Friday, January 10, 2014

ALERT The Existential Threat to Bitcoin Its Boosters Said Was Impossible Is Now at Hand

Christopher Mim reports:

A doomsday scenario that has long been dismissed by bitcoin’s biggest boosters is now a clear and present danger.  At 3am ET this morning, a single bitcoin mining collective known as Ghash.io reached 45% of the computing power of all global bitcoin miners, just six points short of the 51% that would be required to break bitcoin by arbitrarily manipulating the record of future transactions upon which it rests. The result could be, at minimum, “double spending” of existing bitcoins, which would render the currency effectively unusable.
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To put this in context: Imagine that tomorrow, a single corporate entity gained the ability to clone all of its dollars, and then immediately went on an asset buying spree. To say that it would undermine trust in the US dollar would be an understatement. That’s what could happen to bitcoin.
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Update: Ghash.io has issued a press release on the potential for it to launch an attack on Bitcoin. The mining pool says it is taking steps to make sure that Ghash.io never reaches 51% of the world’s bitcoin mining capacity, “as it will do serious damage to the Bitcoin community, of which we are part of.” Ghash.io also said that they will temporarily stop accepting new independent bitcoin miners in their pool, and will allow existing members of Ghash.io to mine bitcoins through other pools.
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Update 2: Bitcoin magazine has weighed in, asserting that the success of Ghash.io is indicative of a larger problem in Bitcoin: nearly unprecedented centralization of the mining upon which the currency’s security depends.
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Update 3: Bitcoin entrepreneur Henry Brade weighs in on Ghash.io’s proposed solution, and finds it wanting. Quartz’s Ritchie King weighs in: No, bitcoin isn’t about to be taken over by a massive cartel.
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Popular discussion boards devoted to bitcoin are freaking out about this possibility, and every post on the homepage of, for example, the portion of Reddit devoted to Bitcoin is currently devoted to the dangerous rise of Ghash.io.

(ht Kevin Killinger)


8 comments:

  1. This is a threat vector coming from a flaw in the technology itself. It's not the same as Wenzel's (perfectly valid) analysis of the threat vectors coming from gov't regulators not to mention BTCs flaws from Mises' regression theorem point of view.

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  2. So that 1400 dollar Bitcoin miner for sale on AM talk radio ain't a good investment?

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  3. https://blockchain.info/ shows GHash.IO; Eligius; BTC Guild as active miners. Unlike a year or so ago, when anyone with a PC could undertake mining, mining now requires massive computing farms that require a lot of cooling, and electricity. There are a handful now able to mine much of the bitcoins out there. So why could not a govt. do the same, in that they have nearly unlimited resources to throw at the Bitcoin mining arms race?

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  4. "a single corporate entity gained the ability to clone all of its dollars, and then immediately went on an asset buying spree"

    That sounds familiar.

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    1. Yep, you read my mind. Imagine that. What would we call such a dastardly scheme? Ah, yes, fractional reserve banking.

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    2. Yes, imagine that. What would we call such a dastardly scheme? Ah yes, fractional reserve banking.

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  5. Where is Honey Badger to put a POSITIVE spin on this story?

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  6. What happens to a crypto currency when they start debasing it? People move to a competing coin that has better qualities.

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