BTC and ETH: Immune to 51% Attacks

New research from Coin Metrics suggests that it is no longer financially feasible for nation-states to carry out 51% attacks on the Bitcoin and Ethereum networks. A 51% attack refers to a scenario where a malicious actor controls a majority of the hash rate in a proof-of-work network or a majority of staked cryptocurrency in a proof-of-stake network. In such a situation, the attacker can make changes to the blockchain, such as preventing new transactions from being confirmed or carrying out double-spending. The report argues that the high costs involved in executing a 51% attack make it unprofitable for attackers. The authors of the report used a metric called “Total Cost to Attack” (TCA) to estimate the expenses involved in launching an attack on the networks. They found that even in the most profitable double-spending scenario, the attacker would only achieve a 2.5% rate of return, which is not financially viable.

According to the researchers, a 51% attack on the Bitcoin network would require the purchase of 7 million ASIC mining rigs, costing around $20 billion. As there is a limited supply of these rigs available, it would not be possible to accumulate enough to carry out an attack. The report also considered the possibility of manufacturing mining rigs, but this option would also cost around $20 billion.

Regarding Ethereum, the report addressed concerns over a potential 34% staking attack by Lido validators. The growth of Liquid Staking Derivative (LSD) providers like LidoDAO led to fears that they could pose a threat to the Ethereum network. The report concludes that carrying out such an attack would be both time-consuming and expensive. It estimates that an attack on Ethereum would take six months and cost over $34 billion.

The research by Coin Metrics has been hailed as a significant contribution to the field, providing a rigorous and empirical analysis of the feasibility of 51% attacks. Castle Island Ventures partner Nic Carter praised the report for providing unprecedented insights into the costs and risks associated with such attacks. He noted that previous analyses had been largely speculative or theoretical, making this research an important milestone.

Aldus Musselwhite

Aldus Musselwhite

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