The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday exclusively to our subscribers.
One of the more disturbing side effects of the crypto market’s downturn is it’s made it easier for malicious actors to launch 51-percent attacks, making that the majority fundamental of blockchain security breach more frequent.
But, like all unfortunate events within the never-ending drama of crypto, the real-world losses, during this case, are providing a valuable lesson. during this case, it’s a lesson about the role that network effects play in building security, especially for blockchains that have adopted bitcoin’s proof-of-work consensus model.
Crypto enthusiasts debate ad nausea about the principles of this or that chain’s design, and people debates are important. But if a permissionless blockchain doesn’t have an outsized enough community of users, developers and miners operating during a self-reinforcing manner useful creation and protection, they’re vulnerable.
That was the takeaway in the week when crypto exchange Coinbase announced it had detected a series of deep chain reorganizations within ethereum classic (ETC). Someone had accumulated a majority of the ETC network’s hashing power and had used that dominant position to change past transactions, leading to double spends of 219,500 ETC, which Coinbase estimated to be worth $1.1 million at the time.
This was arguably the foremost significant 51-percent attack ever, more so than those seen on bitcoin gold and vertcoin.
Twist of fate
It was also, however, an especially painful blow for ethereum classic’s true believers.
They belong to a minority community of ethereum users, developers and miners who in 2016 decided to stay performing on the old blockchain that was left when leading developers within the ethereum community convinced a majority of users to run a replacement software that might reverse the transactions of the notorious DAO hacker.
The ETC community’s position was often described as a principled stance: no matter what losses were incurred by investors within the DAO investment project. Whether you called it theft or not, the ethereum blockchain should be immutable, they might say. No cabal of leaders should be ready to organize a software change that invalidates transactions that the network had previously accepted.
Yet, those principles proved of little value when an attacker overwhelmed their network.
Ethereum, on the opposite hand, which represents the forked version of the blockchain that the bulk moved to after The DAO, has, for now a minimum of , remained free from a 51-percent attack.
This is to not say that ethereum is immune from such risks within the future. With its price at 90 percent of its year-ago peak and still volatile, the profitability of mining pools has fallen significantly, which essentially makes it cheaper to rent enough hashing power to launch a 51-percent double-spend attack.
Still, the numbers point to a way safer foundation at ethereum than ethereum classic. consistent with Crypto51, which tracks the estimated cost of launching such an attack on different proof-of-work blockchains, it might cost $88,633 to launch a one-hour attack on ethereum, as against just $4,571 for ethereum classic.
Ethereum is second only to bitcoin’s $281,060 thereon list because the costliest to hit with a 51-percent attack.
Positive feedback loops
Price and existing network hashing power are key drivers of this cost, but what’s equally important over time is that the broader idea of an outsized network of users that makes a regeneration loop that encourages developers to figure on a blockchain’s code.
A coin’s security is helped by ongoing development, not only due to the improvements and tweaks that are made to the code, but also because there are more eyes watching the network.
For of these interrelated reasons, ethereum’s comparatively large global community of enthusiastic users make it a safer blockchain than ethereum classic. A history of immutability, if that’s what ethereum classic truly represented, was of lesser importance from a security perspective than the strength of the competing ethereum chain’s community.
This is borne call at CoinDesk’s Crypto-Economics Explorer, whose five metrics useful – price, exchange transactions, group action , developer interest and network size – all show markedly higher levels for ethereum than ethereum classic. the info captures a way healthier network effect, a regeneration loop of interest, activity and value that provides the previous comparatively more security against such attacks.
The lessons here are important. and that they aren’t that dissimilar from the teachings learned within the battles between Bitcoin Core and therefore the now many forks that have occurred after bitcoin cash was first created a year ago.
For all the noise that the bitcoin cash, bitcoin SV and bitcoin ABC crowds make, they need nothing just like the vast pool of community value that Bitcoin Core has accumulated.
On the blockchain, community equals security.