Vertcoin (VTC)’s 51% Mining Attack Matters Says MIT Digital Currency Initiative Advisor
A few days ago, the virtual currency Vertcoin (VTC) experienced a 51% attack in which a miner (or a group of miners) controlled more than half of the network hash power. This allowed attackers to conduct multiple attacks and double spend some funds.
Vertcoin is an established player in the virtual currency market and it grew in the market as a ‘decentralized currency owned by its users.’ The digital asset was born as a fork from Bitcoin and Litecoin.
Michael Casey, the chairman of CoinDesk’s advisory board and a senior advisor for blockchain research at MIT’s Digital Currency Initiative, wrote an article in which he asks whether Vertcoin’s team commitment to maintaining the competitiveness of affordable mining equipment was worth it. The network democratized mining activities by blocking ASIC miners but it created an untenable security risk.
As per Mr. Casey, these ASIC-resistant projects have been developed to ensure that powerful ASIC rigs have no advantage over GPUs. GPUs are more affordable, widely available and can be used by the general public in consoles or computers. Clearly, having such a network has its negative side. It is possible for an interested party to have enough hashing power and attack the whole network.
Additionally, there are just a few large ASIC miners in the market. There are a few players around the world that have large ASIC mining farms and could eventually be able to increase their hashing power and control a specific network. This goes against the main objective of virtual currencies and blockchain technology.
Casey puts Bitmain as an example, mentioning that it used its position as a dominant provider of bitcoin mining hardware to manipulate the community.
He went on writing that there is a very hard competition among ASIC miners for block rewards. This is something that resulted in massive amounts of energy consumed by Bitcoin miners around the world. In the future, this electricity usage could be a big problem for Bitcoin and virtual currencies.
Mr. Casey explained that it was rented capacity, not newly deployed machines, that gave the Vertcoin attacker a low-cost route to attack the network. This situation occurred because crypto prices have been falling in the last months, making mining activities less profitable. This is also something that resulted in lower rental rates for installed hardware.
Additionally, he says that the same thing happened in the ASIC industry. Falling prices in the crypto market result in lower rental rates for ASIC hardware that is already installed. This is very important because ASIC coins are not more protected than others.
About it, he wrote:
“That [falling prices in virtual currencies] has put a big pool of installed ASIC capacity at attackers’ disposal, undermining the argument that ASIC coins are protected because their rigs are more expensive to acquire and deploy than general purpose GPUs.”
However, it is also important to mark that if there’s not enough rented hashing power to reach 51 percent, it might be more difficult to perform an attack on that specific network.
And indeed, Casey quotes other individuals and crypto experts such as Zooko Wilcox that say that the attack experienced by Vertcoin could happen to other networks as well.
There's no reason to think the same attack wouldn't work against Zcash, Ethereum, or Bitcoin.
— zooko (@zooko) December 4, 2018
Although there are some virtual currencies that could be affected, Bitcoin seems to be significantly less vulnerable than other networks. Bitcoin has a very large amount of hashing power, that means that it would be very expensive to make an attack on the network. However, a 51% attack on Vertcoin cost $131 per hour.
If Bitcoin starts recovering its price in the near future, it would allow new miners to be profitable. That means that the hash rate of the whole network would also start to recover. Nevertheless, as Casey mentions, Bitcoin is not more secure because there are ASIC miners per se.
At the time of writing, Vertcoin is the 194th largest virtual currency and each coin can be purchased for $0.2495. It also has a market capitalization of $11 million.