Bitcoin faces $8 billion attack risk, Ethereum is more secure

Some observers argue that the bigger concern may not be profit, but whether a state-backed attacker would accept losses to destroy Bitcoin.

The 51% attack on Bitcoin, long dismissed as a theoretical exercise that would only destroy value for those who tried it, has quietly become something an attacker can take advantage of because of today’s financial derivatives markets, said Campbell Harvey, a finance professor at Duke University.

However, many Bitcoin supporters rejected the claim made during the July 12 episode of Scott Milker’s Wolf of All Streets podcast, arguing that it ignores practical economic barriers that could potentially stop such an attack.

Financial derivatives have changed the risk profile of Bitcoin

According to Harvey, a 51% attack, where one entity gains majority control of the Bitcoin network’s hash power, has always been technically possible but makes no economic sense. This is because the attacker would need to spend billions of dollars on mining hardware, but that would only ultimately destroy the value of the assets that were just compromised.

“Why do you spend billions investing in mining equipment, take over the network, but the price of Bitcoin collapses to zero?” Harvey assumed. “So you spent all this money and got nothing?”

But now, it is He believes This equation has changed, as derivative markets hold enough liquidity for an attacker to sell Bitcoin before launching the attack and make a profit as the price declines.

“The difference today is the derivatives markets,” he told Milker. “What you want to do is take a short position on Bitcoin at the same time during the attack, and with selling the ideal outcome is if the asset goes to zero.”

The professor noted that trading should be done on offshore derivatives platforms because it amounts to blatant market manipulation. In his paper titled “Gold and Bitcoin,” he estimated that such an operation would cost about $8 billion, roughly 50 basis points of Bitcoin’s total market capitalization, though he framed the scenario as an exercise of risk management rather than forecasting, arguing that investors should consider every credible threat rather than dismiss inconvenient possibilities.

When Grok was asked the same question estimated Anyone looking to carry out such an attack would need to spend more than $10 billion on mining machines and about $1.3 million in electricity costs every hour. She also noted that any attempt would likely be detected immediately.

Interestingly, Harvey does not believe that the same scenario could work on Ethereum. According to him, since Ethereum switched to Proof of Stake, an attacker would have to obtain more than half of Ethereum’s liquid supply to control a third of Ethereum’s total, which would cause prices to rise rapidly while trying to eliminate the short-selling opportunity he described for Bitcoin.

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The guru’s criticism of Bitcoin has gone beyond the security of its network, as he argued that the OG cryptocurrency is too volatile to be considered a safe-haven asset or reliable store of value. He said price volatility remained high even after years of market growth and increased liquidity. At the time of writing, BTC is trading near $62,000 then Slipping To nearly $61,000 last week after renewed hostilities between the United States and Iran.

The Bitcoin community is declining

The response to X’s interview with Harvey was mostly dismissive, with market watcher David Levenson Contact The professor takes a “fundamental misunderstanding of how derivatives work.” Another listener, PrivateCoSaylor, Argue Bitcoin’s social consensus could reject blocks produced by an attacker, making the strategy economically self-defeating.

However, there were those who expressed various concerns, including the trader alias Tony, who… male Although the entire argument rests on profit being the motive, the same would not be true if a nation-state or short-seller simply wanted Bitcoin to fail regardless of any losses incurred.