Electronic money

[Peter Fairbrother]

On 05/12/14 20:47, Ben Laurie wrote:

> Consider the following thought experiment. I am an Evil Genius, with a
> Lot of Computers.
>
> I go away for a year and mine bitcoins on my own version of the chain.
> Because I have a LoC, I can do this faster than the rest of you.
>
> When the year ends, I present my longer chain, and under the Holy Rules
> of Bitcoin, all of the last year of mining and transactions goes away.


In theory. However that is not an economic attack.

Let me explain: You buy LoC - actually you are already screwed, because 
computers can't keep up; there is no way all the computers in the world 
could calculate hashes faster than the bitcoin mining network, as it 
uses dedicated ASICs and is currently operating at about 2^74 hashes per 
day.


But let's suppose you buy the latest asics, and set them to work for a 
year, spending say the value of all bitcoin mining in a year on asics 
and electricity. You won't make a profit that way, even if it works, but 
you might break even.

Ah, but at the end of the year you find your chain is shorter than the 
community chain. At the end of the year you can't do it faster than the 
rest of us any more - your asics are now pants compared to the latest 
asics (yes the technology does change that fast), and we have a lot more 
of them (yes, the mining network grows that fast too).


So you end up with year-old mining gear after spending £££ on new mining 
gear and electricity - it would be better to mine following the 
community chain, that way you will end up with a lot of mined bitcoins.



> Clearly this situation is untenable. The solution? Checkpoints.


But let's suppose your chain is longer, and you have you have a year's 
worth of mined bitcoins (the mining reward is set so that coins are 
mined at a fixed rate).

It will quickly become obvious that your chain is bogus, so you won't be 
able to gain on transactions - very rapidly, nobody will accept bitcoins 
based on your chain.

No-one will accept your mined bitcoins either, as they will also be 
based on your chain.

And more, as the mined bitcoins weren't authorised by the community 
which sets the mining rate, the major players, who hold most of the 
bitcoins, won't accept them for that reason either.

>
> Those who set the checkpoints are the central authority.
>
> In short.


Yes, roughly speaking - it's a belt-and braces situation, the community 
isn't going to go back and wipe out a year's worth of transactions just 
because someone has a longer chain.

In practice it isn't going to wipe out a chain that's more than six 
hours old - you have six hours to enter a longer chain, starting from 
the generally-accepted six-hour-old chain, or tough titties, holy rules 
notwithstanding.


However while I'd call the community the authority, I'd have qualms 
about calling them the central authority. They aren't terribly centralised.


-- Peter Fairbrother