Claim : 51% attack compromises the immutability (and security) of a crypto-network – and affect individual users who hold the cryptocurrency, which will ultimately cause the price of that cryptocurrency to go down.
Category : Token Economics
Source : This claim represents a broad belief within the industry. Here are some examples:
"There’s no reason for Ethereum Classic to exist. Not in 2019” - Tweet by David Iach.
“A network that allowed for double-spend would quickly suffer a loss of confidence” - Investopedia.com
“51% attack vulnerability is a kind of cryptocurrency sickness and a terminal one at that” - Bitcoin Wiki
“Of all the potential attacks on cryptocurrencies, one of the most dreaded is known as a 51% attack” btcmanager.com
My Stake : [Challenge claim] (50 Cred)
My Argument/Evidence : The prevailing belief is that a 51% attack should negatively affect prices. The reason it should affect prices is because a 51% attack compromises a cryptocurrency’s security proposition, making less of a credible Store of Value (which is a popular view of how value accrues in public cryptonetworks). Qiao Wang makes this case in his ‘The Store of Value Thesis’. He argues that in order for a cryptoasset to be a Store of Value, it must be “immune to theft”, which requires having a high cost of 51% attack.
Haseeb Qureshi has provided an alternative explanation for why a 51% attack may not affect prices as previously believed in this thread.
In the thread, Qureshi writes:
- It was once assumed that 51% attacks would kill cryptocurrencies. But we’ve seen several major cryptocurrencies get attacked in the last year, and we can now put that thesis safely to rest.
- Verge actually gained in price after being 51% attacked.
- the 51% attack on Verge happened in April 2018.
- When this story was released (April 5, 2018), the author mentions that Verge was hacked Wednesday (presumably: April 4, 2018)
- I checked Verge’s prices on the day of the attack (Apr 5, 2018) and a week later (Apr 13, 2018)
Verge’s price on Apr 5th 2018 was 0.057 USD
Verge’s price on Apr 13th 2018 was 0.096 USD
This corroborates the claim that Verge actually gained in price after the attack.
Qureshi is claiming that the primary target of attacks are actually exchanges, rather than individual people. Source.
In fact, it would be more profitable for the attacker to preserve regular transactions made by individuals.
In a subsequent podcast episode, Haseeb first states “if you’re going to do a 51% attack, you’re probably not going to do it against random people because random people don’t have a lot of money” (minute 25:52). He goes on “in essence, it’s actually in the attacker’s interest, when they build this parallel chain to include your transaction in the parallel chain because all your transactions pay transaction fees” (minute 27:30).
Haseeb makes that case that the average user won’t care about chain reorganization that happen in a 51% attack because their transactions are likely not affected and this explains why prices of coins that have been attacked (ETC, Verge, etc) haven’t dropped as anticipated.
Thus, the original claim that a 51% attack compromises the immutability (and security) of the network – and affect individual users who hold the cryptocurrency, which will cause prices to go down.
Should be revised to:
Revised Claim : 51% attack compromises the immutability (and security) of the network – but mostly affect exchanges , which may cause prices to go down if exchanges decide to delist coins en-masse.
For this reason, I would challenge the original claim with 50 cred.
He goes on to suggest ways exchanges can mitigate a 51% attack, but that is beyond the scope of this analysis. Interested readers can read more here.