Quote from: Gabi on August 26, 2012, 07:33:30 PM

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But what they can do with 51%? Not much.

They can omit transactions from the blocks and they can go back some blocks and double spend transactions sent to them. That's the extent of it. They can't spend my coins.

Wrong, wrong, wrong.

With 51% they can destroy bitcoin, they can happily stop bitcoin with that. They control everything. They can go back months in the blockchain, rewrite all that and yes, they CAN spend your coins, if your coins were mined in the blocks that they reverted.

Not really. In time layer defenses will make 51% less effective. Bitcoin is what the consensus of users say it is. One option would be checkpointing more frequently. Anything prior to a checkpoint can never be double spent. Another option would be to change the hashing algorithm. Given the lowest cost method of performing a 51% attack is ASICs that cost would be utterly wasted. Tens or maybe hundreds of millions spent would be wiped out and worthless by a small change to the algorithm.

Finally it is possible that an entity could kill Bitcoin but they won't kill cryptocurrency. Bitcoin is like napster. Smart entities would realize then spending a huge sum to kill it would only spawn dozens of replacements which are even harder to kill. Now this doesn't mean users won't lose money, it doesn't mean cryptocurrency won't be set back years (maybe even a decade) but eventually some future alt-chain will become the "bittorrent" equivalent and will be far harder to kill.

If hypothetically Bitcoin was killed by a 51% attack (or more likely never ending sequence of 51% attacks) I would imagine the next cryptocurrency could implement two major countermeasures
1) Use a variety of hashing algorithms. i.e. from a pool of 20 algorithms, the algorithm used is rotated every block.
2) Use a "proof of history" system to dynamically checkpoint the primary chain once it is more than say older than 7 days.