How can new cryptocurrencies form when the 51% attack exists?

Question

Recently, I learned about the concept of the 51% attack which a malicious actor could perform on a cryptocurrency. Essentially, if you can control >50% of the hashing power for a given cryptocurrency, you can control the blockchain which allows you to do all sorts of devious things like double-spending the cryptocurrency.

There's even a website, crypto51.app, which keeps track of the theoretical costs of performing such an attack. This cost seems to come from the money one would spend in gaining that >50% control for an hour - usually in terms of renting computing time.

Clearly, the more computing power the cryptocurrency community is putting into mining, for a given cryptocurrency, the harder and more expensive it is to perform a 51% attack. So crypocurrencies like Bitcoin are reasonably safe from an attack like this. However, newer, less mined crypocurrencies are much more likely susceptible to the 51% attack.

So my question is, how can new cryptocurrencies even form? It seems like people are forming their own cryptocurrencies left and right, even as jokes (see , e.g., dogecoin). How can new currencies get off the ground and gain enough critical mass to be reasonably safeguarded against a 51% attack? Why don't most new cryptocurrencies get killed off nearly immediately by an attack like this?

SPOOKY_HORN · Accepted Answer

Generally new cryptocurrencies are protected either by a complete lack of incentive to attack them, or by amassing support leading up to their eventual "launch." Older ones are somewhat protected by people being vigilant and communities occasionally agreeing on hard forks to ignore transactions on "compromised" chains; 51% attacks -- which don't actually need 51% of the network to pull off -- are still a threat even for well established blockchains.

Double spending relies on there being someone who wants the cryptocurrency you have that you can dupe, and the amounts being transacted being high enough to offset hardware costs, time investments, opportunity costs, or other costs related to the attack. Very new cryptocurrencies will typically have almost nobody to transact with in the first place; and will have a very low "market cap", which severely limits the returns. There is generally no financial incentive to attack a new blockchain.

There are some cyrptocurrenices that are "launched" with substantial support, where individuals creating the cryptocurrency will offer "ICOs" and other means of generating interest. While this would make for a much more lucrative target compared to another new crypto that has no such interest, it also means that the costs for the attack are much greater, and there will be more interest in forking away from "compromised" chains among the userbase.

Futher, successfully attacking a blockchain like this is relatively easy to detect, and will erode confidence or interest in a cryptocurrency, of which most new cryptos have little to spare. Even if your attack is not "reversed" by the majority with a fork, you will crater the value of any amount you gain through double spends.

gnasher729 · Answer

Many cryptocurrencies are launched with the intent to fleece people by giving you money for worthless cryptocurrency. So all you need is a great launch and lots of initial sales. Since the intent was never for the victims / suckers to make any profit, who cares about a 51% attack? The people who launched the cryptocurrency got lots of money for worthless cryptocurrency, they don't care if others can use a 51% attack to steal more of that cryptocurrency.

Answered by gnasher729 on July 18, 2021

How can new cryptocurrencies form when the 51% attack exists?

2 Answers

Add your own answers!

Ask a Question