My Thoughts on Bitcoin’s Hash War

So the idea of an upcoming hash war in November has unsettled many people and rightfully so. NChain and Ayre Group have threatened potential chain re-organizations and a few exchanges (Gemini) have even delayed their listing of Bitcoin (BCH) over the possible problems that could entail. However, NChain and Ayre group have always been very careful in their strict adherence to legal requirements, so this seems out of character. Though I have no special access to the internal workings of NChain and Ayre Group, there is one type of hash war and chain reorganization that is completely legal and has been talked about before that may be a hint of what is to come.

Craig is quite forthright, if you understand what he’s referencing. This topic in particular is a sore subject for him so it’s even harder to try and understand his stance on it.

The above tweet all but confirms a suspicion I long had on the hash war. The hash war is about forcing replay protection on a chain. I have long advocated for certain offensive mining techniques where applicable, and this is one of them. Replay protection is a mechanism where-by valid transactions on an old chain cannot be copied onto a new chain. This is important because without replay protection, when BTC and BCH split, a valid transaction on the BTC network could be copied and rebroadcast or ‘replayed’ on the BCH network. What must be noted is that the data used for replay transactions is public, and since miners are under no legal requirement for what transactions they include in a block it is not illegal to attempt to include replay transactions in the next block. The block created by the miner would just be considered an invalid block and rejected by the miners.

But without replay protection what happens if enough miners include the transaction? The answer is my favorite part of the world of Bitcoin, offensive hashing. If a rivalry develops between competing developers and miners occurs the two chains are competitors without replay protection both chains are given weapons with which they can try and destroy the other chains. However, we must remember that transactions in Bitcoin are added according to hashrate. So even though both sides have weapons in this war, both sides are not equal in their ability to wield this weapon. To better explain let’s look at how both sides would implement a replay transaction attack.

If the SV/Coingeek team decides to replay attack ABC/Bitmain, they take a transaction unique from their blockchain and simply copy and paste the information as a transaction on the SV blockchain. As they have stated before they would specifically target exchanges. Though this seems aggressive, it is completely legal and targeting exchanges is something I’ve advocated in the past when discussing how to attack Segwit vulnerabilities. When you attack an exchange with a re-organization attack, you have not actually stolen from the exchange. You have forced the miners to figure out which transactions were valid and re-organize their blockchain. Though this would cause major damage, it’s not actual theft, it’s more negligence by the developers but even that charge is hard to press due to Bitcoin’s decentralized nature. If Coingeek has more hashrate than Bitmain they can successfully re-org Bitmain’s chain, thus forcing them to try and pick their blockchain back together from the pieces left by Coingeek thus losing them masses amounts of money and all the while enforcing the market’s confidence in the SV chain.

The attack is continued until the ABC/Bitmain team put on replay protection thus accepting their role as the alt-coin. This last sentence might make readers ask, “If BCH put on replay protection then doesn’t that make it the alt-coin compared to BTC?” Unfortunately the truth is that during the split, Bitmain didn’t try and leverage hashrate to the side of BCH and simply keep BCH as the original POW chain so yes, BCH is currently the alt-coin. Bitcoin Unlimited briefly had majority hashrate support, but the miners ultimately caved in and failed. This is an important distinction, BCH is an alt-coin, not because it should be, but because miners failed to assert authority. I think this has always been something that Craig has hated. The miners had options to utilize their hashrate in order to ensure Segwit and block size limiting wouldn’t happen on the main Bitcoin chain, but they let it happen.

I think Craig took this failure of the miners to react as an insult and I think some of the people warning that Craig won’t do anything after the split may be in for a surprise. Depending on how offensive hash wars are carried out, they can be extremely profitable. We’ve seen in the past Jihan isn’t capable or willing to carry out these attacks. That means he may have no idea what is coming. Furthermore chain splits and even changes in POW can be very profitable for Bitmain, and its uncertain where Jihan’s loyalties lie. Will Coingeek and the infamous Craig Wright try to exploit this coming in November? It seems the animus exists and if the rumors surrounding Craig Wright are true then maybe he has a few tricks up his sleeve. Furthermore if he does truly harbor animus toward Jihan for failing to fulfill his role as a Bitcoin miner qua the whitepaper, perhaps Craig has been waiting for the chance to truly prove to the world what Bitcoin is truly about.

Now whether or not Craig Wright has any interesting ideas for offensive hash wars or not, the reality of hash wars is that you need enough hash power to carry out the attack. Coingeek, though rapidly growing, is still quite new to the world of mining. Bitmain as one of the oldest and without a doubt the most dominant competitor is no small enemy to defeat. Even with their current problems Bitmain is still THE Bitcoin mining company. So for those who want to see a war, don’t think that means your side will win. But the next few months should be interesting. Will the chains split, and if they do, will there be replay protection? If there is no replay protection will this be the cause of a hash war that could ruin the losing side? I’m probably one of the few eagerly hoping something does happen. Even if its not a hash war and its just the release of new software, I’m looking forward to November.