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
Famous economists have called it a Ponzi scheme, ... So we decided to take a closer look at some of the largest companies who’ve upped-sticks to tax havens. Binance: Cayman Islands. Binance is one of the largest cryptocurrency exchanges in the world. It was founded in China in 2017, but a ban on cryptocurrency trading forced the company out to Japan. From there, it subsequently moved to ... US Man Pleads Guilty in $722 Million Bitclub Network Ponzi Scheme Case Regulation Bitcoin News ‘Bitcoin Will Never Ditch You’ Ad Dominates Front Page of Major Hong Kong Newspaper . The number of bitcoin ads appearing in major newspapers is growing. The front page of Apple Daily, a major newspaper in Hong Kong, featured a “Bitcoin will never ditch you” ad this week. Bitcoin ads also ... Businesses around the world continue to adopt bitcoin cash and in 2020 merchant acceptance continues to grow.Tallying up all the companies that accept BCH listed on sites like Green Pages, Map ... Binance; Kraken; Lead Generation! (+600% Your List) Posted on September 6, 2020 by BGC Admin. US Man Pleads Guilty in $722 Million Bitclub Network Ponzi Scheme Case. A Bitclub Network Ponzi scheme promoter has admitted to charges of selling unregistered securities and to subscribing to a false tax return in connection with his role in the $722 million fraud scam. The man, Joseph Frank Abel ... Apart from that at the crypto winter was also responsible for rooting out fake tokens and Ponzi scheme. Overall, the crypto winter made Bitcoin a more reliable asset. People Hoped for Another Massive Bull Run in 2019. The crypto winter wiped out 80% of the crypto market, and thus people had high hopes from 2019. Many self-proclaimed crypto pundits again started the prediction game, especially ... Home Bitcoin News US Man Pleads Guilty in $722 Million Bitclub Network Ponzi Scheme Case US Man Pleads Guilty in $722 Million Bitclub Network Ponzi Scheme Case . TheCryptoInquirer Bitcoin News 0 ‘Bitcoin Will Never Ditch You’ Ad Dominates Front Page of Major Hong Kong Newspaper. The number of bitcoin ads appearing in major newspapers is growing. The front page of Apple Daily, a major ... On the McKinney Ponzi scheme: Originally posted here: Bitcoin: Behind The Cryptocurrency Curtain KERA News. Related Post . Protesters Around The World Are Putting Their Hopes Into Cryptocurrency - Forbes - June 24th, 2020; The Benefits of Cryptocurrency Trading Crypto Benzinga - Benzinga - June 24th, 2020; UNICEF Cryptocurrency Fund announces its largest investment of startups in developing ... TAAL, a Canadian Bitcoin mining firm which mines Bitcoin (BTC), Bitcoin Cash (BCH), and Bitcoin SV (BSV), has announced their plans to no longer mine on the BCH chain. This announcement comes in response to the unilateral announcement to impose a 12.5% mining tax on miners in order to fund BCH development. Bitcoin Ethereum Ripple Bitcoin Cash Chainlink Binance Coin Crypto.com Coin Litecoin Cardano Bitcoin SV EOS Tron Monero Tezos Stellar Lumens NEO UNUS SED LEO NEM Cosmos VeChain Iota Dash THETA Ethereum Classic ZCash Maker Ontology HedgeTrade Algorand Basic Attention Token Dogecoin FTX Token DigiByte BitTorrent 0x Loopring Waves Icon Qtum Ren ... Bitcoin is a Ponzi Scheme. When the United States, Canada, Australia, New Zealand, and the Entire European Union all give a “legal” status to something, you can bet it likely isn’t a Ponzi scheme. These countries may allow banks to operate in a way that hurts their citizens (in my opinion), but you can bet your right arm they’ve been very critical of cryptocurrency. I could stop there ...
The Ponzi Scheme was created by Scammers with a long history in frauds, João Severino (one of the owners) was connected to the Ponzi scheme AMC Invest in Portugal that promised 10% per month, the ... Cryptocurrency exchanges, the most popular ones are all still centralized to this day. These include: Binance, Kraken, Bitmex, Bithumb, Huobi, Gemini, Bitfinex, Coinbase Pro, and many many others ... 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 ... In this video, I discuss whether or not Bitcoin is a Pyramid scheme or a Ponzi scheme. I conclude that it is neither, simply because: 1) Bitcoin is decentralized, not run by a corporation or ... So is Bitcoin really digital scarcity or is it simply a ponzi scheme? Today we investigate the investment case made by the arguments of Gabor Gurbacs, a digital asset strategist and the arguments ... 02/15/18 A $115 Million Ponzi Scheme and a $50 Million Phishing Scam, Brought to You By Bitcoin ... 02/07/18 Peter Thiel: Bitcoin is Libertarian, AI is Communist - Duration: 31:35. Kyle Torpey's ... While national governments try to control inflation, Bitcoin is seen by many as a good hedge against the ravages of inflation. Subscribe to keep up to date with more content from Binance and don ...