Debunking the Empty Block Attack. Bitcoin Tech Talk #233
Note: I started to write this article for the newsletter but it went too long for me to include it here. You can read it on medium, but I’ve included the first part here.
It’s amazing how much effort critics expend on ways in which Bitcoin could not work. Few people ask about the vulnerabilities of USD for instance, which has a far greater impact globally yet in order to FUD Bitcoin, the same “concerns” are brought up again and again as if they were novel to “warn” people away from Bitcoin. The latest salvo against Bitcoin is the idea of the empty block attack, something made popular by Michael in his debate with Pomp.
To be clear, I already wrote about mining centralization scenarios, which covers the empty block attack 3 years ago. But as we’ve seen with Bitcoin critics, their forte seems to be in bringing up concerns that were addressed long ago as if they’re new during each bull cycle. Honestly, I’m pretty sick of the FUD and having to explain the same things over and over again, but given that there’s a good number of new people coming into the space, I’m going to refute the specific attack in this article.
What is the Empty Block Attack?
The empty block attack is one where a majority of mining power would be directed at mining only empty blocks and rejecting non-empty blocks. These miners would essentially execute a soft-fork where all non-empty blocks would be rejected. Given that they have a majority of hashing power on the network, so the thinking goes, they will eventually get the longer chain even if other miners were to mine non-empty blocks. If only empty blocks are being mined, all activity on the network would stop and so, the thinking goes, Bitcoin would be killed.
Who would execute such an attack? The usual villain in this scenario is China, who apparently has a majority of hashing power within its borders. The thinking goes that they would seize control of the hash power one way or the other and execute this attack on the network.
This is not a bad first-order approximation of what would happen, but the problem with this scenario is that the Bitcoin critics don’t believe that there would be any resistance whatsoever. This is about as naive as thinking that a nuclear strike on a populated city wouldn’t provoke some sort of response.
So let’s take a look at some of the countermeasures that the Bitcoin network can perform. There are two scenarios for an empty block attack: direct and indirect. The direct one is acquiring 51% of the mining equipment and executing the attack. The indirect one is compelling pools to only mine empty blocks. Let’s take the more realistic second scenario, one first.
Bitcoin
James O’Beirne writes about his priorities as a Bitcoin Core developer. The main thing I got from his article is that there really is something of a mismatch between Bitcoin’s current security and its price. Price has multiplied by many multiples over the past X years, but there hasn’t been a corresponding security upgrade. The post really made me want to step up my game, too, starting with doing more seminars to create that deep developer bench he talks about.
CommerceBlock has released a way to anonymize on statechains using something called Mercury coinswaps. Statechains are UTXOs that are passed around without actual on-chain transaction using a multisig. The Mercury coinswap allows those with the same denominated UTXO (say 0.1 BTC) to swap with each other in a verifiable way on a statechain. As long as the anonymity set is sufficiently large, this could be a great way to add significant privacy as the mixing process is blind to everyone. This is an excellent argument for statechains as there’s no on-chain data.
BitMex has published the first chapter of The Blockchain War. I haven’t bought the book yet, but what I’ve read reminded me of all the craziness that was going on at the time of Bitcoin XT. There’s an excellent analysis of Gavin Andresen, Theymos, and the arguments for and against big blocks. Having lived through the whole ordeal, I thought the first chapter captured the mood of the time and the personalities really well. I’ll be ordering the kindle version if it ever comes out.
Microsoft has released ION, which is a decentralized identity on the Bitcoin network. This is an alternative to PGP in that keys can be asserted and revoked using the Bitcoin blockchain. I haven’t played with it, but the public key infrastructure problem so obviously present in PGP is solved by having it run on top of Bitcoin. We’ll see if decentralized identity is a worthy enough endeavor to take up precious block space, which the market will be deciding in due course. I do like the idea and hope something like it is used for pseudonymous internet identities in the future.
Lightning
Breez has added a native podcasting function in their app which can be paid for directly from their lightning wallet. As they explain, the centralized third parties that control podcast distribution not only censor, but take exorbitant fees. I’m definitely going to look to add my podcast to the open network and see what happens.
Grubles has a post on how to install c-lightning on OpenBSD. The idea is to reduce the lightning node’s attack surface as OpenBSD is known to be more secure than, say, Linux. This sort of consideration is well placed as lightning nodes need their private keys online and reducing the attack surface is a great idea as channels get bigger.
Economics, Engineering, Etc.
Jake Woodhouse writes a letter to his infant daughter about Bitcoin. The letter is meant as a way to explain how he ended up in the financial place that he did to his daughter. There’s a lot of brutal honesty about the mistakes he made, such as selling down from 13 BTC he once had, which is heart-wrenching, but also quite educational. He lists a good number of resources for his daughter to read when she gets older, much of which would be great for beginners to look at.
Coin Center has an analysis of the new FATF guidelines on Bitcoin. There are some really terrible things in the new proposed guidance, including scrutiny of coinjoins or other privacy technologies. The AML/KYC looks to expand to counterparties and to non-custodial entities which make little to no sense unless the goal is financial surveillance.
Justine Harper has reflections on working in Bitcoin. The post is instructive for what it’s like going from what she describes as a “fiat job” to working in the Bitcoin industry. I know many of you reading this newsletter are in the same position, and I hope she can be an inspiration to you to make the leap. One resource you might want to look at is this Bitcoin jobs board.
NYDIG will have the cheapest BTC access at 0.30%. This is much cheaper than GBTC which has a 2% annual fee, eating significantly into BTC gains. As they point out, this is better than even the best gold vehicle (GLD ETF), which charges 0.40%. ETFs seem inevitable at this point and I’d put the over/under at 9 months.
Kentucky has passed their legislation to incentivize mining in their state. Essentially miners will have their electricity use in the state be tax-exempt. I suspect this will lead to more energy production in the state which will result in cheaper electricity for all of the residents. Of course, there’s nothing stopping other states from copying this legislation, so the advantage may be short-lived.
There’s another way to donate to Bitcoin development and get a tax deduction through Brink. Unlike HRF’s program, funds will exclusively go to Core development.
Events
I am hosting a Thank God for Bitcoin book launch dinner in Austin April 7. All 8 of the authors will be there and we’ll have plenty of meat to eat.
I am going to be at Texas A&M Bitcoin conference on April 16-17. This will be my first in-person conference since Bit Block Boom last summer.
I will also be at Bitcoin 2021 in Miami June 4-5. This will be an enormous conference (they’re expecting 6000+ people).
I am starting up my Programming Blockchain seminar again. I’m trying to help develop that deep bench of Bitcoin developers. Next seminar is on June 1-2 in Miami and then on August 13-14 in Mexico. This is a 2-day seminar for programmers to learn about Bitcoin. You can apply here. I also have a few scholarships available for those that can’t afford it.
Podcasts
On this week’s Bitcoin Fixes This, I talked to Jon Najarian about traditional trading. He talks about the discipline of trading and why it’s something that requires skill and experience.
I recorded a bunch of podcasts, but nobody released any this week nor talked about the new book:
Fiat delenda est.