The same thing happened in the American Gilded Age. In that period of unprecedented (and largely unregulated) growth, much of the US population became quickly enslaved by a few members of an elite group, later called the robber barons (Rockefeller, Frick, JP Morgan, Vanderbilt, Carnegie, Mellon et al.), and it took tremendous efforts by the American press and then by President Roosevelt (the first) to partially dismantle that semi-feudal structure and strengthen the central government, to free the populace from the stranglehold of the robber barons.
While a central power can be abusive, it is almost always better than feudal oligarchy, at least if it is governed more-or-less democratically.
So while BitCoin is an algorithm intended to avoid a single organizing entity, it is no replacement for a social pact, enforced politically by some fair means. Perhaps a better algorithm could somehow prevent any sort of concentrated power, but I doubt it. The desire for power (even with the best of intentions) is so essential to humans, that it probably cannot be circumvented by technology alone.
[1]: http://www.newyorker.com/reporting/2011/12/19/111219fa_fact_...
http://en.wikipedia.org/wiki/Iron_law_of_oligarchy
It is a pretty dismal assessment of the likelihood that a democratic institution can avoid becoming oligarchic (spoiler: Michels believed it was inevitably impossible as the institution grew in size and complexity, years later he abandoned his anarchist beliefs and became a fascist in Italy)
There are a few historical counter-examples to the Iron Law of Oligarchy, but I don't follow the details of Bitcoin closely enough to know whether it is resistant to the factors Robert Michels described.
You ought to rethink what you define as "enslavement". As far as I am aware, neither Rockefeller, nor JP Morgan, nor Carnegie "enslaved" the US population when they helped transform the by then agrarian nation into the industrial and economic powerhouse it later became. They didn't use force, as far as I am aware, in their dealings and the wealth of their achievements certainly wasn't created at the expense of those who didn't.
Then you're not very aware.
During the Gilded Age there were hundreds of strikes a large minority of which ended with the murder of the organizers and arrest of the leadership, an incomplete list thanks to wikipedia:
http://en.wikipedia.org/wiki/List_of_strikes#1850.E2.80.9318...
Still, have you ever heard the song "Sixteen Tons?"[1] You might recognize the lines "another day older and deeper in debt" and "I owe my soul to the company store." It's about the life of a coal miner in Kentucky. Those lines refer to a system where the company paid its workers in vouchers that they could use to buy food and clothing from the company store. Prices at the company store were higher than the workers could afford on the wages they received, but since they didn't get cash they didn't have the option to buy elsewhere. So they'd buy on credit and gradually build up a debt to the company that they had no way to pay off.
Is that slavery? Perhaps not technically, since the workers weren't owned by the company and couldn't be sold. But they didn't have many choices, either. They were basically stuck doing a fixed amount of work each day in exchange for food and lodging. Sounds an awful lot like slavery in practice.
[1] Obligator wikipedia link - https://en.wikipedia.org/wiki/Sixteen_Tons
It has been a while since I studied this era, but my understanding is that Rockefeller, Frick, JP Morgan, Vanderbilt, Carnegie, Mellon et al. were the "good guys" like in the instance of Carnegie steel which gave back tremendously to the community.
The named figures of this period, who still have visible fortunes today, were generally better than the grand morass that were known as the robber barons.
This cartoon[1] shows "infant" Roosevelt battling the Rockefeller and JP Morgan "serpents". No, they weren't the good guys by any means, despite their philanthropic deeds. They most certainly industrialized the US, but so did Stalin in the USSR (though most would agree that the American robber barons were better than Stalin :)).
[1]: http://newsjournalist.files.wordpress.com/2010/01/the-infant...
However, they also had no morals with regards to child labor, unions, worker rights, and so forth.
By default, subsystems can be put in place to diffuse power back into the realm (or at least attempt to)
https://en.bitcoin.it/wiki/Getblocktemplate
Your post is a poorly argued attempt to inject politics into a technical discussion. It reads like the top comment at /r/politics, not HN.
What I find most fascinating about some of the less ideological BTC discussions is the belief that a neutral technology (a cryptographic algorithm) can replace social contracts. I'm not claiming it necessarily can't, I'm just saying that this belief shows not only disdain for government, but an Aspergerish rejection of social structures. It's like saying, I don't want to put people in charge because I don't trust them, and I don't want even to talk to others in order to resolve disagreement; instead, I choose to take all decision-making agency out the hands of humans and place it in the hands of an algorithm that can provably never be swayed, because that is the only thing I can trust.
Regardless, there is nothing technical about a story of a small group attaining concentrated power over a decentralized currency.
This doesn't stop an organized attack of someone who has rented lets say half of amazon's cloud infrastructure for a 10 minute attack to take over the transaction history. Something that becomes more and more profitable with the reduction of bitcoin income from mining and increase of the total number and price of bitcoins.
Actually in this particular case, it's not in the hands of the few, it's in the hands of the majority.
Edit: Thanks to those who took the time to explain. Very interesting.
It worries me that it's this hard to convince miners to leave a pool. If I wanted to kill Bitcoin and had a few million to spare, I'd open a pool with no fees PLUS a bonus of 1 or 2% from my own pocket. Good luck getting people to leave that pool.
It could be even worse than that however. Another post on BCT[2] talks about a "time warp attack", where at 51% node could effectively mine all remaining bitcoins in one fell swoop.
1. While a 51% pool operator could double spend, none of the participants can do that. The social incentives against a pool operator exploiting this power are very strong, however, because double spends are basically impossible to hide and would destroy the value Bitcoin - which is pretty much against the operator of a mining pool who is likely to hold significant amounts of Bitcoin herself.
2. There is a second possible exploit that is not so well known, which is that a >50% pool can capture all mining rewards. They can do so by never accepting a block mined by somebody else, and instead always mining on their private chain. This pool-specific chain will always ultimately become longer.
The loss of confidence associated with such an attack is probably smaller. So I would bet that if the pool operator has evil intentions, that would be the way to go for them.
See https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_...
Edit: According to the Wiki linked, these attacks are also possible with <50% mining rate, although with lower probability of success. So this is a problem even if Ghash.io does not crack the 51%.
What can you do with 51%? You can (theoretically) revert a transaction that has been confirmed, by mining blocks attached to a prior point in the blockchain and getting a longer chain than the rest of the network.
What can't you do? You can't spend someone's coins when you never had their private key to begin with. Making a transaction is an act of "signing" and public-private key cryptography is not dependent on the block chain style technique for sending messages, only for making sure that they got through and maintaining them as a ledger.
You can probably single out arbitrary transactions and make sure that those are the ones that are reversed -- your transactions, so the evidence would point back to you, and whomever accepted your bitcoins as payment for something, would potentially know it was you who wronged them.
You could also decline to single out a transaction, just reversing all transactions after a given block and starting a "new life" for all the people who spent their coins after that. When you refused to re-sign the transactions that you made, you would then out yourself.
All of this is fairly academic since the person in charge of 51% of the hash power (GHash.io owner/operator) is a known actor, the hordes have not trusted him/them anonymously, and it turns out that miners have the least incentive to perform this kind of attack, since you lose an amount of revenue equal to the contents of the number of (your) solved blocks that you reversed. They would be more likely in my opinion to accept hashes and proof of work, but then renege and refuse payment to their miners, since this is really a less sophisticated attack and either way you should lose all of your credibility as a pool operator when you are discovered.
No, since who holds what coin is defined by consensus, which has to stretch out of the mining pool. If they arbitrarily gave themselves coin, for example, then no other client would accept that they hold that.
See smtddr's reply for details of what they can and cannot do.
Where would the sense be in taking the risk to undermine public trust in BTC for a short-term gain like modifying a few transactions when you have such a large stake in the system?
Say the pool operator is also the owner of Bank A (which has nothing to do with BTC). Now, a competitor of Bank A, Bank B, just announced that they will support BTC. The pool operator can now decide to "destroy" bitcoin and therefore cause severe financial loss for Bank B, leading to bankruptcy. If putting Bank B out of business results in gains (in USD), for the pool operator, that are greater than what he just lost in bitcoins, then it might be worth it.
Of course, this is very hypothetical, but it's not hard to come up with similar situations where Bank A is "State A" and Bank B is "State B".
Also, you're missing the point that Bank B's successful adoption of BTC would also benefit Bank A's owner, since that adoption would be a boon for BTC, which Bank A owner has a very large stake in.
I know there is a big spirit of brotherhood about doing what's best for BTC, but if your prototcol is to survive the real world, you have to anticipate people more interested in their short-term gains than global harmony. Particularly if the protocol will involve money. Particularly if the protocol is trying to be money.
I dunno, maybe to double-spend their coins? GHash.IO has been accused of double-spending in the past. Reaching 51% will enable them to double-spend their coins.
If GHash.IO really cared about BTC, they would stop before they reached majority stake in the Hashrate. All other pools in the past have purposefully gimped their hashrate in these situations.
A pool reaching 51% is undermining the trust of the BTC system. Period. GHash.IO apparently doesn't care however.
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Furthermore, as the thread I linked to suggests, GHash.IO attempted to double-spend against BetCoin back when they only had 24%. This isn't a theoretical problem, these guys actually are trying to double-spend bitcoins.
This has even occurred with altcoins (which are often widely believed to be pump-and-dump schemes) where a pool gets too close to 51% and voluntarily makes an effort to reduce their hashrate (either by blocking new signups, issuing fewer work units, etc.)
Disclaimer: Bitcoin noob here
Pools are collections of people who mine Bitcoin. When a block is discovered by someone in the pool, the reward is shared amongst everyone who is in the pool relative to their contributed hashing power (often minus a small fee for the pool operator).
Ghash.io is the largest pool, and the member of the pool control a good 35-45% of total hashing power on the Bitcoin network. A pool with >50% the total hashing power is bad, because the operators in charge of the pool could carry out malicious acts on the Bitcoin network without any members of the pool being aware they are contributing to these acts.
If you control a significant percentage which is less than 50%, you can attempt to do this but it is both uncertain to work (on any given attempt) and costly if it fails. Note that you can take many bites at the apple if you're willing to suffer the opportunity cost, so if you have a sufficiently profitable transaction to cheat on, you'll come out ahead.
The most vulnerable players in the Bitcoin system currently are gambling sites, but in principle with sufficient hash power you can do this to anybody using Bitcoin. Gambling sites are particularly at risk because their intended behavior is swapping bitcoins for bitcoins very quickly, and if you can doublespend, you can swap bitcoins for bitcoins but then say "You know those bitcoins I sent you? Psych, I didn't have them, even though you thought I did." after you've been told that you lost a bet. If you win the bet, you simply don't rewrite history to invalidate your bet. Repeat as desired.
This is the planned and anticipated vulnerability in Bitcoin. Great news: it's rarely the planned and anticipated vulnerability that kills a system.
+ Double spend attacks are not the only attacks you can envision. For example, if you control 51% of hashing power for a month, you're capable of essentially invalidating all transactions globally in the past month, at a time of your choosing. Like, if an unrelated party Bob had been paid in bitcoin by his employer two weeks earlier, and Bob then attempted to transfer bitcoins to Mt. Gox to change into dollars, Bob's bitcoin client would suddenly tell him "Dude, you might remember that salary payment, but it never actually happened." and Mt. Gox would say "Umm, you don't have bitcoin to transfer in, what are you talking about?"
Can anyone "lucky" enough receive 25 BTC from nowhere, is that what you mean by `25 BTC reward`?
How can people share a "computer cluster"/minin pool (that is what you mean right?). Do you mean that one person or company owns such a huge cluster and let's all members share 'virtually' a single 'Bitcoin wallet'?
I'm not really that familiar with it, sorry for the nooby questions.
Nobody mines on their own, unless they are running a server farm of mining gear. It would take too long to make a profit, and you might not ever find a block by yourself, depending on your hashing power and luck. Finding blocks are what generate coins. People combine their hashing power and mine in pools, that's what Ghash.io and BTCGuild are. These pools take all the profits and divide it up to all its members based on how many shares they submitted to find that block (basically, their mining power). Pools allow a more or less consistent payout for their miners instead of mining forever and getting nothing then once in a while getting a big windfall. These pools are run by an operator usually anonymous. These pools sometimes (usually) take a small fee, and some people donate as well to keep the pool running.
Pools are subject to DDoS and other attacks as well often.
His idea was to make this trust explicit. And that's the birth of Ripple. Ripple's consensus process is predicated on trust that other entities are not colluding against you.
The Ripple protocol is not subject to the 51% attack that Bitcoin is subject to. Making entries in the ledger has nothing to do with computational power.
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Link to the 2011 discussion that spawned Ripple: https://bitcointalk.org/index.php?topic=10193.msg146250#msg1...
EDIT: Adding a link explaining Ripple's consensus process for making changes to a shared ledger: https://ripple.com/wiki/Consensus
The primary purpose of mining is to allow Bitcoin nodes to reach consensus about the blockchain. It is intentionally resource intensive. It takes 8-10 minutes. And it is subject to a 51% attack.
I believe that the Ripple protocol's method for reaching consensus is superior to Bitcoin's. It is orders of magnitude faster (2-5 seconds vs. 8-10 minutes). It is not subject to the 51% attack. It is not computationally expensive or resource intensive. It seems like a better design to me.
Ripple protocol =! XRP. If you don't like XRP, then don't buy it. Easy solution. Ripple is still valuable as a protocol, since it's currency agnostic.
@Goldenkey - While we're making demands of each other, please take your logic-free and malinformed vitriol off HN.
People will explain that it's not in the pools interest to do this, but it's missing the point. The pool is now a potential weapon, with a very small number of people in control. This means they are now a potential weapon against Bitcoin, and if someone external wanted to hurt Bitcoin GHash.io might be a good starting point to do this of which there are many ways to potentially realise this goal (blackmail, hacking, bribery, covert seizing of control etc)
The more pools there are, and the more evenly the hashing power is ditributed amongst these pools the safer it is for everyone who has interests in Bitcoin.
Peer-to-peer decentralised pools to me sound like an excellent way to mitigate this sort of risk, and I think it's important. Consolodation of pool hashing power I beleive is a natural inevitable market force. One pool has to be objectively the best and will attract the most miners. From what I gather, p2p pools are a fairly large technical challenge and the question still remains as if they can still compete with centralised pools with regards to efficiency and reliability (profitability).
I really can't see the way for anybody to benefit from a 51 attack. However, a potential attack will probably be a black swan, which will make it "impossible" to foresee for 99% of us, so the fact that there isn't any clear way to benefit from it, doesn't actually mean that there isn't a way.
Obviously, the second there's evidence of double spending or similar, any value of Bitcoin will disappear as dew on a summer morning and the value of all the ASIC gear with it - so there is a very strong incentive for each individual miner to refuse to participate.
At this point it's tempting to consider just mining for this pool as collusion, however. GHash.io have been known to abuse their mining power to double-spend already. Miners are not showing much will to leave for other pools, however. It's a dire situation.
Hoards of people dump insane amounts of money into a new, unproven and unstable currency technology. What could go wrong?
A good explanation is due to the random variation in the who the block is a awarded to.
Big pools are popular for a number of reasons:
1) Lots of hashing power means lots of blocks found means more payment more often, even if it is less coins. People get impatient and leave smaller pools if they aren't getting paid right away.
2) Network effect. It's the first Google search result. This might be the biggest factor.
3) Probably more reputable, so I'll probably get paid too, most pools have honest operators but some can shut down shop and take coins people haven't cashed out yet and run or do other shady things.
4) Probably less downtime, beefier hardware.
I don't know the specifics of GHash in particular if there's anything that makes it more appealing.
They are able to run a pool for 0% fee, along with mining a couple of other altcoins makes them a more profitable pool than others.
On the other hand, the heuristics of blockchain.info do determine block ownership are not perfect either: https://bitcointalk.org/index.php?topic=123726.0;all
---The attacker can----:
Reverse transactions that he sends while he’s in control
Prevent some or all transactions from gaining any confirmations
Prevent some or all other generators from getting any generations
Double spend Bitcoins
---The attacker cannot---:
Reverse other people’s transactions
Prevent transactions from being sent at all (they’ll show as 0/unconfirmed)
Change the number of coins generated per block
Create coins out of thin air
Send coins that never belonged to him
It seems like all you'd have to do is make two transactions within a short time period like < 1 second. Doesn't this happen from time to time?
