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Nano is changing the world and Venezuela is next

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Cryptocurrencies are saving lives

Thanks to cryptocurrency and kindness, poor families in Venezuela can buy food. First, it was Bitcoin Cash helping feed the poor in Venezuela. And now its the turn of Nano.

The Nano donations were gifted by kind Reddit users to help Venezuelan families buy much-needed food. Venezuela is among the world’s poorest countries even though it has the largest proven oil reserves in the world.   87% of its people live in poverty.  Its population is 32.3 million. That means around 28 million people living in poverty.

This heartwarming tale of kindness, hope and cryptocurrency began when a Reddit user from Venezuela called Hector received a 0.5 Nano donation from another Reddit user. This is equivalent to an entire month’s salary in this poverty stricken South American country.

For those of you who are unfamiliar with Nano, it is a cryptocurrency project that focuses on instant and feeless transfers for day-to-day transactions. Nano is based on a different structure to bitcoin called a DAG.  It was designed as a ‘digital currency for the real world’ and this is a perfect example of what the cryptocurrency set out to achieve.

Hector created a thread in /r/nanocurrency called “Got my first 0.5 NANO – venezuelan user” to share his experience about the Nano donations. As a result, more people started to send more Nano donations to his cryptocurrency wallet and it snowballed!

One week later, Hector was able to buy even more food to help others in the wider community. He bought 102 kgs (224 lbs) of food and donated it amongst his friends and neighbours as well as his family.

And only a few days ago he exchanged 61 NANO for 300 kgs of food with a different supplier. As a result, 40 more families benefited from the donations and were able to buy much needed food.

Nano donations life-changing

Hector described the reaction he received when he told people about the Nano donations as “amazing”. What’s even more amazing is the fact that so many of them actually know what cryptocurrencies are. Others were sceptical or indifferent and were only interested in the food. However, when Hector told them about how the Nano donations were helping them buy the food they were overjoyed.

At the time of writing a total of 90,1 NANO has been invested (equivalent to $230 at the time of the investment) in 402 kilograms (884,2 lbs) of food.

Adopt A Family Nano Project

The project launched in /r/nanocurrency is called Adopt a family  It will focus on helping Venezuelan families by means of Nano donations.

It is a fabulous and heartwarming initiative.  So many families are benefiting from the project. Hector hopes hundreds more families will also benefit from it. And in turn, Nano will become more familiar among the Venezuelan population and cryptocurrencies in general.

Long live Nano!

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Battle of the stablecoins: Tether vs Dai

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Stablecoins – aptly named cryptocurrencies designed to be more market-stable and heralded as a way to strengthen the commercial case for blockchains.

In this post, we will evaluate two stablecoins, Tether vs Dai. Called the “holy grail” of cryptocurrency, stablecoins are an exiting proposition for  many businesses who often shy away from the volatility associated with the sector.

What is a stablecoin?

Stablecoins, in their most ideal form, are simply cryptocurrencies with stable value. An optimal cryptocurrency should have the following: price stability, scalability, privacy, and decentralization. A “stablecoin” is a cryptocurrency that is backed by a fiat currency reserve which corresponds with the coins in circulation. Usually, a stable coin is pegged to U.S. dollar but is not tied to a central bank and has low volatility.

This makes the usage of a cryptocurrency as a medium of exchange more viable since the price of a stablecoin should relatively unchanging; being the representation of a known amount of an asset.

Compare this to non-stable cryptocurrencies like Bitcoin and Ethereum; these are highly volatile, and on any given day, it is common to see a fluctuation of 10-20%, making the usage of most cryptocurrencies for daily transactions inconvenient at best, or impossible at worst.

The main types of stablecoins

There are various types of stablecoins in the cryptocurrency market, which can be divided into three main categories, as follows:

  1. Fiat-collateralized – this is the simplest method of creating a stablecoin, and is used by one of the top stablecoins today (Tether). Essentially, fiat-collateralized stablecoins are backed by a real-world asset. This real-world asset is controlled and owned by a central entity.
  2. Crypto-collateralized – these are similar in concept to fiat-collateralized stablecoins, except that crypto-collateralized stablecoins are backed by another cryptocurrency as opposed to being backed by a real-world asset.
  3. Non-collateralized (i.e. seigniorage shares) –  the main non-collateralized approach is the seigniorage shares method. The seigniorage shares method uses smart contracts that automatically expand and contract the supply of the non-collateralized stablecoin using algorithms to maintain its value.

Who issues stablecoins?

Stablecoins are issued either by a central authority or a Decentralized Autonomous Organization (DAO). A central authority behind a stablecoin is Tether which issues new coins based on the guarantee provided, allowing for more stablecoins to enter in circulation if the reserve increases. The benefit of using a DAO rather than a centralised issuer is that DAOs allow for additional transparency if done in a decentralized manner. Dai is an example of a DAO stablecoin and runs on the Ethereum network.

Tether vs Dai: what you need to know

Tether: stablecoin pegged to the US Dollar

Tether was launched as RealCoin in July 2014 and was rebranded as Tether in November 2014.

Tether is the best-known stablecoin and often the most traded crypto asset after bitcoin. However, it is a highly controversial stablecoin, not because of how it works, but due to questions over whether it’s actually dollar-backed with fiat reserves.  What’s undisputed is that over-reliance on a centralized coin that accounts for $4 billion of daily trade volume is a bad thing.

The concept of Tether is simple, on paper at least. For every tether that exists there is a US dollar, meaning the value of one tether should always match one dollar. This is a centralised IOU model, whereby the central issuer (Tether the company) holds the US dollars on behalf of the users to uphold the value of tether and provide price stability.

But tether has been shrouded in controversy ever since questions were raised about whether Tether had the billions of US dollars in the bank to back up the billions of tether in issue. The company dismissed its first auditors and, although it insists it is fully audited, the evidence produced so far has been unconvincing. There is major doubt that it has the $2.7 billion to match the 2.7 billion tethers in circulation and that the stablecoin is being pumped out with artificial value just to prop up the prices of other cryptocurrencies. Supporting this is the fact that, while exchanging dollars for tether is easy enough, swapping your tether back into dollars is thought to be considerably harder. The company has stated on several occasions that it was unable to convert any tethers into dollars. Although some argue this sets off warning sirens about how much dollar it has in the bank, others say it is because it wants people to exchange their tether into other cryptocurrencies, like bitcoin, and then convert that into fiat currency.

Tether is a great example of the highs and lows that the crypto community endures. The idea of injecting crypto power into fiat currency is welcome. However, all of its problems stem from the fact it is centralised. Users have to trust Tether that it has the money it says it does and that it will facilitate the transactions on the network and, so far, Tether is yet to earn its badge of trust.

Dai: decentralised stablecoin built on Ethereum

With the above in mind, competition for Tether is to be encouraged. And it arrived on 18th December 2017, when MakerDAO announced the launch of their Dai stablecoin

Dai is a decentralized dollar-pegged stablecoin from MakerDAO that operates as an ethereum token. The buyer places ethereum in the Maker core smart contract and receives a dollar equivalent of Dai in return. It’s tradable on the likes of Bibox, Ethfinex, IDEX, and Bancor Network.

With all of Tether’s problems spawning from the fact it is centralised this stablecoin could be a game changer. Dai is a decentralised cryptocurrency that is built around Ethereum, a much larger cryptocurrency that is centred on smart contracts to make it stand out from other top cryptocurrencies like Bitcoin.

Ethereum is used as collateral to support the price of Dai. The Ethereum is held in a smart contract, which means there is not a need for a central authority to hold it on behalf of the users.

According to MakerDAO,  the age of stability has arrived.  However, Dai is not free from problems. It may be decentralised but the underlying asset that gives Dai its value is nowhere near as stable as the fiat currencies like the dollar.

Tether vs Dai stablecoins: final thoughts

The 3 key characteristics of cryptocurrencies are that they are trustless, immutable, and decentralized.  Tether has done nothing to convince the crypto community that a centralised cryptocurrency is the way forward. If part of cryptocurrencies is shutting the door to so-called opaque and dishonest banks then the very least a centralised cryptocurrency has to do is prove it can be more transparent and do a better job at managing people’s money.

Dai wins points for being decentralized but the foundation it is built on – the thing that gives this stablecoin its stability – is itself not free from volatility.  Its fate is in the hands of Ethereum.

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Bitcoin (BTC) vs Bitcoin Cash (BCH): What’s The Difference?

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In this post, we will be looking at the difference between Bitcoin (BTC) vs Bitcoin Cash (BCH).

Bitcoin (BTC) is a digital currency which was created in 2009 by a mysterious entity using the alias Satoshi Nakamoto. Eight years later on 1st August 2017, a ‘hard fork‘ of Bitcoin (BTC) created Bitcoin Cash (BCH).

Two Different Idealogical Camps: Bitcoin (BTC) vs Bitcoin Cash (BCH)

There are essentially two different idealogical camps in the the Bitcoin (BTC) vs Bitcoin Cash (BCH) debate.

It all started as a discussion about how to change Bitcoin. Something was needed to help it cope better with the increasing number of people using the cryptocurrency.

However, after years of debate, two different ideological camps arose with opposing views on how Bitcoin should scale its protocol. The miners wanted Bitcoin to use bigger blocks while the users and developers wanted to implement SegWit, an upgrade that would compress transaction data, so more transactions could fit in each block.

The argument about how to scale Bitcoin has centred around restrictions imposed by the original design of Bitcoin. These limited the way in which transactions were processed and put into the public ledger of transactions, called the blockchain.

The rationale for this was to put the security of the system ahead of functionality which, given the small number of people using Bitcoin in those early days, wasn’t an issue.

The options for lifting this restriction however became a sticking point between different groups of developers and their various supporters. One group, consisting of the Bitcoin core developers, decided on a gradual approach that would first make more space in the ledger by shuffling how things were stored. And then as a second step, increase the size of the “blocks” or groups of transactions that were added to the blockchain (the ledger that records all of Bitcoin’s transactions).

Another group of developers lead by ex-Facebook Developer Amaury Séchet, however, disagreed with this approach. They didn’t believe it would actually go ahead and came up with a different design. This essentially meant diverging from the existing Bitcoin blockchain and creating their own version.

The proposal of the Bitcoin core developers, called SegWit2x, wanted to improve the way Bitcoin worked by saying that signatures could be moved to a separate piece of paper, one that is filed along with the sheet containing the transaction information. Because there is more room on the paper, more transactions can be written down. The other proposal was to set a timeline through which the system would allow two sheets of transactions instead of just one.The developers behind Bitcoin cash didn’t agree with the idea of separating the signatures from the transaction. They thought this was a “hack”.

Bitcoin (BTC) vs Bitcoin Cash (BCH): Same Goals But Different Directions!

The goals of the two camps were the same, but neither was willing to compromise on how to get there. Therefore, Bitcoin forked into two different currencies, each sharing a common transaction history from before the fork. Bitcoin Cash is the chain supported by the miners who wanted larger blocks, and the regular Bitcoin chain is the one supported by the core developers.

In terms of the practical intents and purposes of most users, there is very little difference. However, it is imperative to understand that Bitcoin (BTC) and Bitcoin Cash (BCH) are now two entirely separate currencies.

SegWit implementation

Supporters of Bitcoin Cash looked at SegWit as being an inadequate solution to the problem of scalability. It was also against what Satoshi had envisioned, especially with off-chain solutions.

Even if the upgrade was done, the pro-Bitcoin Cash (BCH) team felt that the way forward lacked transparency and would undermine the blockchain’s decentralization and democratization.

In short, the difference is that BTC chose to implement SegWit and has the Lightning Network while the BCH community disagreed and pursues on-chain scalability.

Proof-of-Work (PoW) Consensus Algorithm

Both Bitcoin (BTC) and Bitcoin Cash (BCH)  run on the Proof-of-Work (PoW) consensus algorithm. 

A Proof-of-Work (PoW) coin uses miners to confirm transactions on the blockchain. This isn’t the most environment-friendly option, as a large amount of energy-consumption is involved; but it is the most effective, compared to other consensus algorithms like Proof-of-Stake (PoS).

Besides not being environmentally friendly and slow there is also an added risk of a 51% attack on the network.

Key Differences Between Bitcoin (BTC) vs Bitcoin Cash (BCH)

One key difference between Bitcoin (BTC) vs Bitcoin Cash (BCH) is the difference in block size. Bitcoin has a 1MB block size, while Bitcoin Cash originally had an 8MB block size.  In May 2018 Bitcoin Cash initiated a hard fork to increase the size of the BCH block from 8MB to 32 MB. The upgrade also added new OP codes to its codebase.

Bitcoin Cash (BCH) protocol allows for more transactions per second which translates to faster payments and lower fees.   However, Bitcoin has much greater security and stability, as there is more mining support and infrastructure behind it.

So what does the future hold for Bitcoin (BTC) vs Bitcoin Cash (BCH)? Do you think there will be a greater demand for Bitcoin Cash (BCH) than Bitcoin (BTC) in the future? We will have to wait and see!

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Sidechains: Everything You Need To Know

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Sidechains are an emerging technology that allows tokens, coins and other digital assets from one blockchain to be used in an entirely separate blockchain, securely, and then be moved back to the original blockchain if needed.

How Do Sidechains Work?

A sidechain is a separate blockchain, attached to a parent via a two-way peg. This enabled the interchange slitty of assets between the blockchains. The original, parent blockchain is referred to as the ‘main chain’ and any child blockchains are referred to as ‘sidechains’, however some such as Ardor refers to them as ‘childchains’.

The first step in transferring digital assets, is for a user to transfer their assets (such as coins) to an output address where they are locked and cannot be spent. Once that transaction is completed, a confirmation is sent across the Cains, followed by a brief waiting period for additional security. After that period has expired, an equivalent amount of assets are released on the sidechain, allowing the user to spend them there. The same happens in reverse, when transferring back to the main chain.

What’s The Point

Sidechains allow cryptocurrencies developers to test beta versions of alt coins or software updates on a blockchain before pushing them to the main chain. Things like issuing and tracking share ownership can be tested on sidechains before moving them to main chains. They also allow cryptocurrencies to interact with one another.

Sidechains also allow newer technologies and ideas to be present on older cryptocurrencies. For example, Bitcoin lacks turing-complete smart contract abilities; however side chains can enable that feature. See about Rootstock below.

Examples Of Sidechains

Liquid

Liquid is a commercial sidechain.  If facilitates immediate transfer of funds between exchanges without having to wait for the delay of confirmation in the Bitcoin Blockchain. Liquid is available to users of all participating Bitcoin exchanges.

Rootstock

As mentioned, Bitcoin lacks turing-complete smart contract abilities; however Rootstock is a smart contract platform sidechain with a two-way peg to Bitcoin. This means that effectively Bitcoin minders can participate in the smart contract revolution by reading them with merge-mining.

Conclusion

Sidechains are an exciting new technology in the cryptocurrency space, although they are not without their security concerns. I do think the possibilities of expanding existing currencies like Bitcoin through the addition of new ideas such as smart contracts will aid scalability in the old cryptocurrencies and prolong their live.

As with all cyrptocurrencies, the side chains that succeed will be those that are made to fill a niche, not ones that are used to generate an income and therefore I foresee  side chains with no coin themselves, such as Rootstock, taking off.

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Tezos Blockchain Platform Goes Live

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Tezos Foundation took to Twitter on Monday 17th September to announce that the mainnet is now live.  The Tezos Foundation raised $232 million in July 2017 to build the network and issue a new type of cryptocurrency to its backers in one of the largest-ever initial coin offerings, and launched an initial version of the network one year later after months of delays. 

The announcement marks an important development for one of the most successful ICOs in the past two years:

What is Tezos?

Tezos is a blockchain system designed to govern and upgrade itself through establishing a true digital commonwealth. Tezos facilitates formal verification, a technique which mathematically proves the correctness of the code governing transactions and boosts the security of the most sensitive or financially weighted smart contracts. Stakeholders of the blockchain can vote on protocol amendments to reach social consensus on development proposals.

Tezos is the vision of Arthur Breitman. French-born, Breitman has significant experience working for large corporates like Morgan Stanly and Goldman Sachs. Together with his wife Kathleen, they now manage the cryptocurrency project from a San Francisco office.

Tezos is quite similar to Ethereum and while cryptocurrencies like Bitcoin have stuck to their guns, Tezos sees the future of cryptocurrency as an upgradable path to success. As new innovations unfold, Tezos predicts that their blockchain will remain on the cutting edge.

However, the project has had its fair share of controversy from the start including a number of lawsuits. 

Bitfinex announces Tezos listing

Soon after the official mainnet announcement, Bitfinex, the world’s leading digital asset trading platform, which offers state-of-the-art services for digital currency traders and global liquidity providers, also announced the listing of Tezos, to its trading platform. 

The appearance of XTZ trades on Bitfinex was immediately followed by selling activity. A bit later, the exchange confirmed the listing in a tweet:

The newly introduced token listing has a market capitalization of $1.1 billion USD and is firmly positioned among the world’s top 20 coins, representing a significant addition to the Bitfinex trading platform.

“The new listing of Tezos to the Bitfinex trading platform represents a significant milestone, adding yet another top 20 coin to our services. Bitfinex is committed to providing investors with unlimited trading opportunities by offered a growing array of diverse coins. Tezos is an elite token, with a market cap of $1.1 billion, which will provide a new and exciting investment avenue for our users,” said Jean-Louis van der Velde, Chief Executive Officer of Bitfinex.

“Today’s announcement continues the strong wave of activity within the Bitfinex community, as we continue to anticipate the needs and demands of the digital asset community. We look forward to working with Tezos and building upon this latest achievement for Bitfinex,” concluded van der Velde.

Tezos price spike then dip

According to CoinMarketCap, Tezos went from $1.30 on the day before the announcement to $1.66 the day after.

The Bitfinex development has raised hopes of inclusion on more exchanges soon. XTZ supporters believe the sell-off is temporary:

What was supposed to be a celebratory moment for the project and its investors quickly went downhill, as the price collapsed by almost 20 percent, erasing $170 million from its total market cap a little less than an hour after the announcement. This amounts to almost as much as the Tezos Foundation managed to raise in its July 2017 ICO.

However, Bitfinex volumes immediately increased, making up 20% of XTZ trading, according to updated information from Coinmarketcap. As of 7:00 UTC, volumes were above $1.4 million in 24 hours, with more activity anticipated.

The project expects renewed activity and robust price appreciation to make up for the losses. The launch of the crypto ecosystem comes relatively late and will have to prove its consensus solution is better compared to other platforms.

According to Tezos Scan, the network currently seems to be functioning fine, with a new block once every minute.

Update 18/09/2018: 1530

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Coinbase adds new currency

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Ever the trend setter, Coinbase has once again, rocked us with another exciting announcement about its currency listings.

Coinbase announces support for GBP withdrawals & deposits within weeks

The CEO of Coinbase has confirmed that they will be supporting GBP for withdrawals and deposits within the next few weeks. While it might be expected that a new currency coming to Coinbase would result in furious amounts of market activity, it has not.

Are you excited? No, nor were we. But we dug into the details anyway.

Coinbase currently uses Estonian bank LHV to process payments. These are all done in euros. UK users have to withdraw euros from Coinbase using SEPA transfers or via mobile banking apps such as Revolut.

The UK economy is the fifth largest by GDP and 6% of Bitcoin transactions are made in GBP. So, according to Feroz, this opens Coinbase up to the largest market in Europe.  This is a market which can and has been buying cryptocurrency without this GBP withdrawal support already. GBP deposits have been available for a while now, thanks to a partnership with Barclays. However, withdrawals have not been possible before.

In March, Coinbase partnered with Barclays Bank which opened them up to both GBP payments and the Faster Payments Scheme. This is one of the first collaborations where a UK bank has agreed to accept money that was previously held as a cryptocurrency.

As the website currently states, “Coinbase will send your funds as EUR when you make a withdrawal. If your receiving bank account is denominated in GBP, your bank will usually convert EUR to GBP when they receive the funds.”

The CEO confirmed that support for GBP withdrawals and deposits will be rolled out over the next few weeks.  UK users will be able to deposit Sterling and withdraw Sterling out into their bank accounts using faster payments.

In an interview with NewsBTC, he also said that Coinbase Custody has had a ‘lot of interest’ and that they have had to restrict how many investors they can take on.

Feroz was also asked if Coinbase will always support the same coins and tokens on both their consumer products and their institutional products. He made reference to recently-acquired Paradex, an exchange based on the 0x protocol which offers support for ERC20 tokens. Coinbase also said recently that they plan to support ERC20 tokens.

Feroz said: “We will start to take a product-specific view in terms of the regulatory profiles of coins and the service they’re providing and if that allows us to extend it beyond the four coins we have, then that’s what we’ll do. You will see our businesses as they grow, the coins supported will maybe diverge. One example of that is Paradex which today is live in Europe with eight coins.”

Feroz also commented while they are looking for regulatory certainty, it is not getting in the way of adding new tokens. He said Coinbase will ‘continue to look into tokens that aren’t securities and add them in the future.’ Pointing out their new broker-dealer and ATS licences in the US, he said that they will be able to offer tokens that are registered with the SEC.

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The rise of the 51% attack

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The prospect of a 51% attack is on the rise, and a threat for which the cryptocurrency community is woefully unprepared.  Therefore, it has become essential for cryptocurrencies to find the solution to this problem ASAP.

What is a 51% attack?

The short answer is that a 51% attack is when a miner or group of miners controls more than 50% of a network’s mining power, also known as hash rate or hash power. With most of the power, they can therefore control the network, in terms of what it accepts and confirms. Using this, a attacker could theroretically spend a coin multiple times by refusing to confirm transactions, and do a whole host of other malicious things.

Hash Rate

A network’s hash rate is a measure of the rate at which hashes are being computed on the network, a process that is known as hashing. Simply put, hashing involves taking an input string of a given length, and running it through a cryptographic hash function in order to produce an output of a fixed length.

Hashing on the Bitcoin network requires the use of Secured Hashing Algorithm 256 (SHA-256), which is the cryptographic hash function that is used on the Bitcoin network. Numerous cryptocurrencies make use of different hash functions e.g. Ethereum utilizes the ‘Ethash’ hashing function, whilst Litecoin’s cryptographic hash function is ‘Scrypt’.

A network’s hash rate can usually be measured in the following denominations:

  • 1 KH/s (kilohash per second) is 1,000 (one thousand) hashes per second
  • 1 MH/s (megahash per second) is 1,000,000 (one million) hashes per second
  • 1 TH/s (terahash per second) is 1,000,000,000,000 (one trillion) hashes per second
  • 1 PH/s (petahash per second) is 1,000,000,000,000,000 (one quadrillion) hashes per second

The 51% attack concept was first explained for Bitcoin but could be undertaken on many blockchains. Even though this kind of hacking is possible, it’s extremely difficult.

All cryptocurrencies are based on the blockchain network. In a network that uses the PoW consensus algorithm, in order to add a new block, the miners must perform complex calculations, thereby proving that they have done the work. The first miner who offers the right solution to the problem gets the opportunity to create a new block and an appropriate reward for it. The more processing power at the disposal of the miner, the higher the chances of finding the right solution faster than everyone and the greater the amount of remuneration. When the miner finds the right solution, the system notifies all network participants about it.

It is this key role of computing power that leads to the threat of  51% attack. If the miner or the pool of miners controls more than half of the hash rate, then they have the ability to fully control the network as they can add new blocks, manipulate two-way operations and refuse to confirm new transactions. Also, a 51% attack can lead to the fact that unscrupulous miners can use the same coin several times by recalling transactions made with it, which is called double spending, or double waste. At the same time, the attacking side cannot change information in already added blocks or generate new cryptocurrencies.

It should be noted that blockchain networks using the PoS consensus algorithm are much less subject to the threat of a 51% attack, since under this algorithm, the validators work on maintaining the operational capacities of the blockchain and their work is based on their share of the network’s cryptocurrency (or stake), and not on the computing power of their nodes. Any attack attempt in this system becomes unprofitable.

Most often, new “cryptocurrencies” are jeopardized by the 51% attack  which has not yet managed to garner the support and trust of the crypto community, and accordingly, the miners need less capacity to get a “controlling stake” of the hash of such a network. This attack, however, is unlikely to bring financial benefits to the miners and will more likely be used as a way to eliminate competitors. Another case is an attack on a commercially successful cryptocurrency, but this is an order of magnitude more difficult since the cybercriminals will require huge computing power that is available to only a handful of them.

How easy is it to obtain 51% of the network?

For a big market cap coin like Bitcoin, it would be impossible for one person to acquire the majority power of its network. The majority of the network would require a hash rate of over 14 EH/S, which is thousands of times stronger than the world’s fastest supercomputers. However, mining pools could easily coordinate a pool stronger than half of the network’s power. In July 2014, a mining pool called GHash was close to obtaining 51% power but agreed to limit its mining.”power to 39.99% to preserve trust in the Bitcoin ecosystem.

There is one option that can remove the risk altogether: centralisation. Tokens, like Ripple, simply have a single central authority. Although it’s actually pretty easy to say that Ripple acts like a token constantly under 51% attack; because, well, it is constantly under a 51% attack.

Ripple unveiled a strategy in 2017 to ‘become more decentralized than Bitcoin’. Their (now ex) technology chief Stefan Thomas claimed that Ripple validators are less likely to be malicious or attacked successfully since they are chosen on ‘merit’.

“Bitcoin chooses validators solely based on their mining power, which actually deincentivizes security,” Thomas wrote. “Security measures cost money, but don’t improve on the speed of mining.”

The XRP Ledger’s biggest difference from most cryptocurrencies is that it uses a unique consensus algorithm that does not require the time and energy of “mining”, the way Bitcoin, Ethereum, and almost all other such systems do. Instead of “proof of work” or even “proof of stake”, The XRP Ledger’s consensus algorithm uses a system where every participant has an overlapping set of “trusted validators” and those trusted validators efficiently agree on which transactions happen in what order.

Economics of a 51% attack

If a malicious miner acquires 51% of the network’s power and performs a 51% attack and double spends some coins, the value of that cryptocurrency will presumably drop in value. The result for the attacker would be:

Net value for the attacker = Number of coins double spent * (value of the coin – the coin’s drop in value)

In some instances the net value from that attack would be less than the value rewarded from mining the coin benevolently.

The monetary economics of a 51% do not always make sense from a profit standpoint, but could make sense if greater politics were at stake i.e. a government or competing cryptocurrency that tampers with Bitcoin or another cryptocurrency to distill fear in its network.

Who is affected by a 51% attack?

While a 51% attack is happening, if you hold the associated coin on a wallet you control, you don’t really need to worry. Many sites make a big deal of 51% attacks, but unless they’re sustained for a significant amount of time, only specific people & services are affected by them.

The people affected by such an attack are:

  • Holders: if you hold your coins on a centralised exchange/wallet, if that exchange/wallet is affected by the 51% attack they may lose a lot of money, and potentially forward this loss to their users (similar to where when exchanges are hacked they sometimes absorb losses by taking away from user balances).
  • Exchanges & crypto payment processors: the attacker may try to deposit to an exchange or buy something during the attack. Any payments made during a 51% attack may be invalid (e.g. after the attack is over you might lose the received coins).
  • Miners: the attacker may receive all block rewards, causing any other miners to temporarily lose out on their mining profits.

One reason some people keep their crypto on exchanges is because holding each coin on its own wallet can be difficult to keep track of.

How much do these attacks cost?

The cost of a 51% attack varies per coin, with Bitcoin being the most expensive to attack (as it has a very high hashrate). Many of the coins that have been attacked recently are on the cheaper end.

Reddit user xur17 has created a webiste called Crypto51.app that tracks the costs of performing hourly 51 percent attacks on PoW cryptocurrencies. Alarmingly it’s as cheap as $500 per hour to attack some coins.

The site reaches its figures by the following method: “Using the prices NiceHash lists for different algorithms we are able to calculate how much it would cost to rent enough hashing power to match the current network hashing power for an hour. Nicehash does not have enough hashing power for most larger coins, so we also calculated what percentage of the needed hashing power is available from Nicehash.”

Why has there been a sudden rise in 51% attacks?

The first attacks to gain public attention happened back in 2014 and caused a lot of Bitcoin exchanges to increase their proving standards. But recently we’ve been having a whole new wave of 51% attacks, and it doesn’t sound like they are going to stop any time soon.

Its no coincidence smaller coins are the ones being attacked. The cost to launch a 51 percent attack against many altcoin networks is shockingly low, especially since hashpower can easily be rented from so-called “cloud mining” firms.

Zencash co-creator Rob Viglione has argued the rise of mining marketplaces has made it easier, since attackers can use it to easily buy up a ton of mining power all at once, without having to spend the time or money to set up their own miners.

Meanwhile, it’s grown easier to execute attacks as these marketplaces have amassed more hashing power.

“Hackers are now realizing it can be used to attack networks,” he said.

The growing list of recent 51% attacks

Below is a list of recent 51% attacks. As you can see they are on the rise!

April 2nd 2018

Electroneum (based on CryptoNight at time of the attack) was hit with a 51% attack.

April 4th 2018

Verge fell victim to the so-called “51% attack.

May 13th 2018 – May 15th 2018

Monacoin (based on Lyra2REv2 at time of the attack) was hit with a 51% attack, estimated to have caused around $90k in damages.

May 16th 2018, 10:38pm UTC

Bitcoin Gold (based on Equihash at time of the attack) was hit with a 51% attack against block 528735.

May 19th 2018, 5:26am UTC

Bitcoin Gold (based on Equihash at time of the attack) was hit with a 51% attack that ended on block 529048.

May 22nd 2018

Verge (based on 5 mining algorithms at time of the attack) was hit with a 51% attack. It looks like the attacker took control of two of these algorithms, Scrypt and Lyra2RE, and the attack was between blocks 2155850 and 2206272 (with a loss of around 35 million XVG).

May 31st 2018

Litecoin Cash (based on SHA-256 at time of the attack) was hit with a 51% attack. See a Reddit thread confirming it here.

June 3rd 2018, 2:43am UTC

ZenCash (based on Equihash at time of the attack) was hit with a 51% attack. They experienced 3 double spends; the first for 3,317.4 ZEN, the second for 6,600 ZEN, and the third for 13,234.9 ZEN. The Zen Team recommended exchanges to increase required confirmations to 100 to deter the attack happening again (currently Binance & Cryptopia require 100 confirmations for ZEN deposits, and Bittrex requires 200).

How can a 51% attack be prevented?

The development of a more decentralized network with a greater number of individual miners would be able to provide a strong base for defense against the chance of a 51% attack. The larger mining groups are able to make use of specialist ASIC mining rigs and ASIC-resistant algorithms. Coins that would allow CPU mining are also realistic defense mechanisms against 51% attacks.

The Proof of Stake consensus mechanism is also less susceptible to this kind of attack. This is because purchasing of more than 50% of all the coins available on a network is normally far more expensive than trying to take control of 51% of the hashing power.

Furthermore, any individual with a large stake in any network would be risking their own holdings by launching an attack on the network to make it malfunction critically.

Charlie Lee suggests the best way to prevent the future 51% attacks would be to implement merged mining.

Merged mining allows for the miner’s pool to mine several cryptocurrencies simultaneously, as long as they are implemented on the same algorithm. This would allow the smaller cryptocurrencies to piggyback off the already established mining networks and increase their own hashrate.

Another suggestion of his is to pay miners more — which would in turn drive up the rent for the mining capacities. Unfortunately, that’s not something a lot of cryptocurrencies can afford in the foreseeable future.

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