The Impracticality of Nation-States Destroying Bitcoin and Ethereum Networks
Recent research conducted by crypto intelligence firm Coin Metrics reveals that the feasibility of nation-states carrying out 51% attacks on the Bitcoin (BTC) and Ethereum (ETH) networks is highly unlikely. According to Coin Metrics researchers Lucas Nuzzi, Kyle Water, and Matias Andrade, the exorbitant costs involved in executing such attacks make them unviable and non-profitable.
These attacks, which involve a malicious entity controlling over 51% of the mining hash rate in proof-of-work systems like Bitcoin or 51% of staked crypto in proof-of-stake networks like Ethereum, could enable the attacker to manipulate the blockchain and compromise its integrity.
“The current cost of capital and operational expenses necessary to achieve 51% control render continuous attacks by nation-state actors impractical,” – Coin Metrics researchers.
The researchers introduced the concept of “Total Cost to Attack” (TCA) as a metric to measure the cost of attacking a blockchain network. The report concluded that attacking either the Bitcoin or Ethereum networks is not financially incentivized, effectively making the notion of nefarious attackers profiting from such actions obsolete.
Even in the most lucrative double spend scenario investigated, where an attacker could potentially earn $1 billion by investing $40 billion, the rate of return would be a mere 2.5%. Analysis of market data and hash rate outputs revealed that executing a 51% attack on Bitcoin would necessitate purchasing approximately 7 million ASIC mining rigs, totaling about $20 billion.
The report estimated that even if a nation-state attacker could produce their own mining rigs, the cost would exceed $20 billion, making it financially unviable.
“The practicality of carrying out a 51% attack on Bitcoin or Ethereum networks by nation-states is highly questionable due to the immense costs involved,” – Coin Metrics researchers.
Focusing on concerns regarding a potential 34% staking attack on the Ethereum network by Lido validators, Coin Metrics addressed the use of Liquid Staking Derivatives (LSDs) as a potential method of attack. The researchers highlighted that such an attack on Ethereum would be both time-consuming and extremely costly. The estimated cost of executing an attack on Ethereum exceeded $34 billion and would require managing over 200 nodes, along with significant expenses on Amazon Web Services (AWS).
Commendation by Industry Experts
Castle Island Ventures partner Nic Carter praised the Coin Metrics report as a significant contribution to the field, emphasizing the empirical and rigorous analysis it provided regarding the impracticality of 51% attacks on Bitcoin and Ethereum.
“This analysis is groundbreaking and brings a new perspective to the discussion. It adds empirical evidence to the conversation, unlike previous vague or theoretical analyses,” – Nic Carter.
Carter lauded the report as a substantial addition to the literature on blockchain security and emphasized the importance of such research in dispelling misconceptions surrounding the vulnerability of major cryptocurrency networks to nation-state attacks.
