The reverse acquisition attack: Buying the bitcoin POW to DPOS hardfork

[Ander]

I think that the attempt at this would be the end of bitshares, not of bitcoin. 

The PoW algorithm is not so fragile that it can be taken down like that.  Yes, PoW is slightly flawed in that it wastes money.  But its not flawed in the sense that you cant just easily kill the coin - it does actually work to protect the network.

Any group that tried to do this to bitcoin would be hated by the entire crypto community with a passion you have never seen before.  It would be the end of that coin.  No one would ever touch it again with a 100 foot pole.

[Frodo]

Think about it, why would you hold BTC in this situation. If you were interested in getting a stake in BTS you could much more efficiently buy in with BTC right now. Every one else is just going to dump for fiat.

This is exactly why bitshares stakeholders will support this. Once "this situation" becomes apparent to bitcoiners they will realize that bitshares should be valued at 25% of bitcoins current market cap. Many will dump for fiat, sure (but that's going to happen anyway due to POW mining being a death sentence). With just the first few ERB's mined we will begin to see enormous spikes in the BTS price until it reaches 25% parity with bitcoin. That would put us at 1 billion and give all BTS holders an instant 2000% return. Even if the bitcoin price temporarily halved, we would still see a 1000% return. In the long run the return will obviously be much larger because bitshares with the market cap and infrastructure of bitcoin will be completely unstoppable.

I'm not sure about that. I would expect the opposit to happen: not BTS to rise to 25% parity with BTC but rather BTC dropping to parity with BTS... (the truth would probably be between those two scenarios)
That is given that they don't find any counter measures.

And sure, BTC is probably going to drop if they stick with PoW, but as long as we don't drop a large amount of shares on them I totally don't care.

[gamey]

Wouldn't participation in this kill the price of BTC and thus the mining rewards themselves ?

Same core argument as to why a large stake holder won't attack POS. 

Am I missing something?

[dna_gym]

I cannot understand the motives.
OP hates wasteful uneconomic POW mining or he applauds POW for giving a good clue to light-weight clients. Which is true?
This sort of attack will surely impact the hashrate of bitcoin network as this is simply a bribe. And I think the consequence is introducing chaos only.
Anyway I enjoyed reading your hypothetical scenario, as this is necessary for a cryptocurrency's  security assessment.

edit: I was surprised by this post 

[fluxer555]

We can structure this as a proposal to the Bitcoin community and miners. It's not hostile if they decide through their own autonomy that they would like to start mining ERBs.

[Rune]

Think about it, why would you hold BTC in this situation. If you were interested in getting a stake in BTS you could much more efficiently buy in with BTC right now. Every one else is just going to dump for fiat.

This is exactly why bitshares stakeholders will support this. Once "this situation" becomes apparent to bitcoiners they will realize that bitshares should be valued at 25% of bitcoins current market cap. Many will dump for fiat, sure (but that's going to happen anyway due to POW mining being a death sentence). With just the first few ERB's mined we will begin to see enormous spikes in the BTS price until it reaches 25% parity with bitcoin. That would put us at 1 billion and give all BTS holders an instant 2000% return. Even if the bitcoin price temporarily halved, we would still see a 1000% return. In the long run the return will obviously be much larger because bitshares with the market cap and infrastructure of bitcoin will be completely unstoppable.

[Rune]

Miners do not have control over what hard for users adopt.   

So the solution is really very simple:

Pay miners to produce blocks without transactions in it and eventually to ignore blocks produced that include transactions.

How much do you have to pay them?   Probably 3x the times the value of BTC transaction fees.

How will bitcoin respond?  Increase transaction fees.

How would it help Bitshares if we funded such an attack?  It wouldn't.  We would be labeled by the market as a bad actor and no one would want to join us.

Miners have control over if transactions are put in the main chain. Ultimately it doesn't matter what hard forks a full node adopts, the miners are the final source of authority, and the only way to wrest this control away from them is a hard fork away from the main chain to another blockchain with a different mining or consensus algorithm (which bitshares incidentally is). Also bitcoin doesn't have a system that will allow the different actors in the community to work together to counter this. Even if they could, and they made some sort of weird wallet hack that refused to relay any empty blocks or something like that, the SHA-256 hashing power vested in seeing the exodus through will likely merge mine attack any forks to protect their own gains.

We will pay them drastically more than the transaction fees. An average block with a block subsidy of 25 has about 0.1 BTC in transaction fees. We (or another attacker) will pay the early ERB's 100's of bitcoins, and eventually 50 BTC per block (or whatever numbers we decide will give us the highest success rate). There is no possible way that the bitcoin community will be able to compensate miners more than this if it begins to become apparent that the migration will go through.

The way this would help us is that once bitcoin transaction stops, people will have no option but to use their new bitcoins on the bitshares blockchain. Undoubtedly some will ragequit and sell everything, but overall the average BTS shareholder will gain significantly and bitcoin holders will also gain in the long run because they now get the benefit of DPOS and the rest of bitshares (including less inflation in the long run). Even if the entire thing falls apart the amount of publicity we will gain will end up giving us a massive boost to our market cap. I don't think we have to worry about being labeled as bad market actors, we're already an evil altcoin that they wouldn't buy into no matter what. The shitstorm will not be bigger than if bitcoin died on its own and bitshares became huge and started having major infrastructure defect. Also, if we fail others will follow with the same attack (but just even worse conditions for the bitcoiners so that miners are sure to support the exodus quickly)

[gamey]

I assumed there would be some flaw but I can't bring myself to read that much text.  A succinct description would be much better than everyone going "this is awesome". 

Thank you BM for putting it into one sentence.  It is a cool idea and I'm not saying Rune is not a very bright guy, but you guys were all over this.

Bitcoin guys would hardfork a counter-measure.  You would have to have the miners slowly disrupt because otherwise they give a signature enabling a hardfork to ignore those blocks so that they no longer get the block reward.

Bitcoin might be stagnant in a lot of ways, but they would respond to this quite swiftly I imagine.  Transaction volume is high enough that empty blocks would stick out, so the best one could do is throttle transactions somewhat.  It would be an interesting battle but there are lots of people with interests outside of the transaction fees that also mine. 

etc etc

[Frodo]

How would it help Bitshares if we funded such an attack?  It wouldn't.  We would be labeled by the market as a bad actor and no one would want to join us.   

I think technically this attack would work, but I agree with BM that it might hurt BitShares more than it helps.
It is not just the image damage but we would dilute our stake significantly to drop it on a crypto which market cap I expect to implode once the attack shows effect.

Think about it, why would you hold BTC in this situation. If you were interested in getting a stake in BTS you could much more efficiently buy in with BTC right now. Every one else is just going to dump for fiat.

[bytemaster]

Miners do not have control over what hard for users adopt.   

So the solution is really very simple:

Pay miners to produce blocks without transactions in it and eventually to ignore blocks produced that include transactions.

How much do you have to pay them?   Probably 3x the times the value of BTC transaction fees.

How will bitcoin respond?  Increase transaction fees.

How would it help Bitshares if we funded such an attack?  It wouldn't.  We would be labeled by the market as a bad actor and no one would want to join us.   

[Ander]

I think the only result of this will be:

1) It cant work.
and
2) Bitcoin people hate us even more and it hurts bitshares.

[fluxer555]

May be relevant:

How to Attack Bitcoin Mining

[CLains]

Spooky. But interesting

[Rune]

also:

- the community has the capailities to setup an own mining pool that might end up in 51% mining power because we can pay WAY more to the miners. This way we can also proof the basic flaws of POW

Oooh, I like this! We set up a mining pool that only mines ERB's, and advertise higher (but delayed) rewards to miners who point their hash power at us. Another idea I had for it would be to basically bribe a pool like discus fish and say that we will give them 5k post-exodus bitcoins to distribute to their miners if they begin mining ERB's instantly. It will be an even more direct attack on POW's fundamental flaws, because we abuse that the pools are centrally controlled and that one guy can make decisions on behalf of a huge amount of miners.

In fact we can simply just publicly announce in the social contract that the first of the big 4 pools that begins mining ERB's within 5 days will get 5k extra bitcoins to share on top of the ERB's. All miners who like the idea of ERB's will flock to that pool.

If none of the big pools take us up on this offer, we create our own pool and drop the 5k post-exodus coins onto it instead, distributed across the lifetime of hashing power that is pointed at it. That would be too big an opportunity for miners not to take.

[Riverhead]

Next question: How is this different than the big miners participating in the merged mining of an alt coin?

Merged miners are not incentivized to exclude BTC transactions.

Right right. That was the bit I missed. Thank you.