The Unhinged Government: How Much Would It Cost for a State to Undermine Ethereum?
In recent years, governments around the world have been increasingly fascinated with the potential of cryptocurrencies like Bitcoin. While many see them as a legitimate form of digital currency, others are more cautious and even hostile towards their use. But what if we were to imagine a scenario where a government decides to undermine one of these popular coins? How much would it cost for such an action?
As noted by the Economist in its recent article “The dark side of Bitcoin” (1), governments have secretly been exploring ways to exploit the decentralized nature of cryptocurrencies like Bitcoin. One potential threat is that a government could attempt to manipulate or disrupt the network, potentially causing widespread financial losses and instability.
To put this into perspective, let’s consider some hypothetical scenarios where governments might try to undermine Ethereum. We will explore three possible cases:
Case 1: Creating a “Bitcoin Killer”
Imagine a scenario where a government were to create a new cryptocurrency that competes directly with Bitcoin. This new currency could be designed to be more attractive to users, perhaps by offering lower transaction fees or more advanced security features. The goal would be to drive existing Bitcoin users off the platform and into the new currency.
If successful, this would likely involve creating a large-scale campaign of propaganda and manipulation to promote the new cryptocurrency. This could include:
- Spreading false information about the benefits of the new currency
- Using social media to spread misinformation about its security features
- Offering incentives for users to switch to the new currency
The estimated cost of such an effort would likely be substantial, potentially in the hundreds or thousands of millions of dollars.
Case 2: Disrupting the Ethereum Network
Another possibility is that a government could attempt to disrupt the Ethereum network by launching a series of “51% attacks” on its underlying blockchain. This would involve attempting to control more than half of the network’s mining power, effectively taking over the network and rendering it vulnerable.
To carry out such an attack, a group of hackers or malicious actors would need to pool their resources and launch a coordinated effort to compromise multiple nodes on the Ethereum network. The estimated cost of this operation could be in the tens or hundreds of millions of dollars, depending on the scope of the operation.
Case 3: Using Cryptocurrency as a Tool for Social Engineering
A more insidious approach might involve using cryptocurrency as a tool for social engineering and manipulation. For instance, a government could try to create a new currency that is designed to be used in conjunction with existing systems, such as prepaid debit cards or mobile payments.
This would require significant investment in infrastructure and marketing efforts to promote the new currency. The estimated cost of this operation would likely be substantial, potentially in the billions of dollars.
In conclusion, undermining Ethereum – or any other cryptocurrency – would indeed come at a significant financial cost for governments. While it’s unlikely that we’ll see such an event unfold anytime soon (for now), understanding these potential risks can help us better protect our digital assets and maintain confidence in the integrity of cryptocurrencies.
(1) “The dark side of Bitcoin” by the Economist, published on March 18, 2020.