Bitcoin is not afraid of 51% mining attacks

Whenever I claim that Bitcoin is the only decentralized cryptocurrency, I always hear two counterarguments:

1. My X coin is also decentralized.

2. Due to the existence of Bitcoin's core development team and miners, Bitcoin is not decentralized.

I will answer the question about whether other cryptocurrencies have decentralized properties and the views of the Bitcoin core team next time, and this article will focus on interpreting the view of "mining centralization" for you.

The questions I want to answer include the following:

1. Is Bitcoin mining centralized?

2. How do miners control Bitcoin?

3. What are the risks of a 51% attack?

4. Are the views of altcoin players correct?

Decentralization

Decentralization is a key attribute of Bitcoin. If Bitcoin’s decentralization is removed, the gains will outweigh the losses. It is precisely because there are many centralized currency issuers that inflation and the decline in the purchasing power of monetary savings will occur. However, altcoin players argue that neutrality is just a category, and even believe that Bitcoin is centralized.

First of all, decentralization is not a category. A system with a single point of failure is not decentralized, otherwise there is no single point of failure. Centralized things are called centralized because a single point of failure may cause problems in the entire system. In fact, there is no situation in between as altcoin players say. Altcoins have one or more of these properties, and these properties will cause single points of failure:

1. The creator of the cryptocurrency is still involved in the project;

2. The cryptocurrency has a development team that forces all users to upgrade (hard fork);

3. The cryptocurrency has a foundation or organization that guides its development direction.

Some cryptocurrencies have more attributes, like Ethereum has three, while Monero only has the second. In this way, you can say that one project can have more single points of failure than another. However, in reality, as long as there is a single point of failure, the token is centralized. This allows the government to control the currency with any regulations it wants through this single point of failure. For example, they can arrest the creator, tax the development team, or nationalize the foundation or organization. However, the method by which the authority takes over the cryptocurrency is not the most important here, but the fact that it can be taken over is the most worthy of our attention. Centrally issued currencies may be more easily replaced.

The question here is whether Bitcoin mining is a single point of failure. Can a government or other agency take control of Bitcoin by controlling the individual miners involved in mining? There has been much speculation on this point, which is the subject of this article. Let’s take a look at what exactly it would take to take over Bitcoin.

What can miners with concentrated computing power do?

Miners’ job is to secure the Bitcoin network through proof of work. When a single miner has 51% of the hashing power, a network attack is possible. However, this is very different from controlling the Bitcoin network. A 51% attack is naturally limited, as it only affects the account holders of the attacked account, such as exchanges. This is in stark contrast to a forced upgrade of the network, which can reset the entire balance, increase the currency exchange rate to make it appreciate, or change various incentives. It is actual control over the entire network. This is the real bottleneck for its development, as the rules of the network in the latter are determined by a single group. A 51% attack may make some participants more vulnerable. The two are different.

This distinction is crucial because altcoin players often confuse the two. In fact, they are different. The former is an attack vector with many execution conditions that ultimately affects a limited number of people; the latter hard fork has the possibility of a complete takeover of the cryptocurrency. To use an analogy, if the former is seen as a weak point in the army's defense, the latter is a conqueror taking over the army for any purpose. The former still requires the attacker to fight it out in the open, while the hard fork upgrade is only completed with the core layer's push.

For this reason, we call altcoins centralized. They can be taken over, conquered, and changed at the whim of a few. Controlling a large amount of mining hash power is different, and the impact is limited, not to mention expensive to enforce. It's the difference between having a single person in charge of a bank account, some of whom will embezzle, abscond with the funds, etc. And a valid wire transfer may have to wait a long time before it is deposited.

How to achieve 51% mining attack requirement?

To illustrate this, let's look at how a 51% mining attack would be executed. In order to execute a 51% mining attack, you first need more hashing power than the rest of the network, which means having a lot of mining equipment, which of course costs a lot of money. Currently, the lead time for this mining equipment is long, and it is also very difficult to acquire the latest generation of mining machines, precisely because this equipment is often very profitable. Using old equipment is an option for the attacker, but this equipment is inefficient even if it saves money and is convenient to operate. Either way, the equipment itself and the cost of operating it are very high, which requires a huge capital investment and also needs to compete with miners who are openly mining and making huge profits from it.

Besides that, it is often not enough for an attacker to have mining equipment, a lot of electricity is also needed. Most Bitcoin mining is done at the expense of the profitability of electricity from the power supplier. Mining tends to move to where the energy is concentrated. Therefore, hydroelectric dams, solar panel farms, and geothermal power located in the margins are often the source of power for mining equipment. The electricity price for general mining machines ranges from $0.025/kWh to $0.06/kWh. This is often the absolute lowest electricity price, and in most cases power companies require long-term contracts to supply electricity at such low prices.

Over the past few years, it has become difficult to obtain enough electricity to operate a mining farm due to the increase in prices and the resulting energy requirements. When the Bitcoin network was small, it might have been possible to obtain enough electricity to run a device that could provide 51% of the hashing power, but this has become less and less feasible over time. The amount of energy consumed by the Bitcoin network continues to grow, and attackers would need to obtain a large amount of electricity to successfully carry out an attack.

There may be some power companies that could satisfy 51% of the network's energy consumption at once, but good luck convincing them to sell you that much power at once. In the power industry, consumers often sign large, long-term contracts, and short-term, high-intensity power supply for a week or two is impractical, and even then, the cost is often high. Remember, factories, businesses, farms, and even homes rely on the power provided by these power plants to keep running every day. So you can't just provide power to a hypothetical attacker without considering the power consumption of most users.

In other words, as an attacker, you need to obtain a large amount of electricity, which is difficult to provide if you do not control the power supply. Therefore, the attacker not only needs to control 51% of the potential hash power, but may also need to generate electricity themselves.

Profit-driven mining attacks

The capital cost of a 51% attack is enormous. You will need a lot of efficient mining equipment and a ton of electricity, both of which are difficult to obtain. This means that you may need to produce your own mining equipment and be able to generate your own electricity. This may require years of lead time to produce the equipment and sign long-term contracts to obtain the required electricity. Considering the economic benefits, investing so much capital only makes sense if you can gain enough from the mining attack to make the risk worthwhile. There are several ways to try to profit from a 51% attack, including shorting the market or attempting double spends, but they all require trading to be funded and kept up and running. In the past, this was easy, but it is no longer the case due to anti-money laundering or real-name authentication laws surrounding most exchanges.

In addition, if a 51% attack can be carried out as described above, it means that the attacker can earn huge income through open mining. This is obviously much less risky because you do not need 51% of the network computing power, so the capital investment required upfront is much less.

In other words, from an economic point of view, it does not make sense to conduct a 51% attack due to the high costs and risks involved. Of course, it is much more economical to use this method to attack altcoins with much lower hash power.

Sovereignty Attack

The real potential for a 51% mining attack comes from a nation-state actor. Assuming it is a single sovereign nation, such an entity would have access to enormous power and motivation to attack Bitcoin without having to worry about the cost. Again, this does not give the attacker control of the network, just the ability to attack a small portion of the network. Motivation aside, let's look at the actual situation.

To accomplish such a goal, even a sovereign nation would need to coordinate the work of many parts to make it work. The government would need to acquire a large amount of hashing power, either through its own factories or by commandeering the required equipment. This cannot be done in secret for long, and society would likely be able to prepare for it. Likewise, the government would need to acquire a large supply of electricity in the same way. Again, this cannot be a secret operation for long. The government would also likely have to coordinate at the military level, which most governments would probably not know how to coordinate.

So what is all this for? A double spend attack on a specific exchange? Again, such an attack will not destroy Bitcoin. The rest of the Bitcoin network will continue to function if the attack persists, and in a decentralized manner to eliminate even the most scramble-heavy attacks. This is by no means a single point of failure, because in short, Bitcoin cannot be destroyed that easily.

Why are altcoin players so hot on the heels of 51% mining attacks?

Therefore, the question turns to why so many altcoin players often mention the issue of Bitcoin 51% attack.

First, this is one of the only properties people think Bitcoin is vulnerable to. Remember, altcoins are competitors to Bitcoin, and like any competitor, altcoins tout Bitcoin’s vulnerability to 51% attacks to make themselves look better. This helps people focus less on the obvious centralized shortcomings of altcoins.

Second, they usually try to sell equity or reserves or other bullshit concepts. This is their way of showing the superiority of the system. Most altcoin players support their altcoins because they really wish theirs was Bitcoin. They want their coins to skyrocket in price and become as wealthy as super-rich investors like Trey Meyer. But this is driven by jealousy and human nature, which I will focus on in another article.

in conclusion

Bitcoin mining attacks are often over-exaggerated by those who try to print their own money or by the elite in the new currency space. A 51% attack is too costly and uneconomical, generates too little benefit to generate more money, and only affects a few companies and individuals.

It’s even possible that a 51% attack could disrupt transactions for 100 bitcoins or more, which wouldn’t necessarily be a bad thing for Bitcoin. Like the Bitcoin Cash hard fork, such an event could prove Bitcoin’s antifragility and trigger a massive price rally.