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

[Bear]

On Sat, 2014-02-15 at 18:27 -0500, Phillip Hallam-Baker wrote:
> Let us assume for the sake of argument that BitCoin survives to the no
> more mining phase.
> 
> 
> At this point there is only an incentive to mine if the return
> justifies the cost of mining. Which means that miners have to be
> making more money in transaction fees than they are paying for in
> electricity. Which means that the difficulty of mining may go up or
> down depending on how many miners stay in the game.
> 
> 
> This then creates a situation where it is very likely that there is a
> large amount of mining hardware sitting idle because it isn't economic
> to run it for the transaction fees on offer. If only 10% of the mining
> rigs built are running it becomes quite easy for a 51% attack to work
> because it is now only an 11% attack.

In practice, in the most recent downturn of bitcoin prices thanks to 
the Mt.Gox vulnerability, the idled bitcoin mining rigs went to work
mining altcoins.

Miners set their rigs to work on whichever coin shows highest current
profitability, and if the price of bitcoin plummets, that's an altcoin
that uses the same proof-of-work.  

So instead of diverting mining rigs that are otherwise doorstops, 
the 51% attack has to divert rigs from a profitable activity.  The 
picture is not quite as bleak as you paint it, but I fear that you 
are absolutely correct that it is not stable.  

			Bear