Bitcoin Series 31: Cost of a 51% attack against Bitcoin vs. a Traditional Ledger

 US Forever stamp, circa 2015.

US Forever stamp, circa 2015.

 

In Bitcoin

  • A lot of ink has been spilled on the cost of a 51% attack* on the current Bitcoin ledger.  

    * an attack that would allow parts of the ledger to be re-written
     
  • Most attempts to do a pure calculation of the computing power needed come up with estimates in the range of a few hundred million dollars
     
  • Others argue with those estimates
     
  • Others say in a few years it will be billions of dollars
     
  • Others say that if existing miners collude it might be cheaper
     
  • Other say that miners aren't incented to attack the chain due to the diminished value of their Bitcoin future revenue stream
     
  • And so on

I personally think the explicit or implicit cost is well above $100M and rising, but the debate will go on for a while.

In a traditional financial ledger:

By contrast, it is extremely easy to calculate the cost of a 51% attack on a traditional financial services ledger.  

In the United States, circa 2015, it is $0.49, or the cost of one 1st class stamp.

This stamp needs to be attached to a letter addressed to the CFO of a financial services firm and would have one of the following as the sender: 

  • IRS
  • Treasury
  • OFAC
  • Federal Reserve Board
  • FDIC
  • OCC
  • SEC
  • A variety of state regulators in your state of choice
  • A variety of three letter agencies
  • A federal court
  • A state court
  • An insurance commissioner

I am not judging one model vs. the other as they each have their uses.   But I am comfortable saying that subverting a traditional ledger is a few orders of magnitude less expensive than subverting a decentralized one.*

* What if a three letter agency sent letters to miners ordering them to collaborate to execute an attack on Bitcoin?  I don't know how realistic that is but, to the degree it is realistic, it is an excellent argument for them being distributed.  This is why I don't worry about stories of miners at the Mongolian border of China leaching electricity from state-owned enterprises and hurting the ROI of other miners. The more miners, the more dispersed the miners, the more jurisdictions that they operate in, the safer the Bitcoin ledger is.

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Posted on January 24, 2015 .