Incident: Bitcoin Mining Pool GHash Gains Majority Control Over Network

Published Date: 2014-06-17

Postmortem Analysis
Timeline 1. The software failure incident involving the potential takeover of Bitcoin by the mining group GHash happened in June 2014 as per the article published on June 17, 2014 [27704].
System The system that failed in the software failure incident reported in the news article is: 1. Bitcoin mining system controlled by GHash [27704]
Responsible Organization 1. GHash mining group [27704]
Impacted Organization 1. Bitcoin users and investors were impacted by the software failure incident where GHash, a mining group, gained control of half the currency's computer power [27704].
Software Causes 1. The software cause of the failure incident was the centralization of Bitcoin computing power due to the mining group GHash amassing nearly half of the Bitcoin computing power and briefly going over 50%, which could potentially allow them to control the flow of transactions and freeze people out of the network [27704].
Non-software Causes 1. The concentration of computing power in a single mining pool, GHash, which amassed nearly half of the Bitcoin computing power and briefly went over 50%, leading to concerns about control over transactions and the network [27704]. 2. The potential for one entity, GHash, to control the flow of transactions, freeze people out of the network, and keep all future bitcoins for itself, undermining trust in the decentralized nature of Bitcoin [27704]. 3. The lack of decentralization in the mining industry, with mining pools like GHash pooling computing power to spread financial risk, inadvertently leading to centralization concerns [27704].
Impacts 1. The software failure incident involving the mining group GHash amassing nearly half of the Bitcoin computing power and briefly going over 50% had the impact of potentially allowing GHash to control the flow of transactions, freeze people out of the network, and keep all future bitcoins for itself [27704]. 2. The incident led to a decline in the value of bitcoins by six percent in a week to around $600 as the threat posed by GHash became clearer, although this decline was within the range of normal fluctuations for the volatile currency [27704]. 3. The incident raised concerns about the credibility and trust in Bitcoin as a decentralized digital currency, as the growing power of a single group controlling a significant portion of the computing power could undermine the trust in the currency, which relies on people's willingness to invest in it [27704].
Preventions 1. Implementing a software update to reduce the incentive to create mining pools could have prevented the incident [27704].
Fixes 1. An update to the software underlying the Bitcoin system could potentially fix the issue of a single mining pool amassing majority control over the computing power [27704].
References 1. GHash mining group [27704] 2. Bitcoin network [27704] 3. CEX.IO Ltd [27704]

Software Taxonomy of Faults

Category Option Rationale
Recurring unknown The articles do not provide information about a software failure incident happening again at one specific organization or multiple organizations. Therefore, the answer to this question is 'unknown'.
Phase (Design/Operation) design, operation (a) The software failure incident related to the design phase can be seen in the Bitcoin system's vulnerability due to the growing power of the mining group GHash. GHash, a London-based mining pool, was able to amass nearly half of the Bitcoin computing power, which raised concerns about the potential control over transactions and the network. This incident highlights a design flaw in the Bitcoin system where one player could accumulate majority control, undermining trust in the currency [27704]. (b) The software failure incident related to the operation phase is evident in the way GHash, the mining group, was able to gain control over a significant portion of the Bitcoin computing power through its operations. The operation of mining computers by GHash allowed them to amass computing power, leading to concerns about potential control over transactions and the network. This operational aspect of GHash's activities raised alarms about the security and decentralization of the Bitcoin system [27704].
Boundary (Internal/External) within_system (a) within_system: The software failure incident related to the Bitcoin system's potential takeover by the mining group GHash is primarily within the system. The incident is caused by the growing power of a specific group (GHash) that runs some of the computers behind the Bitcoin network, leading to concerns about centralization and control over transactions [27704]. The failure is rooted in the structure and dynamics of the Bitcoin system itself, particularly in how mining pools operate and the concentration of computing power within GHash. (b) outside_system: There is no indication in the provided article that the software failure incident related to the Bitcoin system's potential takeover by GHash is due to contributing factors originating from outside the system. The concerns and implications discussed in the article revolve around internal dynamics, such as the concentration of computing power within a specific mining group, rather than external factors.
Nature (Human/Non-human) non-human_actions, human_actions (a) The software failure incident occurring due to non-human actions: - The software failure incident in this case is not directly attributed to non-human actions but rather to the concentration of computing power by a mining group, GHash, in the Bitcoin network [27704]. (b) The software failure incident occurring due to human actions: - The software failure incident in this case is primarily attributed to human actions, specifically the actions of the mining group, GHash, which amassed nearly half of the Bitcoin computing power, potentially allowing them to control transactions and undermine trust in the currency [27704].
Dimension (Hardware/Software) software (a) The articles do not mention any hardware-related failure incident. (b) The software failure incident mentioned in the articles is related to the control and dominance of the Bitcoin network by the mining group GHash. This incident is not a traditional software failure like a bug or crash but rather a concern about the centralization of power within the Bitcoin network due to the dominance of a single entity controlling a significant portion of the computing power [27704].
Objective (Malicious/Non-malicious) non-malicious (a) The software failure incident related to the Bitcoin system can be categorized as potentially malicious. The incident involves the mining group GHash amassing nearly half of the Bitcoin computing power, with the ability to control the flow of transactions, freeze people out of the network, and keep all future bitcoins for itself [27704]. This control could undermine trust in the currency, as Bitcoin is built on the premise of existing outside the control of any centralized power. The incident raises concerns about the concentration of power in one entity, which could have detrimental effects on the decentralized nature and trustworthiness of the system. (b) The software failure incident can also be viewed as non-malicious in the sense that the actions of the mining group GHash may not have been driven by malicious intent to harm the Bitcoin system. GHash has stated its commitment to preserving Bitcoin as a trusted currency [27704]. However, the unintended consequence of amassing majority control over the computing power could still lead to negative implications for the system's integrity and trustworthiness. The incident highlights the potential risks associated with the concentration of power in a decentralized system like Bitcoin.
Intent (Poor/Accidental Decisions) poor_decisions The intent of the software failure incident related to the Bitcoin mining group GHash gaining control of over 50% of the Bitcoin computing power can be attributed to poor decisions. The incident occurred due to the poor decision-making of the mining group in amassing such a significant amount of control over the Bitcoin network, which could potentially undermine trust in the currency [27704].
Capability (Incompetence/Accidental) unknown Unknown
Duration temporary The software failure incident related to the Bitcoin mining group GHash gaining control of over 50% of the Bitcoin computing power can be considered as a temporary failure. This incident was temporary because it was caused by the specific circumstance of GHash amassing a significant portion of the computing power, leading to concerns about potential control over transactions and the network. The incident was not a permanent failure as it was not a fundamental flaw in the Bitcoin software itself but rather a result of the actions of a specific mining group [27704].
Behaviour crash, omission, timing, value, byzantine, other (a) crash: The software failure incident related to the Bitcoin mining group GHash gaining control of over 50% of the Bitcoin computing power could potentially lead to a crash scenario. If GHash were to abuse its majority control, it could freeze people out of the network and control the flow of transactions, essentially causing the system to lose its intended state and not perform its functions as expected [27704]. (b) omission: The incident could also be categorized as an omission failure. If GHash were to use its power to keep all future bitcoins for itself, it would be omitting the fair distribution and creation of bitcoins as intended by the Bitcoin system [27704]. (c) timing: In the context of the Bitcoin system, the incident could be seen as a timing failure. If GHash were to manipulate the timing of transactions or freeze people out of the network at specific times, it could disrupt the intended timing of transactions within the system [27704]. (d) value: The software failure incident could also be related to a value failure. If GHash were to control the flow of transactions and potentially manipulate the value of bitcoins by hoarding them, it would be causing the system to perform its intended functions incorrectly in terms of fair value distribution [27704]. (e) byzantine: The incident could be associated with a byzantine failure. If GHash were to act in an untrustworthy or inconsistent manner despite claiming to be committed to preserving Bitcoin as a trusted currency, it would be exhibiting behavior that is erroneous and inconsistent with its stated intentions [27704]. (f) other: The incident could also be categorized as a potential security breach or vulnerability. The fact that a single entity could amass majority control over the Bitcoin network raises concerns about the security and decentralization of the system, which are fundamental aspects of the Bitcoin protocol [27704].

IoT System Layer

Layer Option Rationale
Perception None None
Communication None None
Application None None

Other Details

Category Option Rationale
Consequence property, theoretical_consequence (d) property: People's material goods, money, or data was impacted due to the software failure The software failure incident discussed in the articles pertains to the potential control of the Bitcoin network by the mining group GHash, which could have significant consequences on the value and trust in the digital currency. The value of bitcoins fell six per cent in a week to around $600 as the threat posed by GHash became clearer [27704]. Additionally, there were concerns that GHash, with its majority control, could freeze people out of the network and potentially keep all future bitcoins for itself, impacting the financial interests of Bitcoin users [27704].
Domain finance (a) The failed system in this incident is related to the finance industry. The software failure incident involves Bitcoin, a digital currency that operates without any central authority like traditional banks. The incident specifically revolves around the control and potential manipulation of Bitcoin's computing power by a mining group, GHash, which could impact the trust and credibility of the currency [27704].

Sources

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