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Vertcoin 51 Percent Attack Showcases Security of ASICs

Renting GPUs is simpler than building ASICs.

Crypto Mining Malware Attacks Up 80% In Q2 This Year

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Pseudonymous blockchain blogger Hasu has released an analysis of the latest Vertcoin attack. Published on the Deribit blog, the article makes a credible argument that ASICs enhance blockchain security by introducing an incentive to act in the interests of the network.

The Altcoin Case for ASIC-Resistance

As Bitcoin evolved, so did the prevalence of Application Specific Integrated Circuit machines . An ASIC is a piece of hardware that exists only for the purpose of mining. As a single-purpose device, its mining performance vastly outscales GPUs, meaning that Bitcoin mining is all but impossible on generic hardware nowadays.

The popularity of ASIC-resistant mining algorithms emerged from smaller altcoins like Vertcoin attempting to prevent centralization. The argument goes that by ensuring that anyone can mine using just a GPU, these altcoins can democratize access to mining. Doing so will ensure that mining spread over a larger group who may not want to invest in application-specific hardware.

This school of thought came about partly as a backlash against Bitmain and the major mining pools, which were discussed as being a threat to decentralization. The narrative was that Bitcoin’s security could be compromised if these big mining pools decided to team up and attack the network.

However, as blockchain has evolved, it’s become apparent that attempting to maintain ASIC-resistance is a cat-and-mouse game. ASIC manufacturers are constantly releasing new products, meaning that blockchain developers have to continue upgrading their mining algorithms in an attempt to oust ASIC miners from the game.

Reversing the Argument

Now, this latest analysis of the Vertcoin attack introduces a compelling new argument into the ASIC debate, which actually works in favor of using ASICs as a means of increasing blockchain security.

The central crux of the reasoning is around incentives, based on the principle that ASIC mining makes a network more expensive to attack. As Crypto Briefing reported after the latest attack on Vertcoin, there was substantial evidence to suggest that the GPU hash power used to enable the attack was rented from Nicehash.

Hasu makes the case that because ASICs are highly specific by design, there is unlikely to ever be a marketplace where attackers could simply rent the necessary hash power. This argument is quite watertight because, as Hasu writes:

“Application-specific hardware represents the present value of future cash flows from the particular asset mining.”

Essentially, this means that an attack on the network creates a real risk that the network token will decrease in value, which reduces the value of mining activity. In turn, the attack will render the value of the ASIC itself worthless. Though specialized machines appear to be a centralizing force, their operators have no incentive of disrupting the blockchain. On a practical level, GPU-based networks are far more susceptible to attack.

The Case for Network Monitoring

The article also notes that Vertcoin developer James Lovejoy actually caught the attack happening while it was in progress. Noticing that the attacker had attempted to replace around 600 blocks — which happens to be the block confirmation requirements for Vertcoin on Bittrex — he quickly notified the exchange so that it could disable deposits.

This action is likely to be the reason why the attacker halted the effort midway through. Hasu notes that beyond blockchain, cybersecurity systems use intruder detection methods to help spot abnormalities indicating an attack is in progress.

There are several ways that an attack could be stopped in its tracks. One way is for exchanges to disable their wallets. Another is for the exchange to effectively bribe miners to work on a version of the chain where the funds haven’t been stolen.

Though it was in response to hacking, this approach was briefly suggested by Binance CEO Changpeng Zhao after the Binance attack in May. However, after a swift backlash from the crypto community, he quickly backtracked on the idea.

You can read Hasu’s analysis in full on the Deribit blog.

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