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More of a general question as I've recently gotten into investing in cryptocurrencies. I really love the vision for the future this technology provides, the freedom, ease of use, lack of middlemen, etc.

I am continuing to do my research and came across a lively debate: https://www.youtube.com/watch?v=zA5jnK4v884

Now to me one of the strongest points brought up by the 'opposition' is the idea that the majority of the hash rate could belong to a hostile government, who could then use that to control the network. In other words, is the following possible?

  1. 'China' (replace with whatever centralized boogeyman you'd like) has over half of the world's hash power in their country.
  2. This state actor then confiscates/buys up all the hardware of everyone in their country that is mining BTC.
  3. Then with the majority of the hash power, they can mine 'empty blocks' to clog up the system, or, as I understand it, perform a '51% attack' whereby they can just record everyone sending all their BTC to their account, and then mining these blocks to make it so.

Is this theoretically possible in today's world? What are the practical limitations of such a thing happening?

To me this is the scariest 'Black Swan' event because I don't doubt that a country like China could confiscate everyone's mining equipment, and if that means they'll have more than half of all the mining power/hash rate in the world... Well that could be the end, right?

Let me know what you think and help me understand these possibilities :)

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  • If Lightning fails to deliver, then/or Bitcoin becomes a niche chain, then a permanent 51% attack might become feasible. While Bitcoin stays dominant, a 51% attack is either infeasible, or suicidal.
    – Mercedes
    Nov 17, 2021 at 20:42
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    Does this answer your question? What can an attacker with 51% of hash power do? Nov 17, 2021 at 20:51

5 Answers 5

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Attaining half of the hardware is the prohibiting step here. With China recently kicking all miners out of the country, Bitcoin is now in a place where not even nation-state-level action will be enough to get 51% of the hashpower.

Should mention on 3), as a miner you can't simply mine a block that "sends BTC to their account". Even under a 51% attack, the power is limited to network disruption. Balances are still safe in the event that the attack can be stopped (other than balances received by later-orphaned chains).

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I can't really get my head around the empty block thing. I don't see the point in doing that. If an empty block goes onto the chain, it must still contain the hash of the previous block, and the next block has to contain the hash of the empty block. All an empty block would do is cause everyone who's mining to have to restart mining again because the hash has changed. The rogue state would also have to start mining from the current block too.

But as I understand it, every transaction in the block is also signed by the owner of the wallet with their secret key. So they could only forge transactions if they had access to everyone's secret key. I could be short sighted here, but the only thing that a 51% attack can achieve that I see is reversing transactions (by publishing a block-chain that ignores the original transaction). If they had 51% and could beat the network to publishing transactions they could cash in their bitcoins, receive the fiat money or goods, then go back to the block before their transaction and mine a new block without their transaction published.

It's one of the reasons they say you should wait up to 7 blocks to confirm something is really, truly locked in. To undo that, the rogue state with 51% processing power would need to start from 7 or 8 blocks back and start mining blocks until they have more blocks than the current chain. The original chain continues to grow, so it becomes a race for the rogue state. They have to catch up, then over-run the original chain. The protocol dictates that the LONGEST fork of the chain wins. So they have to overtake it, and then I presume announce to the network that they have rejoined. Everyone then sees they have a longer chain that starts from that 7th or 8th block back and they accept it as the king.

To perform this attack, not only do you need more than 50% processing power but you also need to ensure you stay ahead of the processing power. You could have 51% but then a bunch of power is added to the 49% and the balance has gone from 51:49 to 48:51.

Also, I am not 100% sure but there is the mechanism to increase complexity when blocks are discovered too quickly. It's not changed often from memory but if the average block creation is less than 10 minutes then complexity increases to make it harder. I think this mechanism would be ingrained in the rogue states chain as well so if it is attempting to perform this over a long period there may be an issue with the complexity not matching up to what it should and it could be rejected by the network when joining.

All considered I don't really have much knowledge of the workings of Bitcoin but I joined here to ask a few questions and felt like I had something to contribute here, so I hope that helps. Take it with a grain of salt.

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The US could do this, not overnight, provided they had the political will to do it. It's extremely unlikely without anything strange happening in the near future that the US would decide to do this, but now imagine that a rogue state that is funded by Bitcoin executes a 9/11 impact attack. At this point it would be just a matter of time: The US would declare their intentions to outbid any other purchasers of foundry space and available ASICs. They would buy any ASICs available on the market. It may take a few months to do this, but simply that act of signaling that they intend to do this would put the miners in a prisoner's dilemma situation. They are forced to choose between selling their equipment today to the US for a premium or hoping to battle it out. Prices would crash in anticipation of such an attack, and it would be all over.

As far as the technicalities of the attack, it doesn't really matter. The goal is simply to make it impossible to come to consensus on the state of the ledger. Empty-block may seem easy to identify, but you could also generate several incompatible chains of equal length. Every time a miner chooses one, the attacker mines two blocks on a different chain and supplants that block. At this point nobody can use Bitcoin which makes it essentially worthless. As hashrate crashes, you can go back and ask holders of spent UTXO keys to create new transaction, and with these keys you may be able to orphan a number of transactions and maximize chaos.

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I find it hard to imagine that it would even be possible to influence bitcoin mining that much, it would have to be a conspiracy of the top 10 mining pools, which I think is unrealistic, because in the end it would not be profitable for everyone anyway. For the sake of price manipulation? It's easily done with news as it is. How they manipulate the crowd and release the same news for years. If we talk about China, they certainly won't do it now because they really destroyed mining in China and kicked out the miners there (who in turn went to Kazakhstan and USA). Maybe in the future it will be possible with a super computer, but don't forget that the difficulty of mining the block increases over time too! We should also not forget about algorithmic trading, which will probably soon kill the retail trader completely, because it is unrealistic to compete with a bot written by some wild developers from silicon valley. Just read the latest reviews on cryptodaily.se about trading bots and you will understand what I am talking about.

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A 51% attacker cannot spend funds which are not theirs, they need the private key associated with those funds to do that. In fact, all of their transactions have to be valid transactions otherwise their new blocks will not be relayed by nodes, no matter how much hashpower is behind them.

The main thing they could do is reduce trust in the Bitcoin network and "double-spend" ie "spend" some BTC to receive some other asset or currency, then "reverse" the chain so they still have the BTC and can spend it again. This would also roll back any other transactions that occurred during this time period. A similar thing would happen if the internet was split into two entirely separate networks and then rejoined. The network always chooses the valid chain with the highest difficulty over time. At current rates, a 51% attack would cost at least a million dollars in electricity to do for an hour, and that's assuming you'd accumulated enough equipment and somehow found enough electrical generation in one place to run it. All of those steps would be very difficult, and it would certainly be noticed if somebody was buying up all the ASICs on the market. Plus you need to buy enough BTC to make the double-spend worth it in the first place.

There is little monetary incentive to do a 51% attack. If you double-spend, for example, you need to find somebody who will quickly trade you a bunch of stuff for your BTC which would need to be greater than attack cost in value to make the trade worth it. But people who are doing trades of that cost in Bitcoin will wait for a few blocks of confirmation before considering a transaction valid, meaning your 51% attack has to last longer than a few blocks. You can't trade physical goods this quickly, really the only thing you could trade your BTC for is other digital currency or something else which could be delivered electronically. Additionally, if somebody suddenly doubled the hashpower of the network, people would notice. People doing million-dollar transfers in BTC may notice this as well. Generally speaking, transactions of this size encounter all sorts of hurdles. Exchanges, swap providers, and dexes may put holds on them or require long confirmation times suspecting them of being fraudulent (or may not have enough liquidity to do your trade (even if they claim to), sellers may be suspicious of somebody who wants to buy a million dollars of litecoin RIGHT NOW, etc. Plus, if you successfully attack Bitcoin, all other crypto markets will experience a massive sell-off, so if you traded your double-spend attack for other cryptos then congratulations they just lost half their value.

A more likely scenario is a nation-state actor attacking Bitcoin to reduce people's usage of Bitcoin and reduce public trust in it. First you have to ask why they have such an incentive to do this, do they really think Bitcoin is that threatening? And if so, is this really their top priority item to be worked on? One could easily make the argument that any nation which does not like US hegemony over the financial system (ahem, China) would benefit from Bitcoin's growth and people choosing it over the dollar. Then you have to ask whether that is the cheapest, most effective way to reduce public confidence in Bitcoin. Wouldn't it make sense to use the media, buy some advertising, ban Bitcoin usage in their country, or otherwise influence public opinion any other way? If we assume widespread Bitcoin adoption, perhaps even at current adoption levels, any nation-state who did this runs the risk of diplomatic blowback for attacking an international market. Sanctions etc would be likely to follow. Whatever the "gain" they anticipate from attacking Bitcoin, it would have to outweigh the cost of that blowback. Keep in mind that by attacking Bitcoin they are likely attacking actors within their own economy, and linked economies (bond markets etc) could also experience disruption as a result. I can't imagine it would be popular domestically let alone internationally. As a geopolitical weapon, 51% attack is kind of like lighting a fire, it will damage your target but you can't control where it will spread. In a dense, international, connected marketplace it could very easily have unpredictable knock-on effects that cause bank and economic collapses.

Let's also consider the costs and logistical hurdles associated with acquiring that many ASICs. If you attempt this attack with non-ASICs, you are orders of magnitude more inefficient, so ASICs would be the clear choice. But there's a problem: you need to build a foundry for the ASICs and you need designs for them. Who are you going to steal the designs from, and how? And unless you are building silicon fabs from scratch (goodbye another couple billion dollars), you are buying them from one of very few existing silicon fabs. They may question how you got these designs, especially if they look like another customer's designs. And you must make these orders months to years ahead of time or pay an insane premium to jump the line. Fabs would have to explain to people why their orders were delayed if you manage to do that, otherwise, can you accurately predict the hashrate a year from now? Will other, more effective ASICs have come out by then? At this point in the process, you are interacting with a massive supply chain. Somebody would notice a change of this magnitude. Pulling off this attack at every step is incredibly expensive and difficult to keep secret.

As far as attack cost, Bitcoin would be the most expensive network to attack. Somebody could much easier attack other cryptocurrencies whether they use proof-of-stake or proof-of-work. And remember that in PoW systems, if the attack does not work, you have lost that money you spent and got nothing in return. Hashrate alone for a 51% attack on Bitcoin would be around one million US and that's before considering that even if you have 51% of hashpower, you could still get beaten to the next block, so realistically you need to have much more than 51% of hashpower to guarantee a successful attack. Plus, if you buy up that much hashpower, the cost of hashpower will increase, this number is just assuming it doesn't. Hashpower providers probably also have controls in place to prevent selling that much power to any single entity, and no single hashpower vendor has 51% of network capacity. So realistically, you may have to generate much of that electricity yourself instead of buying it on hashpower markets. And all of these costs don't assume increased hashrate in the future. Hashrate has consistently increased year after year. Every year Bitcoin becomes harder to attack both from a financial and diplomatic perspective.

As a final consideration, Bitcoin is a democracy. Nodes and mining pools could all agree to rollback the chain to the last block before the attack. They could also refuse to send or receive any txes to or from the addresses associated with the attack. So can other networks if you used your double-spend to suddenly buy up 6 million in other kinds of coins.

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