The Danger of 51% Attacks Is Exaggerated: Sterlin Lujan
In a Cryptovest exclusive interview, the Bitcoin.com ambassador said he believed censorship-resistant transactions to be even more important than decentralization.
On September 14, Bitcoin.com ambassador Sterlin Lujan spoke at the NEXT BLOCK conference in Sofia (Bulgaria). He talked about the psychology and evolution of money and how cryptocurrencies can disrupt fiat’s hegemony but also touched on how governments can try to hinder this process. In an exclusive interview for Cryptovest, Lujan elaborated on his views. We publish this extensive interview in two parts, with the biggest risks for cryptocurrencies being the focus of this week’s conversation.
In this part of the interview, Lujan shares his views on the internal and external risks for cryptocurrencies, their future, and the reason the risk of a 51% attack might be overrated.
What are the biggest security risks for cryptocurrencies as a whole?
The biggest security risk for cryptocurrencies right now is developers.
In the case of Bitcoin, we had an unfortunate situation where the protocol was neutered by the developers. They didn’t scale the cryptocurrency to meet market demand, and this had drastic consequences for the market share. To me, this is a security issue: if you can’t trust the developers to scale the technology and grow it with market demand, you are effectively damaging the utility in the use case of the cryptocurrency. In all honesty, the way developers approach open source projects can potentially cause harm to these projects.
I think the outside security risks are much less visible and much less likely to occur than the internal risks. Being able to protect cryptocurrencies as cryptocurrencies is extremely important – 100%!
You probably are going to get to this in a minute, but other people think that mining centralization is a security risk for cryptocurrencies. I think this problem is overstated.
What about Bitcoin Cash? Do you see similar security issues for it as well?
Yes, if the community has some type of irreconcilable differences on how to properly scale. I don’t think [the existing differences] are that intense, and there’s not as much divisiveness in the Bitcoin Cash community although there are some differences that could potentially harm Bitcoin Cash.
But even in the worst-case scenario, where the cryptocurrency does get harmed, there will ultimately be one strong cryptocurrency that has a better, stronger network effect, meets market demand, and keeps people with the solution. So, that does tend to cancel a lot of the negative consequences.
It’s just a shame when we see short-term damage happen to cryptocurrencies as a result of “development incompetence,” for lack of a better term. It’s my hope that we can continue to grow and scale these blockchains in a way that’s efficient and makes sense.
Does this cryptocurrency of the future you’re talking about already exist?
Right now, BCH is poised to be the cryptocurrency of the future as it fits the criteria of being an actual cryptocurrency that can be traded and exchanged in a simple, efficient, and reliable manner.
I’m not a maximalist in that I don’t think it should or could just be BCH. It’s the one I happen to support, but I think a multitude of cryptocurrencies can also succeed in the space so long as they are usable, efficient, and growing with demand.
If we don’t have that in a cryptocurrency and it just becomes a speculative asset, something that only millionaires and billionaires are interested in, we won’t be able to reach mass adoption and really grow the cryptocurrency ecosystem.
Do you think forking is an important part of cryptocurrencies?
What is your opinion of Craig Wright’s fork of BCH?
I absolutely disagree with many of the things Craig Wright says, as well as with his method of communication.
As for Bitcoin Cash and BCH forking, I’m up in the air regarding his opinion. I just don't like the way he's communicating it. I know nChain has already made a public statement to say it is not trying to force miners or anybody else to go in a particular direction with regard to their BCH agenda.
There’s a lot of FUD right now if it will even actually fork, but I will continue to contend that if we don't cooperate, it could cause harm in the short term. However, I still believe some cryptocurrency – Bitcoin Cash or a version of it – will succeed in the long term provided that it continues to be usable for a wide range of people.
At the NEXT BLOCK conference, you said the 51% attack risk is exaggerated, yet you continue to be a staunch supporter of decentralization. How do you reconcile these views?
I'm a supporter of decentralization, but since the technology is in its early embryonic stage, there will be some mining centralization to a degree.
Perhaps I should elaborate on why I believe some centralization is going to occur and why the problems are overstated.
Cryptocurrency centralization in terms of mining is going to happen to a degree because we haven't had mass adoption yet.
Without mass adoption and with intensifying government efforts to regulate cryptocurrencies, entrepreneurs will have fewer opportunities to get involved in the mining process and compete with the already operating miners.
I also want to mention there are many facets of decentralization. Mining is just one part of the equation. There is also decentralization in terms of the projects and the opportunities being built on top of BCH or other cryptocurrencies. There is also decentralization in the sense that other cryptocurrencies can exist; they continue to flatten the ecosystem and provide far fewer opportunities for centralized points of failure
Even with the current situation, mining is not that bad. The problem is overstated. There are no incentives for these miners to conduct a 51% attack and break the network. If they do that, it would be like shooting themselves in the foot, shooting themselves in the head even.
Sure, if they carry out a 51% attack, they can gain a tremendous amount of revenue in the short term. They get millions of dollars doing some massive double spins or some massive attack. But over the long term, they will lose out on all the revenue and generation on that network. If their 51% attack harms the network to such a degree that people go to other cryptocurrencies, how does that help those performing the attack?
Do you believe such an incentive can exist in the future?
It’s a possibility. There could be what we call a “negative incentive” for miners to want to do it. But the way these network protocols are set up on a foundational level traditionally do not incentivize miners to conduct such an attack.
If there were incentives for miners to engage in such attacks, these cryptocurrency networks would have already been broken.
Here’s another point – the ZenCash network underwent a 51% attack. Even if it does happen, you can pivot, upgrade the protocol, and make changes, which is exactly what ZenCash did. I think there were some double spins as a result of the attack, but ZenCash just kept pushing forward, changed up the network, and functions to this day.
So, a 51% attack is not all doom and gloom. There is still an opportunity to pivot and to survive those attacks.
My vision for the future is highly optimistic. I think we will have even more decentralization, and projects, building, and entrepreneurship will continue to blossom and thrive in the space. It is really beautiful to watch it all occur.
Look at what’s going on with Bitcoin Cash right now. The developers have made it so open source that people can now build initial coin offerings on top of it, launch smart contracting platforms, and create colored coins because the opcodes have been enabled. You can’t do this with the Bitcoin network anymore. It generates additional use cases.
I’m not saying there cannot be a bad side to that. For instance, Ethereum has suffered from a lot of nastiness and scams. We definitely do not want that to happen on the Bitcoin Cash network! But having alternative use cases is always good.
As a parting thought on this particular topic, I’ll say it is extremely important to get as much decentralization as possible in the current environment. But there is something even more important than decentralization, and that is having censorship-resistant transactions.
So long as we can transact with whatever cryptocurrency we want and the transaction cannot be intercepted, stopped, seized, frozen, or otherwise prevented from occurring, then we are in a good place. I believe it’s all good if we have enough decentralization to keep censorship-resistant transactions going.
The second part of the interview will be published next week and will focus on the relationship of cryptocurrencies with fiat and whether it hinders the rates of crypto adoption. The discussion will also touch on the ideological aspects of crypto and blockchain.