The 51% attack has been a ghost that has worried many. Know why you shouldn’t fear it when it comes to networks like Bitcoin and Ethereum.
- The attack occurs when one group controls 51% of a network’s computational power.
- Bitcoin and Ether are virtually immune because their Total Cost of Attack is too high.
In a world where digital security has become one of the biggest challenges for emerging technologies, Bitcoin (BTC) and Ethereum (ETH) stand out as bastions of resilience. A recent study by Coin Metrics reveals that both networks are now considered 51% immune to attacks, a guarantee that reinforces their security and positions them as the best cryptocurrencies to invest in for the long term. The possibility of a 51% attack has been a constant concern for blockchains operating under proof-of-work and proof-of-stake mechanisms.
Such an attack would occur if a malicious actor were to gain control of the larger part of the network’s mining or staking power. This situation would theoretically allow him to manipulate transactions and compromise the integrity of the blockchain. However, the analysis conducted by the Coin Metrics team, composed of Lucas Nuzzi, Kyle Waters, and Matias Andrade, introduced the concept of “Total Cost of Attack” (TCA). This innovative metric quantifies the exorbitant cost that such an attack would entail. According to their findings, the ATC for Bitcoin and Ethereum networks is so prohibitive that it renders the viability of such attacks practically null and void for any entity, including nation-states.
Bitcoin and Ethereum: two giants when it comes to security
The study indicates that an attack on Bitcoin would require an astronomical amount of resources, specifically the acquisition of some 7 million ASIC mining equipment, costing approximately $20 billion. In addition, the scarcity of commercially available ASIC equipment makes this feat even more unlikely.
As for Ethereum, concerns about 34% attacks via validator staking, especially with the rise of liquid staking derivatives such as LidoDAO, were also deemed unfounded. The report suggests that, in addition to being extremely costly, such an attack would be logistically complex and take months to implement, costing more than $34 billion. The volume of cryptocurrency transactions in Spain reached €60 billion last year, according to a report by the Bank of Spain.
Coin Metrics’ research alleviates long-held security concerns. They mark a turning point in the perception of blockchain as a mature and robust technology. The meticulous, data-driven analysis offers a renewed perspective on the stability and security of Bitcoin and Ethereum, two of the largest and most influential cryptocurrencies.
51% Attack: How to hijack a Blockchain
Imagine a highway where everyone verifies each other’s directions. Think of one powerful group controls half the cars and starts messing things up. That’s a 51% attack on a blockchain. Here’s how it works:
- Power Grab: The attacker gains control of more than half (51%) of the network’s mining power (Proof-of-Work) or staking power (Proof-of-Stake). This phase involves renting computing resources or manipulating the network.
- Censorship: They can block or delay new transactions, effectively silencing others. Imagine blocking specific lanes on the highway, causing delays for everyone else.
- Double Spending: They can create fake transactions and spend the same coins twice. Think of duplicating tollbooth tickets to avoid paying twice, only on a much larger scale.
- Rewriting History: In some cases, they might even rewrite past transactions, though this is more difficult with longer blockchains. Imagine changing road signs on the highway to confuse everyone.
What are the effect of a 51% Attack?
- Breaches Trust: It undermines the core principle of decentralization, where everyone has equal say.
- Financial Losses: Users can lose money due to double spending or halted transactions.
- Network Damage: The entire blockchain’s reputation and value can be affected.
How to stop it?
- Strong Networks: Larger, well-established blockchains like Bitcoin are harder to attack due to the immense computing power required.
- Alternative Consensus Mechanisms: Proof-of-Stake uses less power and might be more resistant to attacks.
- Network Monitoring: Constant vigilance helps detect and respond to suspicious activity.
51% attacks are a huge threat, but they are not invincible. By understanding the risks and taking precautions, we can build more secure and resilient blockchains.