6 ms·

Ask HN: What's to stop the US Government from buying 51% of Bitcoin?

10 points by vinchuco 13y ago

Hopefully this is not a silly question.

zbtc 13y ago
Even if they did, it wouldn't matter. They need 51% of the _hashing power_, not 51% of bitcoins, to be able to manipulate the blockchain.
bmelton 13y ago
I'm not an expert at all, but right now, I think the only thing stopping them from buying large quantities of Bitcoin is availability. Throwing money at a problem is sort of a unique proposition when the problem is money, and everybody else is doing the same. The question I would have is what objective would that satisfy? Is there some power in holding a slight majority of the currency? I mean, they already hold quite a lot of regular cash (or at least do transiently), but that doesn't seem to be affecting dollars in the same way that shares in a corporation does. Perhaps I'm missing it, but I don't know what significance would arise from a single entity holding a majority of the currency. If there is, and I'm clueless, my apologies.
deleted 13y ago
[deleted]
dragonwriter 13y ago
Why would you buy 51% of BTC? What you really want to buy is 51% of the hashing power in the BTC network. And the correct answer is nothing stops them from doing that (or even stops them from having done that in the past). Its generally presumed that they haven't and won't because it is presumed the cost to do so would exceed the value to the government of doing so.
- PeterisP 13y ago
  I wouldn't be surprised if NSA had a basement full of specialized hardware devices for standard crypto&hash functions (including SHA256) for a decade already - in order to keep up with their primary mission which, among other things, includes bruteforcing such issues. They definitely have some such devices for years already, and have much more practical experience on how to build such things on scale than the current ASIC-miner manufacturers; the question is how much of them they have. If they have some 'spare inventory' available for such a mission, it might not cost that much if they just have to turn on a warehouse-full of already existing HW.
- chrisBob 13y ago
  If I understand BTC correctly then the return on mining is going down. Once the cost of mining exceeds the return in coins then there are only a few reasons to continue mining: 1) Altruism. Some people will just want to support the network. 2) Botnets. If you aren't paying for the hardware then you don't care about the cost. 3) Control. You are a large entity that wants to take over the network. 4) Ignorance. I assume some people will continue to mine and just not know they are losing money doing it. Please let me know if I am missing something. I am betting on a turning point where it becomes more reasonable for the government to take over the network, at least temporarily. It is not a stretch to think that someone (not necessarily the US govt) with enough computer power could get a benefit from controlling the entire network.
  - dllthomas 13y ago
    If it is not profitable to mine, then people will have to pay transaction fees to get their orders processed in a timely manner. These will have to be enough to keep enough people mining. It will only be cheap to run a 51% attack if there's not many people using the network to process transactions. Which isn't to say it necessarily won't be cheap enough for some specific goal. Simple ability to double spend isn't likely to be worth enough to a state, though, I think.
  - dragonwriter 13y ago
    > If I understand BTC correctly then the return on mining is going down. The cost in terms of hashing effort expended to produce new bitcoins goes down over time, and eventually no bitcoins can be mined, however, there are two reward systems for mining: first (and by design important in the early stages of bitcoin adoption) is production of new bitcoins, second (and by design important in the late stage of bitcoin adoption) is transaction fees. Remember that miners are the ones verifying transactions in the bitcoin network, that they can prioritize which transactions to verify, and that all transactions can include an offer of a transaction fee as a reward for verifying them.
hkarthik 13y ago
Because quite simply, they can't. To buy it, they would borrow the money from China. China would provide it by using the BTC they own at whatever price they choose to sell it at.
- drabiega 13y ago
  They most certainly would not have to 'borrow it from China'. If for some reason they wanted to do this, they would just have to sell some securities, most of which would be bought by U.S citizens, the main holders of U.S. Government debt.
bottled_poe 13y ago
Obviously this wouldn't work as bitcoin clones will just pop up.

10 points by vinchuco 13y ago

Hopefully this is not a silly question.

zbtc 13y ago

Even if they did, it wouldn't matter. They need 51% of the _hashing power_, not 51% of bitcoins, to be able to manipulate the blockchain.

bmelton 13y ago

I'm not an expert at all, but right now, I think the only thing stopping them from buying large quantities of Bitcoin is availability. Throwing money at a problem is sort of a unique proposition when the problem is money, and everybody else is doing the same. The question I would have is what objective would that satisfy? Is there some power in holding a slight majority of the currency? I mean, they already hold quite a lot of regular cash (or at least do transiently), but that doesn't seem to be affecting dollars in the same way that shares in a corporation does. Perhaps I'm missing it, but I don't know what significance would arise from a single entity holding a majority of the currency. If there is, and I'm clueless, my apologies.

deleted 13y ago

[deleted]

dragonwriter 13y ago

Why would you buy 51% of BTC? What you really want to buy is 51% of the hashing power in the BTC network. And the correct answer is nothing stops them from doing that (or even stops them from having done that in the past). Its generally presumed that they haven't and won't because it is presumed the cost to do so would exceed the value to the government of doing so.

PeterisP 13y ago
I wouldn't be surprised if NSA had a basement full of specialized hardware devices for standard crypto&hash functions (including SHA256) for a decade already - in order to keep up with their primary mission which, among other things, includes bruteforcing such issues. They definitely have some such devices for years already, and have much more practical experience on how to build such things on scale than the current ASIC-miner manufacturers; the question is how much of them they have. If they have some 'spare inventory' available for such a mission, it might not cost that much if they just have to turn on a warehouse-full of already existing HW.
chrisBob 13y ago
If I understand BTC correctly then the return on mining is going down. Once the cost of mining exceeds the return in coins then there are only a few reasons to continue mining: 1) Altruism. Some people will just want to support the network. 2) Botnets. If you aren't paying for the hardware then you don't care about the cost. 3) Control. You are a large entity that wants to take over the network. 4) Ignorance. I assume some people will continue to mine and just not know they are losing money doing it. Please let me know if I am missing something. I am betting on a turning point where it becomes more reasonable for the government to take over the network, at least temporarily. It is not a stretch to think that someone (not necessarily the US govt) with enough computer power could get a benefit from controlling the entire network.
- dllthomas 13y ago
  If it is not profitable to mine, then people will have to pay transaction fees to get their orders processed in a timely manner. These will have to be enough to keep enough people mining. It will only be cheap to run a 51% attack if there's not many people using the network to process transactions. Which isn't to say it necessarily won't be cheap enough for some specific goal. Simple ability to double spend isn't likely to be worth enough to a state, though, I think.
- dragonwriter 13y ago
  > If I understand BTC correctly then the return on mining is going down. The cost in terms of hashing effort expended to produce new bitcoins goes down over time, and eventually no bitcoins can be mined, however, there are two reward systems for mining: first (and by design important in the early stages of bitcoin adoption) is production of new bitcoins, second (and by design important in the late stage of bitcoin adoption) is transaction fees. Remember that miners are the ones verifying transactions in the bitcoin network, that they can prioritize which transactions to verify, and that all transactions can include an offer of a transaction fee as a reward for verifying them.

hkarthik 13y ago

Because quite simply, they can't. To buy it, they would borrow the money from China. China would provide it by using the BTC they own at whatever price they choose to sell it at.

drabiega 13y ago
They most certainly would not have to 'borrow it from China'. If for some reason they wanted to do this, they would just have to sell some securities, most of which would be bought by U.S citizens, the main holders of U.S. Government debt.

bottled_poe 13y ago

Obviously this wouldn't work as bitcoin clones will just pop up.