What is a fifty one percent attack, and why are Bitcoin users freaking out about it now?

Bitcoin is fated! Or not. Actually, this might be a real danger to the cryptocurrency.

If there’s one structural flaw that could cause Bitcoin to collapse from within, it’s the network’s vulnerability to what’s called a “51 percent attack.”

Threat of a fifty one percent attack was, up until very recently, a theoretical problem that would only come about if one entity came to control more than half of the computing power being used to mine Bitcoin. In theory, with the majority of the network’s computing power, an entity could double-spend Bitcoin and engage in what’s called “selfish mining,” a process that would permit it to mine a disproportionately large share of fresh Bitcoin blocks.

The threat of a fifty one percent attack became very real for many Bitcoin owners this week, when the world’s largest Bitcoin mining pool, GHash.IO, flirted with, and may have even surpassed, fifty one percent.

52% hashrate. rest of the pie comes in at

Bitcoin communities on Reddit and the BitcoinTalk forum reacted to this news with much apprehension. Peter Todd, a prominent figure in the Bitcoin world, wrote a long post on Reddit titled “Why I just sold fifty percent of my bitcoins: GHash.IO,” which was upvoted to near the top of the Bitcoin subreddit.

“GHash.IO shows that the economic incentives behind Bitcoin are very likely very flawed, it might take a disaster to get the consensus to fix it,” Todd wrote, “and if that happens, I want to make sure I can pay my rent and buy food while we’re fixing it.”

It’s significant to note that no one is telling GHash.IO plans to carry out a fifty one percent attack, but the group’s capability to do so is troubling to many.

While the Bitcoin community has long feared the fifty one percent threat, those of us who aren’t seasoned Bitcoin users may not have heard about it until now. In the simplest terms possible, here’s how it works.

Presently, there are almost thirteen million bitcoins in existence, and about twenty five fresh ones are added every ten minutes through a process called mining. Of course, Bitcoin mining doesn’t involve a pickaxe and hardhat.

To mine Bitcoin, one just needs to run the Bitcoin software on a computer. As it’s typically explained, the computer will join all the other computers running the software in attempting to solve a elaborate mathematical problem. Whichever computer solves the problem is rewarded with a “block,” presently worth twenty five bitcoins. When enough of the other computers confirm that the solution is legitimate, the block is added to the Bitcoin’s public ledger, the blockchain, and the computers begin working on the next problem.

At this point, no ordinary computer is powerful enough to mine Bitcoin. It takes fantastic computing power to rival, the likes of which you can only get by a machine specifically designed for this type of task.

Even with a custom-built Bitcoin-mining machine, there is still much competition. Many miners have joined compels to form mining pools in hopes of being able to uncover blocks more regularly, then split the prize.

The very first and most apparent problem with a mining pool that has more than fifty one percent of the computing power of the entire network (hashing power, as it’s also called) is the potential for double-spending. The people attempting to mine Bitcoin are the same ones tasked with auditing the network by confirming Bitcoin transactions.

If you want to buy Bitcoin from me, very first we lodge on a price, then you ask the network to confirm that I haven’t already spent the Bitcoin I say I’m selling to you. When the network signs off on the confirmation, the transaction goes through and those who confirmed it receive a petite transaction fee.

So, basically, an entity that controls most of the mining power also controls most of the auditing power. If it chooses to act maliciously, that entity could potentially spend the same Bitcoin twice.

In addition to permitting double-spending, a fifty one percent entity could engage in what Bitcoin researchers call “selfish mining.”

A person’s or group’s capability to mine Bitcoin should be about proportional to the amount of computing power the person or group is contributing to the network. Once an entity controls fifty one percent of the computing power, it’s possible for the entity to mine much more than fifty one percent of fresh blocks of Bitcoin.

It works something like this:

All Bitcoin miners are attempting to solve a sort of mathematical problem based on the most recently discovered block on the blockchain, which is called the lead block. Even however there are numerous solutions to each problem, the blockchain must remain as one long continuous entity. It can not be “forked.” Thus, the very first discovered solution to each block is the one that the entire network determines to accept.

If two miners, let’s say you and I, detect separate solutions to the lead block’s problem and we both attempt to publish them to the blockchain at near the same time, the network ultimately determines which of us had the very first solution.

It’s likely some miners will begin hashing on the block you discovered while others will hash on mine. Maybe seventy five percent of the miners spotted your solution very first and began hashing on the block you discovered, but only twenty five percent spotted mine. In all likelihood those seventy five percent will determine a solution to your block before the twenty five percent determine a solution to mine.

Either way, when an acceptable solution is published for either of the blocks, that part of the chain becomes the longest and all miners resume hashing on the longest continuous chain.

A selfish miner looking to execute a fifty one percent attack starts by solving that problem but not publishing the solution. While the rest of the network is still searching for that initial solution, the selfish miner commences working on the next problem.

If the selfish miner solves the 2nd problem before the rest of the miners solve the very first, the network is in deep trouble.

The selfish miner proceeds to secretly get as far ahead as possible. When the other miners eventually publish a solution to the initial problem, the selfish miners instantly publish their hidden solution causing a fork. Then, as the network goes to determine which solution came very first, the selfish miners publish their 2nd solution making their chain the longest and thus the most legitimate.

Not only that, but the selfish miners have a head commence in hashing off the 2nd published block. They might have already found the solution. They might be twenty blocks ahead and no one would know.

If this happens, fair Bitcoin miners have no chance to detect fresh blocks, and all the prizes go to the selfish miner.

Cornell researchers Emin Gün Sirer and Ittay Eyal have even argued that a selfish mining attack is possible with less than fifty percent of the network’s computing resources in a two thousand thirteen paper titled “Majority is not Enough: Bitcoin Mining is Vulnerable.”

At the time, it seemed implausible to many that a pool would ever grow to fifty one percent. The Bitcoin community has historically been relatively good at self-policing, and a fifty one percent pool would be bad for business because it would rattle everyone’s confidence in Bitcoin.

When we discovered selfish mining, we cautioned #bitcoin that pools could grow to 51%. Bitcoiners claimed “no one would do that.” Mwhaha.

This wouldn’t be a true Bitcoin story without talking about how Bitcoin could be fated. In reality, Bitcoin has proved time and again that it is resilient, and it has overcome many obstacles.

Earlier this year, GHash.IO released a statement, telling it was “preventing accumulation of fifty one percent of all hashing power.” That was when the pool managed just over forty percent of the hashing power.

“GHash.IO does not have any intentions to execute a fifty one percent attack, as it will do serious harm to the Bitcoin community, of which we are part of,” the statement reads. “If something happened to Bitcoin as a entire, it could risk our investments in physical hardware, harm those who love Bitcoin and we see no benefit from having fifty one percent stake in mining.”

GHash.IO has not replied to our inquiry as to its apparent switch of heart. CryptoCoinsNews got in touch with Jeffrey Smith, the chief information officer of Cex.io, which is a cloud-based Bitcoin mining company that’s associated with GHash.IO. Smith said the following:

We understand that the Bitcoin community strongly reacts to GHash.IO’s percentage of the total hash rate. However, we would never do anything to harm the Bitcoin economy; we believe in it. We have invested all our effort, time and money into the development of the Bitcoin economy. We agree that mining should be decentralised, but you cannot blame GHash.IO for being the number one mining pool.

Not exactly a confidence-inspiring response, but the situation is not fairly dire for the moment, as GHash.IO has dipped back down below fifty percent control of the network, according to this nifty implement that most view as somewhat accurate. Other estimates have GHash.IO at closer to forty percent of the mining power.

It is possible, however, that some members left the pool to avoid wiggling up the Bitcoin community’s confidence at a time when the value of the cryptocurrency has been trending upward.

One way or another, this shows up to be an significant crossroads for Bitcoin, and an issue so often-discussed that it seemed inescapable that it would one day come to pass.

In fact, the fifty one percent attack is even something Bitcoin’s anonymous creator, Satoshi Nakamoto, foresaw and wrote about in Bitcoin’s now-famous founding document. Since there’s no more suitable way to close a discussion on Bitcoin than with Nakamoto’s own words, here they are.

If a greedy attacker is able to assemble more CPU power than all the fair knots, he would have to choose inbetween using it to defraud people by stealing back his payments, or using it to generate fresh coins. He ought to find it more profitable to play by the rules, such rules that favour him with more fresh coins than everyone else combined, than to undermine the system and the validity of his own wealth.

Photo via antanacoins/Flickr (CC BY SA Two.0) | Remix by Jason Reed

What is a fifty one percent attack, and why are Bitcoin users freaking out about it now, The Daily Dot

What is a fifty one percent attack, and why are Bitcoin users freaking out about it now?

Bitcoin is fated! Or not. Actually, this might be a real danger to the cryptocurrency.

If there’s one structural flaw that could cause Bitcoin to collapse from within, it’s the network’s vulnerability to what’s called a “51 percent attack.”

Threat of a fifty one percent attack was, up until very recently, a theoretical problem that would only come about if one entity came to control more than half of the computing power being used to mine Bitcoin. In theory, with the majority of the network’s computing power, an entity could double-spend Bitcoin and engage in what’s called “selfish mining,” a process that would permit it to mine a disproportionately large share of fresh Bitcoin blocks.

The threat of a fifty one percent attack became very real for many Bitcoin owners this week, when the world’s largest Bitcoin mining pool, GHash.IO, flirted with, and may have even surpassed, fifty one percent.

52% hashrate. rest of the pie comes in at

Bitcoin communities on Reddit and the BitcoinTalk forum reacted to this news with much apprehension. Peter Todd, a prominent figure in the Bitcoin world, wrote a long post on Reddit titled “Why I just sold fifty percent of my bitcoins: GHash.IO,” which was upvoted to near the top of the Bitcoin subreddit.

“GHash.IO shows that the economic incentives behind Bitcoin are most likely very flawed, it might take a disaster to get the consensus to fix it,” Todd wrote, “and if that happens, I want to make sure I can pay my rent and buy food while we’re fixing it.”

It’s significant to note that no one is telling GHash.IO plans to carry out a fifty one percent attack, but the group’s capability to do so is troubling to many.

While the Bitcoin community has long feared the fifty one percent threat, those of us who aren’t seasoned Bitcoin users may not have heard about it until now. In the simplest terms possible, here’s how it works.

Presently, there are almost thirteen million bitcoins in existence, and about twenty five fresh ones are added every ten minutes through a process called mining. Of course, Bitcoin mining doesn’t involve a pickaxe and hardhat.

To mine Bitcoin, one just needs to run the Bitcoin software on a computer. As it’s typically explained, the computer will join all the other computers running the software in attempting to solve a complicated mathematical problem. Whichever computer solves the problem is rewarded with a “block,” presently worth twenty five bitcoins. When enough of the other computers confirm that the solution is legitimate, the block is added to the Bitcoin’s public ledger, the blockchain, and the computers begin working on the next problem.

At this point, no ordinary computer is powerful enough to mine Bitcoin. It takes fantastic computing power to challenge, the likes of which you can only get by a machine specifically designed for this type of task.

Even with a custom-built Bitcoin-mining machine, there is still much competition. Many miners have joined coerces to form mining pools in hopes of being able to uncover blocks more regularly, then split the prize.

The very first and most apparent problem with a mining pool that has more than fifty one percent of the computing power of the entire network (hashing power, as it’s also called) is the potential for double-spending. The people attempting to mine Bitcoin are the same ones tasked with auditing the network by confirming Bitcoin transactions.

If you want to buy Bitcoin from me, very first we lodge on a price, then you ask the network to confirm that I haven’t already spent the Bitcoin I say I’m selling to you. When the network signs off on the confirmation, the transaction goes through and those who confirmed it receive a petite transaction fee.

So, basically, an entity that controls most of the mining power also controls most of the auditing power. If it chooses to act maliciously, that entity could potentially spend the same Bitcoin twice.

In addition to permitting double-spending, a fifty one percent entity could engage in what Bitcoin researchers call “selfish mining.”

A person’s or group’s capability to mine Bitcoin should be about proportional to the amount of computing power the person or group is contributing to the network. Once an entity controls fifty one percent of the computing power, it’s possible for the entity to mine much more than fifty one percent of fresh blocks of Bitcoin.

It works something like this:

All Bitcoin miners are attempting to solve a sort of mathematical problem based on the most recently discovered block on the blockchain, which is called the lead block. Even tho’ there are numerous solutions to each problem, the blockchain must remain as one long continuous entity. It can not be “forked.” Thus, the very first discovered solution to each block is the one that the entire network determines to accept.

If two miners, let’s say you and I, detect separate solutions to the lead block’s problem and we both attempt to publish them to the blockchain at near the same time, the network ultimately determines which of us had the very first solution.

It’s likely some miners will begin hashing on the block you discovered while others will hash on mine. Maybe seventy five percent of the miners witnessed your solution very first and began hashing on the block you discovered, but only twenty five percent spotted mine. In all likelihood those seventy five percent will determine a solution to your block before the twenty five percent determine a solution to mine.

Either way, when an acceptable solution is published for either of the blocks, that part of the chain becomes the longest and all miners resume hashing on the longest continuous chain.

A selfish miner looking to execute a fifty one percent attack starts by solving that problem but not publishing the solution. While the rest of the network is still searching for that initial solution, the selfish miner starts working on the next problem.

If the selfish miner solves the 2nd problem before the rest of the miners solve the very first, the network is in deep trouble.

The selfish miner resumes to secretly get as far ahead as possible. When the other miners eventually publish a solution to the initial problem, the selfish miners instantaneously publish their hidden solution causing a fork. Then, as the network goes to determine which solution came very first, the selfish miners publish their 2nd solution making their chain the longest and thus the most legitimate.

Not only that, but the selfish miners have a head commence in hashing off the 2nd published block. They might have already found the solution. They might be twenty blocks ahead and no one would know.

If this happens, fair Bitcoin miners have no chance to detect fresh blocks, and all the prizes go to the selfish miner.

Cornell researchers Emin Gün Sirer and Ittay Eyal have even argued that a selfish mining attack is possible with less than fifty percent of the network’s computing resources in a two thousand thirteen paper titled “Majority is not Enough: Bitcoin Mining is Vulnerable.”

At the time, it seemed implausible to many that a pool would ever grow to fifty one percent. The Bitcoin community has historically been relatively good at self-policing, and a fifty one percent pool would be bad for business because it would rattle everyone’s confidence in Bitcoin.

When we discovered selfish mining, we cautioned #bitcoin that pools could grow to 51%. Bitcoiners claimed “no one would do that.” Mwhaha.

This wouldn’t be a true Bitcoin story without talking about how Bitcoin could be fated. In reality, Bitcoin has proved time and again that it is resilient, and it has overcome many obstacles.

Earlier this year, GHash.IO released a statement, telling it was “preventing accumulation of fifty one percent of all hashing power.” That was when the pool managed just over forty percent of the hashing power.

“GHash.IO does not have any intentions to execute a fifty one percent attack, as it will do serious harm to the Bitcoin community, of which we are part of,” the statement reads. “If something happened to Bitcoin as a entire, it could risk our investments in physical hardware, harm those who love Bitcoin and we see no benefit from having fifty one percent stake in mining.”

GHash.IO has not replied to our inquiry as to its apparent switch of heart. CryptoCoinsNews got in touch with Jeffrey Smith, the chief information officer of Cex.io, which is a cloud-based Bitcoin mining company that’s associated with GHash.IO. Smith said the following:

We understand that the Bitcoin community strongly reacts to GHash.IO’s percentage of the total hash rate. However, we would never do anything to harm the Bitcoin economy; we believe in it. We have invested all our effort, time and money into the development of the Bitcoin economy. We agree that mining should be decentralised, but you cannot blame GHash.IO for being the number one mining pool.

Not exactly a confidence-inspiring response, but the situation is not fairly dire for the moment, as GHash.IO has dipped back down below fifty percent control of the network, according to this nifty implement that most view as somewhat accurate. Other estimates have GHash.IO at closer to forty percent of the mining power.

It is possible, however, that some members left the pool to avoid jiggling up the Bitcoin community’s confidence at a time when the value of the cryptocurrency has been trending upward.

One way or another, this emerges to be an significant crossroads for Bitcoin, and an issue so often-discussed that it seemed unpreventable that it would one day come to pass.

In fact, the fifty one percent attack is even something Bitcoin’s anonymous creator, Satoshi Nakamoto, foresaw and wrote about in Bitcoin’s now-famous founding document. Since there’s no more adequate way to close a discussion on Bitcoin than with Nakamoto’s own words, here they are.

If a greedy attacker is able to assemble more CPU power than all the fair knots, he would have to choose inbetween using it to defraud people by stealing back his payments, or using it to generate fresh coins. He ought to find it more profitable to play by the rules, such rules that favour him with more fresh coins than everyone else combined, than to undermine the system and the validity of his own wealth.

Photo via antanacoins/Flickr (CC BY SA Two.0) | Remix by Jason Reed

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