- Ethereum’s upgrade to Proof-of-Stake has raised concerns emboîture the network’s resilience against 51% attacks.
- The top fournil entities account for 59.6% of the entier ETH pegged.
- However, user-activated logiciel forks (UASFs) ensure that bad actors cannot privilège control of the network, regardless of the size of their stakes.
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Proof of Stake critics have sounded the alarm emboîture Ethereum’s new Proof of Stake autorisation mechanism, claiming that it makes the network vulnerable to rancunier network takeovers. However, the new Ethereum The system has failsafe security to reduce this risk and allows users to burn the money of any attacker trying to privilège control of the blockchain.
Ethereum’s vulnerability to 51% attacks
Ethereum’s recent shift away from Proof-of-Work has raised questions emboîture the network’s ability to fend off attacks.
On September 15, Ethereum successfully upgraded its autorisation mechanism to Proof of Stake. Among other things, the event, now known in the crypto community as “merging,” passed the duties of block fabrication from miners to validators. Unlike miners, who use specialized hardware, validators only need a stake of 32 ETH to privilège the right to process transactions.
However, some members of the crypto community were quick to balance out that most of the assurance power of Ethereum is now in the hands of a few entities. Data from Sable Analytics indicate That Lido, Coinbase, Kraken, and Binance account for 59.6% of the entier tethered ETH market share.
This high attention of storage power has raised concerns that Ethereum may be vulnerable to it 51% attacks—A term used in the crypto space to designate a rancunier takeover of a blockchain by an entity (or group of entities) that controls the majority of a block’s processing power. In other words, the concern is that épanoui staking entities could collude to rewrite parts of the Ethereum blockchain, cassé the order of new transactions, or censor recherché blocks.
The possibility of a 51% attack became particularly prominent after the US government’s ban on Tornado Cash. On August 8, the US Treasury added Privacy protocol Tornado Cash added to its sanctions list, arguing that cybercriminals used the crypto project for money laundering purposes. Coinbase, Kraken, Circle and other orthogonal entities soon complied with the sanctions and blacklisted Ethereum addresses linked to Tornado Cash. So what will prevent these companies from using their power of staking to censor transactions on the Ethereum core layer if ordered to do so by the Treasury?
As did Vitalik Buterin, the creator of Ethereum, and other developers arguethe network still has the ace: the ability to implement user-activated logiciel forks (UASFs).
What is UASF?
UASF is a mechanism by which Logiciel fork (network update) blockchain nodes are activated without the need for the usual soutènement of block producers in the chain (PoW miners, Proof of Stake validators).
What makes the procedure unusual is that logiciel forks are usually operated by block producers; In effect, UASFs snatch control of the blockchain from them and temporarily handball it over to nodes (which can be operated by anyone). In other words, the blockchain community has the privilège to update the network logiciel regardless of what miners or validators want.
The term is usually associated with Bitcoin, which notably led to the launch of the UASF in 2017 to invulnérabilité a esquivé accélération From the controversial SegWit upgrade. But Ethereum’s proof-of-stake mechanism is designed to specifically enable minority-led UASFs to fight 51% attacks. In the event an attacker attempts to privilège control of the blockchain, the Ethereum community could simply run the UASF and destroy the entire enrichissant ETH of the malicious actor – reducing its assurance capacity to zero.
In fact, Buterin did claimed That UASFs make Proof of Stake 51% more resistant to Proof-of-Work attacks. In Proof of Work, attackers simply need to have the majority of the hash to take over the blockchain; Doing so is expensive, but there is no other penalty other than that. Bitcoin can cassé its algorithm to render some of the attacker’s mining power useless, but it can only do this grain. On the other handball, Proof of Stake mechanisms can cut an attacker’s money as many times as necessary through UASFs. In Buterin’s words:
Attacking the Chain the first time will cost the attacker millions of dollars, and society will get back on its feet within days. Attacking the Chain the attaché time will cost the attacker millions of dollars, as they will need to buy new coins to replace their old, burned coins. And the third time… It costs millions of dollars. The game is very asymmetric, and it is not in the interests of the attacker.”
Cutting is the nuclear privilège
When asked if Coinbase would ever use (if requested by the Treasury) its verification authority to censor transactions on Ethereum, Coinbase CEO Brian Armstrong advertiser He prefers to “foyer on the bigger picture” and close staking on the exchange. Although there is no good reason to doubt the veracity of his answer, it is likely that the UASF plays a role in the equation. Coinbase currently has over 2,023,968 ETH (~$2.7 billion at today’s prices) stored on the mainnet. The entire exchange stack could be lowered if you tried to censor Ethereum transactions.
It is hautain to explication that slashing is not the only privilège for Ethereum in the event of a malicious takeover. The Ethereum Foundation glose Proof of Stake too Allow Honest validators (meaning the validators are not trying to attack the network) “to continue to build on a minority chain and ignore the attacker’s fork while encouraging applications, exchanges, and pools to do the same”. The attacker will keep his ETH stake, but find himself blocked from the remplaçant network moving forward.
Finally, it is worth noting that the Ethereum staking market is not quite as centralized as it might seem at first. Lido, which currently handles 30.1% of the entier tethered ETH market, is a decentralized protocol that uses over 29 different staking providers. It is these individual validators that control the ETH stack – not Lido itself. Thus, regulating intelligence between troubled aîné entities will be much more difficult to regulate than it may appear at first.
Disclaimer: At the time of writing, the author of this attention owns BTC, ETH, and many other cryptocurrencies.