New Study Examines Bitcoin and Ethereum’s Defense Against 51% Attacks

n a recent publication on the Social Science Research Network (SSRN), researchers Lucas Nuzzi, Kyle Waters, and Matias Andrade introduced a new framework for evaluating the financial and logistical challenges of launching a 51% attack on Bitcoin and Ethereum. Their study, “Breaking BFT,” explores the Total Cost to Attack (TCA) these blockchains, offering fresh insights into their security strengths.

Key Highlights

Key highlights from the study include:

• A detailed examination of the economic and operational challenges in executing a 51% attack on Bitcoin and Ethereum.
• Insights into how Bitcoin and Ethereum can withstand potential attacks, including those from nation-states.
• An analysis of declining block rewards, suggesting that network security is not solely dependent on transaction fee revenue.
• The study challenges the assumption that higher transaction fees automatically result in greater network security.
• A distinction between profit-driven and ideologically motivated attackers, highlighting the economic deterrents to both.
• Application of the TCA model showing the high costs of successfully attacking Bitcoin and Ethereum, supporting the concept of Nash Equilibrium within these networks.
• Discussion on the sustainability of Bitcoin and Ethereum’s monetary policies and the speculative behaviors of miners.

Lucas Nuzzi shared the essence of their findings on X, stating, “How much does it cost to 51% attack Bitcoin and Ethereum? To find out, we simulated what an attack would look like. Our paper, Breaking BFT, was published today with some interesting results.”

The research highlights the introduction of the TCA model, which integrates capital and operational costs associated with orchestrating a 51% attack. This innovative approach provides a new perspective on the economic barriers protecting Bitcoin and Ethereum from such threats.

The study examines numerous attack scenarios, including those potentially initiated by nation-states against these decentralized networks. It reveals the resilience of Bitcoin and Ethereum, suggesting that the networks have mechanisms to recover and secure themselves even after sustained attacks.

Addressing the issue of diminishing block rewards, the researchers challenge the prevailing belief that network security is directly tied to transaction fee revenue. They argue, “The concern relates to Bitcoin’s security depending on subsidies being replaced by user fees.” Adding, “The higher the fees collected by miners the more secure the network is. Surprisingly while this intuitively makes sense we found this not to be a phenomenon observed historically.”

The paper also differentiates between the motivations of potential attackers, whether for profit or ideological reasons, highlighting the economic deterrents to such attacks.

By applying their TCA model, Nuzzi and his colleagues demonstrate the prohibitive costs of successfully executing a 51% attack on either Bitcoin or Ethereum, thereby supporting the existence of a Nash Equilibrium within these networks.

Furthermore, the study discusses the speculative behaviors of miners and their impact on network security, contributing to the ongoing debate on the sustainability of deflationary monetary policies for Bitcoin and Ethereum.