Bitcoin Flaw
Bitcoin flaw could threaten booming virtual currency
Bitcoin contains a hitherto
unnoticed flaw which threatens to upset the balance of the $1.5 billion economy built
on the virtual currency.
Ittay Eyal and Emin Gun Sirer, of Cornell
University in New York have discovered the "devastating" potential
for Bitcoin "mining" – the process by which Bitcoins are generated –
to be manipulated (arxiv.org/abs/1311.0243v1).
Bitcoins are generated when
people connect their computers to the network and set them to work on a
cryptographic puzzle. This is known as mining. When a puzzle has been solved it
adds a digital "block" to the public record of all Bitcoin
transactions, known as the "blockchain". The miners are then rewarded
with a set amount of Bitcoins.
The blockchain is occasionally split into branches
when separate users generate blocks from the same previous block. Miners agree
to work on the longest branch, so as soon as one of these branches becomes
longer than the other, the shorter branch is abandoned.
Although groups form to share computing power and split
the profits, what they receive is proportional to the resources they
contribute.
Selfish
mining
However, the research argues that it is
theoretically possible for one group to gain an advantage by engaging in what
the authors call "selfish mining".
In this scenario, the group does not release
solutions to solved cryptopuzzles. Instead, it mines a branch in secret, hiding
it from honest miners.
Lengthening the private chain would make it the
dominant one when eventually released. The group would then get a higher share
of coins than is fair for the resources they have contributed because they have
forced other miners to waste computing power on the original chain. The problem
gets worse as the selfish group recruits extra members.
Sirer, who describes the problem on
his blog , says: "Until now we thought that if the
attackers were in a minority they would be ineffective but suddenly we've shown
that no, that doesn't have to be the case."
Mine,
all mine
"Once there's an incentive to join your
selfish mining group it's going to grow in number. If you were to achieve the
majority status, that's actually very dangerous because Bitcoin would
effectively be under your control," says Sirer.
Bitcoin has traditionally been
understood as relatively safe to invest in. It is extremely difficult, for
example, to counterfeit. However, Eyal and Sirer's findings are now being investigated by
members of the Bitcoin community.
"The attack is very clever, and unfortunately
it will work," says Bitcoin developer Peter Todd. "There's been a
tendency for the Bitcoin community to assume miners always have the best
interests of Bitcoin in the long term in mind. So far this has generally proven
to be true, but as mining becomes less profitable due to the inflation rate
dropping (it halves every 4 years) I think we'll see more and more selfish
behaviour."
Another Bitcoin developer, Mike Hearn, adds that if
the technique worked, it would have a negative impact on Bitcoin as a whole,
leaving everyone, including the selfish miners, at a loss, just when the
currency was starting to be taken
seriously by the international community: "If miners were
to start attacking the system or seizing control of it, confidence in Bitcoin
would be severely hurt and the value would fall."
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