Bitcoin network 51% attack only needs 6 billion? Professor: Your BTC is not as safe as you think.

Duke University finance professor Campbell Harvey studies market shocks: The cost of a 51% attack on the Bitcoin network is severely overestimated, as attackers only need $6 billion to destroy Bitcoin, and then profit several times through shorting derivatives to cover the costs. The industry fiercely debates the feasibility of such an attack, and this article provides a deep analysis of this fatal flaw that threatens the foundations of Bitcoin.

The academic world drops a bombshell: 6 billion dollars can destroy Bitcoin

(Source: ZeroHedge)

On October 9, an academic study from Duke University caused a stir in the cryptocurrency circle. Finance professor Campbell Harvey proposed a shocking conclusion in his latest paper: the market has seriously underestimated the "51% attack" threat faced by Bitcoin. In reality, attackers only need an initial investment of about $6 billion to take control of the Bitcoin network within a week, thereby destroying this cryptocurrency system with a market value exceeding $2.3 trillion.

This number has shocked many Bitcoin believers. For a long time, the cryptocurrency community has generally believed that the decentralization and massive computing power of the Bitcoin network make it almost impossible to suffer a 51% attack, and this security is regarded as one of the core values of Bitcoin as "digital gold." However, Professor Harvey's research has overturned this assumption, pointing out that the economic threshold for a 51% attack on the Bitcoin network is much lower than imagined, and this vulnerability could become a fatal risk for the future development of Bitcoin.

Harvey detailed the cost structure of launching a 51% attack on the Bitcoin network in his research. Attackers first need to purchase approximately $4.6 billion worth of specialized mining hardware, primarily the latest ASIC miners, to provide enough power to surpass more than half of the current total network hash rate. Secondly, an investment of about $1.34 billion is required to build dedicated data centers to house and operate this equipment, including facilities, cooling systems, network infrastructure, and more. Finally, maintaining the operation of this equipment incurs enormous electricity costs, estimated at around $130 million per week.

Adding these numbers together, the initial investment is about 5.94 billion dollars, plus the operating costs for the first week, totaling approximately 6 billion dollars. Harvey emphasized that this amount only accounts for 0.26% of the total market value of the Bitcoin network, far below many investors' expectations. For national-level actors, large hedge funds, or tech giants, while 6 billion dollars is not a small amount, it is also not out of reach. This relatively low cost of attack, in Harvey's view, represents a "serious issue regarding the feasibility and security of Bitcoin's future."

What is even more concerning is that this type of attack is not only technically feasible but could also be economically profitable. Harvey's paper points out that attackers can short Bitcoin heavily in the derivatives market both before and after launching the attack. When news of a successful 51% attack breaks, the price of Bitcoin is bound to plummet, and the profits gained from the short positions may far exceed the costs of the attack. According to calculations, traders only need to establish short positions with less than 10% of the average daily trading volume of Bitcoin to achieve substantial profits when the price crashes, enough to cover the entire cost of the attack.

Harvey summarized his concerns in one sentence: "You can destroy the value of Bitcoin with 6 billion dollars; although this kind of attack sounds overly technical, it is quite credible." This conclusion challenges the long-standing confidence of the Bitcoin community in the network's security and raises alarms for institutional investors considering large-scale allocations of Bitcoin.

What is a 51% Attack on the Bitcoin Network: An Analysis of the Threat Sources

To understand this controversy, it is first necessary to clarify what a Bitcoin network 51% attack is. This term refers to the situation where a single party or group controls more than half of the computing power of the blockchain network. In a blockchain like Bitcoin that employs a proof-of-work mechanism, miners verify transactions and create new blocks by solving complex mathematical problems, and having more computing power means a greater chance of winning in this competition. Under normal circumstances, computing power is distributed among thousands of miners around the world, forming a decentralized security net.

However, if an entity can control more than 50% of the network's computing power, the security assumptions of the blockchain will collapse. An attacker with the majority of the computing power can do a few extremely dangerous things. The first is a "double spending attack," where the attacker can first purchase goods or services with Bitcoin, and then use their computing power advantage to reorganize the blockchain and create an alternative chain that does not include that payment, thus allowing them to retain both the Bitcoin and the goods obtained, effectively creating wealth out of nothing. Secondly, the attacker can prevent specific transactions from being confirmed and can even reverse recent transactions, which would destroy users' trust in the system's reliability.

The most fatal aspect is that even if an attacker does not actually perform a double spend or transaction review, simply proving that a 51% attack on the Bitcoin network is feasible is enough to destroy Bitcoin's value. One of the core value propositions of Bitcoin is its decentralization and immutability; if the market discovers that this assumption is not valid, investor confidence will collapse instantly, and the price could plummet by 50% or more within hours. This is precisely the profit mechanism mentioned in Professor Harvey's paper: the attacker does not need to actually steal Bitcoin; they only need to prove that the attack is feasible to earn astronomical profits through shorting.

In contrast, traditional value storage assets like gold do not have similar systemic risks. You cannot "attack" gold itself through any technical means; the physical properties of gold ensure its characteristics of being non-falsifiable and non-inflatable. This is a point that Professor Harvey emphasizes repeatedly in his paper: although Bitcoin and gold are both seen as options for "currency depreciation trading," the dimensions of risk that Bitcoin faces are far more complex than those of gold. The value of Bitcoin is built on cryptography and game theory, and once these foundations are shaken, the entire value system could collapse instantaneously.

The current prosperity of the Bitcoin derivation market further amplifies this risk. In recent years, the Bitcoin futures, options, and perpetual contract markets have experienced explosive growth, with daily trading volumes often reaching hundreds of billions of dollars. These derivation tools provide potential attackers with a perfect profit mechanism, allowing them to gradually build up substantial shorting positions without attracting attention, and then cash out all at once when launching an attack. Harvey's research indicates that this profit mechanism significantly enhances the economic feasibility of attacks, turning what might have been merely a theoretical threat into a risk that could realistically occur.

Industry Debate: Is the Attack Really Feasible?

After Professor Harvey's research was published, the cryptocurrency industry quickly split into two camps. One side believes that this warning hits the nail on the head, pointing out the long-ignored fatal weakness of Bitcoin; the other side argues that these concerns are exaggerated, and the practical difficulties are far greater than theoretical calculations. This debate involves multiple aspects such as technical feasibility, economic logic, and game theory.

Matt Prusak, the president of an American Bitcoin company, is a representative of the skeptics. He believes that there are several key unrealistic aspects in Harvey's calculations. Firstly, there is the issue of hardware procurement. Prusak points out that accumulating and deploying $4.6 billion worth of mining equipment would take years, rather than being completed quickly as suggested in Harvey's paper. The global production capacity for mining machines is limited, and even the combined annual output of a few major manufacturers cannot meet such a huge order in the short term. More importantly, if someone suddenly placed such a large order, it would inevitably raise market alarm, and the Bitcoin community would not sit idly by.

Secondly, there is the issue of the construction time for data centers. Building a professional data center that can accommodate millions of mining machines is not something that can be completed in a few weeks; it requires a series of complex processes such as site selection, infrastructure construction, and power access negotiations, which usually takes one to two years. During this process, if the goal is to launch an attack, it is difficult to go unnoticed. The transparency of the Bitcoin network means that changes in computing power are publicly visible. If a new large mining pool suddenly appears and grows rapidly, the entire community will be alerted.

Prusak also emphasized the practical limitations of shorting operations. Establishing a short position in the derivatives market to cover an attack cost of 6 billion USD requires a huge amount of collateral. Most exchanges require at least 20%-50% margin, which means attackers may need to prepare additional billions in cash as collateral. Moreover, if the exchange's risk control system detects abnormal large short positions, especially when rumors of an attack begin to circulate in the market, the exchange is likely to suspend suspicious transactions or require additional margin, making it difficult for attackers to realize their profits smoothly.

However, supporters of the Harvey camp have responded to these rebuttals. Regarding hardware procurement issues, they point out that the attackers could be state-level actors or an alliance of multiple entities, who may have secretly stockpiled equipment for years or be able to sign confidentiality agreements directly with manufacturers. Regarding timing, the attack may not need to start from scratch; existing large mining farms may have been acquired or infiltrated. As for shorting restrictions, the paper mentions that the attack is likely to occur in overseas markets with weak regulation, where there is a lack of effective measures against market manipulation.

It is worth noting that a 51% attack on the Bitcoin network is not purely a theoretical imagination. Historically, some smaller blockchains have indeed suffered from such attacks. The Bitcoin fork Bitcoin Gold was attacked in 2018, where the attackers successfully executed double spending and stole millions of dollars worth of assets. Ethereum Classic also suffered similar attacks multiple times in 2019 and 2020. Although these are smaller blockchains with lower hash power, making them more vulnerable to attacks, they prove that a 51% attack is not science fiction but a real event that has occurred.

The core of this debate actually lies in risk assessment. Even if the actual feasibility of an attack is disputed, the mere existence of such a possibility is enough to trigger concern. For institutional investors who are considering allocating significant funds to Bitcoin, they need to assess not only whether an attack is "likely" to occur, but whether this risk can be completely eliminated. In traditional financial risk management, even events with a small probability but severe consequences (tail risk) require special attention and hedging.

Defense Mechanisms and Future Outlook: How Bitcoin Responds

In the face of the threat of a 51% attack on the Bitcoin network, the cryptocurrency community is not helpless. In fact, the Bitcoin network has several natural defense mechanisms that, while perhaps not perfect, do increase the difficulty and cost of an attack. First is the economic incentive mechanism. Currently, Bitcoin miners around the world earn billions of dollars each year from block rewards and transaction fees, and they have a strong economic incentive to maintain network security because if the value of Bitcoin collapses, their investments will also be lost.

Secondly, there is the proactive defense capability of the community. The transparency of the Bitcoin network means that abnormal concentration of hash power can be quickly detected. Once the community perceives a potential 51% attack threat, various countermeasures can be taken, including community coordination to resist the attack chain, temporarily raising transaction confirmation requirements, and even changing the consensus algorithm to eliminate the attacker's hardware in extreme cases. Although these measures themselves also come with costs and controversies, they do provide a last line of defense for the network.

The third is the self-destructive nature of the attack. Even if the attacker successfully controls 51% of the hash power and disrupts the network, the 6 billion dollars they invested in hardware and data centers would become worthless with the collapse of Bitcoin's value. ASIC miners are specialized equipment that can only be used to mine Bitcoin and cannot be repurposed for other uses. This nature of the "scorched earth strategy" means that the attacker must ensure they can gain profits far exceeding 6 billion dollars from shorting in order to truly benefit from the attack, which increases the complexity and risk of the operation.

However, these defensive mechanisms are not absolutely reliable. For nation-state actors, the motivation for an attack may not be economic gain, but rather geopolitical or ideological objectives. A government that is hostile to cryptocurrencies may be willing to bear economic losses to destroy Bitcoin, as a means of demonstrating power to the world or combating alternatives to the financial system. In this case, conventional economic incentive analysis may fail.

In the long run, the Bitcoin network may need to consider structural improvements to reduce the risk of a 51% attack. Some suggestions include further increasing the decentralization of computing power, introducing additional security checkpoint mechanisms, or transitioning to a more secure consensus mechanism in extreme cases. However, any fundamental changes could provoke community splits, which in itself is another kind of risk. The decentralized governance structure of Bitcoin means that reaching consensus on significant changes is extremely difficult, which is both its strength and its weakness.

Professor Harvey's research, regardless of whether its conclusions are completely accurate, has at least successfully brought this issue into mainstream discussion. As the market capitalization of Bitcoin continues to grow and institutional investors keep pouring in, the importance of network security will only increase. Investors need to recognize that while Bitcoin is referred to as "digital gold," the spectrum of risks it faces is completely different from that of gold. When making investment decisions, one must not only consider the potential for appreciation but also acknowledge the existence of these systemic risks.