- Launching a 51% attack on Bitcoin (BTC) or Ethereum (ETH) is financially and logistically impractical.
- The robust security mechanisms of these networks significantly deter potential attackers.
In a groundbreaking study by Coin Metrics, a leading crypto intelligence firm, the financial and logistical feasibility of launching 51% attacks on the Bitcoin (BTC) and Ethereum (ETH) networks has been brought into question.
This research sheds light on the astronomical costs and operational hurdles that make such attacks not only impractical but also unprofitable for potential attackers, including nation-states.
Understanding 51% Attacks
At its core, a 51% attack on a blockchain network involves an entity gaining majority control over the network’s mining hashrate in proof-of-work systems, like Bitcoin, or staking power in proof-of-stake systems, such as Ethereum.
This dominance allows them to manipulate the blockchain to their benefit, potentially reversing transactions or preventing new ones from being confirmed, thereby undermining the network’s integrity.
The Coin Metrics report, authored by researchers Lucas Nuzzi, Kyle Water, and Matias Andrade, introduces a novel metric known as the “Total Cost to Attack” (TCA).
8 Most importantly, we find no ways the attacker would be able to profit from attacking Bitcoin or Ethereum.
We evaluate TCA with expected proceeds from:
❌ Double Spends
❌ Long Range
❌ Selfish Mining
❌ MEV (Time Freeze/Bandit)
❌ Fee market manipulation…and others.
— Lucas Nuzzi (@LucasNuzzi) February 15, 2024
The TCA quantifies the expenses associated with executing a 51% attack, encompassing both the cost of capital and operational expenses needed to achieve and maintain control over the network.
For BTC, the report estimates that an attacker would need to acquire approximately 7 million ASIC mining rigs, costing around $20 billion. This figure is predicated on current market prices and the availability of the required hardware, which, according to the study, is far from sufficient to meet the needs of such an extensive operation.
Similarly, the Ethereum network, having transitioned to a proof-of-stake mechanism, presents its own set of challenges for would-be attackers. The report dismisses the fears surrounding a 34% staking attack, particularly from validators like Lido, highlighting the significant time and financial investment required.
An attack on Ethereum is estimated to take six months and cost over $34 billion, considering the limitations on staking deployment and the operational costs involved, including managing over 200 nodes and substantial expenses on cloud services like AWS.
To explore this development more deeply, you can watch this YouTube video, which can be watched here.
The Unrealistic Nature of Profitable Attacks
One of the most striking conclusions from the Coin Metrics report is the unprofitability of such attacks. Even in hypothetical scenarios where attackers could execute a double-spend attack to gain financially, the return on investment remains minimal.
For instance, spending $40 billion to potentially earn $1 billion translates to a mere 2.5% return, a figure that hardly justifies the risk and effort involved.
This comprehensive analysis by Coin Metrics not only challenges the prevailing assumptions about the vulnerability of blockchain networks to 51% attacks but also underscores the robustness of Bitcoin and Ethereum against such threats.
The report’s findings are particularly significant in light of the growing concerns over network security and the potential for state-sponsored attacks on cryptocurrency infrastructures.
Castle Island Ventures partner Nic Carter hailed the research as a monumental contribution to the understanding of blockchain security,. 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 for a long time.”
By moving beyond theoretical speculations to provide a detailed, empirical analysis of the costs and challenges associated with 51% attacks, Coin Metrics offers invaluable insights into the resilience of leading cryptocurrency networks.