6 ms·

How can there be coins with $5M+ market cap where the cost of a 51% attack is $3.00 ?? In an efficient market, thieves should just immediately attack that. Or i

How can there be coins with $5M+ market cap where the cost of a 51% attack is $3.00 ?? In an efficient market, thieves should just immediately attack that. Or is the benefit too low?

ceejayoz 8y ago
There's no demand for those coins. $PAC may have a $5M market cap, but it had $6,500 in volume in the last 24 hours. Some (most?) of that volume is likely to be people just moving stuff around rather than actual buying/selling between people. You might get rich on paper, but good luck getting anyone to help you convert your riches into spendable currency.
- nickik 8y ago
  That's why Proof of Stake is a nice concept. Its like buying 51% of a company and then crashing it into a wall.
- yreg 8y ago
  But even for the top currencies, it is quite cheap. Ethereum 51%/h for 106k? Wouldn't the attacker be able to get much more out of it?
  - ceejayoz 8y ago
    That should tell you just how thin the order books actually are, despite the supposedly enormous "market caps".
  - CydeWeys 8y ago
    The thing is, the amount of GPU processing power required to attack Ethereum is not readily available, and certainly not at a cost of only $106k. That $106k figure comes from extrapolating out marginal rental cost of a single GPU, never mind that there aren't enough GPUs rental to overwhelm the whole network. To give you an idea, the overall Ethereum network is currently 190 PH/s, so you'd need significantly more than that to have a high chance of launching a short term attack with reasonable success rate (if you only control 51% then your odds actually aren't great). Let's say you need 300 PH/s. Well, the average modern AMD graphics card that is suitable for mining Ethereum only does around 30 MH/s. That means that you need 10 million such graphics cards. They simply aren't available for rental anywhere at such scale. That's why you're not seeing such an attack happening. The raw monetary figures are misleading.
CydeWeys 8y ago
Because the market cap isn't truly $5M. That figure uses the naive calculation of "whatever coins sold for most recently times the total number of outstanding coins". But if you tried to sell some significant fraction of the outstanding coins then the sale price would plummet, and you'd never actually reach $5M total. The actual depth of the order book at any given moment isn't close to $5M, plus a lot of outstanding coins are completely lost and unredeemable. The actual cost to take over a cryptocurrency tells you more valuable information than the naively calculated market map. If a cryptocurrency only costs $3/hr to take over then it's truly a shitcoin.
- wcoenen 8y ago
  > But if you tried to sell some significant fraction of the outstanding coins then the sale price would plummet, and you'd never actually reach $5M total. Yes. But it's the same for the market cap of company stocks. So saying that "the market cap isn't truly $5M" is missing the point a bit. The market cap can truly be $5M without $5M having been invested. That's just not what market cap means.
  - vkou 8y ago
    No, this is precisely why trying to calculate the market cap of a crypto-currency is pointless. A company is a productive enterprise, that produces value for you, if you sit on shares of it. Something like bitcoin is a purely speculative instrument, that produces no value if you sit on it. The market cap for a company is an imprecise proxy for all expected revenues, discounted by time[1]. The market cap for a currency is an imprecise proxy for... How much you can hope to unload it to the next fool. [2] [1] At least, it's supposed to be. [2] Yes, yes, we know, Bitcoin is useful for transferring money. This usefulness is completely disjointed from its market cap. It doesn't matter if it's $20/coin, or $20,000/coin, if you're using it to send money.
    - this_user 8y ago
      Strictly speaking there is not even a "market cap" for currencies, because the term applies, by definition, only to stocks of publicly traded companies.
zeroname 8y ago
The only way to profit is to double-spend, so you'll have to buy or already own a substantial amount of those junk coins and then sell them. After you performed the attack, those coins that you now could theoretically sell again may be suspended from trading or should at least trade at a substantially lower price. Add in the opportunity cost of exercising such an attack and it's not clear that you could turn a profit.
- trophycase 8y ago
  Unless there is margin trading, then you can simply just short the coin.
  - zeroname 8y ago
    Is there margin trading on any of these junk coins? Doesn't seem like a good idea to offer something like that, given the relatively low liquidity/volume.
- Applejinx 8y ago
  Or, if you have any other motivation for attacking either a coin or a person or entity known to be heavily invested in that coin. You know, in case turning a profit is not the only possible motivation for anybody to do anything. Many acts of war and violence are not profitable, certainly not directly profitable, and yet history shows people will attack each other anyhow. 'Bit' worrisome if your whole concept of finance depends on altruistically greedy actors who can never act out of spite or malice. That would be creepy but nice compared to the real world as it has always existed.
drexlspivey 8y ago
Because in order to 51% attack someone has to accept a huge payment in that coin.
stale2002 8y ago
Well, the reality is that "attacking" a coin is much more difficult than just spending 3$ on something. You also have to actually do the double spend transactions, and hope that the person that you are stealing money from doesn't do anything about it. It is that step 2 that is actually much harder than a nieve attack might suggest.
- AlexCoventry 8y ago
  Not really, you just have to short the coin in trading, then cover your short when your double-spend discredits the coin's security.
  - michaelmrose 8y ago
    If only there were laws against such behavior.
  - stale2002 8y ago
    Attacking a coin, in an attempt to drive down the price, and make money on an open short that you have is very risky behavior. Historically speaking, the effects of an attack on the price aren't that clear cut. The price of an "attacked" coin can jump, just as often as it crashes. The narrative being "oh, there was a problem, but we fixed it! Look at how great we were at defending against an attack!". Crazy, I know. I am just saying that it is not that simple, and a person is risking losing as much money as they might gain.
  - raverbashing 8y ago
    Yes because the crypto futures market is very well developed and is very liquid (for BTC) and exists for every tiny coin out there

How can there be coins with $5M+ market cap where the cost of a 51% attack is $3.00 ?? In an efficient market, thieves should just immediately attack that. Or is the benefit too low?

ceejayoz 8y ago

There's no demand for those coins. $PAC may have a $5M market cap, but it had $6,500 in volume in the last 24 hours. Some (most?) of that volume is likely to be people just moving stuff around rather than actual buying/selling between people. You might get rich on paper, but good luck getting anyone to help you convert your riches into spendable currency.

nickik 8y ago
That's why Proof of Stake is a nice concept. Its like buying 51% of a company and then crashing it into a wall.
yreg 8y ago
But even for the top currencies, it is quite cheap. Ethereum 51%/h for 106k? Wouldn't the attacker be able to get much more out of it?
- ceejayoz 8y ago
  That should tell you just how thin the order books actually are, despite the supposedly enormous "market caps".
- CydeWeys 8y ago
  The thing is, the amount of GPU processing power required to attack Ethereum is not readily available, and certainly not at a cost of only $106k. That $106k figure comes from extrapolating out marginal rental cost of a single GPU, never mind that there aren't enough GPUs rental to overwhelm the whole network. To give you an idea, the overall Ethereum network is currently 190 PH/s, so you'd need significantly more than that to have a high chance of launching a short term attack with reasonable success rate (if you only control 51% then your odds actually aren't great). Let's say you need 300 PH/s. Well, the average modern AMD graphics card that is suitable for mining Ethereum only does around 30 MH/s. That means that you need 10 million such graphics cards. They simply aren't available for rental anywhere at such scale. That's why you're not seeing such an attack happening. The raw monetary figures are misleading.

CydeWeys 8y ago

Because the market cap isn't truly $5M. That figure uses the naive calculation of "whatever coins sold for most recently times the total number of outstanding coins". But if you tried to sell some significant fraction of the outstanding coins then the sale price would plummet, and you'd never actually reach $5M total. The actual depth of the order book at any given moment isn't close to $5M, plus a lot of outstanding coins are completely lost and unredeemable. The actual cost to take over a cryptocurrency tells you more valuable information than the naively calculated market map. If a cryptocurrency only costs $3/hr to take over then it's truly a shitcoin.

wcoenen 8y ago
> But if you tried to sell some significant fraction of the outstanding coins then the sale price would plummet, and you'd never actually reach $5M total. Yes. But it's the same for the market cap of company stocks. So saying that "the market cap isn't truly $5M" is missing the point a bit. The market cap can truly be $5M without $5M having been invested. That's just not what market cap means.
- vkou 8y ago
  No, this is precisely why trying to calculate the market cap of a crypto-currency is pointless. A company is a productive enterprise, that produces value for you, if you sit on shares of it. Something like bitcoin is a purely speculative instrument, that produces no value if you sit on it. The market cap for a company is an imprecise proxy for all expected revenues, discounted by time[1]. The market cap for a currency is an imprecise proxy for... How much you can hope to unload it to the next fool. [2] [1] At least, it's supposed to be. [2] Yes, yes, we know, Bitcoin is useful for transferring money. This usefulness is completely disjointed from its market cap. It doesn't matter if it's $20/coin, or $20,000/coin, if you're using it to send money.
  - this_user 8y ago
    Strictly speaking there is not even a "market cap" for currencies, because the term applies, by definition, only to stocks of publicly traded companies.

zeroname 8y ago

The only way to profit is to double-spend, so you'll have to buy or already own a substantial amount of those junk coins and then sell them. After you performed the attack, those coins that you now could theoretically sell again may be suspended from trading or should at least trade at a substantially lower price. Add in the opportunity cost of exercising such an attack and it's not clear that you could turn a profit.

trophycase 8y ago
Unless there is margin trading, then you can simply just short the coin.
- zeroname 8y ago
  Is there margin trading on any of these junk coins? Doesn't seem like a good idea to offer something like that, given the relatively low liquidity/volume.
Applejinx 8y ago
Or, if you have any other motivation for attacking either a coin or a person or entity known to be heavily invested in that coin. You know, in case turning a profit is not the only possible motivation for anybody to do anything. Many acts of war and violence are not profitable, certainly not directly profitable, and yet history shows people will attack each other anyhow. 'Bit' worrisome if your whole concept of finance depends on altruistically greedy actors who can never act out of spite or malice. That would be creepy but nice compared to the real world as it has always existed.

drexlspivey 8y ago

Because in order to 51% attack someone has to accept a huge payment in that coin.

stale2002 8y ago

Well, the reality is that "attacking" a coin is much more difficult than just spending 3$ on something. You also have to actually do the double spend transactions, and hope that the person that you are stealing money from doesn't do anything about it. It is that step 2 that is actually much harder than a nieve attack might suggest.

AlexCoventry 8y ago
Not really, you just have to short the coin in trading, then cover your short when your double-spend discredits the coin's security.
- michaelmrose 8y ago
  If only there were laws against such behavior.
- stale2002 8y ago
  Attacking a coin, in an attempt to drive down the price, and make money on an open short that you have is very risky behavior. Historically speaking, the effects of an attack on the price aren't that clear cut. The price of an "attacked" coin can jump, just as often as it crashes. The narrative being "oh, there was a problem, but we fixed it! Look at how great we were at defending against an attack!". Crazy, I know. I am just saying that it is not that simple, and a person is risking losing as much money as they might gain.
- raverbashing 8y ago
  Yes because the crypto futures market is very well developed and is very liquid (for BTC) and exists for every tiny coin out there