The double-spend attack is not the same as the 51 percent attack. It is strange to have to make this point in 2020, but it is true: while having 51 percent control of a blockchain makes double-spend attacks free, that is only because it makes ALL economic attacks free. The vulnerabilities are distinct (you don’t even need 51% to pull off double-spending), and fixing the 51 percent attack requires far more than addressing double-spending.
So what exactly is the 51 percent attack? To pin it down, look at exactly what changes when a coalition goes from controlling 49 percent to 51 percent of a blockchain. Before this point anyone that spends a dollar on “work” will earn roughly a dollar of profit. After this point some block producers are “more equal” than others and can influence how and to whom funds are allocated. What is lost is the economic property of equal-pay-for-equal-work (1-CPU-1-VOTE).
This distinction is important, because while people talk about doublespend attacks as if they are the same thing as 51 percent attacks, this isn’t the case at all. In fact, it is unclear that double-spending is even a problem that will happen in majoritarian conditions. Given that a coalition with 51 percent of a network can do whatever it wants with network fees, the last thing any half-sensible coalition will do is start attacking the users paying it those fees. Why manoeuvre into position to reap a financial windfall and then squander it all to reverse a single payment?
Once attackers can break the principle of 1-CPU-1-VOTE, there are far easier attack vectors that let attackers goose their profits at the expense of their peers. Getting a little bit extra from one’s investment in mining can be done in many ways, such as by selectively orphaning the occasional block to discourage newcomers entering the market or reduce the profitability of competing pools. There is no reason to believe users will notice or care about these problems, which can be explained away as laissez-faire capitalism at work.
Want more ways to take advantage of majoritarian control? Once attackers have majority hash they can force smaller miners to share their inbound transactions to ensure their blocks propagate quickly, while withholding their own transactions as they face no serious risk of block orphaning. Unequal access to transaction fees constitutes a tax the majority can impose on the minority. And majoritarian pools can also charge higher fees-per-kilobyte for network processing to further goose profits. All of these attacks are possible without even needing to reveal that they have majority control.
For those wondering where this leads, ask yourself what happens to a network where one miner or staker is more profitable than all of its peers. Is what emerges a trustless network? Will companies trapped in a Red Queen race refuse to take easy-money?
Like the railroad monopolies in the 19th century, or the information-megaliths of the dot-com era, what will emerge is a monopoly. And so there will be no practical difference between these networks and Facebook Libra. In both cases, the amount of competition will depend on how much the incumbent permits. As the economic incentives switch to encourage collusion, market forces which had previously protected the network now switch to undermine it. The loss of 1-CPU-1-VOTE destroys the most important property of the public blockchain, and morphs it what is effectively a permissioned chain.
In our experience, POS developers don’t talk about these problems because they have no solutions. Instead of focusing on these economic attacks, POS developers talk about doublespending because they can address those far more trivial problems with things like Lamport-style voting rings and “finality” guarantees. Nevermind that all of their guarantees fall apart under majoritarian conditions and are thus effectively meaningless. And meanwhile POW ideologues keep trying to turn the 51 percent attack into a feature instead of a bug, raving about “blockchain governance” and “user-activated hard forks” as if what Satoshi invented was a democratic voting system instead of a financial system explicitly designed to avoid politics. Do they seriously not know the Federal Reserve is subordinate to Congress?
As of today we are starting to see 51 attacks emerge as majoritarian coalitions and consortiums start to form at the economic weak-points of most chains: the economic hubs that connect block producers with those routing money into the network. In Ethereum this is the Infura hub. Within the Bitcoin networks we are seeing clusters form around the oligarchs backing each distinct chain. Within a few years these will be recognized as the Achilles Heels of those networks.
In the meantime, because you’ve made it this far, it’s time for the payoff. And that is that as of today, Saito is the only blockchain with a guaranteed solution to the 51 percent attack: the ability to enforce “equal-pay-for-equal-work” under all network conditions, including majoritarian control of any and all network resources. If you’re interested in checking out how this is possible, a good starting point is our article on how to solve the 51 percent attack. For those that just want to experience the future first, we warmly welcome you to join our community at the Saito Arcade (https://saito.io/arcade). You will be glad you did.