For small networks, the attacks are just beginning
By Leo Zhang
May 24, 2018
Recently, a series of attacks were initiated on a few Proof-of-Work mined networks. The projects under siege include Monacoin, Electroneum, Verge again, and Bitcoin Gold (see story below).
While the exact methods carried out in the attacks vary, miners played a crucial role in all of these attacks. As large ASIC manufacturers engage in an arms race to conquer the mining scene, the scale of the hashpower available to the largest miners makes it trivial to attack smaller PoW networks. Some projects are easier to defeat due to fundamental design flaws (see this article on the vulnerability of Verge), while other Pow projects will be flooded on a whim by increasingly well-capitalized ASIC manufacturers building machines in secret.
What does this mean for the cryptocurrency market? Small PoW networks will inevitably experience more frequent 51 percent attacks, reducing the field of competitors. Will this gradually collapse value into larger PoW networks such as Bitcoin, or fork-resistant projects like Peercoin and Decred? It's possible the rise of cheap ASICs will accelerate the cyclic flow between small PoW networks and larger PoW projects, unless small-network teams find ways to win the cat-and-mouse hard-forking game. It's not going so well so far for Monero; other networks will need to find ways to predictably and safely adjust their consensus algorithms or face a similar fate.
"In recent days the nightmare scenario for any cryptocurrency is playing out for Bitcoin Gold, as an attacker has taken control of its blockchain and proceeded to defraud cryptocurrency exchanges. All the Bitcoin Gold in circulation is valued at $786 million, according to data provider Coinmarketcap."
Post-mortem of the Verge attacks: over two hyperinflation events, 75,410,000 XVG were generated (how come I see that on a "private" blockchain?), worth about $3.5m at current prices. That's 5.3% of all the XVG minted in the last 12 months.
Bitcoin Gold got 51% attacked. Miners have no issue with attacking BTG because if it dies, they could easily switch to mine another coin that also uses Equihash POW. This is not the case for Bitcoin/Litecoin where they are the dominant coin for their respective mining algorithms. https://t.co/ThOzSFz5tQ
"As we found out, the traditional methodology of calculating the cost of a 51% attack -from the cost of mining equipment acquisition- might be completely-off for networks with a total hashrate significantly smaller than others that use the same hashing algorithm, and you can perform that attack at a fraction of the cost."
"Authorities worry that virtual currencies are susceptible to fraud for multiple reasons: skepticism that all exchanges are actively pursuing cheaters, wild price swings that could make it easy to push valuations around and a lack of regulations like the ones that govern stocks and other assets."
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