Destroying the network by Central Banks

How does Cardano prevent central banks from buying 51% of all ADA and destroying the network? They can create infinite fiat money out of thin air.

How do you propose that they will be able to purchase 51% of the Ada supply? Sure some people will sell if the price of Ada moves to $10 or $30 but will 51% of people sell? As the price moves up adoption metrics will move in parallel. Also there will be knowledge about who is buying and why. The current holders of Ada will likely still want to hold much of their Ada as its value will have increased in their minds too.

I think it will be impossible for a government to purchase and control 51% of the Ada supply with a view to controlling it, no matter what price they can afford to pay. I for one don’t want their devalued and manipulated fiat in exchange for my Ada.

It doesn’t work quite so arbitrarily.

Why should they even try it? If governments wanted, they could just forbid. Or they regulate as they are trying now.

And @7.4d4 is right about trying to get 51% by playing our game being economically unfeasible. Too expensive and by making it expensive they make it more important and make more people not wanting to sell.

In my opinion, the “devalued and manipulated” part is grossly overestimated in crypto communities, though.

1 Like

I agree. However, the manipulation of everything is becoming increasingly noticeable and trust is being eroded. People are beginning to notice that the current centrally controlled institutions are no longer fit for purpose.

Furthermore, once you understand, or see, the benefits of crypto you can’t unsee them. People who understand this never change their minds and never move their capital back. There is a net flow in one direction and the younger generation, with more time to wait, is driving it.

I just wanted to know if that would be technologically possible.

That’s why I would like an answer from a developer as to why there could not be a security mechanism to prevent a wallet address from owning 51% of all ADA. (simple if statement)

Theoretically, a malicious group of ADA owners could also collude and swap their ADA so that they all end up at an address that then owns 51% of all ADA.

Such a mechanism would be utterly useless. They could just distribute over lots of addresses (and lots of stake pools) and still control the network.

In fact, they would have to distribute, since there already is the stake pool saturation, limiting pools to around 68 million ADA.

Why is there no solution to the problem? I thought every problem can be solved? Why must 51% attacks be possible for the network to be decentralized?

To understand the technology better you might read the Ouroboros Paper:
Ouroboros: A Provably Secure Proof-of-Stake Blockchain Protocol

Where did you get that take?

There are already things in place to disincentivise pools getting too large, namely, the saturation (currently around 68 million ADA).

You could make the protocol more complicated (and harder to analyse) by forbidding a single address to have more than 50% of the circulating ADA, but why? That is not the threat!

The threat is a single entity, person or organisation, controlling more than 50%. It does not have to be on one address. It does not have to be in one pool. The protocol cannot mathematically decide if two addresses or two pools are controlled by the same entitiy. So, this problem cannot be solved by protocol.

For a proof of stake coin that is worth next to nothing, such an attack would be easy. Much the same as for proof of work, it would be cheap to get more than 50% of the hashing power for a network with only very few miners.

For a proof of stake network that has gained some value – like Cardano, Algorand, or Solana – it is prohibitively expensive to buy more than 50% of the circulating coins (as it is to buy more than 50% of the hashing power for Bitcoin). That is the protection against “51% attacks”. No, it is not mathematically provable. It is “just” an economic argument.

2 Likes

Okay thanks. I already knew that. Wasn’t really the answer to my question either.

Then I’ll do my own research.

Hello @Embedded_Solutions

Technically, for open source network such as Cardano, there doesn’t need to be a solution, since 51% coin ownership is not a problem.

If some entity decide to waste all bunch of fiat money and acquire 51% of the network, then all Cardano community members that do not want to be part of privately owned network can just start Cardano 2.0, since all the work, research, upgrades and technical papers are open source. All stake pool owners could then migrate to new network and the initial network would become mostly worthless. Then that same entity would have to buy 51% on the new network and so on. Very soon this entity would realize that we can start infinite amount of Cardano networks, so they would have to spend infinite amount of money to fight us.

This attack would be a lot more effective if crypto in question had some intellectually property that was taken over or controlled with this attack.

Also, if community of ANY decentralized crypto just decides to sell it self to highest bidder, then they didn’t really care about decentralization in a first place.

So in my view 51% coin ownership attack is like a test for a community. If we want it decentralized we keep our ADA. If we are all just bunch of Moonboys waiting to dump ADA for some fiat, then the network will probably collapse anyways. Might as well just start a new one in that case :wink:

1 Like

I don’t think it’s that simple:

  • The adversaries (if central banks – not likely in my opinion – or others) could do it covertly. Then, it might be very late, when we finally notice it.
  • If we do it as a fork, the question is, how to disown the adversaries.
  • If we do it as a brand new chain, the question is, how people can get their values off Cardano 1.0 and onto Cardano 2.0.
  • There might be several groups starting concurrent versions of Cardano 2.0. How to decide on which of these to go?
  • Such a step will inevitably harm the reputation of Cardano 1.0 as well as all the Cardano 2.0. Not really sure if they will retain or regain their value.

Fortunately, it is a very, very remote risk, requiring billions of fiat Dollar at current price. The entities that could afford it are quite limited and have better things to do with a probability of 99.9%.

2 Likes

Well 51% of people will get their value or higher during buy out. 49% would probably loose value.

Very good point :+1:. I just assumed that Cardano fam is all one. I guess we would need Charles like figure to unite us (or actual Charles :smiley:)

At the state of crypto at the moment it seems to me that every one who doesn’t like one crypto won’t like it anyways. The ones that took time to understand what Cardano project is about will be back.

Considering that daily trading volume of ADA is around 1 billion from about 300 million that is actively traded I can’t see a covert operation taking place past first 1 or 2 billion. After that everyone would notice the price jump 50x for “no reason”.

Also, there are over 10,000 crypto projects at the moment. So I can’t see a scenario where any central bank tries to single out one of 10k for 51% take over.

This central bank fears are mostly Bitcoiner issues since they think that all sovereign states will suddenly “see the light” and start using Bitcoin instead of dollars. They all seem to forget that IMF already created a back up reserve currency called SDR decades ago. If US dollar falters the use of SDR is automatic since it uses a basket of member currencies. (It’s not an actual currency it stands for Special Drawing Rights and it was created as all member distributed ledger in 1969, kind of like crypto with out cryptography).

Also total of all countries reserve currencies is about 12 trillion. The whole crypto market is about 2 trillion. If you look at this chart of what countries are holding as reserve you will quickly see that crypto isn’t not even a contender:
https://data.imf.org/?sk=E6A5F467-C14B-4AA8-9F6D-5A09EC4E62A4

I didn’t intend to make it sound like a two step process and it’s all good :grin:. However, it is a very viable option to all that would want to continue down the Cardano path.

2 Likes

I would love to see a Government with a printing press try to get 51% of Cardano. If it was to happen then it means we have won.

In order to own 51% they would be paying some astronomical amount that they would never be able to afford in the end because enough Cardano holders would realise and they would debase their fiat currency too much.

What will be the price of Ada if it becomes clear that we have won?

1 Like