family was killed by an axe murderer". Clearly this website is simply trying to sell you axes no matter how good or bad they might actually be.
Duff 15y ago
I guess it's time to prime the pump again. More hype == more investment == $35 bitcoin. Then in a few weeks, the early adopters start the "dump" phase of pump & dump. (ie. history repeats itself)
mootothemax 15y ago
Surely there's an easier, legal and potentially cheaper solution open to any government that wants to shut down bitcoin: buy up each and every bitcoin they can lay their hands on. I would have thought it would wreck havoc with the market (there's no reason why the government couldn't use multiple fronts rather than buying under the same wallet), and past a certain point make it impossible to trade in bitcoin without inducing a headache. However, I accept that I know next-to-nothing about how money markets really work; please let me know where I might be going wrong :)
- danenania 15y ago
  That scheme would fail due to basic forces of supply and demand. The government in this case would be a de facto market maker and the price would naturally get pushed up to the maximum amount the government is willing to spend as speculators continually test the limit, which if the government has an 'acquire all bitcoins at any cost' mission, means the limits of its overall solvency. It's actually a similar scenario to what's currently going on in the bond markets. The Fed steps in any time bonds have a weak auction. Traders, knowing this, buy lots of bonds. It's basically a free roll for them because they know the Fed will always step in to prevent a major dip in price--and this cycle will continue until the Fed itself (aka, the dollar) collapses. So who knows, maybe they are dumb enough to try! :)
  - mootothemax 15y ago
    Thanks, your explanation is really helping me to understand! :-D One potentially embarrassingly stupid question: you mention the government becoming a market maker. As far as I'm aware, it's not unknown for traders to spot an opportunity and corner the market. Surely Bitcoin's in an early enough stage to still do so?
- gasull 15y ago
  > Surely there's an easier, legal and potentially cheaper solution open to any government that wants to shut down bitcoin: buy up each and every bitcoin they can lay their hands on. Some people won't sell. And all this would do is making bitcoins more expensive in dollars (deflation). Prices in bitcoins would adjust. No problem at all.
  - mootothemax 15y ago
    Some people won't sell. And all this would do is making bitcoins more expensive in dollars (deflation). Prices in bitcoins would adjust. No problem at all. Great if it's not a problem: can you tell me why in a bit more detail please? :) You see, I love the idea of bitcoin, but this is the one thought I can't get out of my head. Say the government drives up the price of bitcoin, as you suggest. Every hour of every day, deflation takes place... but the government aren't selling any of theirs, and if nobody else is selling, it sounds like we rapidly head towards a stalemate where bitcoin becomes ridiculously hard to exchange in either direction.
fraserharris 15y ago
The government does not need to take down the network to cripple Bitcoin, it just needs to make it difficult to exchange it for other currencies. This will dry up demand for Bitcoins, and the exchange rate will plummet. The US government can compel almost any financial institution in the world to stop exchanging Bitcoins by threatening to sanction them for money laundering.[1] A private letter from the State Department stating that an activity is illegal (without specifying any laws) has been enough in the past for certain significant money transmitters.[2] Recent reports that Bitcoins are being used in the transaction of illegal drugs & money laundering make it highly likely there will be government intervention.[3] [1] http://en.wikipedia.org/wiki/Banco_Delta_Asia http://en.wikipedia.org/wiki/Banco_Delta_Asia [2] http://techcrunch.com/2010/12/08/paypal-wikileaks/ http://techcrunch.com/2010/12/08/paypal-wikileaks/ [3] http://www.theregister.co.uk/2011/06/08/bitcoin_under_attack/ http://www.theregister.co.uk/2011/06/08/bitcoin_under_attack...
- gst 15y ago
  Yes, the US gov can easily prevent financial institutions from exchanging Bitcoins: If a bank holds US dollars, those dollars are "stored" in the US (even if the bank is located outside the US). So the US gov just needs to threaten that it will freeze the banks dollar deposits in case a bank decides to exchange Bitcoins. No, the US government cannot easily block other types of Bitcoin exchanges. Consider bitmarket.eu: The site itself is hosted outside the US. Money transfer happens directly between individual users, e.g., by wire transfer. There's no single entity that you can attack. And even in case where bank transfers are shut down you can still switch to cash. If you have a trusted exchange you can send cash via postal mail. Or your local drug dealer changes his business from dealing drugs to dealing Bitcoins. Of course, this will prevent many legitimate uses of Bitcoin - but I'll doubt that it can stop the usage of Bitcoin for "illegal" transactions.
  - verroq 15y ago
    That'll severely limit liquidity of bitcoins, making them undesirable for use for any purpose.
  - jerf 15y ago
gst 15y ago
"Even in a worst case scenario, if a government or some other anti-Bitcoin faction gets a hold of greater than 50% of the processing power (an extremely expensive feat, and hardly worth it unless you're really determined to destroy the network), the rest of the network can be reconfigured to reject that block chain." At this point the author shows that he does not have much technical background in regard to the Bitcoin network. Once an adversary gains >50% of the processing power you have basically lost. Yes - you can manually blacklist a single "fork" of the blockchain, but the adversary can fork as often as he wants and you cannot immediately tell if a new block has been generated by the adversary.
- gasull 15y ago
  > Once an adversary gains >50% of the processing power you have basically lost. Wrong. An attacker having more than 50% of the network would just stop payments until the rest of the network rejects the attacker nodes. https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_computing_power https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_...
  - gst 15y ago
    You can't "reject attacker nodes". There is nothing in the blockchain that identifies a given miner.
    - gasull 15y ago
      I've seen pie charts with the computing power of several mining pools and the total. I believe you can find the IP of a miner that has a lot of computing power.
      - gst 15y ago
        If there's a public mining pool it's easy to estimate it's computing power. Just take part in the mining pool and compare your own computing power with the percentage of the 50 BTC that you get for each block. Or, alternatively, you can track the BTC that you get from the mining pool back to the block where they were generated, and so you know that this block must have been generated by the mining pool (again, allowing you to use the amount of blocks generated by the mining pool to estimate it's overall computing power). However, if the attacker does not use a public mining pool, but private infrastructure, things get more complicated: The only way how Bitcoin clients can agree on a common view of the block chain is to treat the highest block number as the authoritative one. A malicious miner can now just generate new blocks and inject them over Tor to some of the Bitcoin nodes. As Bitcoin nodes distribute the blockchain amongst each others, those "malicious" blocks will quickly spread throughout the Bitcoin network. The only way how you could prevent this problem is some kind of whitelisting approach, where miners need to be manually approved before their blocks are accepted. However, this would totally change the current Bitcoin infrastructure and turn a completely decentralized network into a more centralized one.
mrvc 15y ago
If anyone wants it I'd be happy to write up a quick how to on how Bitcoin really could be shut down, I have some expertise in the area if that matters and no serious bias either way.
- gasull 15y ago
  Go ahead and write a blog post.
  - mrvc 15y ago
    Done. Check nerdr front page for the article.
    - gasull 15y ago
      Thanks for writing it. Point by point: - Bitcoin software: It's open-source. How would anybody compromise it with so many eyes watching? - Bitcoin trail: Solved using Tor and adding noirc='1' to bitcoin.conf file. Also you need to earn your bitcoins anonymously. Anyway, Bitcoin isn't supposed to be anonymous. It can be anonymous if you do it right, like you can browse the web anonymously if you do it right. - Bitcoin public data: Same as with bitcoin trail. - Bitcoin exchange: Right, but you can buy bitcoins from someone without revealing him/her your name. It seems your article analyzes if Bitcoin is good for money laundering. It can be used for that, but I don't care. It isn't what makes Bitcoin interesting. Bitcoin is an alternative to payment methods like paypal, to currencies like the dollar or the euro, to payment transfers like ACH or Western Union, and to bank accounts. That is what makes it an awesome currency. That is what makes it disruptive. It can be used for money laundering just like cash and offshore bank accounts can be used for money laundering. Way more people are using cash than bitcoins for money laundering. And that isn't what makes Bitcoin disruptive, because money laundering already exists.
      - mrvc 15y ago
        Open source code tends to give a false sense of security. Many people assume others will check the code, yet few do. In addition, it is possible to spread malicious code throughout a code base to prevent detection. (mentioned in article). To use TOR you still connect through an ISP. That can be tracked and deep packet analysis can be done. TOR is not a magic bullet. Exchange - Correct. That was coming in part 2 of the article covering methods around each point, but unlikely to find the time to write it up at this point. I leave the question: Why else would one use an anonymous currency unless they don't want to be detected? From there, who does not want to be detected? Usually those doing things they shouldn't. Otherwise, you'd just use a credit card or normal payment service as an everyday citizen would.
joshaidan 15y ago
I believe people have already brought up this argument in the past, but what are the arguments against why forking new bitcoins won't devalue the currency? Lets say one day Lady GaGa decides to start her own bitcoin, would that in anyway devalue the current bitcoin network if everyone instead decides to start mining Lady GaGa bitcoins?

15 points by kiba 15y ago

"The likelihood that some government is going to declare Bitcoin illegal and try to crack down on it is low" I wish this were true...

trotsky 15y ago

Bitcoin's greatest strengths [...] that will hardly affect the average user of Bitcoin [...] avoiding a port blocking attack would be as simple as [...] The forums and main site would be up in a matter of days [...] ad infinitum. While the article may (or may not) mostly make valid points, there is no honesty in linking to a site that will always promote the subject and only give positive spin to the discussion. Imagine the subject of debate was axes: are axes dangerous? If you only asked theAxeGuild.com the answer would always be no: axes are useful tools but far too unwieldy to be used as a weapon. Such a website would fail, of course, to publish the editorial: "My whole family was killed by an axe murderer". Clearly this website is simply trying to sell you axes no matter how good or bad they might actually be.

Duff 15y ago

I guess it's time to prime the pump again. More hype == more investment == $35 bitcoin. Then in a few weeks, the early adopters start the "dump" phase of pump & dump. (ie. history repeats itself)

mootothemax 15y ago

Surely there's an easier, legal and potentially cheaper solution open to any government that wants to shut down bitcoin: buy up each and every bitcoin they can lay their hands on. I would have thought it would wreck havoc with the market (there's no reason why the government couldn't use multiple fronts rather than buying under the same wallet), and past a certain point make it impossible to trade in bitcoin without inducing a headache. However, I accept that I know next-to-nothing about how money markets really work; please let me know where I might be going wrong :)

danenania 15y ago
That scheme would fail due to basic forces of supply and demand. The government in this case would be a de facto market maker and the price would naturally get pushed up to the maximum amount the government is willing to spend as speculators continually test the limit, which if the government has an 'acquire all bitcoins at any cost' mission, means the limits of its overall solvency. It's actually a similar scenario to what's currently going on in the bond markets. The Fed steps in any time bonds have a weak auction. Traders, knowing this, buy lots of bonds. It's basically a free roll for them because they know the Fed will always step in to prevent a major dip in price--and this cycle will continue until the Fed itself (aka, the dollar) collapses. So who knows, maybe they are dumb enough to try! :)
- mootothemax 15y ago
  Thanks, your explanation is really helping me to understand! :-D One potentially embarrassingly stupid question: you mention the government becoming a market maker. As far as I'm aware, it's not unknown for traders to spot an opportunity and corner the market. Surely Bitcoin's in an early enough stage to still do so?
gasull 15y ago
> Surely there's an easier, legal and potentially cheaper solution open to any government that wants to shut down bitcoin: buy up each and every bitcoin they can lay their hands on. Some people won't sell. And all this would do is making bitcoins more expensive in dollars (deflation). Prices in bitcoins would adjust. No problem at all.
- mootothemax 15y ago
  Some people won't sell. And all this would do is making bitcoins more expensive in dollars (deflation). Prices in bitcoins would adjust. No problem at all. Great if it's not a problem: can you tell me why in a bit more detail please? :) You see, I love the idea of bitcoin, but this is the one thought I can't get out of my head. Say the government drives up the price of bitcoin, as you suggest. Every hour of every day, deflation takes place... but the government aren't selling any of theirs, and if nobody else is selling, it sounds like we rapidly head towards a stalemate where bitcoin becomes ridiculously hard to exchange in either direction.

fraserharris 15y ago

The government does not need to take down the network to cripple Bitcoin, it just needs to make it difficult to exchange it for other currencies. This will dry up demand for Bitcoins, and the exchange rate will plummet. The US government can compel almost any financial institution in the world to stop exchanging Bitcoins by threatening to sanction them for money laundering.[1] A private letter from the State Department stating that an activity is illegal (without specifying any laws) has been enough in the past for certain significant money transmitters.[2] Recent reports that Bitcoins are being used in the transaction of illegal drugs & money laundering make it highly likely there will be government intervention.[3] [1] http://en.wikipedia.org/wiki/Banco_Delta_Asia http://en.wikipedia.org/wiki/Banco_Delta_Asia [2] http://techcrunch.com/2010/12/08/paypal-wikileaks/ http://techcrunch.com/2010/12/08/paypal-wikileaks/ [3] http://www.theregister.co.uk/2011/06/08/bitcoin_under_attack/ http://www.theregister.co.uk/2011/06/08/bitcoin_under_attack...

gst 15y ago
Yes, the US gov can easily prevent financial institutions from exchanging Bitcoins: If a bank holds US dollars, those dollars are "stored" in the US (even if the bank is located outside the US). So the US gov just needs to threaten that it will freeze the banks dollar deposits in case a bank decides to exchange Bitcoins. No, the US government cannot easily block other types of Bitcoin exchanges. Consider bitmarket.eu: The site itself is hosted outside the US. Money transfer happens directly between individual users, e.g., by wire transfer. There's no single entity that you can attack. And even in case where bank transfers are shut down you can still switch to cash. If you have a trusted exchange you can send cash via postal mail. Or your local drug dealer changes his business from dealing drugs to dealing Bitcoins. Of course, this will prevent many legitimate uses of Bitcoin - but I'll doubt that it can stop the usage of Bitcoin for "illegal" transactions.
- verroq 15y ago
  That'll severely limit liquidity of bitcoins, making them undesirable for use for any purpose.
- jerf 15y ago

gst 15y ago

"Even in a worst case scenario, if a government or some other anti-Bitcoin faction gets a hold of greater than 50% of the processing power (an extremely expensive feat, and hardly worth it unless you're really determined to destroy the network), the rest of the network can be reconfigured to reject that block chain." At this point the author shows that he does not have much technical background in regard to the Bitcoin network. Once an adversary gains >50% of the processing power you have basically lost. Yes - you can manually blacklist a single "fork" of the blockchain, but the adversary can fork as often as he wants and you cannot immediately tell if a new block has been generated by the adversary.

gasull 15y ago
> Once an adversary gains >50% of the processing power you have basically lost. Wrong. An attacker having more than 50% of the network would just stop payments until the rest of the network rejects the attacker nodes. https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_computing_power https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_...
- gst 15y ago
  You can't "reject attacker nodes". There is nothing in the blockchain that identifies a given miner.
  - gasull 15y ago
    I've seen pie charts with the computing power of several mining pools and the total. I believe you can find the IP of a miner that has a lot of computing power.
    - gst 15y ago
      If there's a public mining pool it's easy to estimate it's computing power. Just take part in the mining pool and compare your own computing power with the percentage of the 50 BTC that you get for each block. Or, alternatively, you can track the BTC that you get from the mining pool back to the block where they were generated, and so you know that this block must have been generated by the mining pool (again, allowing you to use the amount of blocks generated by the mining pool to estimate it's overall computing power). However, if the attacker does not use a public mining pool, but private infrastructure, things get more complicated: The only way how Bitcoin clients can agree on a common view of the block chain is to treat the highest block number as the authoritative one. A malicious miner can now just generate new blocks and inject them over Tor to some of the Bitcoin nodes. As Bitcoin nodes distribute the blockchain amongst each others, those "malicious" blocks will quickly spread throughout the Bitcoin network. The only way how you could prevent this problem is some kind of whitelisting approach, where miners need to be manually approved before their blocks are accepted. However, this would totally change the current Bitcoin infrastructure and turn a completely decentralized network into a more centralized one.

mrvc 15y ago

If anyone wants it I'd be happy to write up a quick how to on how Bitcoin really could be shut down, I have some expertise in the area if that matters and no serious bias either way.

gasull 15y ago
Go ahead and write a blog post.
- mrvc 15y ago
  Done. Check nerdr front page for the article.
  - gasull 15y ago
    Thanks for writing it. Point by point: - Bitcoin software: It's open-source. How would anybody compromise it with so many eyes watching? - Bitcoin trail: Solved using Tor and adding noirc='1' to bitcoin.conf file. Also you need to earn your bitcoins anonymously. Anyway, Bitcoin isn't supposed to be anonymous. It can be anonymous if you do it right, like you can browse the web anonymously if you do it right. - Bitcoin public data: Same as with bitcoin trail. - Bitcoin exchange: Right, but you can buy bitcoins from someone without revealing him/her your name. It seems your article analyzes if Bitcoin is good for money laundering. It can be used for that, but I don't care. It isn't what makes Bitcoin interesting. Bitcoin is an alternative to payment methods like paypal, to currencies like the dollar or the euro, to payment transfers like ACH or Western Union, and to bank accounts. That is what makes it an awesome currency. That is what makes it disruptive. It can be used for money laundering just like cash and offshore bank accounts can be used for money laundering. Way more people are using cash than bitcoins for money laundering. And that isn't what makes Bitcoin disruptive, because money laundering already exists.
    - mrvc 15y ago
      Open source code tends to give a false sense of security. Many people assume others will check the code, yet few do. In addition, it is possible to spread malicious code throughout a code base to prevent detection. (mentioned in article). To use TOR you still connect through an ISP. That can be tracked and deep packet analysis can be done. TOR is not a magic bullet. Exchange - Correct. That was coming in part 2 of the article covering methods around each point, but unlikely to find the time to write it up at this point. I leave the question: Why else would one use an anonymous currency unless they don't want to be detected? From there, who does not want to be detected? Usually those doing things they shouldn't. Otherwise, you'd just use a credit card or normal payment service as an everyday citizen would.

joshaidan 15y ago

I believe people have already brought up this argument in the past, but what are the arguments against why forking new bitcoins won't devalue the currency? Lets say one day Lady GaGa decides to start her own bitcoin, would that in anyway devalue the current bitcoin network if everyone instead decides to start mining Lady GaGa bitcoins?