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Taking Down The Bitcoin Network

bitcoinweekly.com

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Re: Taking Down The Bitcoin Network

#11

Post by gasull »

mootothemax wrote: post #5

Surely there's an easier, legal and potentially cheaper solution open to any government that wants to shut down bitcoin: buy up each and every bitcoin they can lay their hands on. I would have thought it would wreck havoc with the market (there's no reason why the government couldn't use multiple fronts rather than buying under the same wallet), and past a certain point make it impossible to trade in bitcoin without…

> Surely there's an easier, legal and potentially cheaper solution open to any government that wants to shut down bitcoin: buy up each and every bitcoin they can lay their hands on.

Some people won't sell. And all this would do is making bitcoins more expensive in dollars (deflation). Prices in bitcoins would adjust. No problem at all.

Re: Taking Down The Bitcoin Network

#12

Post by thomasz »

fraserharris wrote: post #6

The government does not need to take down the network to cripple Bitcoin, it just needs to make it difficult to exchange it for other currencies. This will dry up demand for Bitcoins, and the exchange rate will plummet. The US government can compel almost any financial institution in the world to stop exchanging Bitcoins by threatening to sanction them for money laundering.[1] A private letter from the State Departme…

http://xkcd.com/538/

Really, if the government wants to shut bitcoin down it's that easy.

Re: Taking Down The Bitcoin Network

#13

Post by gst »

fraserharris wrote: post #6

The government does not need to take down the network to cripple Bitcoin, it just needs to make it difficult to exchange it for other currencies. This will dry up demand for Bitcoins, and the exchange rate will plummet. The US government can compel almost any financial institution in the world to stop exchanging Bitcoins by threatening to sanction them for money laundering.[1] A private letter from the State Departme…

Yes, the US gov can easily prevent financial institutions from exchanging Bitcoins: If a bank holds US dollars, those dollars are "stored" in the US (even if the bank is located outside the US). So the US gov just needs to threaten that it will freeze the banks dollar deposits in case a bank decides to exchange Bitcoins.

No, the US government cannot easily block other types of Bitcoin exchanges. Consider bitmarket.eu: The site itself is hosted outside the US. Money transfer happens directly between individual users, e.g., by wire transfer. There's no single entity that you can attack.

And even in case where bank transfers are shut down you can still switch to cash. If you have a trusted exchange you can send cash via postal mail. Or your local drug dealer changes his business from dealing drugs to dealing Bitcoins. Of course, this will prevent many legitimate uses of Bitcoin - but I'll doubt that it can stop the usage of Bitcoin for "illegal" transactions.

Re: Taking Down The Bitcoin Network

#14

Post by gasull »

gst wrote: post #8

"Even in a worst case scenario, if a government or some other anti-Bitcoin faction gets a hold of greater than 50% of the processing power (an extremely expensive feat, and hardly worth it unless you're really determined to destroy the network), the rest of the network can be reconfigured to reject that block chain." At this point the author shows that he does not have much technical background in regard to the Bitco…

> Once an adversary gains >50% of the processing power you have basically lost.

Wrong. An attacker having more than 50% of the network would just stop payments until the rest of the network rejects the attacker nodes.

https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_...

Re: Taking Down The Bitcoin Network

#15

Post by danenania »

mootothemax wrote: post #5

Surely there's an easier, legal and potentially cheaper solution open to any government that wants to shut down bitcoin: buy up each and every bitcoin they can lay their hands on. I would have thought it would wreck havoc with the market (there's no reason why the government couldn't use multiple fronts rather than buying under the same wallet), and past a certain point make it impossible to trade in bitcoin without…

That scheme would fail due to basic forces of supply and demand. The government in this case would be a de facto market maker and the price would naturally get pushed up to the maximum amount the government is willing to spend as speculators continually test the limit, which if the government has an 'acquire all bitcoins at any cost' mission, means the limits of its overall solvency.

It's actually a similar scenario to what's currently going on in the bond markets. The Fed steps in any time bonds have a weak auction. Traders, knowing this, buy lots of bonds. It's basically a free roll for them because they know the Fed will always step in to prevent a major dip in price--and this cycle will continue until the Fed itself (aka, the dollar) collapses.

So who knows, maybe they are dumb enough to try! :)

Re: Taking Down The Bitcoin Network

#16

Post by mootothemax »

gasull wrote: post #11
mootothemax wrote: post #5

Surely there's an easier, legal and potentially cheaper solution open to any government that wants to shut down bitcoin: buy up each and every bitcoin they can lay their hands on. I would have thought it would wreck havoc with the market (there's no reason why the government couldn't use multiple fronts rather than buying under the same wallet), and past a certain point make it impossible to trade in bitcoin without…

> Surely there's an easier, legal and potentially cheaper solution open to any government that wants to shut down bitcoin: buy up each and every bitcoin they can lay their hands on. Some people won't sell. And all this would do is making bitcoins more expensive in dollars (deflation). Prices in bitcoins would adjust. No problem at all.

Some people won't sell. And all this would do is making bitcoins more expensive in dollars (deflation). Prices in bitcoins would adjust. No problem at all.

Great if it's not a problem: can you tell me why in a bit more detail please? :)

You see, I love the idea of bitcoin, but this is the one thought I can't get out of my head.

Say the government drives up the price of bitcoin, as you suggest. Every hour of every day, deflation takes place... but the government aren't selling any of theirs, and if nobody else is selling, it sounds like we rapidly head towards a stalemate where bitcoin becomes ridiculously hard to exchange in either direction.

Re: Taking Down The Bitcoin Network

#17

Post by mrvc »

If anyone wants it I'd be happy to write up a quick how to on how Bitcoin really could be shut down, I have some expertise in the area if that matters and no serious bias either way.

Re: Taking Down The Bitcoin Network

#18

Post by mootothemax »

danenania wrote: post #15
mootothemax wrote: post #5

Surely there's an easier, legal and potentially cheaper solution open to any government that wants to shut down bitcoin: buy up each and every bitcoin they can lay their hands on. I would have thought it would wreck havoc with the market (there's no reason why the government couldn't use multiple fronts rather than buying under the same wallet), and past a certain point make it impossible to trade in bitcoin without…

That scheme would fail due to basic forces of supply and demand. The government in this case would be a de facto market maker and the price would naturally get pushed up to the maximum amount the government is willing to spend as speculators continually test the limit, which if the government has an 'acquire all bitcoins at any cost' mission, means the limits of its overall solvency. It's actually a similar scenario…

Thanks, your explanation is really helping me to understand! :-D

One potentially embarrassingly stupid question: you mention the government becoming a market maker. As far as I'm aware, it's not unknown for traders to spot an opportunity and corner the market. Surely Bitcoin's in an early enough stage to still do so?

Re: Taking Down The Bitcoin Network

#19

Post by verroq »

gst wrote: post #13
fraserharris wrote: post #6

The government does not need to take down the network to cripple Bitcoin, it just needs to make it difficult to exchange it for other currencies. This will dry up demand for Bitcoins, and the exchange rate will plummet. The US government can compel almost any financial institution in the world to stop exchanging Bitcoins by threatening to sanction them for money laundering.[1] A private letter from the State Departme…

Yes, the US gov can easily prevent financial institutions from exchanging Bitcoins: If a bank holds US dollars, those dollars are "stored" in the US (even if the bank is located outside the US). So the US gov just needs to threaten that it will freeze the banks dollar deposits in case a bank decides to exchange Bitcoins. No, the US government cannot easily block other types of Bitcoin exchanges. Consider bitmarket.eu…

That'll severely limit liquidity of bitcoins, making them undesirable for use for any purpose.

Re: Taking Down The Bitcoin Network

#20

Post by joshaidan »

I believe people have already brought up this argument in the past, but what are the arguments against why forking new bitcoins won't devalue the currency? Lets say one day Lady GaGa decides to start her own bitcoin, would that in anyway devalue the current bitcoin network if everyone instead decides to start mining Lady GaGa bitcoins?
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