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Comment by Majromax | Hacker News Reader

> The only issue is convincing all those miners to go against their economic interest.

That's the problem, isn't it? Bitcoin "longs" are very unlikely to profit from a 51% attack, since its success would destroy the speculative value of the currency they hold.

On the other hand, increasing financialization of cryptocurrency allows people and institutions to build up short positions without directly holding bitcoin, and a 51% attack would cause those short positions to pay out. It may not even be illegal to do this, since there's no direct fraud in a 51% attack unless it's used to double-spend.

I wonder whether these two factors -- 51% resources and largest viable short positions -- still differ by an order of magnitude or two.

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> That's the problem, isn't it? Bitcoin "longs" are very unlikely to profit from a 51% attack, since its success would destroy the speculative value of the currency they hold.

It’s not about the holders, though. It’s about what the miners decide is best for them. Currently, higher BTC means more profits, but what happens if/when there are proposals to change BTC in ways that make it more eco-friendly? This is where we’d see miners flexing their power over the blockchain.

It’s also not hard to imagine scenarios where the chain forks for whatever reason and the miners go to war trying to discredit or destroy the other fork.

Didn't this already happen with one of the largest mining companies Bitmain and the BTC vs BCH fork? They were largely unsuccessful but still control btc.com and the btc subreddit.

Miners are necessarily 'long' due to the capital investment in mining gear. Granted, this cost is less than the marginal electricity costs for mining, it is nevertheless significant.

The risk associated with colluding for a 51% attack, the risk of financializing such a huge short position, and the near certainty of your capital investment becoming worthless all mean that this isn't a compelling proposition.

Being short is by definition not holding any. If you hold some and go short, that’s just plain old selling.

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).

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.

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.

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/) 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.

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.

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