Kamikaze Attack – Block Halving and the Perils of Proof-of-Work

Is Bitcoin secure from attacks that could destroy the currency? To a large part, this is determined by how expensive it is to carry out an attack and by the potential profits the attacker could generate. Ideally, an attack is so expensive to carry out that no profit-driven attacker would engage in it.

But in this episode, Brian argues that the cost of attacking Bitcoin will likely decrease in the future and the ability to short Bitcoin and thus benefit from an attack will increase dramatically.

Topics we discussed in this episode
  • How an attacker would need to go about shorting bitcoin
  • How the kamikaze mining pool could be used to bribe miners to join the attacker
  • Why all profit-driven miners will have an incentive to join the attack, whether or not they believe it will succeed
  • Why the block halving in 2016 could be an exceptionally dangerous time for Bitcoin, since an attack would be cheap to execute and likely to succeed
  • How a gradual decrease of the block reward, instead of the 4-year halving rhythm would reduce risk