When I first read the title I thought that MIT was going to set up a large mining project, partially as a research piece, and partially to counter balance the very large mining pools that are risking the 51% attack. Which I was very excited about.
"It is often asserted (for example, in the Bitcoin white paper [22]) that a cartel can double-spend Bitcoins. In a strict sense, this is true: a cartel can spend a Bitcoin by paying it to a player Alice, receiving goods or services, and then shifting the consensus choice of history to a branch where that coin is instead paid to a different player Bob. However, we argue that double-spending by a cartel has a limited payoff. Bitcoins have value because people are willing to trade them for goods and services. If players were unwilling to accept Bitcoins for trade or unwilling to spend Bitcoins for fear of having their payments nullified, the value of Bitcoins would diminish significantly as players lost confidence in the system.
Worse, because players are encouraged to generate a new identity for each transaction and because identities are not linked to any side information, players cannot easily determine whether a proffered payment is coming from the double-spending cartel or an honest user. Thus, a rational player should refuse to accept any payments when there is a significant threat of double-spending. As a cartel must outmine the entire Bitcoin network and thus outspend the entire Bitcoin network for as long as it would remain a cartel, we believe it is very unlikely that a cartel could double-spend enough to recover the cost of the attack." - The Economics of Bitcoin Mining in the Presence of Adversaries (11-12)
This presumes that the only reason a double-spend cartel would exist would be to make a direct profit from double spending, rather than, e.g., being sponsored by an entity whose financial or other interests were threatened by the viability of bitcoin and who thus wanted to undermine trust in bitcoin (to, perhaps, make a profit outside of bitcoin) rather than profiting directly through double spending. When you consider that motivation, the trust factor cited in that critique as making a cartel attack less viable based on how undermining trust in bitcoin also undermines the ability to make a direct profit by double spending is irrelevant (or, rather, illustrates exactly why a double-spending cartel may be attractive to a bitcoin-hostile entity that wants to undermine trust in the bitcoin system.)
Agreed. The authors make this point in order to move on to the main analysis of the paper: The Goldfinger attack.
"As described above, a 51% cartel attack is unlikely to generate enough reward within the Bitcoin economy to be worthwhile to the attacker. However, this does not rule out the possibility of a 51% attack that aims to destroy the Bitcoin economy in order to achieve utility outside the Bitcoin economy. We call this the Gold nger attack after the character in lm who tries to undermine U.S. currency by ruining its gold backing [15].
There are at least three possible motivations for a Gold finger attack. First, a government or institution might want to block Bitcoin transactions, to enforce the law, deter money laundering, or achieve some other institutional goal. Second, a non-state attacker might seek to gain some political or social goal, perhaps as a form of social protest (such a model was previously postulated by
Becker et al. under the name \Occupy Bitcoin" [6]). Third, an attacker might seek an investment gain, for example by taking large short positions in Bitcoins so as to profi t if the value of Bitcoins is diminished. In all of these cases, the attacker must achieve enough utility to justify the
substantial cost of an attack. We agree with Becker et al. that it is unlikely that a protest movement could muster the resources to launch a successful attack. And at present it does not appear possible to acquire a short position on Bitcoins that is large enough to justify an attack."
One of the best papers published on the game theory of Bitcoin to date in my opinion.
So, a cartel would not double-spend because it would cost them long term? The premise of the article is really that people don't act in their short-term interests, or did I not understand?
This is cool too though.