Some PoW currencies are using the same mining algorithms as their larger counterparts, making it much easier to hack the smaller networks with a 51% attack.
Blockchain technology is revered as being a completely secure system, but that isn’t necessarily the case. The tech is still relatively new. Also, as the price of popular cryptocurrencies increase and there’s more of a reward for attacking it, more and more people will look for inventive and profitable methods of attacking the $330 billion-dollar industry.
While the math behind blockchains is solid and the security behind the top cryptocurrencies is still unmatched, the same can’t be said for smaller cryptocurrencies that use the same mining algorithms as the largest ones.
A great example of this is Ethereum Classic (ETC). This cryptocurrency uses the same algorithm as Ethereum yet has a much lower total hash rate on the network. Miners would get the same hash rate out of their machines regardless of which network they were mining on.
Cheaply Killing Blockchains
Cryptocurrency researchers from FECAP University in Brazil have shown that it would take only around $1.5 million to attack the ETC network and still pull a nice little profit. With $55 million dollars, you could effectively bankrupt the currency, netting nearly $1 billion in straight profit.
If a party that controlled just 2.5% of the Ethereum hash rate switched to ETC, they’d instantly control over 51% of the total network hash rate. The attack wouldn’t even be absurdly expensive. It’d cost what you would earn mining on the ETH network with 2.5% of the hash rate, which equates to roughly 525 ETH, or $318,000.
The classic 51% attack scenario model accounts for the attacker having to acquire hardware, set up infrastructure, and pay electricity costs. The researchers used the Rindex v2.0 model which accounts for the leasing of hash power, which could end up being significantly cheaper than the full set up of a cryptocurrency mining operation.
The researchers gave numbers for Bitcoin Cash and Bitcoin Gold. Executing a 51% attack on the BCH network will cost you just around 250 BTC, or $2 million, per day. Bitcoin Gold could be attacked for significantly less, only around 26 BTC, or $200,000, per day via the same hash rate leasing methods. These can continue until the developers push an update to fix the attack, or the price of the coin has dropped so low that it’s no longer profitable to attack the network.
Are We Doomed?
At least five 51% percent attacks have been performed on cryptocurrencies in the past few months involving some notable names such as Verge and Bitcoin Gold, but most cryptocurrencies in the top ten have a large enough hash rate that attacking them would be way too expensive to justify.
There are quite a few ideas in the pipeline that could make 51% percent attacks near impossible in the future as well. Things like Proof-of-Stake protocols, updating the hashing algorithm, and sharding can greatly help networks that could be attacked in the future.
What do you think about these possibilities for attacks? Are you worried your favorite coin may be at risk? Let us know in the comments below!
Images courtesy of Bitcoinist archives and Shutterstock.