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gwillen comments on [tangential] Bitcoin: GHash just hit 51% - Less Wrong
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These guys are known for making ludicrous pronouncements about how the Bitcoin sky is falling. Their previous work on selfish mining made a lot of wild doomsaying claims which have not held up.
A single entity having 51% of the hashing power is annoying but not catastrophic. It would be much worse if they had 51% on their own hardware, which they don't. Any attack they can perform with their mining power would be prominently linked to them, which would cause a massive drop in their hashpower as miners fled to other pools. (Which some of them are already doing.)
So while I think concentration of mining power IS a long-term problem that needs a long-term solution, I think all the ghash wailing right now is significantly overblown.
GHash has since backed off from >50%, since they're not stupid.
I note that the fact that, despite all rationalisation to the contrary (that no-one would ever let themselves cross 50%), someone actually did cross 50% has in fact upset people: the cultural assumptions seem to be feeling shaky to them. HN discussion is interesting.
Except that an entity with 51% power could conceivably cause damage in ways that would be hard to figure out (say, but obfuscating the blockchain -- obfuscations could easily get lost in the daily chaos of bitcoin trade). The only safe course of action is to assume that once an entity has gained 51% power, all further blocks are 'tainted', and roll back blocks until before the entity had 51% power. But this would be a huge nuisance for miners, users, and exchanges alike.
This is completely false and I can't understand how you could have acquired this impression.
What do you mean by 'obfuscating'?
A 50+% entity cannot cause permanent damage to the blockchain; they cannot steal coins; they cannot generate coins that weren't supposed to exist; the ONLY extra powers they have are
(1) to suppress transactions that would otherwise have occurred, and (2) to prevent other miners from mining.
Neither of these transactions has any permanent effect on the blockchain after the attack stops, except for the omission of transactions that would otherwise have been present (which, assuming they were organic transactions by real users, will be automatically resubmitted until they're included in a subsequent block.)
While I don't think bitcoin would completely crash, double spending could be an serious issue.