For the first time in Bitcoin's five-year history, a single entity has repeatedly provided more than half of the total computational power required to mine new digital coins, in some cases for sustained periods of time. It's an event that, if it persists, signals the end of the crypto currency's decentralized structure.
Researchers from Cornell University say that on multiple occasions, a single mining pool repeatedly contributed more than 51 percent of Bitcoin's total cryptographic hashing output for spans as long as 12 hours. The contributor was GHash, which bills itself as the "#1 Crypto & Bitcoin Mining Pool." During these periods, the GHash operators had unprecedented powers that circumvented the decentralization that is often held up as a salient advantage Bitcoin has over traditional currencies. So-called 51 percenters, for instance, have the ability to spend the same coins twice, reject competing miners' transactions, or extort higher fees from people with large holdings. Even worse, a malicious player with a majority holding could wage a denial-of-service attack against the entire Bitcoin network.
Like tremblers before a major earthquake, most of GHash's 51-percent spans were relatively short. Few people paid much attention, since shortly after a miner loses the majority position, it also loses its extraordinary control. Then, on June 12, GHash produced a majority of the power for 12 hours straight, a sustained status that enables precisely the type of doomsday scenario some researchers have warned was possible.
Do not pass Go
There's no evidence the anonymous operators of GHash exercised any of those abilities. Still, the mere possibility undermines a core Bitcoin tenet that it be decentralized so it can't be controlled by a single entity.
"A 51 percenter can control which Bitcoin transactions happen," wrote Ittay Eyal, a post-doctorate researcher in Cornell's Department of Computer Science, in an e-mail to Ars. "It becomes a monopoly. It can set arbitrarily high transaction fees, for example, or even extort someone to allow them to perform transactions. It could block or delay all transactions but its own. One of Bitcoin's goals was to be a free system, independent of anyone's control. With small pools, no one has this kind of control. With a 51 percenter, there is."
GHash's ascendency to a majority miner comes even as its operators pledged never to cross the 51-percent threshold. It also comes less than a year after GHash was accused of using its considerable hashing power to attack a gambling site. Emin Gün Sirer, a Cornell professor who works with Eyal, agreed there was no evidence GHash or its operators at CEX.io took advantage of the recent majority positions. In his own e-mail, he added:
But having a single entity in GHash's position, of holding 51 percent of the mining power, of being in a monopoly position, of being able to launch any of these attacks at will, completely violates the spirit and intent of Bitcoin as a currency.
Bitcoin's value proposition stems from its technological foundation, which in turn is based on building distributed trust. People flock to Bitcoin because they do not trust the fiat infrastructure, they hold Bitcoin because they are worried that the people in charge of USD can inflate it at will or usurp money from their accounts. But now, with a monopoly miner, they are suddenly in a position where they have to, once again, trust a single entity to remain benign.
This completely collapses the Bitcoin narrative that the Bitcoin community has been using to draw in new users. If we are to trust GHash's good will and ongoing benign behaviors, we might as well do away with the entire Bitcoin protocol and replace the system with a simple database server kept on GHash's premises.
Worse, no one knows who exactly is behind GHash/CEX.io. They have had an episode where they did a double-spend attack against a gambling site in the past. But even if GHash could be trusted right now, a single entity in command of the currency represents a single point of failure for the Bitcoin economy.
Officials with GHash didn't respond to an e-mail seeking comment for this article. Eyal and Sirer's previous research into Bitcoin weaknesses has been criticized by some as being exaggerations that aren't possible in practice. Matt Green, a Johns Hopkins University professor specializing in cryptography and the security and anonymity of Bitcoin, said whatever mitigations there may be, GHash's 51-percent stake is a significant development.
"If they tried to do [something malicious] people would notice and there would be blowback," Green told Ars. "So it's not the end of the world. Nonetheless, the security model of Bitcoin depends on no miner having (even close to) majority. Right now that assumption is being violated."
Eyal and Sirer reported their observations of GHash in a blog post published Friday headlined It's Time For a Hard Bitcoin Fork. Such a redesign should recognize the existing Bitcoin blockchain to ensure backwards compatibility, but it should incorporate changes to fix three fundamental problems threating the viability of Bitcoin as a currency that's immune from manipulation. The changes include restructuring blocks in a way that disincentives mining pools, closes the threat of so-called "selfish mining" attacks that allow a small number of miners to control Bitcoin, and improves visibility into any attempts to manipulate the Bitcoin blockchain.
The Cornell researchers rejected arguments some Bitcoin advocates have asserted that attacks on the Bitcoin blockchain are infeasible because they would require 51 percenters to act against their own investments in hardware and interest in a stable digital currency. From the start, the researchers said, the point of Bitcoin has been to incorporate strong cryptography as a self-policing system that ensured all players were on equal footing.
"Overall, there is absolutely no reason to trust GHash or any other miner," they wrote in Friday's post. "People in positions of power are known to abuse it. A group with a history or double-expenditures just blithely went past the 51 percent psychological barrier: this is not good for Bitcoin."
