Not Quantum: Duke Investigator Pinpoints Cheapest Risk Vector for Bitcoin's Downfall

While most mainstream attention has gone to quantum computing as a danger to Bitcoin’s existence, Duke Professor Harvey Campbell highlights that a 51% attack is a far more concerning event. Campbell estimates that a one-week attack could be completed for $6 billion, nearly 0.26% of bitcoin’s market capitalization.

Duke Investigator: Quantum Risks Overestimated, 51% Attack on Bitcoin Could Be Completed on a Budget

The Facts:

Harvey Campbell, Professor of Finance at the Fuqua School of Business at Duke University, has raised concerns about a unique risk that could collapse the Bitcoin network and global markets.

While quantum computing has been getting increased attention as a potential attack vector to Bitcoin, Harvey estimates that a 51% attack, where a single entity wields the majority of the network’s mining power, is a more down-to-earth risk vector and could be completed on a budget.

In “Gold and Bitcoin,” a paper where Campbell compares the two assets, he declares that a 51% attack could prove to be an inexpensive way of bringing Bitcoin down, compared to its total market capitalization value.

Setting up some parameters and assuming instant availability of mining hardware, Campbell estimates that a week of the attack could cost nearly $6 billion, only about 0.26% of BTC’s current value.

Furthermore, Campbell breaks down the costs linked to the attack. He declared:

Hardware is the largest expenditure, about $4.6 billion at current prices. The data center build would require $1.34 billion and the electricity to run the hardware and maintain the data center about $0.13 billion per week.

Why It Is Relevant:

While Campbell estimates that a successful 51% attack would plunge the value of bitcoin, instantly affecting the trust in its immutability status, there are exogenous markets that could be leveraged to take advantage of such a move.

The rise of Bitcoin as an institutionalized asset in world markets would entice an entity to organize an attack. Campbell argues that the volumes traded in both perpetual and futures markets linked to bitcoin, reaching billions, would make the attack economically feasible.

“A trader could take a short position, and with less than 10% of average daily volume, ring up enormous profits – more than enough to cover the cost of the attack – as bitcoin prices plunged,” he assessed. Nonetheless, Campbell acknowledged that this could be classified as market manipulation and could be done with other nefarious purposes in mind.

Looking Forward:

If Campbell’s claims are true, the low costs of a sustained 51% attack on Bitcoin should raise concerns about the network’s future, as BTC is currently being adopted as a corporate and state-nation reserve asset.

In the future, the feasibility of such an attack might become a relevant issue in the geopolitical arena and an element of national security, as more central banks are predicted to hold bitcoin as part of their reserves.

FAQ 🧭

• What risk does Professor Harvey Campbell highlight regarding Bitcoin?

Campbell warns that a 51% attack, where one entity controls over half of the Bitcoin network’s mining power, poses a significant risk to its stability and could be executed with a relatively low budget.

• How much would a 51% attack potentially cost, according to Campbell?

He estimates that executing such an attack could cost around $6 billion, making it a feasible threat compared to Bitcoin’s total market capitalization.

• What are the primary costs associated with a 51% attack?

The largest expenses would include nearly $4.6 billion for mining hardware, $1.34 billion for data center construction, and $130 million for electricity over a week.

• What implications could a successful attack have on Bitcoin’s value and trust?

A successful attack could significantly lower Bitcoin’s value and undermine trust in its immutability, potentially leading to vulnerabilities in BTC-tied global markets.