The co-founder and CEO of decentralized cloud storage network Sia, David Vorick, has predicted that 51% attacks will increase dramatically in 2019. This comes hot on the heels of Ethereum Classic suffering such as an attack, as CCN recently reported.
According to Vorick, who is also Sia’s lead developer, 51% attacks – where a group of miners gains control of more than 50% of the computing power of a network – are now a risk for major cryptocurrencies and not just small cap-coins.
Vorick has blamed fundamental weaknesses in the protocols of the targeted coins for the success of the attacks. Specifically, the protocols are not incentive-compatible, as is the case with Bitcoin:
Bitcoin developers strive for something called incentive compatibility. If a protocol has incentive compatibility, it means that the optimal decision for each individual from their own perspective is also the optimal decision for the group as a whole. When protocols are incentive-compatible, individuals can be completely selfish because those selfish actions will benefit the group as well.
So why not just copy Bitcoin’s protocol design if it’s that secure? According to Vorick, the majority of the cryptocurrencies have done that, but then they made changes which broke the incentive compatibility.
Among the biggest mistakes altcoin developers have made, per Vorick, includes making it possible to use shared hardware. This is because when the same hardware is used to mine multiple coins, incentive compatibilities break down. Incentive compatibility also breaks down when there is a shared algorithm among multiple cryptocurrencies:
When multiple cryptocurrencies share the same proof of work algorithm, the same hardware (even if that hardware is specialized) is able to target any of the cryptocurrencies and this disrupts the incentive compatibility in many of the same ways that ASIC resistance does.
Prior to the existence of hashrate marketplaces, attackers would have required an equivalent number of the graphics processing units (GPU) that were defending a cryptocurrency. Expenses incurred to carry out such an attack were prohibitive, and this ensured that GPU coins remained largely safe. The development of hashrate marketplaces has, however, made it possible to hire GPUs for a couple of hours at a fraction of the cost.
Another development that has made shared hardware coins more insecure is the growth of large mining farms. This has particularly been the case for cryptocurrencies whose hashrate comprises several hundred thousand GPUs.
As a solution for the 51% attacks, Vorick has proposed that cryptocurrency exchanges increase confirmation times for deposits. Additionally, Vorick has urged exchanges to adopt more stringent risk management measures while exercising more diligence in choosing the coins they list.
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Last modified: May 20, 2020 12:58 PM UTC