Mining attacks occur when the computers used to solve the complex mathematical problems are faster than the software. Miners can hoard coins before the software has a chance to make the equation more difficult.
As mining became more profitable, miners turned to application specific integrated circuits (ASIC) and multipools.
Read MoreStung bitcoin investors plan Mt.Gox resurrection
ASIC computers are purposely built to solve an equation much faster than every ten minutes and a computer arms race began as miners fought to be the first to solve the equation and receive free bitcoins. At the current rate, a fast and lucky miner can earn up to 25 bitcoins every ten minutes, or about $10,000. Profitability fostered fierce competition which made many miners turn their machines onto other coins and develop multipools.
Multipools are groups of miners who work together to mine the most profitable digital currency. For example, if the price of Dogecoin (an alternative to bitcoin) climbs, the multipools mine this coin and then dump the currency on the market. This mass inflow of supply reduces the price and by extension the mining profitability. Once profitability drops, the miners turn to another coin. The risk is that, without miners, transactions cannot be confirmed or conveyed — a coin without miners is a dead coin.
Newer digital currencies like Dogecoin were vulnerable to a multipool mining attack. Miners hoarding coins would immediately dump them on the market in order to make a quick buck — or bit, if you will. In order to guard against such acts the developers at Dogecoin turned to DigiByte (Digibyte.co). DigiByte is an alternative-digital currency with a unique defense against multipool mining.