Ethereum can afford a 51% attack on Bitcoin, and could profit greatly from it

[Yamane_Keto]

Bitcoin crash does not mean the flow of money to Ethereum as it is the number one cryptocurrency or trust in PoS, but rather it may lead to a loss of trust in cryptocurrencies and the search for another investment.
If Bitcoin is severely affected, Ethereum will certainly be severely affected.
The chances of a 51% success of an attack are expensive, but it will only affect the price. Everyone will stop broadcasting transactions and wait until the network is safe, and whoever creates the attack will not be able to continue it for a long time.

[mjdamgaard]

Well, to be honest with you, I do not fully understand what you are insinuating, but what I have to say is that; even if it's possible for ethereum to perform a 51% attack on bitcoin, it is totally impossible for them to carry such attack cus there is exactly no benefit of doing so. Think about this for a moment, what is bitcoin currently benefiting as the number one cryptocurrency according to the market cap? The answer is nothing, and what will ethereum benefit it successfully flip bitcoin to become the number one cryptocurrency; even after spending billions of dollars to bring bitcoin down? The answer is nothing as well. There is absolutely no benefit if ethereum performs a 51% attack on bitcoin just to take the number one position in terms of market cap, so there is absolutely no need discussing this topic if you ask me.

Well, as mentioned in an earlier reply, the argument that Ethereum will grow in value as a consequence of Bitcoin's crash is based on an assumption that cryptocurrency is a commodity, and that people want to buy and use cryptocurrency due to its benefits.

Thus, if Ethereum knocks Bitcoin off its number one spot, and the total demand for cryptocurrency as a commodity remains constant, Ethereum would grow in value, namely as the consequence of eliminating its primary competitor on the market.

What is your opinion on this assumption, by the way, i.e. that the total demand for crypto as a commodity would remain constant?

[mjdamgaard]

Bitcoin crash does not mean the flow of money to Ethereum as it is the number one cryptocurrency or trust in PoS, but rather it may lead to a loss of trust in cryptocurrencies and the search for another investment.
If Bitcoin is severely affected, Ethereum will certainly be severely affected.
The chances of a 51% success of an attack are expensive, but it will only affect the price. Everyone will stop broadcasting transactions and wait until the network is safe, and whoever creates the attack will not be able to continue it for a long time.

I guess this would depend on whether the Ethereum community manages to successfully communicate to the world that PoS would be safe from a similar kind of attack.

If they manage to do so, then the value of Ethereum might not be negatively affected. (And it would then only be positively affected, i.e. by investors migrating from Bitcoin to Ethereum.)

Edit:
User Stompix also has a really great point here:

It's about the difference in PoW and PoS
They could launch an attack and then an smear campaign, look how centralized it has become, it consumes energy, it's old it's not bla bla bla, everything.
If the king falls they are next in line,  they could make it sound like a Nokia vs Samsung thing, if they are smart enough.

They could in principle make it into a whole 'Ethereum vs Bitcoin' campaign, and try to communicate that narrative.

[Mr. Magkaisa]

I wish to discuss the following topic, as it seems to be a major security risk for Bitcoin.

If Ethereum mounted a successful 51% attack on Bitcoin, it would likely crash the value of Bitcoin, making Ethereum the new number one cryptocurrency.

The cost of a 51% attack has been estimated to be $6–$20 billion. This is only 1.3%–4.4% of Ethereum's current market cap. And it is only 0.5%–1.5% of its potential growth if Ethereum knocks down Bitcoin and conquers its full share of the cryptocurrency market.

If the Ethereum stakeholders pool their resources, they could thus easily afford a 51% attack (also known as a Goldfinger attack in this case) against Bitcoin, and could profit quite considerably from it.

In my preprint (M. J. Damgaard, A severe Goldfinger attack vector on Proof-of-Work blockchains, ResearchGate), I also discuss how the Ethereum stakeholders can bribe existing Bitcoin miners through smart contracts to make the attack even more feasible.

What are your thoughts in this forum? Is it safe to invest in Bitcoin before this attack vector has been mitigated? And do you think that it will force Bitcoin to convert to a Proof-of-Stake blockchain as well?

Honestly speaking, I don't see etheruem attacking Bitcoin in any way. Bitcoin is the king of crypto and it drive entire crypto market since it's inception. Etheruem can't even control the altcoins market, it is just the second largest. .
crypto token with good volume, and has been few times being overtaken by XRP by trading volume.

         -     Is Ethereum attacking Bitcoin? well, that's not possible to happen, then if I am a long-term holder I would rather save Ethereum than Bitcoin because there are higher chances that more than 5x can be earned here at ETH.

Then I also think that when in ETH I am a Bitcoin and other cryptocurrencies are really high chances that we get profit

[yhiaali3]

But I think he is wrong because if we assume the success of the alleged 51% attack, this will not lead to the fall of Bitcoin or the loss of its market dominance. This is not logical at all.

This is an interesting point that I would gladly discuss: Will Bitcoin's value really crash as a consequence of a 51% attack?

When the potential profits of a 51% attack is discussed in literature, it is typically assumed that attackers need to find a way to quickly convert the stolen bitcoin to commodities outside of the blockchain, e.g. dollars. (This is known as a replay attack, by the way.)

The reason is that if they simply stole a lot of bitcoin but didn't find a way to trade them for other commodities, then the value of Bitcoin would simply crash right afterwards, and they wouldn't turn a profit for all their hard work.

However, if one assumes that the value of Bitcoin would not crash as a consequence, then not only would the attackers be free from having to figure out how to trade the bitcoins for something else, they could also come back for seconds afterwards!

Once the attackers have gained more than 50% of the hash rate, they could thus, under that assumption, keep making replay attacks (as well as other malicious things like blackmailing) indefinitely.

Unfortunately, this is true. The biggest obstacle for anyone who wants to carry out a 51% attack is the cost or economic feasibility. Therefore, if this malicious party has the necessary money and its goal is to sabotage the Bitcoin network only without obtaining any economic benefits, then I can say, unfortunately, that they will succeed in controlling the blockchain and they will not care if the network collapses and Bitcoin loses its value.

On the other hand, I do not know the position of the Bitcoin community in this case and do they have countermeasures to contain such a dangerous situation?

[TomPluz]

What are your thoughts in this forum? Is it safe to invest in Bitcoin before this attack vector has been mitigated? And do you think that it will force Bitcoin to convert to a Proof-of-Stake blockchain as well?

Yes, it is very much safe and profitable as well to be investing with Bitcoin...and even with Ethereum also...and all because Ethereum will not be attacking the King of all Cryptos. In case, it is really possible to do such a thing, it would be counterproductive all because where Bitcoin go so does the whole cryptocurrency industry including Ethereum. Bitcoin is the captain of this industry and killing it would turn the whole boat upside down. No, there is no chance for now for Bitcoin to transform into Proof-of-Stake blockchain as it can be more vulnerable to attacks.

[mjdamgaard]

On the other hand, I do not know the position of the Bitcoin community in this case and do they have countermeasures to contain such a dangerous situation?

I don't know it either. I know that in the past, there has been a hard fork due to an update, which was subsequently resolved with a soft fork. But that type of action requires cooperation by more than 50% of the miners, something that Bitcoin couldn't depend on under a 51% attack.

The Bitcoin community could try to vote to go back to the original fork after a 51% attack, and declare the attack fork, as we might call it, invalid. And they could choose to distribute the rights to vote according PoS if they are smart.

However, if this is only implemented as a fail safe solution, the attacking miners, with the backing of Ethereum, could keep making reorgs just at the edge of what the community considers normal or malicious activity, thus causing disagreement of whether forks are valid or not.

The only long-lasting solution (that remains decentralized), as far as I can see, would therefore be to fully convert to PoS for the everyday consensus mechanism. But then Bitcoin better make sure that the community is on board with PoS, or else it will create a fork of the blockchain.

Edit:
Let me also just add: Whatever Bitcoin decides to do, they better make a concise and timely decision about it, I think. 'Cause if investors first start to become uneasy and trade their BTC to ETH as a result, it would make the value of Bitcoin drop, which would then make it even easier to afford a 51% attack. As far as I can see, this could create a feedback loop where more and more investors migrate from Bitcoin to Ethereum—where the first ones to do so might gain a lot from it, but where the last ones left behind will have lost a lot of money.

[Geey]

Until now there has been no news that ethereum is attacking bitcoin so that in the future ethereum can beat the price of bitcoin, that is a small possibility or even impossible. When it comes to Bitcoin technology, it still sticks with the old technology because many people still use it... Investing in Bitcoin is still safe and smooth, depending on how each individual manages it, if that person has a strategy and has enough information, it's likely he will make a profit...

[ABCbits]

• In fact, if Bitcoin crashes and Ethereum becomes the new number one cryptocurrency on the market, presumably this could make Ethereum grow by a lot more than a few percent. This last argument is based on an assumption that cryptocurrency is a commodity, and that eliminating Ethereum's competitors would thus make its value grow.

I somewhat disagree with this part. There's possibility people would lose trust to cryptocurrency in general. And since i expect only small fraction of ETH owner would collaborate to perform such attack, they need ETH price grow a lot to actually make profit.

Do you mean this [...]? It only mention word "profit" once on reference section, so i'm not sure i found correct link.

Yes, that is it exactly.
--snip--

Thanks for the confirmation.

[mjdamgaard]

Yes, it is very much safe and profitable as well to be investing with Bitcoin...and even with Ethereum also...and all because Ethereum will not be attacking the King of all Cryptos. In case, it is really possible to do such a thing, it would be counterproductive all because where Bitcoin go so does the whole cryptocurrency industry including Ethereum. Bitcoin is the captain of this industry and killing it would turn the whole boat upside down. No, there is no chance for now for Bitcoin to transform into Proof-of-Stake blockchain as it can be more vulnerable to attacks.

• In fact, if Bitcoin crashes and Ethereum becomes the new number one cryptocurrency on the market, presumably this could make Ethereum grow by a lot more than a few percent. This last argument is based on an assumption that cryptocurrency is a commodity, and that eliminating Ethereum's competitors would thus make its value grow.

I somewhat disagree with this part. There's possibility people would lose trust to cryptocurrency in general. [...]

I think these are reasonable opinions, especially given that the price of Ethereum in the past seems to have followed the price of Bitcoin to some extent.

However, this correlation in price could potentially end if the Ethereum community manages to successfully communicate the differences to the world, as mentioned in this earlier reply:

Bitcoin crash does not mean the flow of money to Ethereum as it is the number one cryptocurrency or trust in PoS, but rather it may lead to a loss of trust in cryptocurrencies and the search for another investment.
If Bitcoin is severely affected, Ethereum will certainly be severely affected.
The chances of a 51% success of an attack are expensive, but it will only affect the price. Everyone will stop broadcasting transactions and wait until the network is safe, and whoever creates the attack will not be able to continue it for a long time.

I guess this would depend on whether the Ethereum community manages to successfully communicate to the world that PoS would be safe from a similar kind of attack.

If they manage to do so, then the value of Ethereum might not be negatively affected. (And it would then only be positively affected, i.e. by investors migrating from Bitcoin to Ethereum.)

Edit:
User Stompix also has a really great point here:

It's about the difference in PoW and PoS
They could launch an attack and then an smear campaign, look how centralized it has become, it consumes energy, it's old it's not bla bla bla, everything.
If the king falls they are next in line,  they could make it sound like a Nokia vs Samsung thing, if they are smart enough.

They could in principle make it into a whole 'Ethereum vs Bitcoin' campaign, and try to communicate that narrative.

[bee]

I also discuss how the Ethereum stakeholders can bribe existing Bitcoin miners through smart contracts to make the attack even more feasible.

Which is more effective, bribing existing miners or building your own large mining farm that dominates the hash power worldwide?
I also found a good read about the 51% attack on ethereum which might give bitcoin miners a reason to consider whether they are worth accepting ethereum as bribe money.

https://web.archive.org/web/20230529004335/https://vitalik.ca/general/2023/05/21/dont_overload.html

[mjdamgaard]

[...] And since i expect only small fraction of ETH owner would collaborate to perform such attack, they need ETH price grow a lot to actually make profit.

This is a good point. Especially if we assume that the Ethereum stakeholders need to pay the miners for their ASICs as well as the operational costs, which makes sense 'cause if Bitcoin falls, it is likely that those ASICs would be hard to sell.

Nonetheless, it still seems that Ethereum might be able to afford a 51% attack even if only some portion of its stakeholders participate in funding it.

If we for instance suppose that the total demand for cryptocurrency will be unchanged after the attack, and assume that an attack would cost around $12B, then even if Ethereum only grows to become as popular as Bitcoin, which by my calculations would mean a growth of roughly $400B, it would then only take... let me do some quick math: $400B × x > $12B <=> x > $12B / $400B = 3%... It would only take a fraction of 3% before breaking even in terms of costs and gains. (And anything above that would mean a profit.)

If we suppose that Bitcoin is completely destroyed, however, and that Ethereum would grow by $1.3T, then the fraction only needs to be above $12B / $1,300B = 0.9% before they start making a profit from it.

[mjdamgaard]

I also discuss how the Ethereum stakeholders can bribe existing Bitcoin miners through smart contracts to make the attack even more feasible.

Which is more effective, bribing existing miners or building your own large mining farm that dominates the hash power worldwide?
I also found a good read about the 51% attack on ethereum which might give bitcoin miners a reason to consider whether they are worth accepting ethereum as bribe money.

https://web.archive.org/web/20230529004335/https://vitalik.ca/general/2023/05/21/dont_overload.html

I'm not exactly an expert, but I'd say that bribing would likely be the most efficient strategy for two reasons:

• It means that you only need to acquire +50% of the preexisting hash rate in order to gain a majority, rather than +100% of it.
• It would save some logistical costs as well in terms of where to build that farm, etc., instead of just buying into existing infrastructure.

About the read, that is a good one, about not reusing the same consensus mechanism for too many applications outside of the core protocol. Thanks for sharing that.

In terms of the possibility of a 51% attack on Ethereum, I think that (S. Lee and S. Kim, Short Selling Attack: A Self-Destructive But Profitable 51% Attack On PoS Blockchains, https://eprint.iacr.org/2020/019) is also worth a read, even though I believe that Ethereum could quite easily guard against such an attack, as also mentioned in my own preprint.

Edit:
Oh, and there is also the third point: 3. that bribing miners could be done anonymously via smart contracts.

2nd Edit:
Of course, if it turns out that more than 50% of the existing miners are die-hard loyal to their blockchain, then it would also require recruiting at least some new miners.

[Husires]

In terms of the possibility of a 51% attack on Ethereum, I think that (S. Lee and S. Kim, Short Selling Attack: A Self-Destructive But Profitable 51% Attack On PoS Blockchains, https://eprint.iacr.org/2020/019) is also worth a read, even though I believe that Ethereum could quite easily guard against such an attack, as also mentioned in my own preprint.

To succeed in such an attack, you need about 40 million S9 units and a huge amount of electrical power in addition to the space. The chance of this attack continuing is not related to the amount of money you spend to make the attack successful, but to keep all these devices safe. Do you expect that companies or individuals will not move against you to stop providing you with electricity or attack these facilities? While in Ethereum, implementing a 51% attack is much easier, as you need money to implement a successful attack.

[Stompix]

Go to amazon

Nobody even with millions not billions in his pocket buys from Amazon.
Bitmain usually has MOQ of 100 on new gear and they easily sell them in the thousands, as you don't need to order and have them all shipped in the same day, you can easily build that hahsrate with enough money while letting others miners feel the pinch and abandoning their gear, used gear is already selling at $5 per th/s and there are tens of exa waiting to be picked by somebody.

You would need to basically buy many mining companies, it would be more realistic.

Yeah, but just as those companies got their gear you can get yours, right?
It's still a matter of money.

The chances of a 51% success of an attack are expensive, but it will only affect the price. Everyone will stop broadcasting transactions and wait until the network is safe, and whoever creates the attack will not be able to continue it for a long time.

Once somebody has 51% of the hahsrate he can make the attack continuously, there is no stopping them, the first day the honest miners mine 150 blocks, the attacker 160, he broadcasts his chain, his chain has more work, and he invalidates the legit one, the honest miners don't get a dime all tx are invalidated, he does the same the next day, most honest miners will pull the plug as the price goes down, they don't get a single block, it just makes the attack cheaper and easier to do. If the honest hahsrate drops to half it also means that even after running for 7 days and shutting down the attacker will still have a 6 days advance at least on the chain, so he can broadcast his for another week.

Also don't forget the attacker is also getting his bitcoin rewards, so he is getting a bit while running this, just as honest miners.