If you are following the cryptocurrency market, one of the things you must have noticed is the continued rivalry between Bitcoin (BTC) and Bitcoin Cash (BCH) developers and supporters. As of late a group of Bitcoin developers, miners and whales called BitPico, have announced they are planning a 51% attack on the Bitcoin Cash network to prove that the chain is too centralized, controlled and easy to disrupt.
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Let’s dive deeper into the actors, the history of the continuous arguments between the two camps and the affect a 51% attack can have on the network.
BitPico is an anonymous group of Bitcoin developers, miners and whales, who have announced they are stress-testing the Bitcoin Cash network to show how easy it is to successfully initiate a fifty one percent attack on Bitcoin Cash’s network. BitPico are supporters of Segwit 2x and the Bitcoin Lightning Network (LN). Needless to say, they are pro-Bitcoin and anti-Bitcoin Cash.
BitPico plans to infiltrate the Bitcoin Cash network in three installments, with around 5,000 Bitcoin Cash Nodes, that will take a total of six weeks to complete. After they have infiltrated the network they plan to fork the chain into BitPicoCash.
Bitcoin and the birth of Bitcoin Cash
Ever since the beginning of 2017, Bitcoin developers got into an emerging disagreement on how to scale the Bitcoin network capacity. Segwit (Segregated Witness) was one of the solutions backed by a majority of Bitcoin developers and supporters. Segwit is an upgrade to the protocol/ algorithm that changes the way data is stored on the blockchain, enabling a greater throughput on the network.
A small group of early Bitcoin supporters, who own a large amount of Bitcoin, had a fundamentally different view on the future direction of the Bitcoin blockchain and voted firmly against implementing Segwit. Roger Ver and Dr. Craig S. Wright were among the most vocal of this group. One of their main scaling solutions was increasing the blocksize to 8 MB (which later was increased to 32 MB on their own Bitcoin Cash blockchain). Without the ability of coming to an agreement, the group decided to split from the original Bitcoin and proceed with their own blockchain, later deemed Bitcoin Cash.
On the 1st of August 2017 the user-activated hard fork bifurcated the Bitcoin Network into two separate chains, Bitcoin and Bitcoin Cash.
From then on, they both went their separate ways when working on the blockchain; but the constant disagreements and quarrels continued. Bitcoin Cash claims they comply most with the original vision of Satoshi Nakamoto on the peer-to-peer electronic cash version of Bitcoin and thus they feel they are entitled to be acknowledged as the main Bitcoin chain.
The main difference between Bitcoin and Bitcoin Cash is the block size, where Bitcoin allows for a maximum block size of 1 MB, Bitcoin Cash has a much bigger allowance of 32 MB per block.
Bitcoin Hard forks
Bitcoin Cash was the first chain that successfully split from the Bitcoin network. It instantly gained some traction and the price began to rise. It started trading at around 250 USD a coin and increased to more than 800 USD in the first three weeks, after which it settled for a while at 500 USD. After witnessing the first Bitcoin hard fork, which created an instant monetary reward, a lot of development teams jumped on the hard fork wagon to create their own ‘upgraded’ version of the Bitcoin network, resulting in an increase in Bitcoin price, as people didn’t want to miss out on the ‘free’ coins.
After the first relatively successful Bitcoin hard forks the largest part of the new ‘Bitcoins’ were either dead-on-arrival or didn’t make it onto an exchange.
Almost a year and countless hard forks later, only a few Bitcoin hard forks obtained a decent market share; Bitcoin Cash has a market cap of over 12 billion USD, Bitcoin Gold (recently struck by a 51% attack) has a market cap of approximately 450 million USD and Bitcoin Diamond is currently worth more than 300 million USD.
Bitcoin Consensus Algorithm
Bitcoin and Bitcoin Cash both run on the Proof-of-Work (PoW) consensus algorithm, with the cryptographic hash function called SHA-256. Different cryptocurrencies can have different cryptographic hash functions, as for example Zcash uses Equihash, while DASH runs on X11.
A 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), Delegated-Proof-of-Stake (DPoS) and Byzantine Fault Tolerance (BFT). Other then being not-environment friendly and slow there is also an added risk of a 51% attack on the network.
What is a 51% attack?
When a miner or a group of miners control over 51% of the hashing power of a certain coin, they can initiate a so called ’51 percent attack’ or ‘double spend attack’. In this attack they, as a majority hashpower-holder, can prevent other miners from mining blocks, creating a monopoly position where they receive all the mining rewards (currently the Bitcoin mining rewards are 12.5 BTC per block). They can also block other user’s transactions. To enable a double spend attack they send transactions to the network and then reverse them so that it appears the transactions hasn’t been sent yet and the coins are still in the wallet, when in fact they had just sent them, resulting in the possibility of making a new transaction with the coins in the wallet that were already spent.
The website crypto51 will provide you with an overview of the total amount of money it will cost to initiate a 51% attack, specified per individual cryptocurrency. In the picture below (screenshot from Crypto51) you will see some examples of the current costs of a network attack per coin. For instance, it will only cost you 550 USD to 51% attack the Bytecoin network.
How will this whole debacle turn out?
I find it hard to believe that BitPico will turn the fifty one percent attack into a malicious attack. I would assume they only want to make a statement, but then again you never know. The scary part of making such a statement is that it can backfire. You don’t want to piss off the competition that has the resources to retaliate with an attack on your network.
Another interesting fact is that Bitmain, according to blockchain data provider coin.dance, currently already has over 40% of the total hashing power of the Bitcoin network (with its two mining pools BTC.com and Antpool combined). Bitmain is the largest ASIC-miner producer in the world and its co-CEO Jihan Wu is an evincive Bitcoin Cash supporter. During the time the ASIC-mining business was at its top, he even made Bitcoin Cash the sole payment option for people wanting to buy an Antminer mining machine.
The way I see it, the Bitcoin Cash supporting team would be foolish to initiate an attack on the Bitcoin network, because this consequently affects their own Bitcoin Cash network. Both chains run on the same cryptographic hash function (SHA-256) and a disruption on the biggest asset of said hash function will also affect other chains running on SHA-256, like Bitcoin Cash. Another disadvantage for Bitmain to attack the Bitcoin network is that they will destroy a part of their business activities as they are reliant on the sales of new (Bitcoin) miners.
If you would like to follow this continuing story you can check out:
BitPico’s Twitter account: https://twitter.com/bitpicoCoin Dance for stats on the network hashing power by mining pools: coin.dance
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This article is not intended as investment advice. It is just my personal opinion about Bitcoin versus Bitcoin Cash. You should always do your own research. Huobi Pro incentivizes me for writing this article and supports me for ventilating my own personal opinion.
Full disclaimer: I own Bitcoin and Bitcoin Cash.
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