In this short post I want to set out my case for the moral justifiability of 51% attacks against proof of work cryptocurrencies. In the past, a 51% attack was a theoretical construct that most people didn´t seem to think would be practically achievable or lucrative. This has now changed, as hashpower can be rented on sites like Nicehash and Mining Rig Rentals for a few hours at a time. The attack delivers the attacker two prominent opportunities:
-You can orphan blocks of ¨legitimate¨ miners. This essentially means that whatever work was produced by legitimate miners during your attack became worthless. Mine a secret chain of two hours worth of blocks, release it and you orphaned 2 hours worth of blocks by your competitors. By the time most of the miners have noticed their blocks were orphaned in an attack, their nodes will have been automatically mining on your own chain for a while and it will be too late for them to do anything about it. The amount of money they lost would be equivalent to the amount you had to spend to produce your chain. Because mining is an industry with tight margins, the economic impact on these miners can be very big. The cost may be sufficient in case of a very long attack, to persuade them to quit their endeavor and get a real job.
-The more important opportunity is that you´re able to double spend your coins. This is potentially, incredibly lucrative. How lucrative it is tends to depend primarily on the inflation rate of a cryptocurrency. A low inflation rate means relatively little ¨work¨ is done to maintain the security of the system. A high inflation rate on the other hand, turns the cryptocurrency into a very poor long-term investment. As a consequence, most cryptocurrencies face declining inflation rates, that delay the problem of their ultimately unsustainability into the future. The bank of international settlements explains this issue here
When it comes to the moral justification of a 51% attack, we first have to ask ourselves why proof of work is morally unjustifiable. There are two main reasons for this:
-Proof of work has an enormous environmental impact, that ensures future generations will have to deal with the dramatic consequences of climate change. There is no proper justification for this environmental impact, as it delivers no clear benefits over existing payment systems other than the ability to carry out morally unjustifiable actions like blackmail.
-Proof of work is fundamentally unsustainable, because of the economic burden it places on participants in cryptocurrency schemes. Cryptocurrencies can´t produce wealth out of thin air. The people who get rich from a cryptocurrency becomes rich, due to the fact that other people step in later. In this sense we´re dealing with a pyramid scheme, but the difference from regular pyramid schemes lies in the fact that huge sums of wealth are not merely redistributed, but destroyed
, to sustain the scheme. The cost of the work to sustain the scheme is bigger than you might expect, because the reality is that relatively little money has entered bitcoin. JP Morgan claims that for the crypto assets at large, a fiat amplifier of 117.5 is present, as a purported $2 billion in net inflow pushed Bitcoin’s market capitalization from $15 billion to $250 billion. You have to consider that the Digiconomist estimates that $2.6 billion dollar leaves the Bitcoin scheme on an annual basis, in the form of mining costs to sustain Bitcoin. The vast majority of retail customers who entered this scheme ended up losing money from it. In some cases this lead to suicides.
The fact that proof of work is morally unjustifiable doesn´t directly lead to a moral justification for a 51% attack. After all a sane society would use government intervention to eliminate the decentralized ponzi schemes that are cryptocurrencies. There are a few things that need to be considered however:
-Governments have so far failed in their responsibility to address the cryptocurrency schemes. Instead you tend to see officials insist that proof of work might suck and most cryptocurrency is a scam, but ¨blockchain technology¨ will somehow change the world for the better. Most libertarians who saw these schemes emerge insisted that it´s stupid to participate in them because the government would eventually ban them and round up the people who participated in them. This didn´t happen because of the logistical difficulty of suppressing these schemes (anyone with an internet connection can set one up) as well as the fact that suppressing them would lend credence to the anti-government anarcho-capitalist ideology on which these schemes are based. Goverments might say ¨these schemes facilitate crime, ruin the environment and redistribute wealth from naive individuals to scammers¨, but anarcho-capitalists would insist that governments have grown so tyrannical that they want to ban you from exchanging numbers on computers.
-Because cryptocurrency is fundamentally an online social arrangement, governments have very limited influence over the phenomenon. Binance seeks to become a stateless organization, not subject to the jurisdiction of any particular government. Just as with regular money laundering and tax evasion that hides in small nations that can earn huge sums of money by facilitating these practises, governments are dependent on the actions of individuals to address these practices. Whistleblowers released the panama papers and the tax evasion by German individuals through Swiss bank accounts. Through such individuals, the phenomenon could be properly addressed. In a similar manner, cryptocurrency schemes will need to be addressed through the actions of individuals who recognize the damage these schemes cause to the fabric of society.
-The very nature of a 51% attack means that it primarily punishes those who set up and facilitate the cryptocurrency scheme in the first place. The miners who pollute our environment to satiate their own greed are bankrupted by the fact that their blocks are orphaned. The exchange operators are bankrupted due to double-spend attacks against the scams that they facilitate. When this happens, the cryptocurrency in question should lose value, which then destroys the incentive to devote huge sums of electricity to it.
Finally, there´s the question of whether 51% attacks are viable as a response to cryptocurrency. There´s the obvious problem you run into, that the biggest and oldest scams are the most difficult to shut down. In addition, cryptocurrencies that fell victim to an attack tend to move towards a checkpoint system. However, there are a few things that need to be considered here:
-51% attacks against small cryptocurrencies might not have a huge impact, but their benefit is nonetheless apparent. Most of the new scams don´t require participants to mine, instead the new schemes generally depend on ¨staking¨. If people had not engage in 51% attacks, the environmental impact would have been even bigger now.
-51% attacks against currencies that implement checkpointing are not impossible
, if the checkpoints are decentrally produced. What happens in that case is a chain split, as long as the hostile chain is released at the right time. This would mean that different exchanges may get stuck on different forks, which would still allow people to double spend their cryptocurrency.
-There are other attacks that can be used against proof of work cryptocurrencies. The most important one is the block withholding attack. It´s possible for people who dislike a cryptocurrency to join a pool and to start mining. However, whenever the miner finds a valid solution that would produce a block, he fails to share the solution with the pool. This costs money for the pool operator, but it can be lucrative for the actor if he also operates a competing pool himself. In the best case it leads to miners moving to his pool, which then potentially allows him to execute a 51% attack against the cryptocurrency.
-It´s possible to put up a 51% attack bounty, allowing others to do the work for you. This works as following. You make transaction A : 100 bitcoin to exchange X, for a fee of 0.001 BTC. Once this transaction has been included in a block, you immediately broadcast a conflicting transaction with another node: You´ŕe sending those 100 bitcoin to your own wallet, but you´re also including a 50 bitcoin fee for the miners. The miners now have a strong incentive to disregard the valid chain and to start mining a new chain on an older block that can still include your conflicting transaction. Provided that pool operators are rational economic agents, they should grab the opportunity.
-Selfish mining in combination with a Sybil attack allows someone to eclipse the rest of the network, while controlling less than 51% of the hashrate. Your malicious nodes will simply refuse to propagante blocks of your competitors, thereby giving you more time to release your own block. Selfish mining will always be possible with 33% of the hashrate and as far as I can tell there are no pathways known currently to make the scheme impossible for people with 25% of the hashrate. This potentially makes a 51% attacks lucrative without having to carry out double-spend attacks against exchanges. Although double spending is a form of theft, it´s not clear to me whether a selfish mining attack would get you into legal trouble or not.
The dreaded 51% attack is a morally justifiable and potentially lucrative solution to the Nakamoto scheme
Angry South African investors who lost millions of dollars in the now-defunct Bitcoin Ponzi scheme called “Bitcoin Wallets” have looted and burned down the house of Sphelele Sgumza Mbatha, the operator of the scam project, reports the Verge on July 12, 2019. Bitcoin Ponzi Scheme Creator Loses House to Mob Per sources close to the . Read More Read More. The post by Ogwu Osaemezu Emmanuel ... Every Ponzi scheme relies on the hope that investors won’t sell. This one’s just too obvious. – 17 Mar 2018. DON’T BUY THE DIPS IN A FAILING PONZI SCHEME. This is not financial advice. It’s common sense. It was also common sense not to buy magical virtual coins that will make you rich in no time on the Internet, but apparently some things need to be said more clearly. – 29 Mar 2018 ... Binance CEO Changpeng Zhao says the reports of the exchange “not authorized” to operate in Malta is a “mix of truth, FUD & misconception,” because “Binance.com is not headquartered or operated in Malta.” CZ says this is just old news and FUD which has been turned into a story. Binance “not authorized by the MFSA to operate” in Malta Libertarian Leader in Bitcoin, Ethereum, Ripple, NEO, ICO and Cryptocurrency News, Coinotizia covers all cyptocurrencies bringing you the latest news and analyses on the future of money. Famous economists have called it a Ponzi scheme, ... When raking in massive profits—Binance saw $200 million of profits in just one financial quarter in its first year alone—and having nowhere to keep them, tax havens have presented an enticing solution. Add to that the streak of libertarianism that runs through the crypto community, it was all but inevitable. “While powerful economies ... Worse, too much reliance on monetary incentives risks making the project look like a Pump-and-Dump or a Ponzi scheme in the making. Kept promises. Of course, neither a compelling project narrative, nor meaningful content, nor active user engagement can compensate for an over-promised and under-delivered product. After all, successful crypto ventures are defined by whether they can stick to ... A general look over Bitcoin, year to date, paints an obviously negative picture, as the all time high of $20,000 was reached exactly a year ago today. It has been all downhill from there, with Bitcoin shedding over $7,000 in value from December 17 to the end of the year as it settled on $13,000 as its ending figure. It becomes easier to see then how some libertarian economists might label fractional reserve banking as hardly distinguishable from a state-sponsored Ponzi scheme. Mehrling points directly to the ... Dec 30 “Bitcoin—The Andromeda Strain of Computer Science Research” – SMBlog $14,669.04 Dec 29 “Why bitcoin investors are like stamp collectors” – The Sidney Morning Herald $14,617.28 Dec 29 “Why Bitcoin is the largest Ponzi scheme in human history” – Linkedin $14,617.28 Dec 28 “The Great Bitcoin Scam” – Forbes $16,064.44 Dec 27 “Bitcoin Is an Implausible ... An infamous ponzi scheme has allegedly resurfaced under a new name, and is now operated by a prominent top earner in the company. The... Read more. COVID-19 Had Russians Withdrawing $13.6B in March, Fearing Banks Would Shut Down. Bitcoin Innovation Oana Ularu-April 20, 2020 0. ETH 2.0 Could Prove to be the Largest Economic Shift, Driven by Supply Shock & FOMO. Ethereum (ETH) AnTy-April 20 ...
bitcoin bitcoins anderson baloran anderson baloran cryptonickk bruce bruce wang brucewang trevon trevon james eth ltc ripple altcoins invest make money at home ethereum litecoin coinexchange.io ... My top choice is Binance. ... Financial Advisor Accused in Ponzi Scheme Kept Cow Tongues For Hex - Crime Watch Daily - Duration: 6:50. True Crime Daily Recommended for you. 6:50 'Fake Bitcoin ... Rickards: ‘Bitcoin is a Ponzi Scheme’ - Duration: 7:28. Hedgeye 148,392 views. 7:28. ... Breaking News - Binance Adds Peer-to-Peer Trading for Indian Rupees with ... (Hindi / Urdu ) - Duration ... Watch live: Judiciary Committee debates impeachment articles ahead of vote CBS News 3,708 watching Live now Bitcoin to See Return of Bull Cross That Marked Onset of 2016-17 Price Rally - Duration ... It seems like everytime one Bitcoin Ponzi scheme scams away with their investor's money, another one pops up in its place. It's literally like playing a game of Whack-A-Mole. Elderhash follows the ... If you are new to Crypto, my suggestion is that you start with buying ~$150 worth of Bitcoin, Ethereum, Litecoin @ Coinbase and get familiar with storing it, moving it around, etc. In Todays Educational video i look at the TRADITIONAL FINANCIAL MARKETS, i analyse the PRICE OF BITCOIN, i analyse The DOW JONES INDEX DOWJ and i tell you the BREAKING NEWS STORIES from crypto and ... Binance Altcoins Especially!! Will bitcoin keep pumping? Wall Street has been buying bitcoin En Mass! all in todays crypto news! Ethereum 2.0 is coming! Ethereum 2.0 Launches! Ethereum 2.0 is ... Serious money is coming into #bitcoin! Mattie will look at that as well as btc market fear. He will also look at bitcoin's current price and why it hasn't re...