Quote from: townf on April 30, 2013, 05:13:30 PM

http://www.marketoracle.co.uk/Article39704.html
The author of this article posted it here in this forum for discussion:
https://bitcointalk.org/index.php?topic=160612.0

51% attack can also exist as a "benevolent" mining monopoly or cartel that doesn't necessarily wreck the blockchain or ruin the value of the cryptocurrency, but simply controls the majority of transaction processing. It then controls the flow of money, who gets charged transaction fees, who doesn't, who even gets their transactions processed. They choose what makes it into the blockchain and what doesn't. They could freeze accounts or move coins to other accounts at will, behind the scenes, benevolently of course, to keep us safe or some shit like that, or without the majority of people knowing (or caring probably) that they can do this, as a matter of their policy.

As soon as the block rewards dry up, this cannot help but become a reality. It is a mathematical, economic inevitibilty, because joe shmoe miner can't afford to prevent it without block rewards. He will go out of business, and that is who we depend on to keep the network honest. We need joe shmoe to be at least 51%, not the walmart-amazon-google network hash cartel to be 51%. Don't let joe shmoe go broke mining!

This cartel will be comprised of corporations or entities who can subsidize their own mining operations, as in pay their electric bill out of their own pocket, buy their hardware, etc without needing block rewards or transaction fees. The joe shmoe public mining pools whose members depend on these compensations to operate would dry up, thus surrendering the 51% of network hash and more to fewer and fewer entities, which will then start acting like a cartel or monopoly and dictate their policies with the clout of essentially holding as hostage the blockchain.

Whoever doesn't think this will happen when the incentive to mine is gone is a fool or is too lazy to think into the future.

The economics of deflation (and inflation) is harmful to participants in an economy anyway in my opinion but that is for another thread. That's more of a general opinion on a complex issue, but the sweft law thing is not an opinion, it is bombproof math and economic reality.

This is a good point. Block reward is fixed, tx fees are not. Thus, someone can solve blocks at negative cost and bankrupt all other miners, since he can reduce his tx fee to 0.

Inflation also solves this problem because a mining cartel cannot remove all of the income from the solving blocks.