Is it more expensive to attack a Proof-of-Stake (PoS) network compared to a Proof-of-Work (PoW) one? BitMEX’s most recent analysis explores this question, challenging the notion that PoS systems are inherently harder to compromise.
To evaluate the cost dynamics, it is essential to consider renting versus buying the required resources for an attack. In the case of a PoW network like Bitcoin, controlling 51% of its mining power is necessary for an attack. With miners earning approximately $10 billion annually, renting enough hash power to attack the network would entail a substantial expense. However, if an attacker only needs to offer a slightly higher income to entice miners, a 20% premium on their annual earnings would amount to around $12 billion. After subtracting potential mining earnings, BitMEX suggests the net cost of such an attack could be approximately $2 billion per year.
On the other hand, PoS networks like Ethereum require attackers to control a significant portion of the staked coins. Stakers earn approximately $3 billion each year, and applying the same 20% premium would result in a cost of approximately $3.6 billion per year to rent enough staked Ethereum. However, only a third of the total stake is needed to disrupt the network, thus reducing the annual cost to around $1.2 billion. BitMEX acknowledges that this comparison is not flawless but points out that, when normalizing for market capitalizations, the cost to attack PoS networks is similar to that of attacking PoW networks, with Bitcoin being around three times larger.
If an attacker wishes to proceed with a full-scale attack, they would need to invest in mining hardware for PoW or purchase staked assets for PoS. For PoW networks, this means acquiring up to 51% of the mining hardware, a lengthy and expensive process that could take years and billions of dollars. On the other hand, for PoS, attempting to purchase a third of the staked Ethereum, for example, could cost up to $100 billion. Such an acquisition could trigger a market surge. BitMEX highlights that this attack could be counterproductive, as it would significantly impact the ecosystem and lead to a substantial rally in the price of alternative coins.
It is worth noting that attacking PoW networks requires ongoing expenses to maintain control over the network, while PoS systems might only require a one-time investment. BitMEX emphasizes that in PoW systems, the attacker may need to continue spending funds in the long run to sustain the attack, while for PoS systems, it is mostly a one-off cost.
Additionally, the risk of confiscation is another factor to consider. Mining hardware can be physically seized, whereas cryptocurrency stakes can be easily moved across borders. This potentially makes staking more secure against physical attacks. However, both PoW and PoS systems have vulnerabilities. In PoS, if an attacker controls a significant portion of the stake, they could potentially destroy the network. In PoW, the network has the possibility to recover over time as mining hardware degrades and is replaced. BitMEX suggests that in PoW, one at least has the chance to wait it out and return, hopefully unburdened by the attack.
Furthermore, the absence of a real-world anchor in PoS systems could be a weakness, potentially making them more susceptible to certain types of attacks.