Post
Topic
Board Bitcoin Discussion
Re: Ethereum could afford a 51% attack on Bitcoin, and profit greatly from it
by
mjdamgaard
on 08/08/2024, 08:08:08 UTC
Your hypothesis that a smaller coins' stakeholders could profit if a bigger competitor is successfully attacked, is based on the assumption that the cryptocurrency market works like a market of goods (say: apples) where sales are the figure to analyze. This means: there is a "static" necessity creating a demand, which is fulfilled by several competitors with a certain market share, and if one of them sells less, then the others normally sell more.

The crypto market however doesn't behaved like that historically. The "competitors" are often dependant one from another (one crashes, the others crash too, or vice versa). And there are also other products outside the crypto space (gold, stocks, bonds, "speculative assets" in general) partially covering the same demand. This means that while a "market" exists, if one competitor loses market cap, other coins in most cases do not benefit directly from that. Instead there is a very complex interdependence with dependencies to the outside world (e.g. vs the bonds market via the interest rate). And the market for strange reasons in some years contracts 70% and then again expands 500% ...

You would have to find cases in the real world where a similarly complex market exists and then such a predatory attack was successful, to support your claim.

Let's continue speculating in this direction. Imagine a ETH->BTC attack occurs. How can you prevent that people flee in extreme numbers from the whole crypto space because trust has been eroded, and instead invest again in what they have invested until Bitcoin appeared in 2009? Then Bitcoin, Ethereum and most other coins would crash.

It's a good point. I personally think that this is one of the strongest arguments against the possibility of a "Rival Goldfinger attack," especially if you also the point that a part of the public might take Bitcoin's side, being the victim of the attack, and think negatively about Ethereum.

To the latter point, it is worth noting, however, that an attack might only require a fraction of the stakeholders of Ethereum. And they can potentially do it anonymously, as I point out in my preprint. So a majority of the stakeholders might look to have their hands clean. Furthermore, as I also said in a recent reply:
This is assuming that the Ethereum community wants to be seen as innocent. But with enough campaign money, and enough time, both of which they have, I personally think that they will be able to convince a large part of the public that a switch to PoS is better; both for security, for reduced operational costs, which the users and investors ultimately have to pay, and not least for the planet, which is a topic that seems to generally be efficient in swaying a large part of the public.


Now, to your point about the price of Bitcoin and Ethereum being correlated, you are first of all right that they are. And you mention that this is because they partially cover the same demand. People compare investing in crypto to other markets, like how they are comparing investing in precious metal to other markets. But this doesn't mean that if, say, gold all of a sudden loses its value/demand (imagine that all gold turned radioactive all of a sudden, or something like that), then silver wouldn't increase in value. No, it likely would.

And similarly if Bitcoin was out of the picture, investors would turn to some of other options whenever the choose to invest in crypto.

Also, regarding the trust in crypto, if only PoW has this vulnerability, then as long as investors are aware of this, there's no real reason why they couldn't still trust PoS blockchains (assuming that they already do).