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A Look At The 51% Attack And Other Risks On the Bitcoin Network (More Information in the Comments Section)
Synopsis: In this post, we will go over the major risk on the Bitcoin Infrastructure, what kind of solutions have been suggested, and the flaws (if any) of those solutions. The 51% Attack – The Problem/Risks The 51% Attack is based on the premise that, as Bitcoin users, we want no one user to hold 51% of the power on the network. I believe everyone can agree that would be quite the pickle if it were to occur. When we refer to power, we are referring to processing power, which, as most people reading this should know, controls the flow of money, the ability to verify transactions, and other things. Let’s go back a bit and review a few of these basics though. When any machine (which will be henceforth be referred to as a node) applies its processing power to mine, it is doing virtual work, attempting to find a hash which matches up to the algorithm, set at a particular difficulty. As any network grows, the amount of malicious users will too, which is the basis of our problem. If a user (we’re assuming he/she is a neutral entity at this point) controls that much power, we run a few risks.
The user could have found a way in which to maximize the node’s return on investment (ROI), which generally factors in both time and power. This maximization means that the user has found a way to compute multiple hashes at once (thus attempting to take care of multiple transactions at once). This also means that said user wouldn’t receive fees for the transaction though, so the efficiency of this is questionable.
The more malicious route means that the user mines empty blocks, and then refuses to process transactions while mining against only his blocks. I’m assuming (because there seems to be little I could find on the technical side of the attack, for good reason) that this involves a blockchain rewrite, and then the user targeting his/her clients to work on only those blocks which he/she modified, but as for specifics, I do not know. I will research this further and probably post a follow-up that more accurately describe what would happen during this sort of attack. If the user were to mine against just their own blocks though, and not attempt to create any new ones, the Bitcoin network would essentially stop. There is also a variant where a single user can inject a massive amount of hardware into the network quite suddenly, they can bring the production of new blocks to its knees.
This could also be a botnet that does not wish to deal with the hassle of constantly sending all of the current transaction information to its zombies. This would be more for coding simplicity rather than for financial gain. (This point is directly copied from Privacy Online News, as I can’t really think of a simpler way to put it). (List lovingly butchered from Privacy Online News)
The 51% Attack – The Actual Risk/Solutions An attack of this sort would be questionably efficient, and becomes more difficult by the day, here’s why: users. Other users are constantly battling to be more efficient, as they upgrade their own nodes with new GPUs, CPUs, addons like the ones from Avalon or Butterfly Labs, and modified settings. The efficiency of an attack of this sort is questionable since the Bitcoin’s code places odd restrictions on a user who has pulled off an attack likes this, due to its failsafes, cryptography, and other features. This is a list of such limits, brought to you by the Bitcoin Wiki. This [51% attack] allows him [the user] to: Reverse transactions that he sends while he’s in control. This has the potential to double-spend transactions that previously had already been seen in the block chain. Prevent some or all transactions from gaining any confirmations Prevent some or all other miners from mining any valid blocks The attacker can’t: Reverse other people’s transactions Prevent transactions from being sent at all (they’ll show as 0/unconfirmed) Change the number of coins generated per block Create coins out of thin air Send coins that never belonged to him As you can see, there are certainly some risks to a user gaining this kind of control, however the common concerns of them stealing from others, creating coins, and playing with other people’s money simply aren’t possible. It is mentioned later in the article that it is possible to change historical blocks, however the difficulty increases exponentially as you go back, and it becomes impossible past the last checkpoint. Solutions have been mentioned over time, including one (implemented by Solidcoin 2.0) that requires at least one user with a balance of at least a million Solidcoins to be working on every other block. The logic behind this is that a user with that much invested in a system would be very unwise to try to devalue a currency which he/she has so much invested in. I’m personally not a fan of this one, for one reason in particular. To combat the problem of not having enough coins in the beginning, the SolidCoin 2.0 dev team introduced “…10 accounts of 1.2 million [that] were created in the genesis block. These are special accounts that cannot be spent on the network, effectively making them “Null accounts used for special purposes”, until SolidCoin does have real millionaires.” I understand that these coins are unable to be spent on the network, but who controls these accounts? Who decides when there are enough SolidCoin millionaires? What happens if some of these people lose their money, what then happens to the network? These questions and more are raised in my head, and if a SolidCoin dev wishes to have a statement added in, feel free to contact me. As put forward by blogger Gavin Anderson of GavinTech, “[The solution is] Something like “ignore a longer chain orphaning the current best chain if the sum(priorities of transactions included in new chain) is much less than sum(priorities of transactions in the part of the current best chain that would be orphaned)” would mean a 51% attacker would have to have both lots of hashing power AND lots of old, high-priority bitcoins to keep up a transaction-denial-of-service attack. And they’d pretty quickly run out of old, high-priority bitcoins and would be forced to either include other people’s transactions or have their chain rejected.” This solution does sound like a fairly good one, although it does leave us still vulnerable to the attack, albeit for a fairly limited amount of time. User David Schwartz on Stack Exchange mentions this: “…As a longer-term solution, there have been proposals discussed to reject reorganizations that invalidate suspiciously large numbers of blocks such as four or more. The problem with these proposals is that under unusual circumstances (such as if a disaster partitions the Internet for half an hour), the network can permanently split with each side rejecting the other side’s block chain as a suspicious reorganization. Essentially, the client would have to go to a “lockout” mode if this happened and reject all transactions until some mechanism to find the real block chain could be implemented. (It could submit all transactions to both chains and consider only transactions accepted in both as confirmed!) One proposal uses a central authority to pick the real chain. This is an area where there is room for innovation.” Schwartz's solution does sound like less of a risk, but a lockout mode sounds like it could very potentially disrupt a lot of the Bitcoin traffic. Also, it mentions a “central authority” which in a decentralized digital currency, is a bit of a foreign concept. If there are any other major solutions you’d like me to add to this list, let me know.
Sorry if this is obvious, I recently became interested in btc (and trading it like any other currency). The exchanges I am aware of are Mt.Gox, Btc-E, and Bitstamp. I tend to ramble, so i'll try to keep this short:
Is any other exchanges I should look at? Are any of these better than the others? (I know you all don't like Mt.Gox very much as of now)
Is there a way to look up lag time for each exchange? Is it usually minutes or seconds?
I noticed each exchange has different prices. at the time of writing, Mt.G is at 90, Btc-E is at 92, and Bitstamp is at 88. These numbers were farther apart right after the crash. Will these slowly all approach the same number? Do people make money buying on one exchange and selling on another?
Do you have any general advice for buying selling bitcoin?
I'm planning on using Btc-E and buying bitcoins using bitinstant, pushing it to my Qt wallet, and transferring it to Btc-E from there. Is there a more efficient way to push cash to Btc-E? I'm only going to push 20USD for now, just as an experiment.
Is there any risk with holding USD in Btc-E? Is there something safer?
A few days ago, prices were fluxating between 60 and 90 (by the half hour). Now it's pretty stable. Is this good for the strength of bitcoin? Will people take it more seriously?
NEWQUESTION Is there any way to get bitcoin historical prices in csv (or any other easily parsed format)(from any exchange) like the yahoo's ichart csv (download)? NEWQUESTION Will the influx of these new ASICS affect the price of bitcoins? up? down?
Mining: My hardware is a 5770 graphics card which from bitcoin.it says I'll get about 200 MH/s. I'm hoping to make at least a buck a day (mining in a pool), again more just as an experiment.
If I use linux, and don't run a DE, could I increase my MH/s? Would it be noticeable?
What are your thoughts on ASICS? Is it thought that butterflylabs may be a scam? How about Avalon? Would buying one on ebay result in an unhappy scammed DrWoollyNipples?
Is there any information on how these ASICS work? I'm very curious in the technology and any links would be appreciated.
Thanks, you all are amazing. Sorry for so many questions.
Mt.Gox and Coinbase are Bitcoin exchanges, which allow users to trade fiat currency for Bitcoins. Butterfly Labs and Avalon ASICs are two of the many companies competing to design the best Bitcoin mining hardware. Still others, like Bitmit and BTCrow.com exist to help buyers and sellers get together and run smooth deals. Of all these companies, some are much more trusted than others. For a ... IRC Web #bitcoin-politics : Discuss politics with other Bitcoin users. IRC Web #bitcoin-pricetalk : ALL Discussion Remotely Related to Bitcoin Price or other offtopic goes here IRC Web #bitcoin-watch: Streaming Bitcoin transactions, including market data. IRC Web #bitcoin-wiki : Bitcoin Wiki support IRC Web #bitcoin-wizards : Bitcoin experts ... The bitcoin network is a peer-to-peer payment network that operates on a cryptographic protocol.Users send and receive bitcoins, the units of currency, by broadcasting digitally signed messages to the network using bitcoin cryptocurrency wallet software. Transactions are recorded into a distributed, replicated public database known as the blockchain, with consensus achieved by a proof-of-work ... Bitcoin is a decentralized digital currency that enables instant payments to anyone, anywhere in the world. Bitcoin uses peer-to-peer technology to operate with no central authority: transaction management and money issuance are carried out collectively by the network. The original Bitcoin software by Satoshi Nakamoto was released under the MIT license. . Most client software, derived or "from ... The Best Bitcoin Exchanges. Find the best place to buy and sell Bitcoins from 20+ exchanges we reviewed. Buy Bitcoin Instantly. Use our geo-based search engine to find the fastest exchange in your area. The Best Bitcoin Wallets. Choose the most secure wallet for storing your coins. Most Popular Reads: Buy Bitcoin with a Credit Card. These days it’s getting much easier to purchase Bitcoin ...
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