David Vorick, the co-founder of the decentralized cloud storage Sia, predicted a significant increase in the number of 51% attacks on cryptocurrency networks in 2019.

High risks for all

In the corporate blog, Vorick notes that earlier the problem of 51% attack was relevant for cryptocurrencies with low capitalization, but currently, even coins with high market value and good reputation become victims of double-spending attacks.

The 51% attacks are successful due to fundamental vulnerabilities in the protocols of many cryptocurrencies, writes Vorick. According to him, these bugs pose a high risk to cryptocurrency exchanges which can lose their financial stability. Therefore, exchanges should be more scrupulous when choosing cryptocurrencies for listing.

The main mistake of altcoin developers is that they allow the use of the same equipment for different cryptocurrencies mining.

“When the same hardware is able to mine on multiple cryptocurrencies, critical incentive compatibilities break down.”

The second factor is the technological development of the industry, the emergence of hashrate marketplaces.

“A side effect of hashrate marketplaces is that attackers now have a great pool of hardware that they can draw from quickly and temporarily when attempting an attack.”

Another reason for network vulnerability is the emergence of large mining farms.

Bitcoin as a sample

Vorick notes that bitcoin remains the best cryptocurrency that counteracts a 51% attack. This is due to the fact that if the creators of many altcoins believe that at least 51% of network participants will play fair, bitcoin designers, on the contrary, are confident that in the “anonymous, unregulated Internet” participants will act “according to their best economic interest.”

“This threat model is substantially less forgiving. Instead of assuming that most participants will follow the protocol faithfully, Bitcoin developers assume that participants will proactively seek out ways to deviate from the protocol if those deviations can result in profit. This assumption greatly restricts the flexibility in protocol design choices, but has proven to be a crucial requirement for success out on the open Internet,” writes Voriсk.

He called the bitcoin protocol incentive compatibility.

“If a protocol has incentive compatibility, it means that the optimal decision for each individual from their own perspective is also the optimal decision for the group as a whole.”

Altcoins, even if they copied the bitcoin protocol, often made critical changes that interfered with incentive compatibility.