1
Please ignore the connection between difficulty & creation rates for the purposes of this question.
Can a difficulty be set so low that the security of transactions is compromised? In other words, if a difficulty is set too low, can malicious miners forge transactions?
If so, what number is "too low", and how is it determined?
2
A low difficulty is only insecure if the malicious miners have a combined hash power much greater than the difficulty level. The difficulty level is adjusted up or down every 2 weeks so that a new block continues to be found approximately every 10 minutes. So, to forge transactions, a large percentage of the current miners would need to stop mining in order to get the difficulty level to drop. Then the malicious miners could jump in and create bogus transactions assuming they controlled enough hash power to make their blockchain the accepted one.
Thank you for your knowledge! Something I don't grasp: are transactions in the blockchain tested to see if they were hashed properly? If so, how do the transactions stand? Thank you so much in advance! – None – 2013-12-16T23:11:05.780
1Yes, the hash for each transaction is validated by each node in the network before accepting the block. A block containing an invalid transaction will be rejected by the node and won't become part of the blockchain. – ScripterRon – 2013-12-17T00:30:50.287
Thank you so much ScripterRon! I think I'm putting words in your mouth for my understanding: when you say that malicious miners jumpt in and create bogus transactions, do you mean that they can only do it temporarily until others catch on thus deceiving people in the short run to potentially extract assets in exchange? Thank you so much for helping me to understand this and in advance for your reply! – None – 2013-12-17T00:39:44.643
2Once the deception is discovered, the honest miners can work together to fork the blockchain starting at the last honest block. This would result in all subsequent transactions going back into the queue to be mined again. Since that would include the dishonest transactions as well as the honest transactions, some sort of transaction cleanup would be required. Perhaps just erasing all transactions after a point in time and then requiring people to do them again, which would surely cause havoc. – ScripterRon – 2013-12-17T02:04:45.900
Again, thank you very much for instructing me! Is that cleanup process not already included in Bitcoin or any other alt? Thank you so much in advance! – None – 2013-12-17T02:49:19.230
Also, if difficulty were set to
0or-, would there be any security at all? Thank you so much in advance! – None – 2013-12-17T04:14:14.1402If the situation really occurred, I don't know what procedure would actually be used. That was just my take on how to recover. The network difficulty refers to the number of leading zeroes in the block hash, so it can't go negative. At difficulty 1, I'm able to create a block in less than a minute using my GPU. So it would be very easy to create a long block chain that way. – ScripterRon – 2013-12-17T08:25:52.253