1

You own a very valuable thing and you want to go to holiday without it, but there is nobody who you trust and who can look after the thing. So you take somebody unknown to guard it. You pay him a fee hoping he doesn't run away with the valuable think. How much would you pay?

I think you should pay for the fee minimum the value of the valuable thing!

But now to bitcoin. Do the story again: You own a very valuable coin which is guarded by somebody unknown (the miners). You pay him a fee (mining profit) that is much less than the value of the coin (market cap of bitcoin). Why don't the miners hold short positions on the coin, bring value of the coin down with a large majority attack which destroys any trust in the coin and go with benefit from the destruction?


I asked this fundamental question about bitcoin in a stricter way 2 days before in this question and similar in this question and there is also a bounty for an answer, but there is only less interest and no upvotes and no good answers. I think the question is fundamental, and so I tried to do it in an easy analogy now.

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    Calling the short positiong "running away with our coins" is highly misleading and confusing answerers. Can you please edit your question to make it absolutely clear that you are talking about markets and shorting and not how miners can actually steal coins? – Andrew Chow Dec 4 '17 at 16:39
  • Do you think I should do this in the caption, in the question or in both cases? – user65934 Dec 4 '17 at 16:41
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    Do it in both. The title is what people see first, if that does not match the content of the question itself, it is confusing. – Andrew Chow Dec 4 '17 at 16:43
  • I hope it's better now, I'm looking forward to have you in the discussion! – user65934 Dec 4 '17 at 16:44
6

Because miners do not actually own/ or have access to the bitcoins which are being spent in a transaction.

They simply choose a number of transactions which have valid signatures, and put them together with the hash they created/solved, thus creating a valid block. See https://en.bitcoin.it/wiki/Block_hashing_algorithm for more information.

The person that owns the private key owns the bitcoin, which (unless you share it ofcourse) would be something miners, or anyone in general, won't have access to.

EDIT:

There's currently ~12.000.000 TH/S, In order to gain 51% of the hashpower, ( which is needed to always be faster, thus control the bitcoin chain), you would atleast need 12.000.001++ TH/S, lets say we would generate this power with an Antminer S9+, currently the fastest, (i believe?) which has an average speed of 11.5TH/S

12.000.001TH/s / 11.5 = 1043479 Antminers, which would cost a total of 1043479*2000= 2.1 billion$

If you're willing to spend that much money just to short bitcoin, you have to ask yourself if it's going to viable, and profitable.

Even if there's a majority attack, miners still can't decide the protocol rules. See What can an attacker with 51% of hash power do?

as to what is actually possible with a 51% majority of the hashpower.

You could then speculate on the price going down, but then again, it might not, leaving you with extreme losses.

Also, you would probably be able to earn way more by simply mining the majority of the blocks and its fees.. 25 Bitcoin every 10 minutes ( since you have the majority) = 250k$ every 10 minutes. ( At the current exchange rate. )

250.000*6*24=36.000.000$ in blockrewards each day alone. ( double that number with segwit?)

So, i'm not saying that you can't theorethically making profit shorting it while trying to destroy it with a majority hashpower, but that there are probably better options.

  • The attack scenario is holding a short option and destroy bitcoin by majority attack. Your answer is completely different. – user65934 Dec 4 '17 at 15:58
  • What exactly do you mean by holding a short option? Like a short as in a stock? – Rutger Versteegden Dec 4 '17 at 15:59
  • Yes, profiting when the currency goes down. – user65934 Dec 4 '17 at 16:00
  • So the wrong sentence is "bring value of the coin down with a large majority attack which destroys any trust in the coin", because it isn't sure that this happens? – user65934 Dec 6 '17 at 0:18
  • What about an attacker that owns 51% of the full nodes? All mined blocks have to get approved by full nodes and then be added to the blockchain.. "honest" full nodes decide the difficulty level.. what if tommorow someone gained access to 51% of full nodes and changed the difficulty level back to 1 (a difficulty that can require a couple GHs to solve blocks)? – Miki Berkovich Dec 9 '17 at 13:02
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At what point in the transaction could the miners "run away with your coins"? I may be wrong, but the miners just take your transaction and put them into the Blockchain for a small fee. They never actually have your coins, a portion of the transaction goes to them. I don't think they could steal your coins if they wanted to.

  • Did you read the question? It's about holding a short position during destroying the coin. That's completely different from your answer. – user65934 Dec 4 '17 at 16:01
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    I am confused, your question didn't mention anything about a short position or anything. Are you referring to a group of miners? How do you miners 'guard' the BTC? – Childishforlife Dec 4 '17 at 16:13
  • " Why is there any hope that he doesn't run away with the coins or more formal why don't the miners hold short positions on the coin, destroy the coin and run away with benefit from the destruction?" is part of my question! Miners guard the coins in the sense that they create trust in the coin with their mining power. – user65934 Dec 4 '17 at 16:13
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    Ah okay so say the miner's do short the coin, how do they 'destroy' the coin in someone else's wallet? – Childishforlife Dec 4 '17 at 16:15
  • They bring the currency down by majority attack and so they profit from the short. They don't steel the coin, but the coin is worthless afterwards. – user65934 Dec 4 '17 at 16:16

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