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The Altcoin Bitcoin SV was attacked to 51% earlier this week and thus offered the opportunity to highlight the importance of the security model for “decentralized” blockchains. This tweet thread from Lucas Nuzzi explains very well what happened.
The notion that Bitcoin is “too slow” or that it doesn’t have “enough transactions per second” to be global money that many altcoins proponents have advocated over the years is based on false assumptions and an understanding how blockchains work and what they are basically solve.
First, what is a 51% attack?
In a 51% attack, if a company acquires a majority stake in a network’s hash rate, it can maliciously double coins. Since the longest block chain on the Bitcoin network fails, a 51% attack is only possible if the attacker can continue to produce blocks faster than honest miners.
“The system is safe as long as honest nodes collectively control more CPU performance than any cooperating group of attacker nodes…. When a lot of CPU power is controlled by honest nodes, the honest chain grows the fastest and outperforms all competing chains. In order to modify a past block, an attacker would have to repeat the proof of work of the block and all blocks after it and then catch up with and surpass the work of the honest nodes. “- Satoshi Nakamoto,” Bitcoin: A Peer-to-Peer Electronic Cash System “
In the case of Bitcoin SV, the security model is particularly compromised for two different reasons:
- Because of the monopoly nature of proof-of-work networks, it is often uneconomical to sell hash power for forks. Less security, less liquidity, fewer users, etc. Network effects are important.
- Since Bitcoin SV (a fork of Bitcoin Cash) has further expanded the block size to 100 times the size of BTC, there are little or no transaction fees in the network, which further reduces the incentive to sell hash power to the network. Since the output of Bitcoin (or one of its forks) tends asymptotically towards zero, the transaction fees for the entire security model of the network are paid. This is not sustainable for networks like BSV.
Below is the hash rate of BTC and BSV shown together (in both logarithmic and linear views for perspective):
Those who believe that a blockchain can scale by simply multiplying a concept across the network have a fundamental misunderstanding about how a decentralized blockchain can scale. Bitcoin SV is a classic example of this. Supporters of BSV would say how “quick” and “cheap” transactions were on the network, but the reality is that there are always tradeoffs. The users of BSV ultimately opted for inferior security and processing guarantees.
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