Friday, September 17, 2021
HomeNewsBitcoin SV - The 51% attack and why the original Bitcoin is...

Bitcoin SV – The 51% attack and why the original Bitcoin is completely safe

Because only if you understand that you will know why I warn against “small” crypto projects or the associated coins / tokens.

The story behind the creation of Bitcoin SV (BSV)

As is well known, the Bitcoin (BTC) from Satoshi Nakamoto saw the light of day on January 3, 2009. Satoshi himself had made certain determinations, namely:

A block of the Bitcoin blockchain can be a maximum of one megabyte in size. The block time should be 10 minutes and every 210,000 blocks the miner’s reward, which was initially 50 new Bitcoin per block, is halved.

These determinations have been made arbitrarily – and have been causing certain problems for some time. Because by limiting the block size to one megabyte, only 2,000 to 2,500 transactions fit in one block. As a result, the Bitcoin network can only process three to four transactions per second, which is far too little for a global payment network.

In other words: Bitcoin itself may be good money because it is free of censorship and cannot be increased at will. However, the Bitcoin network is not a good payment network. We can leave it open whether Satoshi Nakamoto was not aware of this, he simply didn’t care or, in the end, he didn’t want to create a payment network with the Bitcoin (network). In any case, the fact is that some Bitcoin fans also wanted such a functioning payment network.

That is why there were various suggestions as to what changes could be made to Bitcoin in order to improve this payment function. After long discussions, a consensus was actually found. In the course of “SegWit”, for example, the intended use should no longer be written into the blockchain, so that a single transaction would take up less space in a block. At the same time, the block size should be increased from one to two megabytes.

At the last second, however, the negotiated deal fell through because Satoshi Nakamoto’s specifications were too sacred for too many. Although the latter had explicitly mentioned increasing the block size, if necessary, as a possibility in his white paper, this was rejected at the last second by the majority of the community. Thereupon the advocates of the “update” decided to split off from the original Bitcoin by means of a hard fork: Bitcoin Cash (BCH) was born.

So that you can classify it correctly: Up to block 478,559, the blockchains of Bitcoin (BTC) and Bitcoin Cash (BTC) are absolutely identical. Then Bitcoin Cash (BCH) was split off, which meant that every investor who held x Bitcoin (BTC) at the time now also held x

Bitcoin Cash (BCH) had. You can perhaps compare this with a so-called spin-off on the stock exchange. Later they argued again within the Bitcoin Cash community.

Bitcoin SV (BSV) – just like Bitcoin Cash ABC (BCHA) – was split off from Bitcoin Cash (BCH). The driving force behind the first Bitcoin Cash fork Bitcoin SV was the Australian Dr. Craig Wright, who calls himself Satoshi Nakamoto. Most of them, including myself, consider him to be a “Faketoshi”, especially since he still owes the (actually simple) proof of being Satoshi Nakamoto to this day.

Brief explanation: Since Satoshi Nakamoto is the founder of Bitcoin (BTC), the first Bitcoins belong to him, of course. Because he was the only Bitcoin miner at the time. So if someone wants to prove that they really are Satoshi Nakamoto, all they have to do is move one of those first bitcoins ever created. So the proof of being Satoshi Nakamoto is actually quite simple. Dr. Craig Wright refuses to do this.

However, it is primarily important to know for you: Bitcoin SV (BSV) is a fork of Bitcoin Cash (BCH) – and Bitcoin Cash (BCH) in turn is a fork of Bitcoin (BTC). There are also other forks of Bitcoin (BTC) such as Bitcoin Gold (BTG). But Bitcoin SV (BSV) is not a direct fork of Bitcoin (BTC). The abbreviation SV stands for Satoshi Vision, because the main initiator of the fork, the Australian Dr. Craig Wright, claims to be Satoshi Nakamoto. Most, including myself, however, consider him a “faketoshi”.

Price fall after a 51% attack

Now that you know what Bitcoin SV (BSV) actually is, we come to the topic of the 51% attack. You have to know: A blockchain is a decentralized database that basically anyone can make changes to. However, in order for a change to take effect, more than 50% of those who work on this database must agree to this change (consensus).

The database is managed by the so-called miners, who receive a corresponding reward for doing so. That all sounds very good at first, because it sounds absolutely democratic. But … in principle, a democracy can unfortunately always be taken to the point of absurdity. For example, a change in the Basic Law in the Federal Republic of Germany requires at least a two-thirds majority in the Bundestag. But what if a party got 70% of the vote in an election?

Then this party could in principle rule through and even change the Basic Law of the Federal Republic of Germany almost at will (apart from the articles with a so-called “eternity clause”!). It is similar in the world of cryptocurrencies. So if someone controls more than 50% of the computing power that is used to operate a blockchain, they can change this blockchain at will.

Specifically, it could prevent transactions or, in the worst case, possibly even reverse transactions that have already been made. This could turn it into the so-called “Double Spending”, i.e. the double use of one and the same coin. Incidentally, this is also the reason why a quantum computer could be dangerous to Bitcoin – as it is today. Because this would of course have a gigantic computing power.

Exactly such a 51% attack occurred at Bitcoin SV (BSV) at the beginning of the month. Based on the corresponding regulation in German professional football, this would actually have to be called a 50 + 1 attack, but you certainly know how this is to be understood in principle. If someone controls more than 50% of the computing power of a blockchain network, they control that network.

In early August, for example, considerable hash power was used to temporarily take control of the Bitcoin SV network. Specifically, this attack began on Tuesday, August 3, 2021, around 11:45 a.m. and resulted in up to three versions of the Bitcoin SV blockchain being generated at the same time. The attacker controlled the network for at least three hours. Unfortunately, we do not know whether he ended the attack himself or whether the operating company nChain was able to fend off the attack.

As a result, Bitcoin SV (BSV) fell more sharply, but this has since been compensated for. Finally, the question arises as to what lessons one can and of course should draw from this story.

Bitcoin (BTC) or Ethereum (ETH) absolutely safe!

Well, first of all, the natural lesson is that a 51% attack is dangerous. In the worst case scenario, you can even lose your coins or tokens in whole or in part. In addition, a successful attack can lead to significant price losses at short notice. However, if the attack can be warded off quickly so that the damage is kept within narrow limits, something like this can offer traders a good (re) buying opportunity.

Although Thorchain (RUNE) has not recently had a 51% attack, there have been two hacker attacks in just one week. Fortunately, however, it was a white hat hacker (that’s what hackers are called who only point out weaknesses and don’t want to harm anyone) so that they could be fended off. For a short time, the course from Thorchain (RUNE) went to diving station anyway, but has now doubled compared to the lows.

In the past we have already seen several 51% attacks, for example with ReddCoin (RDD) or Verge (XVG). None of these projects was completely destroyed as a result. However, ReddCoin (RDD) is no longer one of the top crypto projects and Verge (XVG) could not quite build on its best times. However, the latter also had its best time in 2017, when a certain John McAfee touted him at short notice.

With Bitcoin SV (BSV), a somewhat larger project hit at the beginning of August, the market capitalization here is around three billion US dollars. But it is also true that the smaller a project, the more at risk it is. At least if a traditional blockchain is used. Not only, but also for this reason, I always advise against larger investments in crypto projects that are too small.

I also consider the two market leaders, Bitcoin (BTC) and Ethereum (ETH), to be absolutely safe. In particular, the hashrate in the Bitcoin network is so high, even if the policy of the Chinese Communists has in the meantime led to a slump, that only a quantum computer could actually carry it out. By the way … the more energy the Bitcoin network consumes, the more secure it is and the less likely such an attack becomes. Paradox, right?

I regularly observe and comment on the development of Bitcoin and other cryptocurrencies in my premium service “TAK”.

Also read:

Hasan Sheikh
Hasan, who loves technology and games, is studying Computer Engineering at Delhi JNU. He has been writing technology news since 2016.


Please enter your comment!
Please enter your name here

Trending News

Recent Comments