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
It is not making computing blocks any easier for that miner, it is making him being an asshole, however.
This is just BFL doing their “mandatory burn-in” on all those singles thousands of people are waiting to receive. Maybe after the block reward is cut in half they will finally send them out.
Man they are taking forever!
More analysis on the Bitcoin War. Thanks for the relevant and timely information!
Do we really need or want blocks that dont have any transactions in them? Could we agree on a BIP that says if the block doesnt have any non-block-reward transactions in it, its not a valid block? Is that something a majority of pools would be able to agree on?
but what about when it’s a slow day and no transactions happen? we need to be able to mine a new block every 10 mins.
no we don’t – the only point of having another blocks is that they contain transactions
We could, but it doesn’t solve the problem. What we want from Bitcoin is an efficient decentralized electronic currency. If Bitcoin is susceptible to attacks like this, it doesn’t fill that role, and no patching up will do. If we implemented this rule, it would simply mean that the attacker would have to include a single transaction (besides the generation transaction) in the block, which is only slightly less detrimental to the network than zero transactions in the block is. Any arbitrary minimum amount of transactions to include in a block would restrict Bitcoin as much as it would restrict any potential attacker (as it would deter honest miners as well, when no or few transactions have occurred between two blocks).
As someone else has pointed out, this signals that fees are not big enough (relative to the block subsidy). Fees from a block are literally like a 0.1% extra income for the miner (and that’s even a lot!). This is so small that it is simply not worth it – financially – to bother setting up a node that keeps a copy of the block chain, checks transactions, and includes them in blocks. This can be solved by fees relative to the block subsidy increasing (which will, in any case, happen around the mid-December, when subsidy halves to 25 BTC per block).
I does not matter if a block has 1 transaction or 100 in terms of the time to compute the hash. Only the merkle root of the transactions is included in the hash.
to clarify: a miner attempting to mine a block calculates a “merkle root” of the transactions he wants to include. This takes longer if there are 1000 transactions than if there is one transaction. Then, along with some other stuff like an incrementing nonce, the miner hashes this over and over again.
Once someone finds a block, everyone recalculates what transactions will be in their block, then continues hashing.
Since miners are operating in the “billions of hashes per second” range during this second part, the time it takes to calculate the merkle root is insignificant.