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Bitcoin (BTC) and Ethereum (ETH) Protected Against 51% Attacks by Coin Metrics with Cost Barriers

Crypto intelligence firm Coin Metrics has released a groundbreaking study that sheds light on the viability of nation-states attempting to dismantle the Bitcoin (BTC) and Ethereum (ETH) networks through 51% attacks. The research, conducted by Lucas Nuzzi, Kyle Waters, and Matias Andrade, introduces the concept of the “Total Cost to Attack” (TCA) metric, which assesses the financial implications of carrying out such malicious activities.

A 51% attack involves gaining majority control over a network’s hash rate in proof-of-work systems like Bitcoin or staking in proof-of-stake networks like Ethereum. This control could potentially allow attackers to manipulate the blockchain for their benefit. However, the study’s findings suggest that launching 51% attacks on Bitcoin or Ethereum is not only financially impractical but also economically inefficient, nullifying the incentives for such actions.

For Bitcoin, the study reveals that acquiring the necessary resources to attempt a 51% attack would require around 7 million ASIC mining rigs, amounting to an investment of approximately $20 billion. However, the market currently lacks the availability of such a vast number of ASIC rigs, and even if an attacker were to manufacture them, the cost would still far exceed $20 billion. This renders the attack unfeasible and economically inefficient, with the most profitable double-spend attack yielding only a 2.5% return on a hypothetical $40 billion expenditure to gain $1 billion.

On the other hand, Ethereum faces a similar situation with its transition to a proof-of-stake model. The report evaluates the feasibility of a 34% attack by Lido validators and concludes that attempting to compromise the Ethereum network using Liquid Staking Derivatives (LSDs) would be both costly, exceeding $34 billion, and time-consuming, taking up to six months due to the churn limit, which restricts immediate stake deployment.

The logistical challenge of managing over 200 nodes and incurring significant expenses, such as $1 million on Amazon Web Services, further diminishes the likelihood of such an attack. Notably, Nic Carter, a partner at Castle Island Ventures, commended the report for its empirical examination of the impracticality of 51% attacks on Bitcoin and Ethereum. Carter highlighted the report’s concrete, data-driven approach as a significant contribution to understanding the security and resilience of these leading cryptocurrency networks against potential nation-state threats.

In conclusion, Coin Metrics’ research underscores the robustness of the Bitcoin and Ethereum networks against 51% attacks, demonstrating that the significant costs and logistical challenges involved make such attacks financially unviable for potential attackers. The study serves as a valuable resource for the cryptocurrency community, providing insights into the security measures that safeguard these networks from malicious interference. By analyzing the economic barriers to attacking Bitcoin and Ethereum, the research reinforces the resilience of blockchain technology in the face of external threats.

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