After five success years of self-policing, the entire decentralized structure of the Bitcoin economy is threated by one user. That user, or entity if you will, single-handedly mustered half the computational power needed to mine new Bitcoins.
According to researchers from Cornell University, a single Bitcoin mining pool run by GHash, the self-proclaimed “#1 Crypto & Bitcoin Mining Pool,” contributed more than 51% of Bitcoin’s total cryptographic hashing output for spans as long as 12 hours.
Why is this a problem?
Controlling 51% of the hashing output grants GHash an unfair advantage, allowing it to spend the same number of coins twice as quickly as other users, reject the transactions of competing miners, extort higher fees from people with large holdings, or even engage in a malicious denial-of-service attack against the rest of the network. That’s not to say GHash will engage in any of these activities, but concentrating so much power into a lone entity undermines the principal Bitcoins philosophy: a decentralized economy.
The reason people opt to place their liquid assets in Bitcoins in the first place is to avoid the inflation and collapse-risk associated with a fiat currency, or money deriving its value from government regulation or law; however, having a majority miner controlling 51% of output does just that: forces users to trust that GHash’s intentions remain benign. It’s oxymoronic.
“This completely collapses the Bitcoin narrative that the Bitcoin community has been using to draw in new users. If we are to trust GHash's good will and ongoing benign behaviours, we might as well do away with the entire Bitcoin protocol and replace the system with a simple database server kept on GHash's premises,” Ittay Eyal, a post-doctorate researcher in Cornell's Department of Computer Science, tells Ars Technica.
No harm, no foul
Alarms were set-off on June 12 after GHash maintained a steady 51% control for a sustained duration of 12 hours after testing the waters with significantly shorter periods of activity. GHash had previously pledged that its mining operation would never exceed the 51% threshold, and to greater consternation of the Bitcoin-scene, there’s no evidence that its operators engaged in any malicious activity. ”One of Bitcoin's goals was to be a free system, independent of anyone's control. With small pools, no one has this kind of control. With a 51 percenter, there is,” adds Ittay Eyal.
Major blowback
Matt Green, a Johns Hopkins University professor specializing in cryptography and Bitcoin, suggests that there would instant reaction from the core developers in the form of overnight alteration to the algorithm that enables mining. As such, GHash would have a massive economic incentive not do anything that compromises the basis of their core expenditure. Whatever the case, changes need to be incorporated to fix the viability of the Bitcoin.
Via Ars Technia
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