On December 1, 2020, the launch of the zero phase of Ethereum 2.0 took place. Its main features are the work on the Proof-of-Stake consensus mechanism, which is significantly different from what is happening on the network today.
Approximately in 2021, Ethereum will no longer support cryptocurrency mining on video cards, that is, the PoW algorithm will be irrelevant. How, then, will the blockchain resist possible attacks from ill-wishers? Let’s tell.
To understand the topic, you need to remember the distinctive features of the Eth2 network. As we have already noted, it does not have the usual miners who are currently mining ether and other coins on the 2Miners mining pool. Instead, the so-called validators play a dominant role in the network, that is, the people who sent 32 ETH to the deposit contract.
Ethereum 2.0 network innovations
The tasks of the validators are quite simple. First of all, they take turns proposing blocks for inclusion in the existing cryptocurrency chain. At the same time, the rest of the validators must be online and confirm the correctness of the blocks, vote and include them in the blockchain. Thanks to this, the network will work and pay rewards, and the owners of the cryptocurrency will be able to conduct transactions with it.
The more validators, the safer the network, since in this case more different nodes can confirm the correctness of what is happening on the network. However, here Ethereum fans have a question: what happens if someone wants to harm the Eth2 blockchain, regardless of any financial losses?
Ethereum 2.0 security
This question arose for a reason. The fact is that more than 1.5 million ethers were sent to the Eth2 deposit contract not only by the fans of the project, Vitalik Buterin and retail investors.
Recall that Vitalik transferred 3200 ETH to the deposit contract, that is, he borrowed one hundred stakes in the current network.
A significant share of these ethers was also sent by cryptocurrency exchanges, which launched staking for their users immediately after the launch of the zero phase of Ethereum 2.0. That is, they offer clients to hold funds and earn a certain percentage of profits. By the way, with the current number of validators, it is 12.6 percent.
On December 13th, Ethereum Foundation spokesman Justin Drake posted an important tweet. According to statistics, 10.7 percent of all validator deposits are made on the Kraken exchange. That is, the platform received funds from its users and sent them to staking. Here is a quote.
10.7 percent of all validator deposits are made on the Kraken exchange. At the same time, Coinbase and Bitfinex have 5.8 times more Ether than Kraken. So, in theory, two exchanges can control a third of all validators. And five exchanges can hold half of the coins. Stake at home to avoid crypto exchange fees and support decentralization.
As you can see from Justin’s tweet, cryptocurrency exchanges hold a huge number of ethers of their traders, and in theory they will be enough to send a third or even half of the entire network to deposit. This is where users started to think about the security of Eth2 and got nervous. However, there is nothing to worry about – the network is able to protect itself. For clarity, we will analyze several scenarios of possible problems for the updated network. Let’s say that Ethereum 2.0 is attacked by major cryptocurrency exchanges or states.
Exchange attack on the Ethereum 2.0 network
Imagine that for some reason the management of cryptocurrency exchanges wants to use the ethers of users to attack the Eth2 network.
There are several ways to try to create problems for the blockchain. For example, suggest conflicting blocks for inclusion in the network, which essentially implies the formation of a fork in the network and its fork.
In any case, this idea is doomed to failure. First, it is important to understand that in the new Beacon Chain, only 900 stake holders are included in the so-called set of validators every day, not all of them. Accordingly, a queue is formed here, and most of the validators must confirm blocks and ensure the operation of the network. Accordingly, even if someone possesses half of the validators of the entire network, only a small part of them will be active and will be able to take actions that violate the rules of the network.
Secondly, the network has a built-in punishment mechanism, which users faced the next day after the launch of the zero phase. It involves the so-called slashing – that is, cutting off the validator’s deposit. In the future, the minimum penalty will be equivalent to 1 ETH.
Accordingly, any attempt to violate the rules of the network and create problems will result in monetary punishment. In addition, the chances of offering a block to the owner of the cut deposit will be less, which in the long term will affect further earnings.
As Anthony notes, such activity means death for the authority of any cryptocurrency exchange. According to him, no one – including other exchanges that will start staking later – will violate the rules, since this will necessarily end in loss of funds.
Users are unlikely to interact with a platform that burns their customers’ coins for obscure purposes.
And if the cryptocurrency exchange is from the United States, the consequences of such actions will be even more serious. In general, you can immediately dismiss such a scenario. It is much more profitable for platforms to operate according to the rules and make money.
State attacks on the Ethereum 2.0 network
Now let’s imagine a different situation when some state tries to harm the Ethereum network. Let’s imagine this is some weird government regime that doesn’t want to see cryptocurrency successfully create problems for their familiar banking system. That is, he is not afraid of losing money, and his representatives are ready to achieve results at any cost.
In this case, officials will first have to buy a huge amount of ethers to represent 33 or 51 percent of the network. If they want to become more than half of the network, they will need to buy more than 1.5 million ETH, since there are so many coins in staking at the moment.
The price of the issue is more than a billion dollars. And since it is unlikely that representatives of a separate country will be able to find such a large seller to sell at least a million ETH past the exchange, they will have to buy coins on exchanges. This will raise the course, making the cost of the attack even higher.
Let’s say the regime takes the easy path and simply withdraws the cryptocurrency from the local exchange, that is, it receives the required amount of coins. But here, too, not everything is so simple: it will be possible to become the majority of Eth2 in a very long time, because – as we have already noted – the network allows no more than 900 validators per day. At the same time, the remaining 49 percent of validators will also apply for the block proposal, so in reality the procedure will take even longer.
During this period, representatives of the ecosystem will have enough time to notice the huge amount of sent cryptocurrency and prepare for retaliatory actions.
Capturing validators on the Ethereum 2.0 network
Anthony admits another option – the government capture of the validators themselves, that is, the nodes that are already working on the Eth2 network. Again, the network uses slashing against the attacker and will mercilessly reduce their deposits. And as soon as the deposit drops from the initial 32 to 16 ETH, the offending validator will be excluded from the network.
Finally, the updated Ethereum also provides for a social consensus on the fork of the network, that is, its separation from the chain, where most of the nodes are captured by the attacker. This is a complex procedure that can come with problems for ETH, although this should be fine in the long run.
As a bonus: successful separation from the chain with the attacker will destroy the scammers’ tokens and permanently remove them from circulation. And this will result in at least a billion dollars in losses for them – without achieving a result.
As you can imagine, attacking Ethereum with a Proof-of-Stake consensus mechanism is a complex task that requires a huge investment of money and time. Even if the scammers manage to create problems for the network, their deposits will be cut off, and the money in the worst case will simply be burned.
In this regard, it is obvious that the developers have taken good care of the security of the new blockchain. Attacking Eth2 is too unprofitable, so hardly anyone will take such a step.