Headline:  What is a Sybil attack?


In the field of psychology, there is a disorder called dissociative identity disorder, or more commonly, multiple personality disorder.  These poor people have almost uniformly experienced an elongated period of physical and psychological trauma, and it is very serious.  One of the best known case studies is “Sybil” (a.k.a. Sybil Dorsett.)  The outfall is that, seemingly randomly, different portions of her personality would come forth, out of proportion with the situation.  This is the crux of dissociative identity disorder.    In cryptocurrency, some people have taken over several nodes within the network (like multiple personalities in our example) and this has become known as a Sybil attack.

Can this really cause problems?

Yes, it can.   People who take over several nodes on the blockchain, can artificially expand their voting power.   They can even extend to refuse validation  of transactions, and this can be harmful to the currency.  If they control over half of the nodes on the network (a 51%  attack) they can significantly affect the order of transactions being validated or even reverse  some of the already validated transactions.  Scientists have been working diligently to come up with a solution to not allow these attacks, but, their attempts have yet to be successful.

Are there defenses to prevent Sybil attacks?

Yes, there are defenses.   Primary is the consensus algorithm used with that cryptocurrency.  Whether it be Proof of Work, Proof of Stake or some other model, they are all designed to make Sybil attacks expensive enough to be unfeasible.

Do these consensus models really work to keep people honest?

I think it does.    Not long ago, a University of Michigan professor did a study of the impact of reputation upon E-bay results.  The Swansons sell vintage postcards, and have an exceedingly high score for customer satisfaction.  Professor Resnick asked them to set up several fake accounts that would later go on to have either neutral or negative reputations.   During the period of the experiment, their main page made an average of 8.1% more than even the best of the fake accounts.  The point is that a good reputation tends to maximize your profit, snf  you would be wise to do what you could to preserve your good name.    This belief underlies the whole idea of decentralized finance.

Similar gaming of reputation has happened all over the Web.   Yahoo shopping had a store that had many reports of bad experiences, but they still had a stellar score since their network was setting up fake sales, attached to glowing recommendations.  They booted the vendor from the network, they changed names, and came right back.  A news aggregator called Digg also had a similar artificial reputation boosting problem, and this affected which stories were placed on the valuable front page.  Would anybody be surprised that there are businesses that make their money helping people to game these systems?   Yes, there are many of these.

The Verdict

Sybil attacks appear to be very real, and we need to strive to find ways to make them less effective.   This is all true.   What strikes me, though, is how similar this attack is to the others we have discussed.  Yelp has been attacked in a similar manner.   There are 2 restaurants, Restaurant A and Restaurant B, and they are the only 2 within one town, so they are competing.    The owners of Restaurant A might contact their friends and say, “Please give us a glowing review on Yelp.   At the same time, please give Restaurant B a terrible review.  Thus, through no fault of their own, the reputation of Restaurant B will go down.  My point is that you have to be very careful when considering investment into a cryptocurrency.  They could be artificially hyping their own currency (think FTX) or downgrading another currency.   Read the whitepaper, read the trustworthy blogs about this cryptocurrency, investigate the management team, and then ask yourself if you feel comfortable to give them some of your hard-earned money.






Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.


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