Work for Sale — Bootstrapping Security Through Network Protection
“Other opportunities arise from time to time that almost don’t accord with the overall situation, opportunities whereby a word, a glance, a sigh of trust may achieve more than a lifetime of exhausting endeavour.”
Franz Kafka, The Castle
Many proof of work (PoW) chains aren’t secure. They’re extremely difficult to bootstrap hashpower for and as the value of the network greatly outpaces the coordination and hardware cost of an attack, it becomes quite lucrative to do so. An exception, in this case, would be Bitcoin as it had a first-mover advantage and is the strongest network from both an ideological standpoint and mining operations.
Crypto51.app has been a fantastic tool that shows just how weak some PoW networks are. What the site provides is an overview of the amount of hashpower NiceHash can provide, along with the associated cost of renting enough power to match the network’s current hashpower for an hour. For example, one could rent ~130% of Bytecoin’s total hashpower (a $200M+ marketcap coin) for only $514 an hour. It’s also important to note that renting this degree of hashpower would most likely result in an increase in price. However, the site isn’t geared toward simply displaying the weaknesses of some networks — it also shows the strength in well-proven networks such as Bitcoin or Ethereum.
The problem with launching a PoW based network deals with the costs associated with securing it with enough hashpower. If a network’s total valuation is $10M for example and costs $5 to attack, wouldn’t an attacker be incentivized to obliterate that network for an extremely sharp short-term gain? Recent examples of a PoW chain being launched with hashpower issues once social traction was gained can be seen in the case of Ravencoin. Ravencoin, launched in January 2018 as a fork of Bitcoin, experienced attacks back in September once their x16r mining algorithm was supported by hash renting companies.
Other examples of PoW networks being attacked came at the expense of both Zencash (now Horizen) and Bitcoin Gold. Both networks used Equihash as their mining algorithm, thinking that it was ASIC resistant, until Bitmain came along and released the Antminer Z9 on May 3rd, 2018 to eliminate that idea. One of my favorite lines of thinking about ASIC resistance comes from David Vorick of Sia, when he put together his magnum opus on the state of cryptocurrency mining:
At the end of the day, you will always be able to create custom hardware that can outperform general purpose hardware. I can’t stress enough that everyone I’ve talked to in favor of ASIC resistance has consistently and substantially underestimated the flexibility that hardware engineers have to design around specific problems, even under a constrained budget. For any algorithm, there will always be a path that custom hardware engineers can take to beat out general purpose hardware. It’s a fundamental limitation of general purpose hardware.
Needless to say, once the ASIC was released, Bitcoin Gold was attacked later that month, and Zencash was attacked just a week later. However, these weren’t even the cheapest networks to attack — they simply had a high valuation, high exchange volume, and an immediate weak point to exploit with the release of the Antminer Z9.
Home Protection Due to College Shenanigans
According to recent data from Crypto51.app, 11,912% of Einsteinium’s hashrate can be rented for $17. This became the inspiration for one college freshmen known on the internet as “Geocold51” to show the community how easily these networks could be compromised. His intent wasn’t to attack, but rather prove a point: the security of a network isn’t accurately reflected in its valuation. On October 13th, he live-streamed an attack of Bitcoin Private, which ended up getting pulled from Twitch (maybe try Livepeer next time), and then he set up an attack on Einsteinium. The attack on Einsteinium was pulled from Twitch rather quickly, and the Einsteinium community pulled together enough hashpower at the time of the attack to ward Geocold51 off.
Because the attack was announced publicly, the community and developers were able to react accordingly, keep the attacker at bay, and return to their original hashrate. After the failed attempted attack on Einsteinium, Geocold51 turned back to Bitcoin Private where he quickly amassed a majority of hashpower, mined a block, but stopped as his stream was then pulled from Stream.me. In the article from Coindesk, Geocold51 mentioned that it only took $100 to actually pull off the attack on Bitcoin Private, with the increase most likely due to mining for enough confirmations over time with a sufficient amount of hashpower to rent.
The thing to remember here is the fact that this was an announced attack — the situation may have looked quite different if there wasn’t any warning shot. However, could a service be created to keep watch over these networks and automatically deploy hash power if it were needed to mitigate an attack? Could hash renting services conduct a new line of business related to insurance for PoW chains?
AP: Autonomous Protection
What if a service was created in which a monthly retainer is paid to a hash renting company to monitor networks and any unusual spikes in hashrate from either a pool or single entity, for them to quickly shoot down the attacker by pouring hashpower onto the network. Or, considering the fact that hash renting entities are attempting to sell hashpower to the highest bidder, a bond is set up from an entity to protect the chain in the case of an attack. In this case, the service offered by the hash renting company would be a form of home security — if any unusual activity is detected, the security system triggers by taking effective measures to stop the attacker.
This would obviously assume a theoretical world in which information asymmetries don’t exist. For example, an attacker would be mining in secret before broadcasting a different set of blocks with their own double spend. The resources at the disposal of the attacker are also unknown variables. But it’s always fun to toy around with these ideas —
Of course, the next question is, who is paying for this service in a “decentralized” network.
In the most centralized case, a new team or individual would front the costs for protecting the network. Of course, this would include the assumption that the team has a form of treasury through a fundraising mechanism, or is in the process of bootstrapping a PoW chain while having a large share of a liquid asset due to being first movers on block rewards. Although heavily centralized with a concentrated liability, this could be the most coordinated effort outside of a single entity paying for the service alone. The single entity paying for the service could also be an exchange, as they are typically on the receiving end of the direct-damage during these events.
The second case would be through a DAO-style funding mechanism. For example, if a supply-side entity such as NiceHash made a funding proposal for DASH’s treasury or Decred’s Politeia, the network can collectively fund it. This would then be a coordination effort between all active participants in a network (in the case of Decred’s ticketing system), or masternodes (in the case of Dash), or general coin holders in a token-vote treasury system. However, the attack vector for a DAO-style funding mechanism would be the supply-side colluding to continue the service through various Sybil mechanisms over time, as the funding proposal is taken care of with the native asset.
The third and final case could be through a general donation mechanism to a central party. An example of this would be Monero’s “Forum Funding System” in which coin holders simply donate to an individual or collective cause which is then handled by an individual or team. This would probably be the hardest way in which sufficient funding can be achieved for a goal, as the coordination mechanisms are quite loose and most users don’t wish to part with their assets unless it was truly necessary. The first and second options are easier because the “team” and DAO-style funding mechanism allow the users to remain as the subsidy side in the funding process (aside from the DAO treasury’s natural inflation).
Although a bit far-fetched, the “Brinks Home Security” model for a PoW chain could prove to be useful for any new launches looking to take on the liability. It’s like having a Slomin’s Shield on a blockchain. We could even see futures contracts on hashrate start to develop from miners who can try to guarantee future income despite market fluctuations — as suggested by Anthony Lusardi. Come to think of it, this service would be quite useful in the current Bitcoin Cash drama between BCHABC and BCHSV.
Special thanks to Anthony Lusardi, Nathan Chen, and the Alpine team for providing feedback on this post.
Follow me on Twitter
Nothing in this article should be taken as legal or investment advice.