Ethereum could afford a 51% attack on Bitcoin, and profit greatly from it

[pooya87]

I believe that you are vastly underestimating Ethereum. The value of Ethereum is not 4% of Bitcoin's. It is currently 32%, according to https://bitinfocharts.com.

Market capitalization (aka supply*price) does not correctly represent value specially for altcoins with no cap and a massive premine.

And regarding all the supposed security flaws of Ethereum's protocol that you mention, this also shows that there are quite a lot of people who disagrees with you and believes it to be secure. However, I would love to hear more about what you believe those security to be? This sounds quite interesting.

PoS is the newest flaw they introduced intentionally.
For others you gotta research the etherem's smart contract protocol and the flaws it has, like the most famous one that led to DAO issue and the subsequent roll back. A flaw that was never fixed.

A miner is running a business and has made a significant investment. Why would a businessman kill his own business by attacking the very thing that is making them profit?

Yes, this is already taken into account in the estimated price of the attack.
[/quote]
I'm not talking about the costs of the attack, I'm questionings its very viability.

[DaveF]

For others you gotta research the etherem's smart contract protocol and the flaws it has, like the most famous one that led to DAO issue and the subsequent roll back. A flaw that was never fixed.

It's not a 'flaw' it's a feature. Smart contracts don't stop you from doing anything stupid, that's not their job. Look at the thousands and thousands of token scams that keep popping up on ETH.
They don't stop coming.
People are still sending their ETH to contracts that will do nothing but take their money.

...It's worth noting that in that discussion, it was pointed out that only two companies control more that 51% of the Bitcoin hashrate. An entity controlling these two companies (either through legal/political or clandestine means) could effectively control the Bitcoin network....

Pools are not miners. I am guessing that you are taking about Foundry USA and AntPool

Although they do host some miners that are under their control a lot of the mining hashpower that is coming into them is from independent miners running their own equipment. As soon as it looks like they are doing something funky / non legit people are going to point their miners elsewhere. If they get too big people will point their miners elsewhere. Even going back 10 years ago (crap has it been that long) GHash.io hit over 51% and the community freaked and miners moved off. It was a minor worry then and an even smaller one now.

-Dave

[legiteum]

...It's worth noting that in that discussion, it was pointed out that only two companies control more that 51% of the Bitcoin hashrate. An entity controlling these two companies (either through legal/political or clandestine means) could effectively control the Bitcoin network....

Pools are not miners. I am guessing that you are taking about Foundry USA and AntPool

Although they do host some miners that are under their control a lot of the mining hashpower that is coming into them is from independent miners running their own equipment. As soon as it looks like they are doing something funky / non legit people are going to point their miners elsewhere. If they get too big people will point their miners elsewhere. Even going back 10 years ago (crap has it been that long) GHash.io hit over 51% and the community freaked and miners moved off. It was a minor worry then and an even smaller one now.

It doesn't really matter: a government entity could order whichever company to do their bidding, or take them over by clandestine means. In the latter scenario, nobody would even know what was happening until they had complete control of the network.

GHash.io is not Russia, China or the USA. GHash.io does not have a CIA, an FBI or nuclear weapons. Etc. etc.

[Catenaccio]

Market capitalization (aka supply*price) does not correctly represent value specially for altcoins with no cap and a massive premine.

Market capitalization of altcoins is very fake and distorted by massive pre-mined coins, tokens from founders and core team members. Newbies in the market, altcoin investors must be very cautious with altcoins and their market caps!

Bitcoin vs. Altcoins – projected Marketcap

[pooya87]

It's not a 'flaw' it's a feature. Smart contracts don't stop you from doing anything stupid, that's not their job. Look at the thousands and thousands of token scams that keep popping up on ETH.
They don't stop coming.
People are still sending their ETH to contracts that will do nothing but take their money.

Well yeah but the whole system is flawed and that's because the idea behind it was flawed and it was also implemented with flaws!

Otherwise we have smart contracts in Bitcoin as well and the whole Bitcoin system is designed in a way to prevent users from doing stupid stuff like sending their coins to an OP_TRUE contract so that anyone can spend it.

[legiteum]

Market capitalization (aka supply*price) does not correctly represent value specially for altcoins with no cap and a massive premine.

Market capitalization of altcoins is very fake and distorted by massive pre-mined coins, tokens from founders and core team members. Newbies in the market, altcoin investors must be very cautious with altcoins and their market caps!

Bitcoin vs. Altcoins – projected Marketcap

Thanks for pointing out this write-up. Everybody investing in altcoins / memecoins should know about these things before they invest.

My project, Haypenny, seeks to be an honest and safe marketplace for altcoins / memecoins for the average consumer. With so much dishonest crap out there, our business model is to provide consumers a safe place, e.g. a marketplace with strong and enforced rules that protect consumers from fraud and misinformation. We're definitely going to add this write up to our site (in some format, not sure how yet).

My view is that the more information consumers can learn, the better it is for the long term health of the market. This is an aside to this conversation, but I'm glad it came up!

[HeRetiK]

A miner is running a business and has made a significant investment. Why would a businessman kill his own business by attacking the very thing that is making them profit?

Yes, this is already taken into account in the estimated price of the attack.

I'm not talking about the costs of the attack, I'm questionings its very viability.

Also, again, the paper is assuming an attack duration of 1 hour.

That's $6-20 billion thrown out the window for... what? Showing that it could be done? The thing is, the 6 confirmations that the paper is using as a basis for calculating the attack cost are pretty much arbitrary. In case of an imminent or ongoing 51% attack, exchanges and merchants can simply increase the required confirmation count, increasing the attack's cost signficantly, with very little effort.

So basically you'd spend tens of billions to stall the network for a few hours. Basically what Ordinals achieved by accident, but to a much lesser extend.

[DaveF]

It doesn't really matter: a government entity could order whichever company to do their bidding, or take them over by clandestine means. In the latter scenario, nobody would even know what was happening until they had complete control of the network.

Once again it shows you don't know how mining works. If I see VIABTC starting to do things I don't like my miners are going to be pointed someplace else in a matter of hours or less. Other more diligent miners will probably be quicker to point them elsewhere.
So will a lot of other people. So yes if a bunch of governments that are at least on the surface semi-hostile to each other got together and decided to force a bunch of mining pools in independent parts of the world operating in different countries work together to disrupt BTC then a bunch of other pool operators are going to see a ton more hashrate pointed to them.

I believe that you are vastly underestimating Ethereum. The value of Ethereum is not 4% of Bitcoin's. It is currently 32%, according to https://bitinfocharts.com.

Market capitalization (aka supply*price) does not correctly represent value specially for altcoins with no cap and a massive premine.

Another thought, how much ETH is locked up in staking? [Don't know or care and not bothering to look] But if a bunch of people start unstaking their ETH to sell it's probably going to make other people wonder what is going on and they would start to unstake and sell and so on creating a dump.

You see it here with people trying to push the FUD that the MtGOX coins are going to cause a crash in BTC price, or some country selling off the BTC they too in from criminal busts is going to cause a crash in BTC price. Yet, it never really happens.
OTOH with people looking at $100000+ worth of ETH locked up in staking that take a while to unstake and a price that would be dropping I can see a lot of people pulling the trigger and getting out. IIRC it's something like a week once you unstake to get your coins so people are going to be worried about loosing even more $ with a big drop.

Also on that same note 2 providers (AWS and Hetzner) provide for just about 50% of ETH node hosting add in OVH and you are @ 60%
So if some government told these providers to shut down their services hosting ETH nodes you would have a lot of fun laughing as the ETH price dumped as people tried to get their funds out of staking (and could not since they could not reach their nodes) Also, I think if your staking node goes offline there are penalties [once again don't know or care].


-Dave

[mjdamgaard]

The other conclusion from the threads was that Bitcoin is ultimately protected by... the US federal government. Any actor, be it private or national, would have the USA to contend with if it were to try something like this. Indeed, it is undoubtedly the threat of the US government's reprisals that probably keeps a major entity from attacking Bitcoin. (Kind of ironic, given all of the anti-government rhetoric coming from some of the Bitcoin community).

This is a very interesting point to discuss. I admittedly don't know much about the topic, but I did read this blog post by Conklin et al., https://sites.duke.edu/thefinregblog/2022/12/28/legal-liability-of-a-51-goldfinger-cryptocurrency-attack, as part of my research, which concludes that a 51% attack will be hard to prosecute in reality.

Its argument in particular about why the Computer Fraud and Abuse Act would be difficult for a prosecutor to use is quite interesting.

[legiteum]

It doesn't really matter: a government entity could order whichever company to do their bidding, or take them over by clandestine means. In the latter scenario, nobody would even know what was happening until they had complete control of the network.

Once again it shows you don't know how mining works. If I see VIABTC starting to do things I don't like my miners are going to be pointed someplace else in a matter of hours or less. Other more diligent miners will probably be quicker to point them elsewhere.
So will a lot of other people. So yes if a bunch of governments that are at least on the surface semi-hostile to each other got together and decided to force a bunch of mining pools in independent parts of the world operating in different countries work together to disrupt BTC then a bunch of other pool operators are going to see a ton more hashrate pointed to them.

So a government has to get to... you. And people like you. Large governments would have no problem doing this through either legal or clandestine means.

There's no point dragging the discussion into the technical details of crypto when all cyphers can be broken with a Rubber Hose / $5 Wrench attack. Russia, China and the US have nuclear weapons and tens of thousands of personnel who can force people to do things, and economic control over millions more.

The only thing stopping a 51% attack on Bitcoin now and always, is... the US government. If another country did this, it would be an act of war and we would retaliate. If a large private entity did this, the FBI would intervene.

And if the US itself did this, then, well, they would control Bitcoin .

The other conclusion from the threads was that Bitcoin is ultimately protected by... the US federal government. Any actor, be it private or national, would have the USA to contend with if it were to try something like this. Indeed, it is undoubtedly the threat of the US government's reprisals that probably keeps a major entity from attacking Bitcoin. (Kind of ironic, given all of the anti-government rhetoric coming from some of the Bitcoin community).

This is a very interesting point to discuss. I admittedly don't know much about the topic, but I did read this blog post by Conklin et al., https://sites.duke.edu/thefinregblog/2022/12/28/legal-liability-of-a-51-goldfinger-cryptocurrency-attack, as part of my research, which concludes that a 51% attack will be hard to prosecute in reality.

Its argument in particular about why the Computer Fraud and Abuse Act would be difficult for a prosecutor to use is quite interesting.

Interesting article. Any takeover would probably need to break other laws though, which would be easily prosecutable, most likely. In other words, hacking, extortion, etc. would be required to pull off a 51% attack. Or in the case of overt move by a state actor, it would be an act of war on US citizens who hold Bitcoin, and the US would respond accordingly, no different than if Russia decided to attack Apple.

[mjdamgaard]

I think at this point anyone that is interested enough in crypto to be invested (or to consider investing) is already well aware of the PoW vs PoS situation.

Regardless of that it seems impossible to guess how the market would react in practice, but given that history suggests both that (1) Bitcoin crashing takes the rest of the market with it and that (2) markets react surprisingly little to 51% attacks (though those were admittedly rather minor alts) it seems like the odds are not especially in an attacker's favor -- at least in the scenario of Ethereum trying to take Bitcoin's throne by means of a 51% attack.

Yes, we certainly agree that it would likely require some change in the public perception of crypto. But who knows, that could happen. And it seems to me that once the Ethreum stakeholders truly realize that there could be up to a trillion dollars on the line, they will have more than enough motivation (and means) to make the public more acutely aware of the competition between the two blockchains.

According to the paper the range of 6-20 billion would apply to an attack that lasts for one hour. So that's about 6 blocks, not hundreds.

No, the operational costs that the paper mentions are only in the millions. (And if we consider the daily total mining rewards, we also see that the price is measured in the millions.) So by far the largest part of the price of a 51% attack will be due to acquiring the ASICs (and/or compensating bribed miners for their ASICs).

[HeRetiK]

No, the operational costs that the paper mentions are only in the millions. (And if we consider the daily total mining rewards, we also see that the price is measured in the millions.) So by far the largest part of the price of a 51% attack will be due to acquiring the ASICs (and/or compensating bribed miners for their ASICs).

Fair enough! I read/misunderstood your previous post as stating that $6-20 billion is all it takes, ignoring costs for the ongoing operation. But you're right, compared to the initial cost the operational costs are almost neglible.

[darkangel11]

There's no point dragging the discussion into the technical details of crypto when all cyphers can be broken with a Rubber Hose / $5 Wrench attack. Russia, China and the US have nuclear weapons and tens of thousands of personnel who can force people to do things, and economic control over millions more.

The only thing stopping a 51% attack on Bitcoin now and always, is... the US government.

So the US government was protecting Bitcoin from a 51% attack in 2012 and 2013 when Karpeles was running the biggest exchange in the world... That's an interesting theory
If China could do something about bitcoin and knew it was protected by the US, why didn't they? Why would they instead ban exchanges when Bitcoin was cheap and vulnerable to an attack by a rich and powerful country? As time goes by the cost of an attack will go up. There was a window to do it in the early years, but they ignored bitcoin thinking it wouldn't survive on its own. Now it's too late.
As for Russia forcing other people to do things... They can't even force one much smaller and weaker country to do what they want and give up some land.

[legiteum]

There's no point dragging the discussion into the technical details of crypto when all cyphers can be broken with a Rubber Hose / $5 Wrench attack. Russia, China and the US have nuclear weapons and tens of thousands of personnel who can force people to do things, and economic control over millions more.

The only thing stopping a 51% attack on Bitcoin now and always, is... the US government.

So the US government was protecting Bitcoin from a 51% attack in 2012 and 2013 when Karpeles was running the biggest exchange in the world... That's an interesting theory

Nope. Nobody, including the US government, cared about Bitcoin back then.

But if somebody tried it now, they would get in trouble with the US government (unless, again, it was the US government).

If China could do something about bitcoin and knew it was protected by the US, why didn't they? Why would they instead ban exchanges when Bitcoin was cheap and vulnerable to an attack by a rich and powerful country?

I am not sure what you are trying to say here.

[franky1]

you think 1–4% is not enough to crash a market.. but here is the thing.. not all coins circulating are on the market.. only a small proportion of coins crculating are on market orders so a sudden increase of coins hitting the market supply would cause change

take for instance bitcoin, there are over 19m coins in circulation.. but there are not 19 m coins on the market. most market orders are 0.0X coins per order.. so if there was a sudden period where people were colluding to sell for instance 190,000(just 1%) coin the market orders would flood with sell orders compared to the norm.. now translate that to the numbers of ethereum circulation amount and market supply and see some scenarios of then dumping 1-4% of that circulation on the market supply.. you will soon see how it affects the markets

we seen it many times in the bitcoin market when the market orders were <1btc each. but then whales created walls and orders of just 1000 coin order lumps.. it had enough impact on the markets

This seems surprising to me. According to https://bitinfocharts.com (today), the transaction volume is roughly 0.6% each day. So I have a hard time wrapping my head around the proposition that transfers of 1%-4%, potentially over several days or months, would crash Ethereum?

you linked stats about blockchain transactions. not market volume
also of the $10b estimated actual market volume of ethereum today, majority of that is not sourced from staked ethereum holders but instead from a small amount of traders whom are bitcoin based and are arbitraging the markets in a loop pattern several times a second

so now put the math to work.. if you had an actual group of actual ethereum holders that want to wealth transfer to then invest in bitcoin hardware. the numbers even over many days would effect the markets

also i know you want to imagine it as many people selling just 0.0x eth every second for weeks on end, but in reality knowing that over 2 million bitcoin asics need to be bought over say 6 months to keep the collusive gang in check/entertained that their plan can succeed. they would need to sell hundreds of thousands of eth periodically to then bulk order in batches the hardware

as for your next suggestion about having ethereum users lock their ethereum and try to convince physical hardware owners of bitcoin miners to disrupt bitcoin whereby they only get paid after the disruption... um no just no.. the asic owners whom will still have hardware after the attack wont shoot self in foot for a temporary payday if it meant long term harm to their long term investment they physically hold

this is why asic miners dont even go full on extreme accelerating the hashrate as they know pushing the difficulty too fast too soon would affect their rewards.. so dont think that asic miners would suddenly jump ship just to attack their own investments for such a temporary payday that "may" not happen(ethereum holders lie about payout)

and lastly

Yes, we certainly agree that it would likely require some change in the public perception of crypto. But who knows, that could happen. And it seems to me that once the Ethreum stakeholders truly realize that there could be up to a trillion dollars on the line, they will have more than enough motivation (and means) to make the public more acutely aware of the competition between the two blockchains.

you keep trying to make the false presumption that a 51% attack would lead to ethereum taking the top market cap.. and then win trillions because of it

sorry to inform you once again that the market cap $$ number is not real money stored in a vault waiting to be paid out..
the market cap is just a empty math number of taking the current price based on a small order of 0.0xcoin and then multiplying the number by how many coins in circulation.. its not based on real $$ held anywhere

infact if you only care about replacing a altcoin as the top market cap #1 stat.. do the simple thing.. create a altcoin with 5 trillion coins pre-mined/minted. sell 0.00x of those coins on a popular exchange for $0.01 and instantly create a market cap of multiple trillions.
yep a "#1 market cap attack" can occur at the cost of just $0.01

[mjdamgaard]

Another thought, how much ETH is locked up in staking? [Don't know or care and not bothering to look] But if a bunch of people start unstaking their ETH to sell it's probably going to make other people wonder what is going on and they would start to unstake and sell and so on creating a dump.

Oh, let me clarify, when I talk about the 'stakeholders of Ethereum,' I'm talking about all the stakeholders/investors/owners of the cryptocurrency, i.e. all those who are staking money in the blockchain, not just those who are currently staking their Ether as part of the consensus protocol. I can see how this might have caused confusion, and if so, I am sorry.

Maybe I should say 'Ethereum investors' instead from now on as to not cause this confusion.

[mjdamgaard]

I believe that you are vastly underestimating Ethereum. The value of Ethereum is not 4% of Bitcoin's. It is currently 32%, according to https://bitinfocharts.com.

Market capitalization (aka supply*price) does not correctly represent value specially for altcoins with no cap and a massive premine.

In terms of there being no cap on the total amount of Ether, I think the point is that while Ether is deflationary, the owners are also able to stake their Ether in the consensus protocol, which will yield them returns. The average returns gained from each ETH at any given time will be equal to the average reduction of value of each ETH at any given time due to the deflation. And since the average returns equals the average reductions, the value of the asset remains constant in time (when disregarding other factors, of course) in the eyes of the investors.

A miner is running a business and has made a significant investment. Why would a businessman kill his own business by attacking the very thing that is making them profit?

Yes, this is already taken into account in the estimated price of the attack.

I'm not talking about the costs of the attack, I'm questionings its very viability.

Well, it seems that we agree that in order to bribe any existing miners, the Ethereum investors would have to also compensate them for their loss of business. Therefore, whichever strategy these investors choose, i.e. bribing existing miners or constructing new mining farms, they have to ultimately pay the capital expenditures (CapEx) regardless. And that price is estimated to be between $6B and $20B.

[thecodebear]

OP, you've seriously mis-thought all of this.


First off, price would not be 6-20 billion dollars. Very possibly over 100 billion dollars. Oh and don't forget all these people are gonna be paying taxes on their ETH sales so add a bunch more billions of ETH needed to sell.

You're talking about suddenly trying to purchase an amount equal to ALL the miners in existence, AND having to compete for these purchases with the existing mining industry which is always expanding, so prices of ASICS would go up. This would take wayyy more money than you suggest, and years to accomplish.

Then you need to add in the cost of finding places to run miners and set up the infrastructure, so add more billions of dollars.

Selling the Ether to get this done would drastically decrease Ethereum's price, meanwhile Bitcoin's price would be unaffected, making Ethereum's long term outlook to other market participants look weaker and weaker as the attackers are selling and setting up this plan over the course of a few years.

Oh by the way, in the several years that it would take to set this all up, the rest of the bitcoin hashrate will have grown so then these attackers will have to spend even more time and money (and selling ETH) to account for that and still be able to pull off the attack.

Finally, the people engaging in the attack would now no longer have a reason to want to do it because now instead of being Ethereum owners they are Bitcoin miners! They sold their Ethereum to mine Bitcoin. They are bitcoiners now, no longer participating in Ethereum. Their economic value is now tied to Bitcoin, no Ethereum. And besides, as stated above, by the time the attack could actually go off, Ethereum's market will have lost a lot of ground to Bitcoin so many of them at that point would probably not want to go back to Ethereum anyway when they are already now participants in a more successful cryptocurrency.

See how your entire idea works against itself. This is the power of Bitcoin and PoW. Bitcoin has global-level security and engaging in a 51% attack is pure folly.

[mjdamgaard]

The other conclusion from the threads was that Bitcoin is ultimately protected by... the US federal government. Any actor, be it private or national, would have the USA to contend with if it were to try something like this. Indeed, it is undoubtedly the threat of the US government's reprisals that probably keeps a major entity from attacking Bitcoin. (Kind of ironic, given all of the anti-government rhetoric coming from some of the Bitcoin community).

This is a very interesting point to discuss. I admittedly don't know much about the topic, but I did read this blog post by Conklin et al., https://sites.duke.edu/thefinregblog/2022/12/28/legal-liability-of-a-51-goldfinger-cryptocurrency-attack, as part of my research, which concludes that a 51% attack will be hard to prosecute in reality.

Its argument in particular about why the Computer Fraud and Abuse Act would be difficult for a prosecutor to use is quite interesting.

Interesting article. Any takeover would probably need to break other laws though, which would be easily prosecutable, most likely. In other words, hacking, extortion, etc. would be required to pull off a 51% attack. Or in the case of overt move by a state actor, it would be an act of war on US citizens who hold Bitcoin, and the US would respond accordingly, no different than if Russia decided to attack Apple.

I think this might be true for a Replay attack. But if the participating miners simply rewrites the blockchain ledger and steal a lot of bitcoin, but doesn't trade these for other commodities, then the trial will only concern the blockchain alone, and whether miners are legally allowed to construct such an alternative fork after x > 6 confirmations. Am I right in this?

And note that since the attackers true goal is to cause a crash rather than the steal itself, they would actually want to keep their stolen bitcoin on the chain.

[thecodebear]

But if the participating miners simply rewrites the blockchain ledger and steal a lot of bitcoin

What do you mean "steal a lot of bitcoin"? Do you know how the blockchain works?

No amount of mining allows someone to steal bitcoin from other wallets. In a 51% attack the attackers can choose which txs to mine and which not to mine so they would be able to censor the transactions, and they can double spend their own bitcoin, but they can't steal any bitcoin. The only way to steal would be from the double spending, stealing from the merchants they were supposed to be paying. And if a 51% attack is happening, pretty quickly everyone is going to know about it, and it'd be easy enough for bitcoin participants to stop taking payments from known attackers addresses until the attack ends. This is where the transparency of the Bitcoin network comes in handy.


Besides, the entire idea is preposterous for the reasons outlined in my previous comment.