Bitcoin Is Broken
bitcoin is broken. and not just superficially, but fundamentally, at the core protocol level. we’re not talking about a simple buffer overflow here, or even a poorly designed api that can be easily patched; instead, the problem is intrinsic to the way bitcoin works. all other cryptocurrencies and schemes based on the same bitcoin idea, including litecoin, namecoin, and any of a few dozen other bitcoin-inspired coins, are also broken.
Specifically, in an article we published on arxiv, ittay eyal and I outlined an attack whereby a minority group of miners can earn more than their fair share and grow in number until they reach the majority. when this point is reached, bitcoin’s value proposition collapses: the currency comes under the control of a single entity; it is no longer decentralized; the controlling entity can determine who is mining and what transactions are committed, and can even reverse transactions at will. this snowball scenario doesn’t require an ill-intentioned bonus-style villain to cast; it can take place as a result of the collaboration of people trying to earn a little more money for their mining efforts.
Reading: Bitcoin is broken
Conventional wisdom has long held that bitcoin is safe from colluding pools of miners, as long as the majority of the miners are honest (by honest, we mean they duly obey the protocol prescribed by the pseudonym nakamoto) . our work shows that this statement is incorrect. we show that, at this time, any group of nodes employing our attack will manage to earn more than their fair share. we also show a new limit that invalidates the honest majority claim: in the best case, at least 2/3 of the participating nodes must be honest to protect against our attack. but achieving this 2/3 limit is going to be difficult in practice. we describe a practical solution to the protocol that is easy to implement and will protect against the attack as long as 3/4 of the miners are honest.
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We need the help of the bitcoin community to implement this solution so that the bitcoin ecosystem can be made more robust, at least against attackers whose mining power is below the 25% threshold. however, even with our solution in place, there is a problem: there are mining pools right now that control more than 25% of the mining power, and in the past, there have been mining pools that control more than 33% of the power. mining power. we need awareness from the bitcoin community and concerted effort to ensure that no mining pool reaches these thresholds. the mere possibility that the system could enter a vulnerable state will be a deterrent to further adoption of bitcoin.
Those of you who want a precise and complete explanation of the attack can go directly to the research article, although it can be a bit terse and dry. in the rest of this blog post, we will describe the attack for the non-expert practitioner, so by the end of the blog post, anyone should understand the intuition behind our attack, be equipped to earn higher income through mining , and possess the necessary tools to usurp the currency. To get to this point, we need a bit of information about how bitcoin works. If you are familiar with bitcoin mining, you can skip to the next section that describes how the attack works. If you’re not a techie bitcoin user, you can skip ahead to the implications section.
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