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Please correct me if I am wrong.

The difficulty constantly changes according to the current hash rate. It changes to ensure that a block is mined every 10 minutes. If the hash rate was 1000 TH/s and a pool contributed 1000 GH/s, then that pool should theoretically be getting 0.1% of the coins being mined. Now say, hypothetically, that 90% of the network hashrate were actually rerouted to mine another SHA256 coin. If every pool and solo miner was reduced to 10% contribution to bitcoin mining, the payout percentage (and ultimately absolute payout) should remain the same. (100 GH/s)/(100 TH/s) = 0.1%. I am of course assuming that payouts work in this linear manner; I am not sure if they do. Now the other 90% of the network hashrate could be essentially one big pool mining another coin.

Comparing bitcoin and peercoin: 28,780.806 GH/s 151.079 TH/s

(0.90*28781)/(.90*28781+151) = >99%

Why then couldn't bitcoin be rerouted to do 51% attacks on various SHA256 coins until people leave each of those communities and move onto other coins until bitcoin is the only SHA256 coin left? Likewise, this could be done with scrypt coins as well, but each in its respective sector. My first assumption is that this is not possible, or else it would be used already.

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Destroying the competition might (and I think, would) hurt Bitcoin, not help it. –  Tim S. Feb 17 at 12:59
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2 Answers 2

You could easy manipulate a pool to wreck havoc on other SHA256 coins if you owned it or managed to gain access. You don't even need to be a large pool, some altcoins are really small and vulnerable. It has affected other coins before, where a pool or a large miner created trouble solely by mining a smaller altcoin.

Feathercoin hit by massive attack

Only thing that prevents this regularly happening is that is isn't profitable to attack small crypto-currencies and in fact devalues whatever you make in the end.

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Exactly. So know lets assume that a coin's network is a pool of pools. Couldn't 90% of the meta-pool be mining another coin? –  scolnick Feb 17 at 23:33
    
@scolnik You can't mine two different coins with 100% efficiency, only with merge mining but coins have to be specifically designed to allow that. –  Jacob Torba Feb 18 at 2:18
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It's already happened, it's much easier if the alt-coin is merged-mined for then the attack occurs for "free".

Merge-mining can be a double-edged sword. Piggy-backing a coin onto another encourages plenty of people to mine it for they continue to earn as usual from the main chain plus increase their profits (even if just a bit) from the secondary coins they receive for (almost) free. Theoretically, this should ensure the merge-mined coin eventually gets as much hashpower as the main coin, thus becoming unvulnerable to such attacks.

However, if a big pool of the main coin decides to attack it very soon after lunch, before many others start merge-mining it, with their enourmous hashpower they usually acquire >51% and the coin is destroyed.

Right when UnitedScryptCoin (or its offspring OrgCoin and Pesetacoin) were released they would've been very vulnerable to this attack should a Litecoin pool have decided to attack them. For the good or the bad no-one did, and now it'd be much difficult to attack for this coin is merge-mined with Dogecoin, Digitalcoin, 42coin and a bunch of others.

What may be happening instead is some Litecoin/Dogecoin/Digitalcoin pool operators silently mining USC and keeping the alt-coins for themselves, an ethically dubious move for which I believe there's nothing the pool miners can do about.

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