This post is also available in: deDeutsch

Bitcoin Cash underwent what has been described as a 51% attack recently. The definitions get a little hazy depending on what action and motivations are considered an attack, however the fact remains that miners conducted a reorg of the chain in order to reverse some transactions. While on its surface this is much ado about nothing, with a possible theft due to a technical issue stemming from the main hard forks that have affected the various Bitcoins being thwarted as the only immediate consequence. However, the long-term implications are much more severe: one of the very top cryptocurrencies, essentially Bitcoin, proved to not be immutable given the correct circumstances. That creates a ticking time bomb for a technology which is viewed as permanent and unalterable.

We’ve known most coins to be insecure while still investing in them

The fact remains that most proof-of-work coins are shockingly easy to attack and disrupt. With the relatively low levels of investment powering the mining of each coin, all except the top few are at easy risk. In particular, those which share an algorithm with coins higher up the food chain (Bitcoin Cash and SV come to mind) have enough hashrate collected and at hand, in use by a competitor in the market, able to crush the chain at any moment. Economic incentives simply haven’t aligned yet to where someone has seen this as beneficial enough to warrant the hassle in most cases, though documented cases of 51% attacks are piling up. With this newest act of miner collusion, we now see willingness to act against the immutability of the chain without necessarily wanting to destroy it entirely. That significantly lowers the barrier to action.

Bitcoin itself is clearly only as immutable as miners want it to be

In a way, smaller cryptocurrency projects are testing grounds for what could affect larger ones. In this sense, other coins have been a foreshadowing for Bitcoin itself. Since the base technology is essentially the same, the same exact fate can befall any project with the same technological parameters. This means that, yes, Bitcoin is vulnerable to 51% attacks and transactions being rolled back. The economic incentives just haven’t aligned yet. It still damages Bitcoin’s value proposition, and that of the technology as a whole, to disrupt the network’s perceived immutability, and actors capable of such an action have some of the most to lose. That explains why Binance’s public musings on rolling back transactions to stop a theft were not put into practice. However, someday, the incentives will line up, either by force from an outside coercive actor, or when the immense benefit of tampering with a transaction or two outweighs the perceived harm in a particular circumstance.

When will investors react?

Right now, people invest in Bitcoin under the pretense that it’s immutable, and have similar (though fainter) illusions regarding similar coins. When projects such as Ethereum Classic actually suffer 51% attacks, the market barely reacts. Eventually, however, people will realize that this is real money, and it can be manipulated and stolen the same as fiat currency under centrally-controlled banks. When? It’s anyone’s guess. But when it does happen, we may see a massive shift away from a cross-your-fingers method of security towards thoroughly investigating the tech of projects before investing.