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Michael J. Casey is the chairman of the CoinDesk advisory committee and a senior blockchain research consultant at MIT's Digital Currency Initiative.
The following article originally appeared in CoinDesk Weekly, a personalized newsletter that is delivered every Sunday exclusively to our subscribers.
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One of the most shocking side effects of the crypto market downturn is that it has made it easier for malicious actors to launch attacks at 51%, making the most fundamental blockchain security violation more frequent.
But, like all unfortunate events in the endless drama of crypto, losses in the real world, in this case, are providing a valuable lesson. In this case, it is a lesson on the role that network effects play in building security, especially for blockchains that have adopted the bitcoin test consent model.
Encrypted enthusiasts publicly discuss the design principles of this or that chain, and those debates are important. But if an unauthorized blockchain does not have a large enough community of users, developers and miners working in a self-reinforcing way of creating and protecting value, they are vulnerable.
This was the takeaway this week, when the encryption exchange Coinbase announced that it had identified a series of deep-chain reorganizations within ethereum classic (ETC). Someone had accumulated the majority of the hashing power of the ETC network and used that dominant position to alter past transactions, resulting in a double expense of 219,500 ETCs, which at the time estimated in Coinbase $ 1.1 million.
This was probably the most significant 51% attack ever, more than those seen on bitcoin gold and vertcoin.
Twist of fate
It was also, however, a particularly painful blow to true believers of classical ethereum.
They belong to a minority community of users, developers and miners of ethereum who in 2016 decided to continue working on the old blockchain that remained when the leading developers in the ethereum community convinced the majority of users to run new software that would have reversed the transactions of the infamous DAO hacker.
The position of the ETC community has often been described as a principle position: regardless of which losses were incurred by investors in the DAO investment project. Whether you called it theft or not, the blockchain ethereum should be immutable, they would say. No leader cabal should be able to organize a software change that invalidates previously accepted transactions from the network.
However, these principles proved to be of little value when an attacker overwhelmed their network.
Ethereum, on the other hand, which represents the forked version of the blockchain that the majority moved after the DAO, has remained, at least for now, free from a 51% attack.
This does not mean that ethereum is immune to such risks in the future. With its price at 90% compared to the peak of a year ago and still unstable, the profitability of mining pools has decreased significantly, which essentially makes it cheaper to rent enough energy to launch an attack at double the expense of 51%.
However, the numbers indicate a much safer ground in ethereum than the classic ethereum. According to Crypto51, which tracks the estimated cost of launching such an attack on several job test blockchains, it would cost $ 88,633 to launch an attack of an hour on ethereum, instead of just $ 4,571 for classic ethereum.
Ethereum is second only to $ 281.060 of bitcoins in that list as the most expensive to hit with a 51% attack.
Positive feedback loop
The price and hash power of the existing network are key factors in this cost, but what is equally important over time is the broader idea of a large network of users creating a positive feedback loop that encourages developers to work on the code of a blockchain.
The security of a currency is aided by continuous development, not only for improvements and changes to the code, but also because there are more eyes looking at the network.
For all these interrelated reasons, the global community of relatively enthusiastic users of ethereum makes it a safer blockchain than the classic ethereum. A history of immutability, if this is what the classic ethereum really represented, was of less importance from a security standpoint than the strength of the competing ethereum chain community.
This is confirmed by CoinDesk's Crypto-Economics Explorer, whose five value-to-price metrics, exchange transactions, social activity, developer interest and network size – show markedly higher levels for ethereum than the classic ethereum. Data capture a much healthier network effect, a positive feedback loop of interest, activity, and value that gives the former greater security over such attacks.
The lessons here are important. And they are not so different from the lessons learned in the battles between Bitcoin Core and the many forks that occurred after the bitcoin money was created a year ago.
For all the noise of the cash bitcoin crowd, bitcoin SV and bitcoin ABC, they have nothing to do with the vast pool of community value accumulated by Bitcoin Core.
On the blockchain, the community is equal to security.
Weigh the image through Shutterstock
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