New research has revealed that Bitcoin (BTC) and Ethereum (ETH) are now practically impervious to 51% attacks, rendering the notion of nation-states crippling these networks financially unfeasible. This revelation comes as a result of in-depth analysis conducted by Coin Metrics, a leading crypto intelligence firm renowned for its insightful research.
Firstly, it’s essential to understand what a 51% attack entails. In the realm of cryptocurrencies, a 51% attack occurs when a malicious entity gains control of over 51% of the network’s computing power or staked assets. With such dominance, attackers theoretically possess the capability to manipulate the blockchain, potentially disrupting transactions and even executing double-spending exploits. Historically, this vulnerability has instilled fear in the crypto community, with concerns over the integrity of decentralised networks looming large.
However, Coin Metrics’ groundbreaking study, authored by Lucas Nuzzi, Kyle Water, and Matias Andrade, provides a reassuring reassessment of these fears. Released on 15 February, the report introduces the concept of “Total Cost to Attack” (TCA), a metric designed to quantify the financial feasibility of launching a 51% attack against BTC or ETH.
Through rigorous analysis, the researchers determined that launching a profitable attack on either Bitcoin or Ethereum is currently implausible. The report read:
“In none of the hypothesised attacks presented here [would the attacker] be able to profit by attacking Bitcoin or Ethereum.”
The astronomical costs associated with acquiring the necessary computational power or staked assets act as a significant deterrent, nullifying the financial incentives for potential attackers. Even in the most lucrative hypothetical scenarios, where attackers could potentially reap billions in profit, the return on investment remains minimal, hovering around a mere 2.5%.
For instance, to orchestrate a 51% attack on Bitcoin, an attacker would need to procure an astonishing 7 million ASIC mining rigs, totalling a staggering investment of approximately $20 billion. Furthermore, given the limited availability of such specialised hardware, the feasibility of this approach is severely constrained. Even if a nation-state were resourceful enough to manufacture their own mining rigs, the costs would still exceed $20 billion, rendering the endeavour economically unviable.
Similar conclusions were drawn regarding potential attacks on Ethereum. Contrary to widespread concerns over a 34% staking attack facilitated by Liquid Staking Derivative (LSD) providers like LidoDAO, the report debunked these fears. While the growth of LSD providers has raised eyebrows within the Ethereum community, the analysis revealed that orchestrating such an attack would not only be prohibitively expensive but also immensely time-consuming. With an estimated cost exceeding $34 billion and the logistical challenges of managing over 200 nodes, the practicality of executing such an attack is severely diminished.
Notably, Castle Island Ventures partner Nic Carter hailed Coin Metrics’ research as a significant milestone in crypto analysis. He lauded the empirical rigour of the study, emphasising its departure from vague, theory-driven analyses prevalent in the past. Carter underscored the unprecedented value of Coin Metrics’ findings, highlighting its potential to reshape the discourse surrounding network security and decentralisation. He said:
“This is analysis that has never been possible before. This is a very significant contribution to the literature, and one that I personally have been waiting for a long time.”
In summary, Coin Metrics’ research represents a paradigm shift in understanding the resilience of blockchain networks against 51% attacks. By debunking fears of nation-state adversaries wreaking havoc on Bitcoin and Ethereum, the study instils confidence in the robustness and security of these foundational cryptocurrencies. As the crypto landscape continues to evolve, empirical research of this calibre serves as a guiding light along its journey.
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