Blockchain technology, undoubtedly, is the best tamper proof and secure design currently available. However, not all networks are 100% safe. In fact, the second successful attack on Verge (XVG) clearly indicated that some of the blockchain networks are indeed vulnerable.
In this regard, Husam Abboud, a cryptocurrency researcher at FECAP University in Brazil, has revealed that hackers need a mere $1.50 million to execute an attack on Ethereum Classic (ETC) network, which has a market cap of about $2 billion, and exit with a profit.
Husam Abboud explained that smaller blockchains, which use PoW (proof-of-work) consensus protocol as larger blockchains are particularly vulnerable to attack. Abboud further uses Ethereum Classic (ETC), a smaller blockchain in comparison with Ethereum (ETH) as an example to explain why it is relatively easy to attack some blockchain networks. According to Husam Abboud, the cost of execution is not high in the case of smaller blockchains and this removes the entry barriers to a great extent.
Abboud points out that Ethereum (ETH) miners who contribute a mere 2.5% of Ethereum Nethash can easily switch over to Ethereum Classic (ETC) mining and easily execute a 51% attack. The returns generated by an Ether miner who contributes 2.5% of Nethash (~ 525 ETH or $315,000) will be sufficient to execute a 51% attack on Ethereum Classic for an entire day. In fact, Abboud believes that a hacker who is willing to spend $55 million can bankrupt the currency and exit with a profit of $1 billion.
The Brazilian research used Rindex v2.0 model to study the cost involved in hacking blockchain networks. Calculations based on classic model include the cost of acquiring mining equipment and power. However, there is no need to account thos expenses separately when the calculation involves blockchain networks which uses the PoW consensus protocol. The Rindex v2.0 model uses the cost of leasing hashpower to determine the cost involved in hacking a blockchain network.
In addition to Ethereum Classic, the researcher also studied the amount required to execute a 51% attack on Bitcoin Cash. Based on the Ridex V2.0 model, the researcher determined that it would cost 250 BTC/day (~$2 million) to execute a successful 51% attack on BTC’s blockchain network. Likewise, it was estimated that a mere 26 BTC or ~$200,000 per day would be enough to execute an attack on Bitcoin Gold. Notably, the attack can be continued until the developers modify the code and fix it perfectly. Alternatively, the hacker would withdraw when the price of the cryptocurrency would drop too low and make hacking unattractive.
According to Abboud, Satoshi Nakamoto created Bitcoin based on PoW consensus protocol, with an assumption that miners would not attack a blockchain network, leading to an overall drop in the price of coin. However, the argument no longer seems to be true.
Abboud said
“We have major exchanges with a lot of liquidity, which allow you to short-sell with a trading margin from 2.2 to up to 100 times. It’s just becoming easier every day and the market is more liquid for opportunities where you can benefit from the price decline.”
In the last two months, Verge, Electroneum, Bitcoin Gold and Monacoin were subject to attacks in various forms. Jameson Lopp and Peter Todd has stated that such a situation has arisen because of the lazy cloning of established blockchains, resulting in new altcoins.
According to cryptocurrency experts, 51% attack can be resolved by sharing the security of existing PoW chains, switching to proof-of-stake protocol, increasing the number of confirmations, or improving the hashing algorithm.
