The Coinbase security team has identified a significant imbalance in the hashrate distribution of Zcash (ZEC), with more than 51% of the network’s hash power being controlled by a single mining pool, ViaBTC. This concentration of power poses the risk of a 51% attack, which could result in double-spending or transaction manipulation.

Risk of 51% Attack

In response to this observation, Coinbase has implemented several measures to mitigate the potential risks. One such measure is increasing the Zcash transaction confirmation threshold to 110 blocks, significantly extending the deposit time from 40 minutes to 2.5 hours. This change aims to reduce the risk of network manipulation and fraud.

Additionally, Coinbase has implemented a “limit-only” approach to the Zcash markets to minimize the impact of volatility. The exchange has also engaged with ViaBTC and the Electric Coin Company, the developer group behind Zcash, to advocate for a more decentralized mining distribution for ZEC.

Zcash developer ECC has acknowledged the concerns raised by Coinbase and confirmed that discussions have taken place regarding the issue.

A 51% attack occurs when a single miner or mining pool controls more than 50% of a Proof-of-Work blockchain’s computational power (hashrate). This control can be leveraged to execute double-spending attacks or censor transactions, potentially resulting in the loss of user or exchange funds. Notable examples of 51% attacks in the crypto space include Ethereum Classic, Bitcoin SV, Bitcoin Gold, Verge, and Vertcoin.

ECC has plans to transition Zcash to a proof-of-stake consensus mechanism, similar to the milestone achieved by Ethereum in September 2022.

FAQs

What is a 51% attack?

A 51% attack occurs when a single miner or mining pool controls more than 50% of a Proof-of-Work blockchain’s computational power (hashrate). This control can be leveraged to execute double-spending attacks or censor transactions, potentially resulting in the loss of user or exchange funds.

How is Coinbase addressing the risk of a 51% attack on the Zcash network?

Coinbase has implemented several measures to mitigate the potential risks of a 51% attack. These include increasing the Zcash transaction confirmation threshold to 110 blocks, extending the deposit time to reduce the risk of manipulation and fraud. Coinbase has also engaged with ViaBTC and the Electric Coin Company to advocate for a more decentralized mining distribution for ZEC.

Is Zcash planning to transition to a proof-of-stake consensus mechanism?

Yes, the Zcash developer group, Electric Coin Company, has plans to transition Zcash to a proof-of-stake consensus mechanism. This transition aims to address the risks associated with a 51% attack and increase the decentralization of the network.

Which cryptocurrencies have experienced 51% attacks in the past?

Some notable examples of cryptocurrencies that have experienced 51% attacks in the past include Ethereum Classic, Bitcoin SV, Bitcoin Gold, Verge, and Vertcoin. These attacks highlight the vulnerabilities of Proof-of-Work blockchains and the importance of maintaining a decentralized hashrate distribution.

What are the potential consequences of a 51% attack?

A 51% attack can lead to double-spending, where a malicious actor can spend the same coins twice, or transaction manipulation, where certain transactions can be censored or modified. These consequences can result in the loss of user or exchange funds and undermine the trust in the affected cryptocurrency and its network.