Cornell University professor Emin Gün Sirer believes that Bitcoin mining as a security model is “ancient and badly parameterized” after a flash crash of the network’s hashrate several days ago, giving doubt to the reliability of a pure proof-of-work system.
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Earlier this week, Bitcoin’s hashrate dropped by over 40% and while the exact reason is still unknown, it still raises concerns about security since the rapid drop makes the network more vulnerable to 51% attacks. According to Sirer, the potential cause of the flash crash from 107 exahashes to a little over 59 exahashes in around 14 hours could be due to a few reasons, but they all represent a technical problem that could lead to security issues. He pointed out how this problem arises from the Bitcoin block interval and commonly accept 6 block confirmation window:
“But the root problem is that Satoshi picked a very long interblock interval. 10 minutes is a long time. Bitcoin has to pick that number generously because it’s a synchronous protocol. This then yields a finalization time of 6 blocks, 1 hour. Exchanges have 6 blocks hardwired.”
Sirer continued to explain that everyone has to monitor the blockchain and detect attacks within 5 blocks, ideally earlier, and monitoring over a greater number of blocks would detect the attacker too late. He then suggested that exchanges should require more confirmations from the Bitcoin proof-of-work chain to be sure there is no attack in the event of another rapid flash crash.
Centralization Risks of proof-of-work
Bitcoin’s reliance on proof-of-work was intended to preserve decentralization by enabling and incentivizing anyone to mine, however, mining has been advanced to the point where only ASICs are profitable and the majority of Bitcoin mining, 75% by one study, is located in China. Sirer pointed this out and also said how “the entire space will go up together, or sink together”.
“Bottom line is that BTC mining is extremely centralized. Most of it is manufactured by one company. It’s mostly in one country. The mining game causes the miner with the lowest capex to overtake others. It’s just decentralization theater.”
Additionally, the fact that over 50% of Bitcoin’s hashrate belongs to just four mining pools significantly increases the risk of another rapid decrease in hashrates due to government crackdown, power failure, or software issues. Many in the open-source community are therefore exploring alternative methods to further secure cryptocurrency.
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The necessity of evolving cryptocurrency’s security model
With the increasing security risk of proof-of-work, especially among coins that do not have as large of a hashrate as Bitcoin mining, Dash leveraged its masternode network to create ChainLocks and validate block with a proof-of-service method in addition to proof-of-work by miners. The innovative technology makes the network more secure against 51% by having Dash masternodes lock in the first-seen block, invalidating later-published conflicting blocks, and incentivizing all individuals to publish all blocks immediately. This not only enables Dash to be more secure against 51% than Bitcoin, according to Dash Core CEO Ryan Taylor, but also super fast and inexpensive. Dash’s InstantSend enables all transactions to be locked in under two seconds and for less than $0.0005 USD.
As partial validation of the technology, Zcoin adopted the ChainLocks technology into their network in an effort to further secure their blockchain. Additionally, when Coinbase integrated Dash they made its confirmation time 12 times faster than Bitcoin by only requiring two confirmations at Dash’s 2.5 minute block times vs. Bitcoin’s required six confirmations at 10 minute block times.