1) Why bother withholding the transactions if they're free?
The other miners wouldn't process them any way (when coin rewards are near 0).
Maybe they would and maybe they wouldn't. Miners currently process zero fee transactions. Why would they stop just because "coin rewards" are near zero?
"there will probably always be nodes willing to process transactions for free" - Satoshi Nakamoto
Whether they accept them or not is irrelevant. The relevant point is they won't receive any fees for those transactions. As the cartel grows, then more and more of the transactions will either be withheld from the other miners or sent to them with 0 fees offered.
At some level, those other miners go bankrupt. The cartel starving them of a portion of their revenue yet they still need to produce the ENTIRE difficulty of hashrate because the cartel is paying their own miners from either the non-free transaction fees and/or from profits of being a cartel. Cartels gain more size and thus economies-of-scale efficiency as well they can charge higher prices once they have eliminated the competition.
The effect is still to withhold fees and revenue from the other miners.
And to greatly delay your transactions.
I refuted that already upthread. Why can't you read the thread carefully?
The cartel can give 0-confirmation transactions to its customers, because these are going to be repeat customers because the cartel covers so much commerce.
Only the non-cartel transactions get delayed, because the cartels miners won't include them when they win the blocks sometimes.
2) What are "mandatory tx fees"? Are you confusing the behavior of the clients with the protocol?
I said the attack would still be possible for a coin that decided to make transactions fees mandatory. In bitcoin they are not, but I was just preempting the incorrect argument that mandatory transaction fees would be a fix.
The correct argument is that there's nothing that needs to be fixed in the first place. When miners fight over who can provide the cheapest transactions, the people making the transactions win.
The market rate for transaction fees has nothing to do with my attack.
I only said that alternate coin designs would still be subject to the attack.
You waste my time here.