How to attack Bitcoin Mining

[Riverhead]

I must be missing the forest for the trees. Would a pool even notice a 3% hit to their profits? Or is it that it's 3% of their total revenue and their margins are less than 3% therefore pushing them into a red position?

Some very rough number crunching shows that it would take about $4.5MM USD to gain 3% of the total BTC hash. Assuming a pool large enough to make this attack worth while has 20% of the BTC hashing power you're looking at under a million dollars in HW. Pocket change considering the $7BB USD market cap of BTC.

[CLains]

jaw

__

floor

[gamey]

If I have 1% of hashpower for a pool and keep the winning hashes to myself then that means I lower my own expectation by 1%.  So it costs me very little to do, but hurts the whole pool for 1%.  So you can attack pools this way.  You lose very little but you can actually hurt a pool significantly. 

It would be a dirty game.  If you are heavy into bitcoin mining there are reports about which pools are under expectation etc. 

[alt]

I have not understand it, but it seems cool!
are you beginning the attack?  ;D

[cass]

 +5%

[yellowecho]

Whoa...

[gamey]

Oh I thought you were redirecting your pool's hashes to attack ... but you're just using the initial 3 %.  I do wonder how long it would take for the 3 % to not be written off to variance.  And I suspect this type of thing might be going on already and could always be done to your pool.

[bytemaster]

Do I misunderstand something? Won't the three % lost by the other pool be incurred by your own pool? So you will not be able to maintain profitability beyond the pool that you are attacking.  I do not think merge mining will subsidize much and it can always be done by the pool that is being attacked.

You have 3% secret hash power... you lose 3% on your 3%, but those mining in your pool lose nothing.  You then take your 97% BTC earned from your 3% miners and use it to subsidize those mining on your pool. 

[gamey]

Do I misunderstand something? Won't the three % lost by the other pool be incurred by your own pool? So you will not be able to maintain profitability beyond the pool that you are attacking.  I do not think merge mining will subsidize much and it can always be done by the pool that is being attacked.

[emski]

What makes you think it hasn't already started?

[cgafeng]

When do you start?

[jae208]

Brilliant! !

When do we start? ;)

[bytemaster]

Step 1)  Buy 3% of the hash power (secretly)
Step 2)  Set up a mining pool that merge mines Namecoin (or other alts) and auto sells for BTC, thus charging a negative fee
Step 3)  Once your pool has enough hash power (3-4%), point your secret hash power at top mining pool
Step 4)  Don't submit winning hashes, reducing the REVENUE of competitors by 3%
Step 5)  Continue to subsidize your pool with BTC earned from competitors pools

Result: Competitors pools become unprofitable and your pool is the only profitable option, your pool gets 51%

Step 6) Randomly Orphan blocks produced by other pools (cutting into their profits more, increasing your hash power further as people are forced to join your pool or eat losses on their hardware investment)

The cost of the attack is an order of magnitude cheaper than buying 51% hash power and assumes only that a large number of miners are in this to earn profits today and not to hold BTC.   You appeal to their short-term greed, their thin margins, or their cash flow constraints to force them to join you to avoid losses. 

The only way to combat this is to have 51% of the hash power in private pools.