> In a PoW system, the amount of work done must be proportional to the total value of all BTC (if not, it would make 51% attacks feasible).
I’m confused. Why must this be the case and how would it lead to a 51% attack if it were not?
I know the difficult goes up when the price goes up because more people are able to mine profitably and the system will automatically scale the difficulty to maintain the 1 block per 10 minutes rate, but I don’t understand what the difficultly being proportional to value has to do with 51% attacks being feasible.
1. The whole design of "Proof of Work" is that a miner must prove that he has spent a certain amount of money (in the form of electricity spend) to mine a block and win the block rewards and fees.
2. First of all, this means that (eventually) the amount of electricity spent on mining is proportional to the total rewards earned (again, block rewards PLUS fees). So if the value of BTC goes up, it's a classic arbitrage play - miners would spend more electricity to win the more valuable rewards. Of course, everyone with the capacity would do this, until the difficulty level is set at a higher level.
3. Similarly, the value to be gained from a nefarious mining attack is proportional to the total value of BTC, so the difficulty must increase to keep a 51% from being feasible.
The fact that electricity spend absolutely must be proportional (over time, there can be short term imbalances before they are arbitraged away) to total value of the coins in a PoW system is a fundamental, undeniable fact. It is simply how PoW works. Yet I still am amazed how many BTC fan boys try to wave this away.
I'd argue it's susceptible to 51% attack already, but as BTC's value grows, the profitability from pulling off a 51% grows as well. Therefore, the hashrate not scaling with the market cap of BTC makes the prospect of funding a 51% attack more and more appealing.
I’m confused. Why must this be the case and how would it lead to a 51% attack if it were not?
I know the difficult goes up when the price goes up because more people are able to mine profitably and the system will automatically scale the difficulty to maintain the 1 block per 10 minutes rate, but I don’t understand what the difficultly being proportional to value has to do with 51% attacks being feasible.