Many supporters have come to see bitcoin as the model of the perfectly secured digital good. This view owes itself in no large part to the blockchain, the distributed database that secures units of the digital currency by allowing users to add and verify transactions without a third-party. But, as has long been detailed by academics, the balance of incentives that keeps the blockchain in operation is ever at risk of disruption.
Perhaps the most infamous potential attack, known as a ‘ 51% attack ‘, would find a single entity introducing a version of the blockchain that it controls and is accepted as valid. With as little as 40% of the bitcoin mining network’s hashing power, as mapped out by the white paper by bitcoin creator Satoshi Nakamoto, this is possible.
But, at 51% of the hashrate at a given point, such an attack would be almost guaranteed to work.
To date, this threat has reared its head rarely, but new changes to how the bitcoin network incentivizes key participants have stoked fears that a 51% attack could again become viable.
For example, some are worried that the upcoming decline in the number of new bitcoins minted daily will lead to a corresponding drop in the number of miners that today rely on this income to pay for their operations, thus securing the blockchain. Miners compete to add new blocks to the blockchains, producing newly minted bitcoins as a reward.
Expected to occur on 9th July, the event brings this theoretical attack out of the realm of possibility and into probability, given that exactly what will happen when the halving point is reached is unknown.
Practically, with fewer bitcoins being produced per block (from 25 BTC today to 12.5 BTC after the halving), the reward for mining may also be reduced by half, should the […]
