[Cryptography] Another Bitcoin issue (maybe) (was: BitCoin bug reported)

[Phillip Hallam-Baker]

On Thu, Feb 13, 2014 at 7:17 PM, Jeffrey I Schiller <jis at qyv.net> wrote:

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> I?ve been playing with Bitcoin myself. When I first looked at it when
> it came out, I was convinced it would not scale because of the ever
> growing size of the blockchain (on my system it is currently around
> 20Gb). But then again, I though that .COM wouldn?t scale either. :-)
>
> So disks are getting bigger and we are seeing ?light weight? wallets
> (aka they depend on other peers instead of having their own copy of
> the blockchain). I don?t believe this will be a long term problem.
>
> However, I am concerned about mining and the diminishing
> rewards. Today, as has been said here, a tremendous amount of mining
> is going on. However the block reward is 25 BTC (~$15,000) so there is
> real motivation to use hardware and really go all out to do mining.
>
> However when the block rewards go away (years from now) it doesn?t
> make sense to me to spend a lot of effort mining for the tiny
> transaction fees. I know the theory is that the transaction fees will
> motivate miners. Really?
>
> Here is what I fear may happen. When the reward goes away, so will the
> miners. So the protocol will adapt by reducing the work factor
> required to create a block. At some point it will stabilize. But what
> of all of that idle mining hardware? I wonder if someone could
> purchase enough of it to capture the blockchain and have their way
> with us? The security of Bitcoin is dependent on no one entity being
> able to do more work then the rest of the network... but will this
> remain a valid assumption?
>

There is a similar risk in that the mining guilds have a network effect and
it is better to be part of the biggest guild with the best tools. So the
Ukrainian guild recently had to voluntarily shed members to avoid getting
up to 51%.

But there is nothing to stop a collusion under the table between the
miners. And given the interest organized crime has taken in mining, that
collusion can be coerced. We lost a couple of guys who are presumed
murdered by the Russian mob a couple of years back and Ulrich is on charges
of attempted murder. So a scenario in which the mob works out who controls
the machines coordinating the mining rigs and literally puts a gun to their
kids heads if they don't help them steal a few tens of millions seems very
likely to me.


Another area where cheating looks possible is in these 'proven secure'
bitcoin gambling sites.

Most of the sites tell you that they aren't cheating and for most
Bitcoiners, that is enough. Though some are careful enough to look at the
'I'm not cheating page' where you can press buttons that tell you the site
isn't cheating, honestly. Or if you are really paranoid you can download an
open source program provided by the site owner and run it. And that will
tell you that the site owner isn't cheating.

Hows that for confidence building?

I can't see any specifications or explanations on the sites I have visited
so I can't see if the protocols are vulnerable to other forms of attack. I
am pretty sure that there are attacks that are going to be possible if the
site owner colludes with the miners. One easy way to cheat would be to only
include losing bets in the blockchain. Which would be visible in the
results of course. Unless the site owner made sure to only cash out by
making an equal number of known winning bets.


The idea of getting close to a currency being used by people with lots of
guns and a history of using them on other people seems like a very bad plan
to me...


-- 
Website: http://hallambaker.com/
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