The Importance of Inventing New Consensus Algorithm For New Cryptocurrency

The Importance of Inventing New Consensus Algorithm For New Cryptocurrency

It is not a hard task to fork a cryptocurrency project into a brand new coin, due to the fact that almost all projects in the cryptocurrency world are open source. The benefit of having open source project is its openness to feedbacks and contributions by multiple programmers; they often contribute great pieces of codes for free if they think the project is interesting and worth their precious time. Moreover, the project has the opportunity to be reviewed by third parties which will also do it for free, e.g. for academic purposes.

On the other hand, publishing a project under an open source with no licensing means that others can also copy and duplicate the project, even with slight modification or even no modification at all. One of the easiest copy is to fork the existing project to create a new branch of blockchain. This way, the project can have a good coverage and the users are motivated to explore the “new project” if they are offered a significant amount of free money (after all, it is the best thing that can be done by forking an existing project, isn’t it?).

But forking a new project is actually not an easy task. Public blockchain such as bitcoin and ethereum implement open consensus mechanisms, e.g. proof-of-work and proof-of-stake with variations in its algorithm. In such projects, in particular, expensive cryptocurrencies, have strong miner communities. These people have invested a large sum of money to build the infrastructure to gain profits as much as it can get from the mining activities.

The problem with the new forked project is that the consensus of the new project can be disturbed by the communities that might not be happy with the new project. There was a popular incident a couple of years ago when Luke Dashjr, one of the top bitcoin contributor, launched an attack against another cryptocurrency named CoiledCoin, simply because he did not like it. The way he attacked the victim was somewhat unacceptable. He was the administrator of Slush, a bitcoin mining pool. He abused his authority to take over CoiledCoin by using 51% attack, such that the altcoin had a block reorg.

It appears that now everyone can launch the 51% attack against coins as long as he/she can pay. You can see it here. Bear in mind that those cryptocurrencies which were forked from existing cryptocurrencies are likely to be cheap enough for the attackers to launch the 51% attack and cause havoc to the system, including reorganization and double spending.

In fact, launching 51% attack against a coin which has a market cap of $10million is not that hard. You can just borrow the hash power from a provider such as Nicehash, and the victim will feel your wrath.

That is why the first thing to consider before launching a new cryptocurrency is this type of attack; is it possible for the attackers to rent hash power from a provider to take over the new system. Or is it possible to develop a new consensus which will not use any existing computing devices such as CPU, GPU, and ASIC? Or is it also possible to develop own mining facilities such that the system is well-protected (although it might not be feasible since the new coin might only have a limited resource)?

Nevertheless, we are aware that the possibility of attacking the cryptocurrency is cheap, and we can see more attacks in the future if the result of the attack is beneficial enough to the attacker.

There is another possible answer to the attack: to use merged mining with another strong cryptocurrency. The merged mining will make it possible for the new cryptocurrency to get the benefit of being protected from low-cost attack, and in the same time will provide an extra income to the honest cryptocurrency miners.

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