When I was 16, camping out in an airport waiting to board my first International flight to England I began chatting with a U.S. Airforce pilot who had camped up beside my group. Asking him what it was like to fly at mach speeds he replied in a very sober expression, “you have to be alert at all times. You see a mountain or some obstacle appear on the horizon, you better adjust now or you’re going to slam into it.” Maybe he was adding dramatic effect, I’ve never flown at mach speeds at low altitudes, but I never forgot it and the analogy it carries…especially so fitting for technology and progress.
This past week in cryptocurrency shined an important (and hopefully sobering) light on a “mountain” that appeared on our industries horizon…and has actually been visible to us for far too long already: Pure Proof of Work’s inevitable fate.
By pure, I mean consensus algorithms that use nothing but the original Bitcoin proof of work consensus model without updates or algorithm changes to address its weaknesses relative to the ever expanding technology used to hash it. This means Bitcoin, today’s Ethereum, Zcash, Ethereum Classic, and other coins that comprise most of the value in the top 100 cryptocurrencies. The original, unmodified form of basic PoW that most of these coins use is dead. This demise may not be fully appreciated today, but as sure as a mach-speed plane, unable to turn in time is doomed to collide with a mountain in its path, these blockchains must soon either accept their lack of security in today’s world or fork and upgrade to more effective solutions, some of which have been pioneered by smaller projects that don’t command as much hash power and therefore already had to face and address their need for extra security.
I believe it’s actually irresponsible to deny it and assume economics, hash power, market, sentiment or even self-preservation of network participants will be protection enough.
Because Bitcoin is the biggest (by market cap) of the pure PoW cryptocurrencies in existence today, I’ll establish my arguments using BTC, but the same goes for all pure PoW cryptos.
1 – Economics
Bitcoin is often defended because it has the largest market cap of all cryptocurrencies and commands most of the capable hash worldwide that might be used to attack it. It is a “store of value” with proponents of this argument relying on few factors, limited supply combined with sentiment being one of the most prominent. They believe that this limited supply will inevitably drive the price up and, somehow, bitcoin will remain unequivocally secured and established.
Bitcoin has serious limitations in its adherence to the pure PoW model, and though the realities of competition has kept it free from major 51% attacks, I predict that it’s only a matter of time before it cannot command the majority of hash power that may be used to attack it. Lack of acceptance that consensus must use more than just PoW, even when checkpoints are an already accepted as necessary augmentation, leaves Bitcoin open to a catastrophic failure at some point in the future, which would affect the short term value of every cryptocurrency, even those that have addressed and solved the most glaring security challenges of a pure PoW model. Some projects have developed and are now using more advanced, more secure technology than pure PoW, and still remain fully decentralized. This is now an area where altcoins are leading, as they fill the security vacuum. With altcoins also having smart contracts and advanced currency capabilities and being potential stores of value as well, the landscape visible on the horizon in front of us looks quite different from the smooth sailing we have seen behind us with respect to projects relying on PoW and PoW alone. I’m not suggesting that Bitcoin should try to be everything that every other altcoin is becoming, but to rely on its single function as an argument of it’s security and sustainability while refraining from important technical advancements to secure its future, is foolish. The calculator is an important, valuable, and useful tool, yet people understood that it should be part of a more multifunction solution and now carry one around inside their smartphone.
The argument supporting Bitcoin’s status quo as a pure PoW blockchain and claiming it is perfect as is for whatever particular reason, is often combined with the following and includes an argument resting on self-preservation. In other words, why would anyone be nefarious and ruin their own wealth and store of value given the enormous hash power and cost it would take to attack Bitcoin? Bitcoin, then, relies on theoretical protection with idealistic boundaries.
2 – Hash Power and Hardware Capabilities
This is sort of a 2 in 1 argument. Bitcoin is considered by many, the most secure blockchain in terms of pure hash power. In other words, more hash power is directed at Bitcoin than any other cryptocurrency and, there are limits to sha256d hashing speeds, economically and in hardware capabilities therefore it would be too expensive to attack Bitcoin and by the same token, make no sense to the attacker to do any wrong in this case (self preservation).
To assume technology, A: is limited to what we know now and B: will remain within these bounds for long, is just ignorant. What happens when sha256d can be hashed faster, when hardware innovations change the cost and capabilities involved? How do we know it isn’t possible now? What’s more, will Bitcoin always hold its position as the “special” coin due to its leading network hashpower that simply will never experience a world where there is enough available hash power from other sources to use for a 51% attack? The argument that Bitcoin will remain special is not an argument that its technology can protect it, especially with its roots as a project that grew from a figurative David with its sights set on the Goliath of the banking industry.
Look at the enormous hash power presently directed at Bitcoin and ask, what happens if that hash power is suddenly directed at another, less special coin, as part of a 51% attack? Is that other coin ready to defend in some way against that event? And how does this then impact Bitcoin? I would submit that at the end of the analysis, if the only thing protecting Bitcoin and its current technology from being doublespent to death is the fact that it is uniquely “special” because it is biggest, then as it unarguably becomes centralized among the largest Bitcoin participants and/or institutions, in an ironic way, refusal to improve technology could create exactly the systemic centralization that Satoshi was trying to prevent.
Even so, the idea that Bitcoin can always and forever remain the largest cryptocurrency and “special” as such, ignores historical realities that teach us differently. Remember “alta-vista”, the pre-Google winner of the search engine wars? Remember AOL? MySpace? The economics of bitcoin as people understand them today, the economics involved in mining pure PoW, the sentiment and value assigned to bitcoin and any coin now, can change as rapidly as Bitcoin emerged, even unexpectedly to the masses.
The ETC attack of only a few days ago just put the entire Cryptocurrency industry on notice. Any project without an active solution in place of immunity or at least a defense against a 51% hash attack is in trouble. I would argue that even though it will likely still take some time for market dynamics to enable an attacker to reasonably mount a 51% attack on the largest pure PoW cryptocurrency, Bitcoin, without new defense against such an attack, it is a question of when, not if.
The other day I identified a small handful of projects that have developed and are using defenses against 51% hash attacks, only one of which has a provable solution of hash attack immunity in place.
It’s important to note, any solution that can be seen as real progress over the Bitcoin protocol must be one that is decentralized. While some cryptocurrencies solve the 51% hash attack problem with a fully centralized approach, that truly misses the point of the original Bitcoin paper. Centralized databases are a different technology altogether, and implementing a centralized solution to a decentralized technology changes it entirely, in which case it’s more akin to just trying to brand your centralized database with the latest catch phrases to gain attention, support or funding.
Here’s a short list I identified of projects who have developed a defense or a complete solution to 51% hash attacks. To my knowledge, all of these solutions are now active on the respective project main networks, with the exception of Litecoin Cash, which is running on testnet at this time.:
Komodo with dPoW defense
Litecoin Cash with its “Hive” algo defense
Zencash with Horizon as a defense
Verus Coin, the only project I know of with provable immunity using a decentralized new “Proof of Power” consensus
As an industry, we need to face the fact that pure PoW is an incomplete solution to decentralized blockchain security in this age of cheap, fungible compute power. Pure PoW-only systems must evolve, and it’s time we look beyond to understand what are the best solutions that have evolved to address that fact. If you are part of a crypto project, no matter how large, you ignore the notice provided by the ETC attack at your own peril and the peril of your network participants.
My request is this… if you know of a project with a 51% hash attack solution, please provide some information below. If you totally disagree with the main point of this post, please provide a reasoned argument to prove me wrong or explain why pure PoW systems will remain viable indefinitely. As an industry, it’s time we see the blunt reality and apply innovation. Those who don’t will be reduced to interesting historical experiments.