Nation-States No Longer Able to Destroy Bitcoin and Ethereum Networks through 51% Attacks, Research Shows
According to a recent report by crypto intelligence firm Coin Metrics, nation-states face insurmountable challenges in attempting to launch 51% attacks on the Bitcoin (BTC) and Ethereum (ETH) networks. The study reveals that the exorbitant costs involved in carrying out such attacks render them impractical and unprofitable.
A 51% attack occurs when a malicious actor gains control of over 51% of the mining hash rate in a proof-of-work system like Bitcoin or 51% of staked crypto in a proof-of-stake network like Ethereum. This level of control allows attackers to exploit and manipulate the blockchain, posing a significant threat to its integrity.
The research, conducted by Coin Metrics researchers Lucas Nuzzi, Kyle Water, and Matias Andrade, highlights the current cost of capital and operational expenses associated with achieving 51% control as the main deterrent for nation-states. The team introduced a metric called "Total Cost to Attack" (TCA) to quantify the expenses involved in attacking a blockchain network and concluded that attacking either Bitcoin or Ethereum is not financially viable. Even in the most profitable double-spend scenario considered, the rate of return would only be around 2.5%.
By analyzing secondary market data and real-time hash rate output, the researchers determined that a 51% attack on Bitcoin would require approximately 7 million ASIC mining rigs, amounting to roughly $20 billion. However, the scarcity of available ASIC rigs in the market makes executing such an attack impossible. Manufacturing their own mining rigs would cost nation-state attackers over $20 billion, making it an unfeasible option.
The report also addresses concerns about a potential 34% staking attack on the Ethereum network by Lido validators. Coin Metrics concludes that leveraging Liquid Staking Derivatives (LSDs) as a means of attacking the Ethereum blockchain would be prohibitively expensive and time-consuming. An attack on Ethereum would take six months due to the churn limit, which prevents the deployment of all the stake at once and the cost would exceed $34 billion. The attacker would need to manage over 200 nodes and spend $1 million on Amazon Web Services (AWS) alone.
Industry experts, including Castle Island Ventures partner Nic Carter, have commended Coin Metrics' research as a significant contribution to the field. Carter stated that previous analyses lacked empirical evidence and were instead based on vague theories, making this report a valuable and well-supported examination of the impracticality of 51% attacks on Bitcoin and Ethereum.
Analyst comment
Positive news: It is no longer viable for nation-states to destroy the Bitcoin and Ethereum networks through 51% attacks. Coin Metrics’ research shows that the astronomical costs required to carry out such attacks make them impractical and unprofitable.
Market prediction: This news will instill confidence in the Bitcoin and Ethereum markets, as it demonstrates the resilience and security of these networks against nation-state attacks. It is likely to lead to increased investor trust and potential market growth.