A fascinating article out of University of Chicago Business school on the limits of blockchain -- especially when regarding cryptocurrency security. I have to be honest that some of the proof was "well above me" but the fundamental issue is true; cryptos are created with Math, and there's, at the very least, then this massive power could also be used to corrupt the system.
The article is here, and should make for interesting reading especially for those who are still good at math!
The concept is that of a double spending attack, the attacker sells say bitcoin for dollars. The bitcoin transfer is registered on the blockchain and then, perhaps after some escrow period, the dollars are received by the attacker. As soon as the bitcoin transfer is registered in a block–call this block 1–the attacker starts to mine his own blocks which do not include the bitcoin transfer. Suppose there is no escrow period then the best case for the attacker is that they mine two blocks 1′ and 2′ before the honest nodes mine block 2. In this case, the attacker’s chain–0,1′,2′–is the longest chain and so miners will add to this chain and not the 0,1… chain which becomes orphaned.
The trick is that the attacker’s chain does not include the bitcoin transfer so the attacker still has the bitcoins and they have the dollars! The security behind avoiding the double spend attack is not cryptographic but economic, it’s really just the cost of coordinating to achieve a majority of the computational power. The issue now is that there is a lot of "spare" computing power available since bitcoins are trading around $4,000. So the "usual" economics may be corrupted here. Frankly, if I was the Feds and other traditional monetary agencies I would highlight this security issue
The article is here, and should make for interesting reading especially for those who are still good at math!
The concept is that of a double spending attack, the attacker sells say bitcoin for dollars. The bitcoin transfer is registered on the blockchain and then, perhaps after some escrow period, the dollars are received by the attacker. As soon as the bitcoin transfer is registered in a block–call this block 1–the attacker starts to mine his own blocks which do not include the bitcoin transfer. Suppose there is no escrow period then the best case for the attacker is that they mine two blocks 1′ and 2′ before the honest nodes mine block 2. In this case, the attacker’s chain–0,1′,2′–is the longest chain and so miners will add to this chain and not the 0,1… chain which becomes orphaned.
The trick is that the attacker’s chain does not include the bitcoin transfer so the attacker still has the bitcoins and they have the dollars! The security behind avoiding the double spend attack is not cryptographic but economic, it’s really just the cost of coordinating to achieve a majority of the computational power. The issue now is that there is a lot of "spare" computing power available since bitcoins are trading around $4,000. So the "usual" economics may be corrupted here. Frankly, if I was the Feds and other traditional monetary agencies I would highlight this security issue
Comments