Quote from: smooth on January 07, 2015, 05:20:11 AM

It will fail because the community will press what Adam calls the Big Red Button and hard fork.

(I don't recall whether I replied to that here or on reddit.) The "Red Button" solution is the third option that, in my summary above, each user would have: upgrade to a different protocol that the cartel miners cannot mine.

That option is a suicide only for the rebel users, since all the miners, whether they like the change or not, would be forced to abandon the rebels and join the cartel ranks. The rebel users would then find themselves in a new altcoin, with a fourth blockchain (4) that wuld not use the bitcoin protocol, supported by a minuscule CPU/GPU mining network. Their rebelBTCs would not be accepted by users or services who converted, and they would not be able to receive cartelBTCs from them.

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Your cartel will lose the transaction fees they didn't earn when rejecting transactions on the original chain. They will also lose the value of the mining gear (and other brand value associated with their mining businesses). I doubt the community would go so far as to hard fork retroactively (eliminating the mining rewards from the empty attack blocks), but that is also possible, so its a risk the cartel would face.

Unless I missed something, in the plan that I outlined the cartel will earn both cartelBTC and rebelBTC rewards throughout the transition. Depending on the outcome of the attack they will lose one of the two, but the other is still double what they would earn by fair play.

The rebels could try to take revenge from the cartel by stealing their rewards, but they could do that only in the rebel altcoin.

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You don't have to believe that individual end users would be behind this (I argue they will simple update their software from whatever its original source, which in no case of which I'm aware includes miners), but that the rest of bitcoin industry -- coinbase, bitpay, venture capital firms, hedge funds, etc. -- certainly would support it. They have nothing to gain and everything to lose from ceding power over the network to miners.

The bitcoin industry will surely choose the fork that is expected to have most users. The cartel fork will have all the miners and 500 PH/s (say) of hash power. Rebel users will be unable to use the network for days until they upgrade to the red button version; while users who give in to the cartel will not suffer any inconvenience. The design of the economic game part of the protocol has always assumed that the players are greedy and will choose their behavior so as to maximize their immediate gain; but that would make them switch immediately to the cartel version. The network has always been controlled by the miners, only that now the power is concentrated in half a dozen companies.