For the past weeks, there have been rumblings about mining pool GHash.io, operated by anonymous entity CEX.io, getting close to 51 percent control of Bitcoin’s mining power. The concern is that if GHash has majority of the control over mining, it could lead to the centralization of Bitcoin.

If a single entity takes control of 51 percent of Bitcoin’s mining power, this could result in the single entity controlling all Bitcoin transactions. Transactions may be delayed or halted and the mining pool could favor certain transactions beneficial for them, while preventing other miners from minting coins or finding blockchains, and Bitcoins could be double spent.

The concerns are real, but some reports state that they’re not something to worry about. It’s believed the situation can be controlled by increasing the number of confirmations needed for a Bitcoin transaction to be considered as fully completed, launching a DDoS attack against GHash, or boycotting the pool.

Earlier this year, GHash released a statement saying it’s not interested in gaining 51 percent mining control. It also promised that it would do everything it could to prevent the mining pool from reaching the majority of control.

Sounds reassuring, right? Not really. As of last week, GHash officially held 51 percent of the mining power, which means a single entity has control over Bitcoin – a clear violation of the core principle of Bitcoin which pegs itself as a decentralized cryptocurrency that no single entity has control over.

GHash takes control

On Friday, post-doctorate researcher Ittay Eyal and professor Emin Gün Sirer in Cornell University, published an alarming report regarding GHash’s mining power.

The report stated that GHash had gained 51 percent mining control for 12 hours, that Bitcoin was therefore no longer decentralized, and is now “in a position to exercise complete control over which transactions appear on the blockchain and which miners reap mining rewards.”

The authors explained that though some think GHash’s dominance is not a matter of concern, it had gained 51 percent mining control in a span of 12 blocks, something one could not simply pass off as “getting lucky.”

They also explained the difference between 51 percent power and a 51 percent attack, and what could happen if GHash suddenly decides its done playing nice:

“It’s critical to note that there is a difference between having 51% of the mining power, and launching a 51% attack. An honest, benign 51%er (and we’d expect GHash to be on their best behavior in the next few weeks to not spook everyone) will continue to operate normally. But 51%er can turn dishonest at any moment, for there is a huge difference between someone who only holds 49% of the revenue, and someone who holds 51%.”

“A 49%er can collect only 49% of the rewards if they are honest; if they engage in selfish mining, they can collect almost 100% of the rewards, but they cannot launch a full 51% attack. A 51%er can collect 100% of the mining rewards. In addition, they can reject every block found by competing miners and selectively drive them bankrupt. They can reject selected transactions. They cannot take away your Bitcoins but they can make certain addresses unspendable. And that allows them to extort any mining fee they like. They are a de facto monopoly”.

How real is this threat?

The paper states that when they first published their concerns over a 51 percent attack, the response was that it would be unwise for the mining pool to do so, as it would be undermining its own investments. For this reason, it seems that GHash or anyone else who gains 51 percent countrol would not allow such an attack to happen.

Though it’s noble to think GHash will not launch such an attack because that would be like betting against their own horse, the same nay-sayers claimed that GHash wouldn’t allow itself to reach the 51 percent threshold anyway. But now we’re already at that point. There’s no guarantee GHash will keep its word on not carrying out a 51 percent attack when it failed to keep its first promise.

In an interview with CryptoCoins News, Jeffrey Smith, CEX.io’s Chief Information Officer, answered some questions regarding the 51 percent threat. In summary, Smith made it clear that neither GHash nor CEX.io has any intentions of launching an attack despite, as it would harm their own investment which includes money, time and computing power. Smith also explained that the hashing power CEX.io controls is only 25 percent and the rest are controlled by independent miners. In other words, Smith claims that in reality, neither CEX.io nor GHash has 51 percent mining power.

The rest of the CCN report also made it clear that a 51 percent attack, though feasible, would not be beneficial for any miner in the GHash mining pool and so the community has no reason to worry. The report cites Coinotron as having 51 percent of Litecoin’s mining power, but no attack has been carried out on that cryptocurrency.

But can we really trust an entity with a history of double-spending? Last year, it was revealed that GHash launched a double-spending attack against BetCoin Dice, a Bitcoin-based gambling site that accepted 0-confirmation transactions. This allowed them to place a Bitcoin bet and if they lost, GHash simply cancelled the losing bet and placed a new one, allowing them to continuously place bets without losing any Bitcoins and cash out when they win. GHash double-spent Bitcoins and also stole money from BetCoin Dice.

Get the Forks out

Eyal and Sirer are calling for a ‘hard fork’, which will fix three outstanding problems of the broken mining protocol.

According to Eyal and Sirer, the changes should include disincentivize mining pools, fix selfish mining, and incorporate changes to make what’s happening among the miners easier to detect.

“The hard fork need not respect the existing blockchain (in which case, it would be a new currency with new rules and a fresh blockchain) but it should. That would enable the system to retain the Bitcoin name, and keep everyone’s existing investment in Bitcoin intact. The Bitcoin system weathered a hard fork just slightly over a year ago, and can pull off another one again,” the report explained.

The two said the most sensible thing to do is to implement these simple fixes to improve the Bitcoin community. The only alternative is to ignore the threat and hope that GHash will always be on its best behavior and keep its promise not to launch an attack.

There are some cruder, alternative solutions to this problem than forking Bitcoin. The easiest one that’s been suggested is to simply subject GHash to a Distributed Denial of Service (DDoS) attack, and that’s already underway. Yesterday, users reported that GHash’s site was inaccessible. Currently, all that can be accessed is a non-live version of the site, which means its miners are unable to access their statistics.

DDoS has been cited as one of the first lines of defense against a 51 percent attack but has yet to be proven effective in reducing the percentage control of the mining rate. The thinking goes that if the mining pool’s operations are disrupted for long enough, its percentage of control will drop. Whether that actually happens or not will depend on how long the DDOS attack can be kept up. But even if it does work and reduce GHash’s control to less than 51 percent, there’s nothing to stop it regaining control at a later date.

photo credits: The PIX-JOCKEY (visual fantasist) via photopin cc; wizgd via photopin cc

Mike Wheatley contributed to this article