51% Attacks on Bitcoin and Ethereum Networks Are Not Possible Due to Impractical Costs: Coin Metrics

It is no longer viable for nation-states to destroy the Bitcoin (BTC) and Ethereum (ETH) networks through 51% attacks.

According to the latest research from crypto intelligence firm Coin Metrics, the astronomical costs required to carry out such attacks make them impractical and unprofitable.

A 51% attack refers to a malicious actor owning more than 51% of the mining hash rate in a proof-of-work system like Bitcoin or 51% of staked crypto in a proof-of-stake network like Ethereum.

This level of control theoretically enables attackers to manipulate the blockchain and undermine its integrity.

51% Attacks on Bitcoin and Ethereum No Longer Viable

In the report, Coin Metrics researchers Lucas Nuzzi, Kyle Water, and Matias Andrade argued that the current cost of capital and operational expenses associated with achieving 51% control make continuous attacks by nation-state actors unfeasible.

The researchers introduced a metric called “Total Cost to Attack” (TCA) to quantify the cost of attacking a blockchain network.

Using this metric, the report concluded that there are no profitable avenues for attacking either the Bitcoin or Ethereum networks, rendering the financial incentive for nefarious attackers obsolete.

The report highlighted that even in the most profitable double spend scenario considered, where an attacker could potentially make $1 billion after spending $40 billion, the rate of return would only be 2.5%.

Analyzing secondary market data and real-time hash rate output, the researchers found that a 51% attack on Bitcoin would require the purchase of approximately 7 million ASIC mining rigs, totaling around $20 billion.

However, there simply aren’t enough ASIC rigs available on the market to execute such an attack.

Even if a nation-state attacker were resourceful enough to manufacture their own mining rigs, the report estimated the cost to be north of $20 billion, making it financially unviable.

Ethereum’s 34% Attack Exaggerated

The report also addressed concerns about a potential 34% staking attack on the Ethereum network by Lido validators.

Coin Metrics concluded that leveraging Liquid Staking Derivatives (LSDs) to attack the Ethereum blockchain would not only be time-consuming but also extremely expensive.

The researchers estimated that an attack on Ethereum would take six months due to the churn limit preventing stake from being deployed all at once, with a cost exceeding $34 billion.

The attacker would need to manage over 200 nodes and spend $1 million on Amazon Web Services (AWS) alone.

Experts, including Castle Island Ventures partner Nic Carter, praised Coin Metrics’ research as a significant contribution to the field.

Carter highlighted that previous analyses had been vague or theory-driven, whereas this report provided a rigorous and empirical analysis of the impracticality of 51% attacks on Bitcoin and Ethereum.

“This is analysis that has never been possible before. this is a very significant contribution to the literature, and one that I personally have been waiting for for a long time.”

previous 'cost to attack' analyses of bitcoin have been vague or theory driven. no longer. the CM team developed mine-match, which meant they were able to identify virtually every ASIC mining on bitcoin (based on karim helmy's research). this, combined with ASIC 2ndary…

— nic carter (@nic__carter) February 15, 2024