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However, you could SHORT crypto currency and then do some damage it. Where would this logic break?
That's the trick. In some cases, you'd be correct and the thieves can get away with theft. In most cases though you are incorrect, the cost of getting that many ledgers to agree with the thieves is prohibitively high.
This theory underscores the importance of having many full nodes running on the network. If only a small number of people run validating nodes, the cost of committing some theft like this is substantially reduced. This is one of the biggest and most important arguments behind having small blocks instead of large blocks.
Large block supporters tend to think you only need a few full nodes to get immunity from these types of attacks, and small block supporters tend to believe that a small number of nodes is easy to compromise relative to the reward for doing so.
You're correct that cooperation is key and that if you get "enough" people (50% of hashing power in most cases) behind a plan, they can change the rules of the game. This could be used to steal coins. This has actually happened in the past. When massive amounts of Ethereum were stolen from the DAO, the community got together and decided that those coins did not belong to the hacker. With >50% of the network, they for…
What people forget about in these imagined 50% attack scenarios is that 50% attacks only work if the attacking nodes generate valid blocks. All the hashpower in the world doesn't matter if your blocks do not pass validation. So no consortium can just start mining bad blocks and get away with it. The problem is that there are a non-trivial amount of clients that don't do any validation themselves and so rely on full nodes to tell them the true state of the network. Those clients would be subject to losing money. But any big exchange should be validating blocks themselves so the risk to the entire network is minimal to non-existent.
1. enough people means >50%, that's a lot. 2. ledgers keep transaction histories, not absolute values. to clear someone's wallet, you have to transfer his money out. you can't forge that guy's crypto signature. 3.whoever owns more than 5m would not probably put all the money under one wallet.
> 2. ledgers keep transaction histories, not absolute values. to clear someone's wallet, you have to transfer his money out. you can't forge that guy's crypto signature. As long as there's >50% consensus, they can do anything they want (longest chain wins). You don't need to forge someone's crypto signature to clear their wallet. You just stop agreeing that the guy has the 5m.
The power of >50% is that you can keep some (valid) blocks on the chain, like some payments to a service provider, for as long as you want and have them accepted by the community because that's the longest chain that everyone's seen, and collect the service for that payment. Then whenever you want release another chain, that's longer and doesn't include the payment blocks, invalidating the payment.
The rest of the 49% of the users can still agree that someone has 5m, nobody's gonna take that away from them. But they're not going to be able to agree on any payments on the chain, because the 51% could invalidate them at any point.
You're forgetting that the integrity of the blockchain has value, particularly for miners. The token would crash once such a deception were made known making the miner's reward for mining worthless. That's the cost that you are not factoring into your example.
For ASIC blockchains like bitcoin, a few companies in china dominate the network so they could easily collude and do just this.
For non-ASIC blockchains, you can do it through the cloud. Here is some math i did on it the other day:
digiconomist [0] estimates that current etherum mining cost is 1.3 billion a year, or 3.6 million a day, or 151,000 an hour, or 2,500 a minute.
Multiply by 5 for cloud on demand premiums and you could dominate the etherum network for an entire day for 18 million. You could also do it for free if you can manage to do it with stolen credit cards.
Something like this happened last year with Ethereum. A hacker stole $150 million, but the funds were conveniently trapped on one place for a month. People rolled out a patch that moved the funds back to their original owners. Some people thought that was a bad idea and kept running the unpatched version. That caused the blockchain to split into two separate blockchains, the patched (ETH) and unpatched (ETC). After t…
If the value of smart contracts is that they will execute as written with no possibility of third party interference then Ethereum is not a smart contract platform. It is a very inefficiently designed public ledger governed by a highly centralized group of developers who can change it on a whim.
You can't update an account value without issuing a valid transaction (requiring the private key). What you can do with a majority hash power is roll back transactions. But this is limited to your ability to generate a longer chain which becomes more improbable with each mined block.
This attack vector isn't that great because transactions worth larger amounts will wait for more confirmations. You're essentially left with an expensive DoS.
Something like this happened last year with Ethereum. A hacker stole $150 million, but the funds were conveniently trapped on one place for a month. People rolled out a patch that moved the funds back to their original owners. Some people thought that was a bad idea and kept running the unpatched version. That caused the blockchain to split into two separate blockchains, the patched (ETH) and unpatched (ETC). After t…
The term "hacker" depends on your viewpoint. Put another way, a user executed a function on a decentralized smart contract platform that transferred $150 million to the possession of the function's caller. If the value of smart contracts is that they will execute as written with no possibility of third party interference then Ethereum is not a smart contract platform. It is a very inefficiently designed public ledger…