Five Main Principles Behind Blockchain Technology Part 9

The principle of security.

 

Here is how this adds to the security of the network. When you see the Bitcoin network adding yet another block to its blockchain today, you know that miners have spent tens of thousands of dollars on the electricity and really powerful hardware to create that block. If someone were to try and create a chain with an alternate history, they would need to spend at least the same amount of money.

With Bitcoin, the network has certain other factors that contribute to its security because attacking the network would take more than spending money on electricity. Speed and efficiency of Bitcoin mining hardware are some of these factors. The speed with which hardware can come up with hashes trying to guess a winning hash is called hashrate. Just like the price of Bitcoin, hashrate has been increasing exponentially since the launch of the network in 2009. Here is a chart for the hashrate of the network https://blockchain.info/charts/hash-rate

For any attack with the goal of rewriting history on the Bitcoin network to be successful, the attackers would need to have higher hashrate that all other miners on the network. It will be the efficiency of the hardware that they use that will determine how much electricity they will need for the attack. For instance, if the hardware is 50% efficient compared to the average efficiency of the hardware on the network, then the attackers would need to run it twice as long as someone with an ASIC card, meaning that the attackers will need to spend double on electricity.

 

ASIC Cards

Currently, if someone were to attack the Bitcoin network using hardware other than ASIC cards designed specifically for the Bitcoin network, the efficiency would be thousands time less and a ten thousand dollar attack would become a ten million dollar attack. This is the reason why, when discussing potential attacks on the Bitcoin network, most experts do not worry about someone using a data center with a lot of computers or handful of supercomputers. A small number of ASIC cards can perform better than a large number of computers not tweaked for producing hashes quickly.

An ASIC card is a very expensive piece of hardware and Bitcoin-specific ASIC cards can do only one thing really well, which is create hashes on the Bitcoin network. This means that if someone were to buy an ASIC card and not be using it to mine Bitcoins, they are essentially losing the money. For this reason, it is highly likely that most ASIC cards today are being used by miners on the Bitcoin network to mine Bitcoins and create blocks of the blockchain the way the network wants them created. Any meaningful number of ASIC cards not being currently used would cost a very large amount of money. The consequence of this is that it is very unrealistic to assume that someone, including large corporations and governments, can achieve hashrate that is more that 51% of the current hashrate of the Bitcoin network.

 

Bitcoin’s layers of defense

The Bitcoin network has several other layers of defense and these layers exist because of the incentive model that the network uses for the creation of new coins. If an attacker were to attack the network, he or she would need a lot of hardware that can only be used to mine coins on the Bitcoin network. This means that the price of the hardware is linked to the price of Bitcoin. When the price is going up, manufacturers of the hardware can be selling it for more money and make more profits. If the price were to dip significantly and were to reach, say, $1,000, manufacturers would simply not be able to sell the hardware for a lot of money because it would not be economically feasible for miners to be buying that hardware.

When the price of Bitcoin is high, there are a lot of people interested in becoming a miner on the network. This means that existing miners can easily sell their hardware to new incoming miners. If the price of Bitcoin were to go down, which would absolutely happen in case of a successful large scale attack, the hardware would be worth less, too. In addition to this, many of the miners mine on the Bitcoin network because they believe in the principles of the network and the idea of decentralized currencies taking over the world. For this reason, they may not be selling the coins they get as a reward for block creation. If they are keeping the coins, then they are also interested in the price of the coins going up, which means that they are interested in not selling their hardware to someone who could potentially perform an attack on the network. Moreover, if they were to notice that someone is accumulating hardware and not using it for mining, they would bring it up to the attention of the community and start brainstorming ways to interfere with the plans of the potential attacker.

However, all of this does not change the fact that other than strengthening the network, the electricity and computational operations go to waste.