3 ms·

Not quite. Being short is borrowing Crypto, selling into USD (or something else) and having an obligation to return the borrowed Crypto position at some point (

Not quite. Being short is borrowing Crypto, selling into USD (or something else) and having an obligation to return the borrowed Crypto position at some point (agreed or not) in the future. Returning a borrowed position in a subsequently forked chain which is no longer economically valuable could be incredibly profitable. It is of course entirely possible the collateral held by the counter-party securing the borrow is seized in such a scenario (legitimately or not).

Majromax 5y ago
Which is why a prospective attacker would probably seek to build its short position at the ordinary Wall Street level. Nobody will try to seize collateral for "winning" if you've sold Microstrategy shares short, for example, or even the BTCC Bitcoin ETF (trading on the Toronto stock exchange). My gut feeling is that we aren't yet at the point that you could build an entirely on-exchange short position sufficient to fund a 51% attack, but that may change. To estimate the cost of a 51% attack, miners currently get 6.25BTC/10 minutes at $35k/bitcoin, so the value of mining is about $32m/day. Rounding that up to even $50m/day to account for transaction fees, that's not very expensive if a hedge fund can build a $1bn short position. The saving grace might be that you can't rent bitcoin mining hardware in unlimited quantities. A hedge fund might have to own the miners used for the attack, and if executing the attack causes bitcoin's value to drop to near-zero that would also devalue the mining hardware.
- noxer 5y ago
  This is why you would build a mining pool or multiple pools They pay for themself and by the time the miners notice the abuse its too late. You could probably create a pool that grows rather fast if you simply pay more than others this would be possible by not generating any profit form the pool or worst case you could pay on top. far more likely is a scenario where an existing pool owner or a few collude and pull this off as "exist scam". A crypto winter where the price of BTC drops below the mining cost would be the perfect situation. low hash rate. price of BTC down so not many people shorting and mining hardware cheap form all the miners who went bankrupt. Once a miner/pool has 51% it would eventually make financial sense to kill BTC for a final huge profit rather than slowly going bankrupt as well.
  - Majromax 5y ago
    Perhaps the only reason a hedge fund hasn't tried this yet is the unclear legal status of doing so. One law blog (https://restislaw.com/liability-51-attacks-cfaa/ https://restislaw.com/liability-51-attacks-cfaa/) argues that a 51% attack would violate the Computer Fraud and Abuse Act, but that blog does not take into account the recent Supreme Court decision limiting its application. It might also be considered market manipulation to take out a short position on a bitcoin-linked fund or company (like Microstrategy) and then take actions with the intention of changing the price of Bitcoin. That could add enough legal risk to make a hedge fund think twice. I doubt a hedge fund could build a sufficient short position on unregulated DeFi networks, either, especially since blowing up Bitcoin would likely break the peg on at least Tether. Still, this would seem to leave Bitcoin in an uncomfortable spot: the only reason the "free from government" currency continues to exist may be regulations by those selfsame governments.
    - noxer 5y ago
      Far more likely this would be done by "criminals" and they dont care about the law especially the law on the other side of the globe.

Majromax 5y ago

Which is why a prospective attacker would probably seek to build its short position at the ordinary Wall Street level. Nobody will try to seize collateral for "winning" if you've sold Microstrategy shares short, for example, or even the BTCC Bitcoin ETF (trading on the Toronto stock exchange). My gut feeling is that we aren't yet at the point that you could build an entirely on-exchange short position sufficient to fund a 51% attack, but that may change. To estimate the cost of a 51% attack, miners currently get 6.25BTC/10 minutes at $35k/bitcoin, so the value of mining is about $32m/day. Rounding that up to even $50m/day to account for transaction fees, that's not very expensive if a hedge fund can build a $1bn short position. The saving grace might be that you can't rent bitcoin mining hardware in unlimited quantities. A hedge fund might have to own the miners used for the attack, and if executing the attack causes bitcoin's value to drop to near-zero that would also devalue the mining hardware.

noxer 5y ago
This is why you would build a mining pool or multiple pools They pay for themself and by the time the miners notice the abuse its too late. You could probably create a pool that grows rather fast if you simply pay more than others this would be possible by not generating any profit form the pool or worst case you could pay on top. far more likely is a scenario where an existing pool owner or a few collude and pull this off as "exist scam". A crypto winter where the price of BTC drops below the mining cost would be the perfect situation. low hash rate. price of BTC down so not many people shorting and mining hardware cheap form all the miners who went bankrupt. Once a miner/pool has 51% it would eventually make financial sense to kill BTC for a final huge profit rather than slowly going bankrupt as well.
- Majromax 5y ago
  Perhaps the only reason a hedge fund hasn't tried this yet is the unclear legal status of doing so. One law blog (https://restislaw.com/liability-51-attacks-cfaa/ https://restislaw.com/liability-51-attacks-cfaa/) argues that a 51% attack would violate the Computer Fraud and Abuse Act, but that blog does not take into account the recent Supreme Court decision limiting its application. It might also be considered market manipulation to take out a short position on a bitcoin-linked fund or company (like Microstrategy) and then take actions with the intention of changing the price of Bitcoin. That could add enough legal risk to make a hedge fund think twice. I doubt a hedge fund could build a sufficient short position on unregulated DeFi networks, either, especially since blowing up Bitcoin would likely break the peg on at least Tether. Still, this would seem to leave Bitcoin in an uncomfortable spot: the only reason the "free from government" currency continues to exist may be regulations by those selfsame governments.
  - noxer 5y ago
    Far more likely this would be done by "criminals" and they dont care about the law especially the law on the other side of the globe.