If you really want to scare some people you should point out that this is happening as we get ready for the US Marshal BTC auction, and could be related. I would be very reluctant to put 1.5M into BTC right now.
It's Time For a Hard Bitcoin Fork
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Re: It's Time For a Hard Bitcoin Fork
#32This is the same panic-prone author (@el33th4xor) who, in early November 2013 with Bitcoin at about $220, wrote "@el33th4xor: You heard it here first: now is a good time to sell your Bitcoins" (https://twitter.com/el33th4xor/status/397219415025934336)
This was just before releasing some research that he thought would cause a confidence collapse. (That is, his prediction was almost self-consciously attempting market-manipulation.) In fact, the paper just formalized some concerns discussed in the mining community for years.
So then, rather than collapsing, Bitcoin went on an epic rally, and hasn't been below $339 since the same week of that doomsaying prediction.
There is certainly danger in one entity controlling 51% of the hashing power. But everyone's known this risk, as one of the design assumptions of the system, from the beginning... and also seen the tipping point approach/recede/approach repeatedly. And also, the "Bitcoin lunatic fringe", who this author mocks, has so far been right about the pool(s) attaining such power refraining from taking destructive (and self-bankrupting) next steps.
So: focused concern, yes. But @el33th4xor-style panic, no.
Further, any 'hard fork' (or forks) that were to remedy pool issues, using the "well-known" techniques referenced, would almost certainly retain some continuity with prior key balances. That is: imagine the most destructive transition possible. A total civil war between mining pools. Irreconcilable dissension in the core team (or offshoots thereof). Collapse of the Bitcoin price to values of 1-2 years ago. Still, at the end of that process, there are one or more "offshoot" chains, adopting the Bitcoin history as their own, patched and stronger than before, with pre-crisis Bitcoin balances intact.
(That is: a 51% cartel may not be actually "good" news... but it is survivable and perhaps even necessary.)
So if you like to try to trade in and out of predicted market panics, like @el33th4xor, maybe there are some trading plays here. But if you just like cryptocurrency for the long haul, keep your Bitcoin private keys (end eyes) safe & dry, and trust evolution. There are enough smart, well-funded, and relatively cool heads involved that @el33th4xor's predictions are just a car alarm going off in the night, whether the car is actually at risk or not.
Re: It's Time For a Hard Bitcoin Fork
#33ELI5:
Miners join in pools to mine bitcoins to even out their earnings. It's a way to diversify their risk.
Unfortunately, bigger pools let you diversify the best, and this is currently undermining the core tenet of bitcoin, which is to avoid having any one person with central control over the network.
The linked article is suggesting modifying the core software for bitcoin in order to discourage this kind of centralization. Other people, however, think the core software is fine, and that the solution is to instead improve "decentralized mining pool" technology to get rid of the problem.
Re: It's Time For a Hard Bitcoin Fork
#34This article feels sensational, but I would say accurately reflects a large portion of the communities feelings. Great accompaniment is from Peter Todd (Coinkite adviser, respected dev) who announced this AM he is selling 50% of his holdings in bitcoin until this is resolved http://www.reddit.com/r/Bitcoin/comments/281ftd/why_i_just_s...
This article would be decent if they ditched the hyperbole. Like it or not, this is not Armageddon for Bitcoin - the network is still functioning as intended.
Re: It's Time For a Hard Bitcoin Fork
#35This is the same panic-prone author (@el33th4xor) who, in early November 2013 with Bitcoin at about $220, wrote "@el33th4xor: You heard it here first: now is a good time to sell your Bitcoins" ( https://twitter.com/el33th4xor/status/397219415025934336 ) This was just before releasing some research that he thought would cause a confidence collapse. (That is, his prediction was almost self-consciously attempting market…
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Re: It's Time For a Hard Bitcoin Fork
#36IANABME[1], but it seems that a solution already exists to this problem, which is to use a decentralized mining pool. The unfortunate fact is that we're in a time window right now where large miners have not yet transitioned to this ideal solution. However, any miner in the long run would prefer to join a mining pool that does not require trusting some pool operator over one that does, all other things being equal. Y…
As long as large centralized pools charge no fees and use less bandwidth than p2pool, people will have no incentive to adopt p2pool.
Re: It's Time For a Hard Bitcoin Fork
#37The article makes a pretty interesting point: Bitcoin's version of proof of work can be delegated, which makes mining pools possible. An alternative design could ensure that the task to solve is designed so that miners and pool could not trust each other, thus ensuring that pools do not exist. It seems like this is a pretty big flaw in how Bitcoin is designed, as its security relies on miners remaining independent.
It's pretty easy to break delegation, but the cure is worse than the illness— to reduce mining variance there you must use hosted mining, where miners have even less control (absent more fixes…). GHash.IO is substantially hosted mining in any case.
Really the more important point to note is that pooling for variance reduction has absolutely nothing to do with delegating control. Running a outbound only bitcoin full node, past initial syncup uses less than 20kbit/sec bandwith and a fraction of a percent of cpu... it's not costly to do, purposefully so.
It's perfectly possible to individually run your own consensus decisions but agree with others to, in a provable way, pool your payments. This is what P2Pool does.
Unfortunately many Bitcoin miners don't have a rigorous mathematical understanding of how mining works— they erroneously believe it to be a race where the fastest wins disproportionally— something entirely untrue (absent some proposed attacks which are not happening in practice)... just keeping yourself from getting scammed by the many scammy hardware companies is basically a full time job itself. Then you have various technically unsophisticated Bitcoin pundits claiming that hashpower consolidations in pools isn't something to worry about... not a great mix.
Fortunately, the reasons for the current behavior are mostly inertia— if P2Pool had been invented first the symmetry would have broken differently. It's still possible that there might be a massive swing (say if GHash.io decides to steal a bunch of coins from their miners and makes a runner).
Re: It's Time For a Hard Bitcoin Fork
#38A hash pool at 51% is big news. If this isn't corrected soon, BTC is doomed to fail.
You're assuming that someone with a significant investment in the space would act dishonestly. That's the only reason BTC fails as the result of something like this. Seem like MAD to me, if they were to act dishonestly they would destroy their own investment and profit potential.
The point of a distributed system is not having to trust people to act honestly.
If you're perfectly fine trusting a GHASH to act honestly, you should be perfectly fine trusting them or some other entity to run a centralized, non-distributed currency.
Re: It's Time For a Hard Bitcoin Fork
#39IANABME[1], but it seems that a solution already exists to this problem, which is to use a decentralized mining pool. The unfortunate fact is that we're in a time window right now where large miners have not yet transitioned to this ideal solution. However, any miner in the long run would prefer to join a mining pool that does not require trusting some pool operator over one that does, all other things being equal. Y…
As long as large centralized pools charge no fees and use less bandwidth than p2pool, people will have no incentive to adopt p2pool.
Presumably large pools aren't charities, so the lack of fees can remain indefinitely.
Bandwidth is certainly a problem though... are there any good numbers on the bandwidth difference?
Re: It's Time For a Hard Bitcoin Fork
#40I was under the impression that the mining percentage would give you the same percentage chance to cook the books. 51% means you are more likely to succeed than fail in an attempt. Much like buying 51 percent of lottery tickets gives you a slightly better than even chance of winning the big prize. in that respect, wouldn't 51% be only marginally different to 49%. Both would be a bit of a concern, but neither would be…
No, 51% is vastly more powerful than 49%. With 51%, you essentially control the entire Blockchain because you can always create a new Blockchain that would be accepted by the network, given enough time. Always.
With 49%, you can only get away with it a few times, and it's less likely you will mine the next 6 blocks.
Essentially, as time progresses, with 49% you lose out, with 51%, you keep winning.