The short SHORT version of the problem: Cartels are bad.My short SHORT version of the solution: Fix bugs. Focus on p2p. Stay the course. Ignore the cartels and they'll go away.There is an interesting discussion on the Bitcoin forum about mining cartels. Some of the forum members are worried that a group of individuals might mount an attack on the Bitcoin network using a cartel style attack. How is a cartel style attack potentially more of a problem than a non-cartel style attack?Any cartel entity coordinates itself to represent a threat to the non-cartel entities. It is comprised of people who want to subvert their target by allying themselves together to share resources and maintain "out of band" communication to that end.
How can this approach succeed against the Bitcoin network? A cartel could generate blocks ahead of the network, holding out on announcing these new blocks until they get an advantage by manipulating these withheld blocks. In other words, they can try to hoard new blocks while they monkey with them by creating cartelized blocks.
In this case, the worry is that mining cartels will form to target the Bitcoin network.
How can this approach succeed against the Bitcoin network? A cartel could generate blocks ahead of the network, holding out on announcing these new blocks until they get an advantage by manipulating these withheld blocks. In other words, they can try to hoard new blocks while they monkey with them by creating cartelized blocks.
A cartelized block contains cartel approved transactions. If you are being rewarded by the cartel, your transaction will be included in the block. If you are being punished by the cartel, your transaction will be delayed or dropped completely. I left out a lot of details in my explanation above. If you want to know more, take a look at the original thread.The reason I am skeptical that a mining cartel would ever represent a threat to the Bitcoin network is that in order for the cartel to succeed, it would have to run a very tight ship. The folk in the thread I mentioned shows that there are all kinds of technical roadblocks to prevent this attack. The most likely roadblocks typically implement more p2p solutions, not less.In other words, add more p2p oriented features to Bitcoin so the cartel must cope with things like keeping timestamps in the proper sequence. And I'm totally in favor of a greater p2p focus, beyond what is already implemented. The more, the better.Beyond that and fixing bugs, nothing formal should be done to deal with mining cartels.Why? Because they'll do what every other cartel has done in history. They will self destruct on their own. It may take some time, but down the line, I can tell, that every cartel in history either self destructs or gets violent. An example cartel in history may have started off as a friendly pact among good business associates. But once someone inside the cartel betrays his buddies, something has to give.And the more p2p focus there is, the less likely violence will be possible in any meaningful way, so the mining cartel can only self destruct. Maybe it can try to start over with a smaller, more trusted circle. That's the only option for it: cartel fragmentation. Fragmentation reduces the chance of a successful attack. In historical examples, cartels get overtly violent or they join up with government so that the violence becomes legitimized by law. Cartels benefit from the "captured regulator" effect when they join up with government so they can regulate away competition. That's just not an option for a well focused p2p implementation. So what if the cartel is able to maintain control of its members to keep them from breaking ranks? Well, that's the ultimate boogie-man, isn't it? It only takes one member to take it down. But ok, let's say it happens. Then what? I'm not suggesting this would be a quick fix, but if the cartel has really done damage to the integrity of the network, then set up a new p2p currency and abandon Bitcoin, if it really is that bad off. Call it Bytecoin or something. Or Twobitcoin. I liked the name Hashcash, but the name doesn't matter. The cartels can have their own private currency all to themselves. Either they keep spending CPU time on the old abandoned network they just took over or they start completely over with a brand new network. Competition makes everything better.
And as Fred Brooks said, "Make one to throw away, you will anyway."
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