still can attack with these rules, if I have about 1% XTS.
1. use about 10^7 XTS or more, control the price to 500USD/XTS, get about 5*10^9 USD
2. usd about 10^7 XTS or more + maybe 10^5 USD, control the price to 0.0005USD/XTS,get all the backup XTS.
It is just a matter of scale. Attacking the network in such a manner would destroy the network and make your 1% worthless. We can set that value as high as 5% or more. The assumption is anyone with that much steak we not want to harm the network. No one else would participate in the network and instead could go to a new bit asset. You and then be trading against yourself and not profit at all.
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Arrrg. I'm not a tester, but I don't think I like this reasoning at all. Assuming that no individual person or group would spend money to harm the network is a bad assumption, especially at the early stages when the total NAV is still low. There could be great incentives to try and destroy the network. 
Please tell me I don't know crap and I'm wrong because that's what I want to hear right now. 
+ 1
Lets look at this very closely because it is very easy to confuse yourself when it comes to thinking about markets (happens to me a lot and I have a good grasp on it). I write this to "think out loud" so I may have something wrong.
Before any trading can occur there must be at least X% (say 1%) of the XTS sitting in unmatched shorts & asks. Lets also assume that this 1% does not belong to the attacker because the attacker would have no victims if it all belonged to him.
Primary goal of the attack:
1) Create a large amount of BitUSD with very little XTS backing it which will be unresolvable and break the peg until someone eats the loss.
2) To be successful the attacker must be on both sides of the trade (collecting a large USD balance, and an equal short position).
3) To achieve this the attacker must eliminate all other asks on the book that are not their own.
To execute the attack:
1) You must sell 1 XTS for 10000 USD (a very high ask if it were real USD)
2) This means you must place bids to match every ask at 1, 10, 100, 1000 USD per XTS
3) To places these bids means you must short USD at lower and lower prices
4) As you short USD at lower and lower prices you are creating more and more USD backed by less and less XTS.
5) At the end of the day you have a lot of people who long USD while you are short USD at a very low value.
*** Critical Point: Does the rest of the market run out of money before you do ********6) Eventually you run out of money and can no longer fight off the hoards of people selling XTS for USD
7) The value of USD starts rising absent your manipulation until your short position is blown.
Those who were buying USD while you were shorting knew at the time of purchase that USD wasn't pegged to the dollar and they bought knowing their max return would be 2x on their XTS. So these buyers of USD gladly sell their USD at a 2x profit even if it is below the dollar peg.
9) The market will continue to correct until all of the attackers USD has been covered and his collateral lost.
10) The peg is restored and all is well.
Some things to note:
1) During the attack many legitimate shorts will start covering to lock in their profits and thus make it more difficult to maintain the attack
2) During the attack many savvy users will start buying USD at the huge discount. If BitUSD is currently 10% of real USD then you buy it because you know it has collateral worth 20% of real USD backing it. Sure you don't get to realize a 10x gain when it returns to market peg, but you still get a free 2x gain on the return to market peg. For this reason, BitUSD is a solid buy any time it is below parity and profit can be made by selling BitUSD for XTS even below market peg if you bought it at an even lower point.
What this means is that only the attacker's short positions get blown out, and everyone else still profits. In this case I consider an attacker anyone who shorts BitUSD when BitUSD is already below USD value.
So the attacker has to clear the order book of all orders but their own, create a large short against their own ASK so they end up being LONG and SHORT a significant amount of USD. To execute this attack requires:
1) Enough XTS to buy out all existing asks while having enough XTS to keep the market open, so lets call that 2% of XTS
2) The ability to execute your attack faster than the rest of the market participants can enter to take your money.
- shorts entering to cover at a profit
- asks entering to buy USD cheap
I think that the 2% attack threshold is only viable if the rest of the network is idle, in practice I suspect that the market depth could be 10% and would grow as the attacker attempted to push down USD.
Lastly I would like to submit one last fail-safe feature:
Delegates To execute any attack requires delegates to include your transactions in the first place and for regular users to propagate your transactions. For this reason an attacker would have to connect directly to a delegate that will include their transaction because it is unlikely to propagate among regular users. If there are good delegates then the market can function with little opportunity to attack.
Topic: Dry Run 10: Viva la Vida Delegada (Read 13530 times)
