Blockchain expert Simon Dingle has refuted an analysis by TokenAnalyst which found that Bitcoin’s hash rate was highly centralised, leaving the cryptocurrency vulnerable to a 51% attack.
The analysis found that Bitcoin’s infrastructure is more centralised than it has ever been, with five companies controlling 49.9% of the blockchain’s total mining power.
This raised concerns about whether the Bitcoin blockchain could be vulnerable to manipulation by these mining companies, or even a 51% attack.
A 51% attack is when miners who control more than half of the blockchain’s mining power attempt to manipulate and prevent transactions to their benefit – usually to double-spend cryptocurrency.
Dingle said there is no cause to fear a 51% attack, however, as there are a number of things preventing this from occurring.
Miners vs nodes
“Firstly, Bitcoin miners alone do not make the rules for the network, but also have to work in consensus with node operators who do not earn block rewards and act as enforcement of network protocols,” Dingle said.
“Miners can not change the rules of the network without node operators agreeing.”
Secondly, Dingle said, the companies alluded to are mostly mining pools that let Bitcoin miners from around the world combine their resources and share in the profits.
“Each pool consists of many miners that can choose to leave the pool at any time and affect the voting power of the collective.”
“It is hard to imagine a situation where these companies could firstly agree with each other to attack the network, as they have no incentive to do so, and then also convince all of the miners they represent to follow suit,” he added.
Dingle said that even if they did these two things, node operators would not agree.
Viability of a 51% attack
Another problem presented by a 51% attack is the need to run mining hardware for an extended period of time with no guarantee of success.
“The other challenge of a 51% attack is that you would need to run it for an extended period of time, which would devour massive resources and potentially billions of dollars with uncertain outcomes,” Dingle said.
“Basically a gamble in which you stake a huge portion of the world’s computing resources, and will probably lose, during which time you have given up the mining profits from block rewards you would’ve earned during that period.”
Dingle asserted that Bitcoin remains decentralised and added that its governance will continue as normal.
“Nakomoto consensus has proven itself to be bulletproof and I don’t see much changing from this perspective until mining rewards dry up completely in the 22nd century,” he said.
“Even then, the network was designed to accommodate new paradigms in incentivising miners to continue processing blocks of transactions.”