Bitcoin War: The First Real Threat to Bitcoin?
For most Bitcoiners, it is a well known fact that there is a significant risk in the decentralized peer-to-peer currency pertaining to hashing power. In order to maintain a perfectly democratic internet currency, no one single entity should ever have control of 51%, or greater, of the total network hashing power.
Today, one of our researchers discovered that according to Blockchain.INFO, a miner at 85.214.124.168 currently has approximately 15% of the total hashing power. This, in itself, is every day news. However, the strange or even frightening fact is that it is producing empty blocks (single transaction blocks). If this 15% turned into 51%, it could have the potential to kill bitcoin. Why are they doing this? There are a few possible reasons:
1. The entity may have discovered a method for increasing mining ROI, and essentially, is earning its 50 bitcoins per block much more quickly than others. In general when finding a block, hashes for every transaction must be computed. When computing 1 transaction per block versus 100, you can imagine the latter would be more costly than the former. However, this means that the entity would not receive any fees for processing transactions. It is difficult, at the current time, to determine whether this would be beneficial.
2. The entity is willing to blow money on mining these empty blocks. Essentially, this could lead to a complete stop in bitcoin transaction processing. If the entity obtains 51% of hashing power and fully stops processing transactions while mining against only its own blocks, the block chain will become useless. Some people who might do this include governments, banks, competing currencies, or ridiculously wealthy and bored individuals who have a vendetta against bitcoin.
3. 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.
As of today, there is still very little risk. Additionally, assuming this entity falls under the #1 listed above (i.e., not entirely malicious), the worst thing that will happen is that bitcoin transaction confirmations will be slowed down by whatever percent of hashing power they are “contributing,” and Jerry McGuire will yell “SHOW ME THE MONEY!”
So what is it? Is this entity generously increasing their ROI, or is it attacking and taking over? With the recent security advisories and, of course, the widely publicized hacks, it looks like the WWW (Wild Wild West) is in full effect.
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69 Comments
This shows that transaction fees are too low. If miners aren’t even bothering with them, there’s probably not a sufficient incentive. Raising transaction fees will increase the incentive for miners to include as many of them as possible. This is especially true for mining pools where the transaction fees are often pure profit for the pool operator.
This is where the “free market” idea fails.
If you tell people that they can pay whatever they want, they won’t pay anything.
Just look at the size of fees right now. It’s usually about 0.001 bitcoins in the whole block. Who cares about that.
Actually, I was thinking this is where the “free market” idea excels. If miners are not including transactions it is begin the transaction fee people are paying is too low. Seems simple enough to me.
This is irresponsible journalism putting their IP address on here and subsequently copied over and over again by blogs linking here!!
Hi, the IP is listed on blockchain.info.
LOL
The usual form of the 51% attack is to produce an alternative block chain that is longer than the legitimate one, then make a transaction with a third party to receive goods and then release your longer chain with alternate transactions that instead pay the money to yourself.
There could be *several* attackers capable of the 51% attack, because the whole point is that you only employ your resources when you need it. If these are single transaction blocks, it’s likely the single transaction is the one intended to invalidate the transaction conducted with the person being attacked.
These could simply be proof of concept tests, categorizing and perfecting the system until they know exactly what services they can offer.
Why is 51% so important?
An attacker that controls more than 50% of the network’s computing power can, for the time that he is in control, exclude and modify the ordering of transactions.
No. There is no magic with the 50% number relating to control of the network. In fact, if you have 10% of the network, you could choose to slow down transactions by 10%. Someone with 50% can slow it down by 50%. The ONLY serious consequence of a 51% attack is the potential to temporarily double-spend coins. The remaining 49% would continue on their merry way, ignoring the invalid transaction. The loser would be the original recipient of the bogus transaction.
In other words, 51% lets someone do a chargeback.
There are a number of misconceptions in your article:
* Even at 51% mining power the blockchain is still going to be filled with transactions verified by other miners. Just about half of all blocks are going to be empty. Of course with 51% mining power, there would be potential for more harmful abuse like attempts to spend bitcoins twice, invalidating transactions after the fact etc.
* For the miner it is (almost) not more costly to add more transactions to blocks, so that cannot be a reason why that entity refuses to validate transactions. My first guess would just be that this host is misconfigured :)
I’ve seen that possibly malicious host in the blockchain, too. There are a few occurences in time where it provided every second block. That could’ve been by chance. It could also mean that 85.214… has more mining power than it shows most of the time, maybe somebody is still preparing for a larger attack on the bitcoin network and tries to stay below the radar by artificially limiting mining power.
Yes, what I was saying in the post is that it will only kill Bitcoin if the miner only mines his own blocks. This means his chain (which is completely empty) will be the longest, and thus, none of the blocks with transactions will make it into the chain.
At 51% hashing power, he gains the option to do this.
He doesn’t just gain the option, but he gains the incentive. Say he has 60% of the mining power. If he mines “honestly”, he mines 60% of the blocks and gets 60% of the rewards. If he only builds off his own blocks, he gets 100% of the block rewards. Since the block rewards are fixed for now at 50 bitcoins per 10 minutes, he has a strong incentive to only build off his own blocks.
However, he has no incentive (unless his motive is to kill Bitcoins) not to include transactions. If he includes no transactions, he makes Bitcoins useless and reduces the value of the Bitcoins he has mined.
Yes, I agree with this completely. It is a potential problem though that the view you express here is not more widespread. It could cause market panic to ensue even though the honest monopolist’s activities cause no direct harm to users.
I also think that honest monopoly is the most likely near-term scenario. As block reward decreases however, the temptation towards dishonesty increases.
Ah yes, now I see what you were referring to. Didn’t even think of this attack (but who would do this kind of DoS if he could actually make money by spending his bitcoins twice?! :)
Other than that, you write about the transactions fees that this host doesn’t collect. Transaction fees currently are at about 0.02 BTC per block (for the blocks I checked), so he doesn’t really loose much. If people payed more fees, maybe that host would start to behave more socially?
A miner with 51% of the hashing power could build a longer block chain than the rest of the network resulting in blocks generated by anyone else being ignored. A technically adept miner with 51% could prevent transactions being processed. In practice that would reduce the value of bitcoin so a miner is more likely to allow the system to work.
It’s far more likely that this miner is just a botnet operator, not an organisation with an interest in destroying bitcoin like the NSA, Paypal, Visa or Mastercard.