Author: Leo Wandersleb 2019-08-06 01:51:02
Published on: 2019-08-06T01:51:02+00:00
The Bitcoin community is discussing the issue of Sybil attacks and their costs. It is agreed that running a dishonest maker operation requires a sacrifice of fee income because of the quadratic V^2 term in the formula calculating the fidelity bond value. There will emerge a market to lock coins, so these locks will be readily available without having to buy them. However, requiring the bond to reside on a hot wallet would be a massive disadvantage. It is argued that the honest maker will have operational costs and gain fees, while the sibyl attacker will have the same plus profit from deanonymization. As long as makers hunt marginal profits, the sibyl attacker having the higher margin from deanonymization will always win. The fidelity bonds would make this even worse, as increased complexity and entry cost would not favor more makers but less. A solution proposed is to shift incentives from being taker to being maker by introducing a mandatory fee. If each join costs 1% per maker, people would initially reject it but those who do update to that version will become makers, increasing the maker count massively. With these changed rules, the sibyl attackers would still have their competitive edge and would flood the market with even more cheap offers but now everybody would have an incentive to do the same.
Updated on: 2023-06-13T20:28:03.219121+00:00