- Bitcoin’s network security depends on block rewards and not transaction fees
- The cost of a 51 percent attack on the Bitcoin network
- The effect of Bitcoin halving on its security
Cryptocurrency News Today – The forthcoming halving of Bitcoin reward seems to have raised some security concerns on the network. The security of the Bitcoin network mainly depends on block rewards, not transaction fees. Bitcoin halving is fast approaching. The halving will reduce the rewards of miners; can transaction fees alone sustain the network after the halving?
What Is Network Security?
The immutability and decentralization of a blockchain network depend on its ability to resist the double-spend issue. For Proof of Work, this means the ability to resist the hashrate-related 51 percent attack. Controlling over 50 percent of the network hashrate, as well as over 50 percent of the block production, lets an entity restructure the chain however it sees fit. Such an attack could ‘erase’ legitimate transactions.
Bitcoin (BTC) Price Today – BTC / USD
What Would a 51 Percent Attack Cost?
You can obtain a rough estimate of the cost of carrying out a network attack by calculating the number of top-of-the-line devices you need to recreate the existing hashrate. It assumes that part of the hashrate and discounts production, set up, and electricity costs are not already under the control of the attacker. It also assumes that the fundamental ASIC manufacturers, Canaan and Bitmain, are willing to sell these specialized devices at that volume, instead of mining for themselves.
Bitmain S17 Pro produces 53 TH/s and costs $2,500 per unit. The present hashrate is 90 Exahashes per second. About 1.7 million devices are needed at a cost of $4.2 billion.
Will the Halving of Bitcoin (BTC) Affect Its Security?
As the block reward of Bitcoin (BTC) continues to reduce more and more, the security of the network would depend on fees. Block rewards are projected to stop entirely sometime in 2140. This means that the network would need to run solely on transaction fees except they make fundamental changes to the code of Bitcoin, which is highly unlikely. The daily revenue from transaction fees is currently about $350k, which is just 2.2% of the daily block reward revenue of $15.8 million.
As the halving of the block reward approaches, transaction fees will need to surge by 22 times to make up for the incoming shortage in revenue. If this does not happen, the hashrate would drop and the network’s security would decrease. This is not just rumor. Litecoin (LTC) had its reward halving in August this year. After the halving, the hashrate of the network plunged by about 30 percent. Nevertheless, it is less likely for a 51 percent attack to unfold on the BTC network as the block reward continues to decrease.