JorgeStolfi
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March 13, 2014, 04:02:07 PM

For concreteness, suppose they have 100,000 BTC previously spread out over that many addresses, and start sending out 10-satoshi transactions between those addresses with 1 satoshi of fee.  They can send 10^13 (10 trillion) such transactions before they run out of coins.  Would the network handle that?

Not exact numbers, but useful numbers for reasoning, approximately correct: You can pack about 20,000 xns into a block. To outcompete other xns you need to pay > 0.0001 btc per xn.  Filling a block to deny service for 10 minutes requires 2BTC.  100,000 BTC would deny service for 500,000 minutes, about 11 months.  

In practice I would expect fees to rise quickly, as miners observed the attack and began to take steps.  I could see such an attack lasting for a week or two, depending on how quickly measures were taken and how well co-ordinated the major mining pools were.  More likely a day or three.  There are a zillion ways to break the attack vector.   Miners are ever and always the defenders of the network.

Thanks! 

The Evil Lords also have huge computer farms.  Could they enhance the attack by using them for mining?

(Not that I think that the US government would use such a complicated method. If they ever decide to stifle cryptocoins, they will just declare them illegal tender, like China did.  Unless the FBI and/or the NSA see such an attack as a way to justify a budget increase.   Smiley)