Read now to learn how Bitcoin is much more immune to 51% attacks than you may have been led to believe.
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As we’ve learned over the past several weeks, Bitcoin is the only decentralized blockchain in existence. Most other cryptocurrencies and protocols advertise themselves as decentralized, but are in reality decentralized in name only
A key component of Bitcoin’s decentralization is its security. The Bitcoin blockchain has an ever-increasing amount of computing power processing transactions on its network and thousands of nodes verifying that those transactions adhere to the rules established by the Bitcoin community.
Given the massive amount of people, computers, and energy securing Bitcoin, it’s reasonable to say that Bitcoin has the strongest network in the space. However, there are those who would call into question whether Bitcoin’s proof of work (PoW) consensus mechanism is as secure as other consensus mechanisms.
Proof of stake (PoS) is the elephant in the room in light of Ethereum’s recent move to use it in place of proof of work, so naturally our discussion today will compare those two consensus mechanisms:
Attacking A Blockchain, One Block At A Time
One of the greatest fears of many participants within the Bitcoin and “Crypto” spaces is the dreaded 51% attack. In a nutshell, a 51% attack can occur whenever one entity or group controls more than half of a blockchain’s computing power.
The main risk factor in the case of a PoW blockchain like Bitcoin is a double spend transaction, in which an attacker could theoretically spend the same Bitcoin twice. Double spends are also a risk for PoS blockchains, but users also have to worry about the network’s governance being taken over since validators on PoS blockchains are often responsible for both transaction processing and governance.
Perhaps in an attempt to sidestep that extra weakness inherent to PoS blockchains, I often see supporters of PoS attempt to claim it as the more secure consensus mechanism due to the supposed costs of performing a 51% attack against both consensus mechanisms. Since the market cap of large PoS cryptocurrencies like Ethereum is in the billions of dollars, they theorize that attacking their cryptocurrency of choice would also cost billions if attackers had to buy their coins on the open market. Relying on misleading charts like the one below, they then imply that attacking Bitcoin costs significantly less:
Many spectators have unfortunately fallen for this argument, but there are a pair of rather significant flaws that can’t be ignored:
Attacking Bitcoin Is Neither Easy Nor Cheap
The true cost of controlling 51% of Bitcoin’s hash rate is much higher than what’s being advertised. The per-hour cost of $864k listed in the chart above is based off of prices advertised by a hashrate rental service, but the right side of that chart also makes it clear that the rental service doesn’t actually have any Bitcoin hashrate for rent. In other words, the prices it’s advertising are so low that literally no one wants to rent their hashrate out at those prices.
The Bitcoin blockchain is protected by tens of thousands of ASICs and other computers that are cumulatively using hundreds of millions of dollars worth of electricity per year. The reality is that attacking Bitcoin for even one hour would cost billions of dollars since an attacker would have to buy enough computers to command 51% of Bitcoin’s hash rate, not to mention electricity to power them all.
Attacking PoS Lasts Forever
An attack against Bitcoin would quickly bankrupt the attacker. The electricity costs alone to run all the attacker’s computers would pile up astronomically as the hours tick by. And if the attacker should succeed in destroying Bitcoin, all those costs would be expended at a complete loss, since the Bitcoin earned from mining or Bitcoin used to double spend would be worthless once Bitcoin were destroyed.
By comparison, an attack against PoS wouldn’t take very long. Whoever controls the majority of a PoS blockchain’s tokens determines the token balance of all other users on the blockchain. So once a 51% attack succeeds on a PoS blockchain, the attacker controls that blockchain forever without ever again having to expend any additional costs.
Long story short, an attack against Bitcoin is next to impossible, especially when compared to the ease of gaining control of a PoS blockchain.
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