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"The Bitcoin narrative, based on decentralization and distributed trust, has collapsed."
Bitcoin's integrity is being threatened in a massive way — but not by a government attack, in this case, but rather by the very people who make bitcoin happen.
GHash, a bitcoin mining pool, has contributed more than half of the total bitcoin cryptographic hashing output for several stretches of time this past week, Cornell researchers announced, with the longest stretch of such control clocking in at 12 hours.
Why does this matter?
"So-called 51 percenters... have the ability to spend the same coins twice, reject competing miners' transactions, or extort higher fees from people with large holdings," Ars Technica explained. "Even worse, a malicious player with a majority holding could wage a denial-of-service attack against the entire Bitcoin network."
Mining pools like GHash "discover" bitcoins by leveraging massive computing power to keep bitcoin transactions sorted: "Miners keep track of all the bitcoin transactions and add them to the blockchain ledger, and in exchange, they get the privilege of, every so often, awarding themselves a few extra bitcoins," per Wired's idiot's guide to bitcoin.
If one miner or pool gains majority control over the process, the result could be "armageddon," as Cornell researchers Ittay Eyal and Emin Gün Sirer called the event in a Friday blog post.
"The Bitcoin narrative, based on decentralization and distributed trust, has collapsed," the pair wrote. "This is far more important than the Bitcoin economy, which is about as healthy as it was yesterday, and the Bitcoin price, which will likely remain afloat for quite a while. But the Bitcoin economy and price are trailing indicators. The core pillar of the Bitcoin value equation has collapsed."
While the pair acknowledges the possibility of a "51 percenter" remaining honest, they stress the point that having to depend on honesty undermines a key component of what made bitcoin attractive in the first place — and they note that GHash has been implicated in shady "double-spend" activities before.
The Cornell researchers advocate a "hard fork" to shore up bitcoin's stability, including the disincentivizing of mining pools.
"Once pools are eliminated, the constant pleas on Bitcoin forums to avoid the biggest mining pool will cease," they write.
Not everyone is worried, however.
Bitcoin Foundation chief scientist Gavin Andresen responded to concerns in a blog post Friday, writing, "Bitcoin mining has been too centralized for years, with just a handful of pool operators have controlled well more than 50% of hashing power. Recently, mining power has become even more centralized, with one mining pool (GHash.IO) likely controlling somewhere between 40% and 60% of hashing power."
While GHash's size "isn't good," Andresen said, "it isn’t disastrous, either."
If it wanted to abuse it's power, Andresen argued, GHash would be limited to one of two attacks: double-spending already-confirmed transactions, or denying new ones.
"I think either attack is extremely unlikely from an economically rational mining pool," Andresen said. "Blockchain history would make it obvious that they were mis-using their power, and I’m certain either technical or social solutions would be found to punish the bad behavior."
This isn't the first time the world has worried about GHash's growth.
In January of this year, the bitcoin community fretted as GHash entered the 40 percent range of hashing power, prompting GHash to put out a press release disavowing any desire to hold a majority.
"Although the increase of hash-power in the pool is considered to be a good thing, reaching 51% of all hashing power is serious threat to the bitcoin community," the organization said. "GHash.IO will take all necessary precautions to prevent reaching 51% of all hashing power, in order to maintain stability of the bitcoin network."
Featured image via Shutterstock
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