The largest banks clearly conspire, as an explicit or tacit cartel, to obtain maximum profit.  That is one reason why bank fees are so high compared to the actual costs (including fraud damages) and large banks are so obscenely profitable.

The correctness of the bitcoin protocol apparently was based on the implicit assumption that a sufficiently large number of users would have sufficient hashpower to fight attacks, and, having a vested interest in the health of the network, would want to do so.  (It is the same assumption used to justify democracy with frequent direct elections.)  That assumption is not valid if there are 4 mining entities that hold the majority of the hashpower, and are not even significant holders of bitcoins.

So, according to that post, the cartel cannot force the users to do a compatible change the protocol because the users who do not want any change to the original protocol would immediately agree to make an incompatible change to the protocol.  Makes sense...

That hard fork would of course prevent *all* existing miners, including the faithful ones, from working on the 'born-again orthodox' chain.  That chain would be no different from any other junk altcoin with a tiny CPU-based network.  The cartel probably would have enough money to rent cloud computing and jam that rebel bitcoin chain too.  Would users choose to run that risk?

Even if the rebel fork survives, it will in time see its mining get centralized again.  That is, users may escape from *that* cartel, but not from the centralization of mining itself.

If the rebels opt for a hard fork, exchanges and payment processors would still have to upgrade their software anyway, only they would have to choose between the cartel's chain or the rebel chain.  Which one would seem to be a safer bet?

Among the users who are not willing to switch to the cartel, many will not upgrade to the rebel version right away; instead they will just stop using bitcoin until the winner has emerged.  And the rebels could always defect the ranks at any time, with no penalty or risk, and they will find their coins still there in the cartel's fork, minus any possibly even most of the transactions that they made since the fork.

Only ideologically motivated bitcoiners would be bothered by a proposed change in the protocol like the one I outlined in my reddit post.  How many of those are there?  The selfish bitcoiners will care more about their wealth (current or expected) than saving the world from greedy bankers and fascist government.  Which of the two chains would seem safer in that regard?

If the cartel's change is not too radical, the holders of large hoards of cheap coins will not want to sell, for the same reason that they are not selling now:  they would still hope to make large profits in the future.  On the contrary, they would hold and support the cartel's decision, in order to preserve that expected return.

EDIT: the cartel would probably mirror the transactions of the rebel chain on their chain too, as long as they are valid in both chains.

I would not be surprised if a lawyer sent a complaint to a moderator that included the words "or else" and several as per number dot number dot numbers.

I refrained to write this before, not wanting to expose the prudish side of my character: but I kept imagining Ms. Helen Wong or some other FTC official reading those #ASKFTC posts that reminded me so much of the bathroom walls at my junior high school.

Maybe, just maybe, those FTC officers were sufficiently annoyed by those posts to start thinking that BFL and their customers perhaps deserved each other after all, and they had better devote their resources and dramamine to the more meritorious case of those Neonazi ex-con bikers who did not get their pedo-themed KKK uniforms delivered in time by that North Korean army supplier.  So, while punctiliously defending the FTC case with her mouth, Ms. Wong blinked three times to the Judge, who got the message and ordered that his desk be cleared of that pile of unsavory attachments as quickly as possible.

It would be risky to move those coins now, since the transaction requests could be traced back to the thief.  They are inaccessible there, so why move them?

Tumbling would probably mix them with coins that are just as dirty.  Every output of a tumbler is suspect of being a criminal, and its movements and tx requests will probably be tracked by police agencies around the world.

The two USMS auctions sold almost 30'000 BTC and exactly 50'000 BTC, respectively.  They have still about 94'000 BTC to auction from Ross's personal holdings.

I believe that a few other bitcoin stashes were seize by the FBI after the SilkRoad bust.  Didn't they get some from SR 2.0?  But they must be much smaller than Ross's.

Those 18'000 coins stolen from Bitstamp will probably sit there for a long time.  They cannot be dumped at most Western exchanges, probably neither at the Chinese ones.  Perhaps they will be be sold at locabitcoins in Siberia or other faraway land?

Uh, thanks! Yes, a prof of Computer Science, at a public univ in Brazil.

I read that article before.  It is mistaken; users do not have voting power, because their only options are give in to the cartel or lose their coins.  Note that any entity that can jam some process for a sufficient time can force the users of that process to accept anything that is not as bad as the jamming itself.

This paper is more correct, as far as I can tell: 
http://hackingdistributed.com/2014/06/16/how-a-mining-monopoly-can-attack-bitcoin/

And here is my attempt to describe in more detail how the cartel could force a change of protocol that benefits miners:

http://www.reddit.com/r/Bitcoin/comments/2qdfat/without_downvoting_me_to_hell_can_someone_explain/cn5s41z
http://www.reddit.com/r/Bitcoin/comments/2qmfgw/so_warren_buffet_says_bitcoin_is_bs/cn82t3q
http://www.reddit.com/r/Bitcoin/comments/2qmfgw/so_warren_buffet_says_bitcoin_is_bs/cn7rxz1

Discussion of the "51%" risk often seem to assume that the attacker wants to either destroy bitcoin or to pull some scam, like a large double-spend, and then run away with the loot.  However, monopolies usually try to use their power to maximize their gains in the long term, and are careful to not kill their cash cows -- which does not prevent them from doing many nasty things.

I know practically nothing about PoS coins; unfortunately the forums I have been reading only mention them to dismiss them.
Do you think that PoS solutions are immune to miner centralization?  Or will centralization only be delayed?

Of course.

And surely they have been using them, not sitting on them needlessly.  If any $$ are left, it must be reserves for payroll or other expected future expenses.

They are also not likely to leave profits sitting in the company's bank account.  They must have paid out most of the profits to investors, including themselves.  They cannot be forced to use that money to save the company (that is what "LLC" means), unless they have done something very wrong in the management of the company and are criminally prosecuted for it.

Sorry, I was not blessed with the necessary Faith.  

Put your feet on the ground again, please, and wake up.  We cannot create anything even remotely similar in robustness and permanence to a new law of physics.  The Bitcoin network is a minuscule hardware and software artifact, that survives only because a few thousand people are willing to keep it working.  If a few hundred (or maybe even a few dozen) of those persons changed their mind, the network would stop.  Or the protocol could be modified, e.g. to randomly toss coins around and make half of them negative, or whatever.

It may seem impossible to get those people to agree to that, because of incentives and bla bla.  But, physically, the energy required to change the neuronal state of a million bitcoiners, so that they start hating the thing, is maybe less than the charge of an AA battery.  And the wiring in their brains is such that one would not need some sci-fi mind-reprogramming zap gun, but only send the right signals through their eyes and ears.  I don't know how to do that, but it is absurd to claim that it will never happen.

The point, again, is that all human constructs are astronomically small and fragile; doubly so for virtual constructs; triply so for virtual constructs -- like bitcoin, the euro, or the US democracy -- that depend on a collection of humans behaving in some 'rational' way.  

Bitcoin in particular has already failed in its primary goal.  The network is still churning, and most bitcoiners still believe (or pretend to believe) that it has proven itself robust; yet it is anything but.

Bicoin, as stated by Satoshi, was designed to be a system for p2p transmission of money that does not require trusting a third-party authority.  But his solution, the Bitcoin protocol, does not do that.  The protocol still depends on trusting that the miners who retain a majority of the mining power are interested in preserving the network.

Satoshi apparently assumed that mining would be fairly spread out among the users, who would be well spread out over the world.  From that assumption, one is expected to conclude that any majoritarian subset of the miners would be so large that they would not collude, and could not be coerced, co-opted, or tricked into any particular behavior.  From that assumption, furthermore, one should conclude that there would be a majoritarian subset of the miners who would have a simple, greedy and rational behavior; meaning, that they would choose to play by the rules, if that choice maximized their expected revenue from block rewards and fees.

However, things did not turn out that way, and in retrospect it is perhaps obvious that they couldn't.   The total reward paid to the miners turned out to be large enough to make mining a very profitable activity, provided one could muster a significant fraction of the hashing power.  To maximize his profit, a miner had to increase his total hashing power and lower his operating and capital costs.  As we know, these facts led to the development of hashing ASICs. Economies of scale then made large miners mor eprofitable, and this advantage led to the extreme concentration of mining power that we see today.

The largest miner will usually grow the fastest, so in time it will have a majority of the hashing power all by itself.  The GHash.io pool briefly reached this state, but then it claimed to have voluntarily limited its growth to remove that very visible risk.  Even so, today the 4 largest know mining entities have ~54% of the total hashpower.

I don't know whether this size+technology race has been going on since the very beginning, or whether it started only after the price rose to a certain minimum level.  If Satoshi had chosen a different reward and fee schedule, or if bitcoin had never attracted the attention of speculators and hoarders, then the price today would probably be around 1 $ or less, the total mining reward would be only ~3600 $/day,  and perhaps the race would not have started yet.  However, if bitcoin (or any similar crypto-currency) were to gain widespread use, it would have to reward its miners well in order to ensure a robust network;  and then the size+technology race would occur anyway.

By now, everybody should be aware that an entity or cartel with the majority of the hashpower has absolute power over the network.  For starters, it can effectively disable the whole network and starve other miners, by selfish mining of empty blocks.  But then it can also use that capability to "convince" most users (including exchanges and payment processors) to accept changes in the protocol (such as extension of the reward schedule and/or increased fees). In the same way, it can convince most other miners to cooperate with the cartel.  These changes would probably include details that further consolidate the power of the cartel and gradually lock the users in, so that they will have to accept more radical changes.  (In general, any entity that can jam some process for a sufficient time can force the users of that process to accept anything that is not as bad as the jamming itself.)

Therefore, it is already a proved fact that the bitcoin protocol does not work. All users now have to trust a 3rd party authority, namely those 4 companies.  These miners must be trusted not to collude, and not be coerced, co-opted, or tricked into violating the network's "terms of service", such as inviolability of accounts, irreversibility, no-double-spending, etc..  That assumption could have been justified for a set of thousands of miners, but not for a set of 4.

It does not matter whether those 4 companies will form a cartel, or will abuse their power.  The mere possibility of them doing so already requires us to trust that they won't.  And it does not matter if they will always seek to gather the most bitcoins, or if they will have other external motives: in fact, the concentration of hashpower, the takeover of the network by a small majority, and the changes of the protocol are all predictable outocomes of the assumption that every agent will behave in a greedy and rational manner.

The price does not matter, too.  It may recover in the next few months, perhaps even go to a new all-time high.  But the only advantage that bitcoin was supposed to have over other payment systems -- not being controlled by a central authority -- is not there. Inevitably, it will lose is "market" to traditional systems; that are just as centralized as bitcoin, but much more efficient.  Even those who love bitcoin because of political idealism will abandon it -- precisely because it does not meet their ideals.

This is not my own view, of course.  This fact has been known for quite some time, and has been pointed out by many critics; and no one has provided a glimmer of hope that this flaw can be corrected.

Among bitcoiners, I still see a lot of denial, with people disputing the ability or willingness of a majoritary cartel to exercise their power, or assuming that a larger coalition of 'rebel' users can prevail over such cartel, or predicting that individual pool members would desert the cartel.

But in the last couple of months I have been seeing also many bitcoiners who seem to have internalized the fact, and are now scrambling to find a way to save their investment -- or at least convince the public, for a while longer, that they have found a solution and are working on it.

EDITS: Grammar and typos

Could it be that (ahem!) China still sets the price, and the Chinese do not care about Bitstamp?

Wait, those chickens and ducks are alive, aren't they?

Quick, ignoring the ducks for the moment, how many spits would be needed to roast all those chickens?

dear @gmaxwell, I agree that many of those deleted posts were rather pointless, and there was way too much re-re-quoting and re-re-posting of the same material.  However, many of them were actually about people and facts connected to BFL.  Unfortunatly, only "insiders" of that thread would understand, for example, that a post about "chickens" refers to Jody Drake, a BFL manager who raises chickens and posts pictures of a pet chicken.  And ditto for many other posts.  

Many BFL victims could have been spared of their losses if they had known about the criminal precedents and dubious business history of some BFL managers.  Some of the bitcoins that were mined by BFL with customer equipment may be in the hands of BFL staff and associates, such as their mysterious forum manager and the owners of certain mining pools.  Much material in that thread is about trying to uncover the identity, past, and improper actions of those people.

It is the right of customers to know the managers and key employees of a company that they are considering to order from -- or, worse, that has swindled them.  People who choose to be in such positions or be part of such scams, even passively, have no right to remain anonymous or to hide their past.

Out of spite perhaps?

I am sure there were a few others, such as MercadoBitcoin / BitcoinRain here in Brazil.

Not quite.  AFAIK, NYC only sent out a request for suggestions about the general idea of letting people pay parking tickets and schedule court hearings by mobile platforms.  The word "bitcoin" appears only once, like "such as ApplePay, Paylap, bitcoin, etc."

Sometime in the future, NYC may decide to deploy such a system, and then they will issue a call for bids from companies willing to actually build it.

Bitcoiners will probably pass the chance: why sign up for all that boring programming work, when their 1.5 BTC will soon make them billionaires?

I recall seeing in the BitPay input wallet some large deposits by KnC, among many small deposits (presumably from retail customers).  Whenever that wallet collects sufficient amount, BitPay sends a large deposit to Bitstamp, it seems.

However that is only an impression from random browsing.  I may try to get some statistics later this week.

Yes, why?