Bitcoin Is Being Monitored by an Increasingly Wary U.S. Government

That being said, writing it off as FUD is premature. The fact that it is getting written tells you where media and possibly government focus is now. We can either write that focus off or consider the implications.

Terrorist and criminal organizations are some of the most effective users of new media in the world. ISIS produces some of the most slickly-produced videos you'll ever see. They know and harness Telegram and other apps. If they are not stupid - and they aren't, they're looking for whatever advantages they can get. We can acknowledge this without a bias for or against cryptos.

The Bitcoin and cryptocurrency community has since birth by and large been about speculation and making stacks of cash. That's been it's reason for existence and adoption practically - otherwise it would just make for really cool tech that we all talk about on HN. It's been running straight ahead with fully anonymous protocols which while great have the most natural application in black market purchases, and early adopters/users that while they have a right to use them, practically don't need to - their actions are tracked via hundreds of other unrelated means.

The cryptocurrency community has done really poor job of policing itself. It's done a really excellent job of attracting attention through exchange after exchange being hacked and/or scams. Maybe it can't and shouldn't try to restraining itself or police itself, but the natural result of that is someone else is going to police it or shut it down.

Instead of just saying it's FUD, this article is probably ahead of the curve. This is going to become a bigger and bigger issue. Either Bitcoin advocates find out effective arguments or means or it's going to get shutdown.

If they really worried about $600 in the Gaza strip, what happens when that turns to $600k and then $6 million? Because that will happen as the technology advances. Does that give governments the right to intervene? No, but it makes a bigger and bigger target.

There might not be an effective solution, but it's the canary in the coal mine. The US government was never just going to let this stuff happen unhindered.

The fact that they are paying attention when there's not much to pay attention to is all you need to know. Just wait until there's a sizable sum a politician can make a media campaign out of...

[edit] like especially normal people and not just Terrorists or Criminals

The concept of hawala makes this prospect somewhat more interesting than it may seem at first. You don't need to convert to fungible currency if the blockchain is merely used to keep track of who owes what to whom.

I don't disagree the article, but these example attacks sound pretty bullshitty to me. I don't think it is that trivial to attack cryptocurrencies in a meaningful way, so that actually it would be something else to the government than spending some money on pointless harm.

Its very hard to track and certainly non-human SIGINT proof. If anyone on the planet wants those guys to pick up a systematic trackable crypto-currency, its the secrect services.

It's certainly possible for a government to pay to consume the available space in a blockchain with a very small capacity limit such as Bitcoin has, but I think you miss the very important dynamics that undermine this attack vector - namely that such an attack is a wealth transfer from the attacker to the defender. This is antifragility at its finest.

Let's say that some acronym-agency decided to "spam" the blockchain as you suggest.

The result would not be a "DoS-like" disruption to the mining or node network itself, but just an increase in the cost to make a transaction (we've seen this in the so-called "spam attacks" on the Bitcoin blockchain in the last year). Beyond a certain transaction cost, the demand for space in the blockchain will just diffuse to a competing crypto with cheaper transactions and be harder to trace. Oops.

Moreover, in the meantime, the attacker is simply transferring his wealth to the miners in the form of artificially high fees. The miners will happily accept the attackers money and use it to build more mining capacity. If blocks stay full, eventually miners will decide to mine larger blocks, raising the cost of the attack. How polite of the attacker to pay the mining network to build out capacity to handle his attack!

The result is that all the activity you hoped to suppress just diffuses to other cryptos and becomes harder to track. Meanwhile the attacker is subsidizing a better mining network. That's a bad attack.

Relaxing (or removing) the block size constraint doesn't help the attacker. With a higher constraint, the attacker must spend more to fill up the blockchain, raising the cost of the attack and increasing the wealth transfer from the attacker to the miner.

Bitcoin clients like Bitcoin Unlimited that would make the limit a dynamic variable create a whole new wrinkle for the attacker: because such a limit is an emergent network property, the attack cannot even really be accurately planned or budgeted - the attacker literally has to hit a moving target.

But let's say our attacker doesn't care about plan or budget. As the attacker fills space on our "Unlimited" blockchain, blocks could bloat to the maximum size tolerated by a supermajority of the node network - the "emergent" blocksize limit. This is exactly the same size the "preplanned" blocksize limit would eventually ratchet up to in a sustained block-filling attack, the only difference is the mechanism used to raise the limit.

IOW, if you think this "spam attack" through - regardless of the block size limit - the network will automatically adjust to make the cost of the attack as expensive as possible, minimizing the disruption to normal users and maximizing the wealth transfer from the attacker to the miner.

The fact that blockchain "spam attacks" are actually wealth transfers from the attacker to the mining network is the primary reason why these events cannot even be correctly viewed as "attacks" - these are paying customers!

A blockchain spam attack is exactly like trying to shut down Starbucks by planting a million stooges at every store to purchase lattes so that regular customers can't shop there. Starbucks gets rich from all the money the attacker is feeding it, and organic demand for coffee just shifts to other stores.

TL;DR I think there's no such thing as a blockchain spam attack - the worst that an attacker could do might be to raise transaction prices on the Bitcoin blockchain and keep them artificially high for long enough that demand for Bitcoin transactions eventually collapses and (counterproductively for our attacker) goes to other cryptos.

Newsweek has been a tool of US propaganda for a very long time.

  From his first days in power, Allen Dulles polished the public image of the
  CIA, cultivating America's most powerful publishers and broadcasters, charming
  senators and congressmen, courting newspaper columnists.
  
  He found dignified publicity far more suitable than discreet silence. Dulles
  kept in close touch with the men who ran The New York Times, The Washington
  Post, and the nation's leading weekly magazines. He could pick up the phone
  and edit a breaking story, make sure an irritating foreign correspondent was
  yanked from the field, or hire the services of men such as Time's Berlin
  bureau chief and Newsweek's man in Tokyo. It was second nature for Dulles to
  plant stories in the press. American newsrooms were dominated by veterans of
  the government's wartime propaganda branch, the Office of War Information,
  once part of Wild Bill Donovan's domain. The men who responded to the CIA's
  call included Henry Luce and his editors at Time, Look, and Fortune; popular
  magazines such as Parade, the Saturday Review, and Reader's Digest; and the
  most powerful executives at CBS News. Dulles built a public-relations and
  propaganda machine that came to include more than fifty news organizations, a
  dozen publishing houses, and personal pledges of support from men such as Axel
  Springer, West Germany's most powerful press baron.
  
  Dulles wanted to be seen as the subtle master of a professional spy service.
  The press dutifully reflected that image.

https://books.google.com/books?id=UlCPDQAAQBAJ&printsec=fron...

Heh, not quite. You can increase the fees a little with about $1000 worth of transaction spam.

[Come on-- do you really want to be part of the Wikipedia Review of Bitcoin skepticism? I think Bitcoin deserves better critics than that.]

It's a stretch as a justification for things like acts of war against some other country (say some country in South America decided to back an anonymous digital currency...) or even just legislation banning crytocurrencies.