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On Friday for a period of nearly 12 hours, mining pool GHash had surpassed the 51% controlling share mark in the anonymous digital currency bitcoin and that has many watchers worried….perhaps with good reason.
Back in January GHash had 42% control and even then there were concerns mounting.
From TechCrunch.com:
In short, once you control more than 50% of the total hashing power of the bitcoin network, you can do nasty things, like spend bitcoins twice, and reverse and block transactions.
The reaction shot bitcoin’s price dramatically downwards.
The average price of bitcoin on all exchanges had been gradually heading upwards to the $700 mark after a steep drop back in March following the collapse of the currency's then largest exchange, Mt.Gox.
A well-known bitcoin developer sold 50% of his holdings as a result of the GHash concerns.
TechCrunch’s Alex Wilhelm writes that surpassing the 51% mark is done only with ill intentions and GHash has already demonstrated what they are capable of.
A 51% attack is something you do willfully. So, GHash would have to want to behave badly. As Ars Techica reported recently, GHash was accused less than a year ago of “using its considerable hashing power to attack a gambling site.” As such we’re not dealing with an actor that we should implicitly trust.
Ittay Eyal, and Emin Gün Sirer, both of Cornell, have even called the 51% event "Armageddon".
"They could keep 100% of the mining profits to themselves if they so chose," the two professors claim.
If the implicit trust that undergirds bitcoin is denigrated, or destroyed all together, its price will hit the skids. Wilhelm warns.
GHash’s movement over the 51% plateau will most certainly cause instability in the price of bitcoin.
Sirer suggests that coding changes to the protocol must be made so as to fully disincentivize pool mining.
Ghash has yet to say much but reports surfaced over the weekend that the Ghash.io site may have been subjected to a Denial of Service (DoS) attack.
- Aaron Goldstein, Gambling911.com
