A successful 51% attack executed by an anonymous group called “51 Crew” on Krypton and other small blockchain networks triggered an argument amongst experts concerning the safety of Proof-of-Work systems. 

The Crew gained 51% control of the Kryton blockchain network and executed double-spending by attempting to sell around 20,000 KR on the cryptocurrency exchange Bittrex. The hacking group demanded the Krypton development team to pay a ransom of 7 BTC for the compromised blocks. 

In response to the attack, Krypton founders announced the plan to build a Proof-of-Stake blockchain, which focuses on validation instead of mining. Essentially, in a Proof-of-Stake system, each validator holds some stake in the network unlike the Proof-of-Work system, where each block requires a certain amount of work to be mined and validated.

“Krypton has decided on the following temporary course of action in order to protect KR from being stolen from exchanges through a double spend: Krypton is moving KR from an Ethereum-based proof-of-work blockchain to a Bitcoin-based proof-of-stake blockchain,” the Krypton team stated.

In recent days, however, misleading headlines in bitcoin media provoked some overcomplicated arguments. To begin with, Krypton is not based on the Ethereum network. Its entire infrastructure is a replica of the Ethereum network but it is not integrated into Ethereum. Second, some claimed that Krypton is moving to the bitcoin Proof-of-Stake blockchain network. This is incorrect since bitcoin itself is a Proof-of-Work blockchain!

Proof-of-Work and Proof-of-Stake: difference in security

The Proof-of-Stake, as an alternative to the Proof-of-Work, provides double spend prevention by allowing stakeholders of the network to mine a share of the network equivalent to their holdings. For instance, in a Proof-of-Stake network, a miner that holds 5% of cryptocurrency can mine 5% of blocks.

Because of this mechanism, some believe that the Proof-of-Work could allow blockchain networks to operate on a low network security by changing miners’ incentives for higher network security. 

Thus, smaller blockchain networks like Krypton could potentially utilise a Proof-of-Stake blockchain to provide better security with the lower computing power of hashpower.

Vitalik Buterin, the founder of Ethereum, who has long expressed his support for the Proof-of-Stake model of the blockchain, recently stated on Twitter that there has not been a single instance in which Proof of Stake blockchains were hacked.

https://t.co/gH2W03p3MM Honestly asking, has there even been a *single* instance of a PoS blockchain being 51% attacked?

— Vitalik Buterin (@VitalikButerin) September 4, 2016

Although there are fundamental problems with the Proof-of-Stake, Buterin assures that these problems are solvable and provides instead a list of advantages:

“The idea has many undeniable benefits, including efficiency, a larger security margin and future-proof immunity to hardware centralization concerns, proof of stake algorithms tend to be substantially more complex than proof of work-based alternatives,” said Buterin.

Joseph Young