Here's Why It's Hard to Attack the Bitcoin Network
The Bitcoin network has never been hacked or shut down.
Photo credit: Frida Bredesen
“Yeah, but can’t someone just hack the Bitcoin blockchain?”
It’s one of the most frequently asked questions I get when talking about bitcoin.
I don’t blame them. Everything is hacked these days. Twitter gets hacked. Emails get hacked. Presidencies get hacked. We live in a world where things get hacked seemingly easy.
But to answer their question: yes - if there was a 51% attack on the Bitcoin network, it could all be over. Even then, that’s extremely difficult to do. I’ll try my best to explain why.
(I recognize I’m not covering this topic in detail. I may dig in deeper in the future.)
The 51% Attack
The 51% attack is the idea that someone controls over 50% of the Bitcoin network’s mining hash rate (hash rate = computing power).
Don't know what bitcoin miners are? Bitcoin miners are like auditors. Instead of excavating out of the ground like gold miners do, Bitcoin miners are reviewing and verifying all bitcoin transactions. In return for their hard and honest work, they get rewarded bitcoin.
Ok soo… why 51% you ask? Because a majority is always required to approve or decline transactions in the Bitcoin network. Hence why a 51% attack is needed to overtake the network.
By overtaking the majority of the network, the successful attacker could alter or overwrite the transaction history of the network… Like if you had a new CEO at a company that would completely change the culture and operations of a company.
To be more specific, the attacker could theoretically:
prevent new bitcoin transactions from getting confirmed, therefore stopping payments between some (or all) users
reverse transactions (rendering them invalid)
spend the same bitcoin twice (known as the double-spend problem - a big no no)
prevent new bitcoin from being created.
…Total chaos.
While technically this is possible, it's very hard to do.
You see, running the Bitcoin network and maintaining its integrity requires highly specialized computers to solve complex math problems. Each machine has to make trillions of guesses to get this problem solved (every 10 minutes).
So yea, they’re not your average MacBook Pro.
They are beasts of machines that are really expensive and consume a LOT of energy. The size of small countries.
Assuming an attacker had these insane mining machines and gained 51% of the network’s hash rate, they could create a new network that branches away from the original Bitcoin network (called a “hard fork”).
This new network would now have its own rules. It could reverse previous transactions and the attacker could walk away with unimaginable amounts of profit.
It’d be criminal.
While it sounds easy to do, the odds aren’t stacked in its favour because of economics.
Oohh - and if I may add! The hacker would also break the encryption technology that powers the Bitcoin system, the global banking system and our communication system. So, if they hack the Bitcoin network we have bigger problems my friend!
It All Boils Down to Economics
The incentives for hacking the Bitcoin network aren’t there.
For starters, if someone were to successfully achieve the 51% attack then the world would lose interest in bitcoin. Demand for bitcoin would collapse causing the attacker’s stolen bitcoin to lose value too.
It’s basically value-suicide.
Plus, it’s also a ridiculous loss in their capital investment. Remember, the powerful computers needed to process Bitcoin transactions are unique and expensive and hard to acquire.
Miners typically make an enormous investment (like warehouses full of these insane machines). They tend to have a long-term mindset too. Like any logical person would do, they try and make returns on their capital-intensive investment.
So, they have a tremendous interest in maintaining the integrity and purity of the Bitcoin network in order to get their rewards (more bitcoin) and eventually profit from their original expense on the machines.
Where a 51% Attack Might Be Possible
Okkkk, with ALL that said, a government or private/for-profit company could decide to buy up a lot of the mining equipment to try and gain a majority on the Bitcoin network.
Governments could command all the hash rate to do double-spend attacks and destroy people’s confidence in the safety of the Bitcoin network.
It’s possible. But once again, the incentives aren’t there…
A government (or many) would buy all the hardware necessary to successfully attack. But here’s where it gets interesting…
If they buy a massive amount of mining machinery, it would make the price for these machines skyrocket. #supplyanddemand
This would effectively reward existing miners as their investments have also ballooned in value, allowing them to re-invest in mining equipment, further strengthening the network.
“It would also lead to heavier capital investment in the production of mining power by mining producers, which would bring the cost of processing power down and allow the faster growth of Bitcoin’s hashrate.” Saifedean Ammous
Ironically, the more resources spent on growing mining hash rate to attack the Bitcoin network, the harder it becomes to attack it.
Plus, Bitcoin mining is spread all around the world making this specific scenario quite challenging. Governments would likely need to ban together to destroy the Bitcoin network…
But we’ve all seen how useless they are when it comes to collaborating or solving world issues.
Where the network might break is if the world experiences a power outage that brings down the network and all internet-related things. Or, if a bug is introduced into the code.
A Robust Network for the Developing World
To date there’s been no successful double-spend attack or a 51% attack on the Bitcoin network… even after 13 years!!
It’s never been down for a minute. It basically has a 100% uptime which is pretty remarkable.
The Bitcoin network is therefore the most robust network in the world thanks to the right economic incentives put in place to reward good behaviour instead of malicious behaviour.
If we’re going to build a financial network that lifts people out of poverty worldwide, we’re going to need this network to be robust, unbreakable and safe… which the Bitcoin network has proven to be.
By being secure and reliable, the Bitcoin network will allow us to innovate on top of it. Sending remittances at affordable prices is just the tip of the iceberg. There will be a growing need for Bitcoin-related products.
And since anyone with a phone and an internet connection can download a bitcoin wallet, the unbanked population can now bank themselves. Their wallet can quite literally act as a bank account where they can save, spend and invest. They’ll have opportunities and possibilities that were out of reach for too long.
And what will they do with these opportunities?
They’ll trade, they’ll produce, they’ll start businesses, get an education and lift each other out of systemic poverty. They’ll live and work in an economy of honesty… for all humankind.
At that point, we will enter a new era of enlightenment thanks to the strength of the Bitcoin network.
Hello Ayelen, Excellent article with an exceptional understanding of Bitcoin. Your article about Andres the Venzuelan immigrant to the U.S. is what brought me to your substack. That was a moving article. Loved it. This reply is a cautionary reminder that it is not possible to have honest money without honest government. In my opinion the people who control the highest levels of the U.S. govt are among the least honest.
Below are links to articles describing how easily the US govt can, and undoubtedly will, control all Bitcoin transactions globally. Complete control of Bitcoin by Western governments may not happen for several years -until the world is in the midst of financial crisis. Still it is best to prepare now. Stay diversified. If you have savings, keep some in Bitcoin, some in commodities (gold, silver), some in your business, some in land and perhaps some quality stocks.
You write well. And you write from the heart. Please continue.
https://medium.com/coinmonks/the-bitcoin-network-is-so-big-there-is-not-enough-hash-power-in-the-world-to-successfully-attack-c69af62c629b https://blog.cryptostars.is/death-of-the-real-bitcoin-coming-all-too-soon-6622ef8cbfc8