TL;DR
Researchers argue that large Bitcoin derivatives markets can create a financial incentive to perform block-reverting attacks by shorting BTC and acquiring hash power to trigger a price crash. The blog author accepts the technical analysis but outlines significant practical obstacles for an outsider attacker, especially acquiring rigs, power and data center capacity without detection.
What happened
A 2024 paper by Soroush Farokhnia and Amir Kafshdar Goharshady extends prior work on selfish mining to show that block-reverting attacks need not require an outright majority of hash power and that derivatives markets (options and futures) can make such attacks profitable. Their scenario: an attacker shorts Bitcoin heavily, then obtains sufficient mining capacity to revert recently mined blocks and trigger a price collapse, profiting from the short position even after paying for hardware. David Rosenthal reviews that analysis and agrees with its technical conclusions but emphasizes practical barriers for an outsider attacker. He examines the challenges of acquiring mining rigs, securing electricity and data-center space, and avoiding detection; notes the concentration of rig manufacturing (Bitmain estimated ~82% market share); and uses recent hash-rate growth to estimate how long it might take to assemble the required capacity, arguing these factors make execution difficult in practice.
Why it matters
- If feasible, coordinated shorting plus block reversion would undermine trust in confirmation counts (e.g., six confirmations) and could trigger sharp market crashes.
- Derivatives trading volume now dwarfs spot trading, creating potential leverage for attackers that was not present in earlier years.
- Concentration in rig manufacturing and mining infrastructure shapes both the feasibility and detectability of large-scale attacks.
- Even if technically possible, substantial logistical and timing obstacles could limit real-world risk—but they do not eliminate the theoretical vulnerability.
Key facts
- Farokhnia & Goharshady (2024) argue (i) successful block-reverting attacks can occur without majority hash power, (ii) acquiring a majority hash power was estimated at roughly $6.77 billion in their calculation, and (iii) derivatives markets create incentives for such attacks.
- Prior work by Eyal & Sirer showed selfish-mining strategies can be profitable for pools controlling more than about one-third of mining power and that protocol safety requires roughly two-thirds of miners to be honest.
- Bitcoin processes roughly $17B of nominal value per day across about 450,000 transactions, which averages to roughly $121.6M per block (3,200 transactions per block, 144 blocks/day).
- A calculation in the blog suggests recovering the estimated cost of a 51% attack would require double-spending about eight hours' worth of transactions.
- Research by Makarov & Schoar (2021) found about 90% of on-chain Bitcoin transaction volume is not tied to economically meaningful activity, and exchanges account for roughly 75% of real Bitcoin volume.
- The derivatives market has grown far larger than spot: in a recent month cited, $1.7T of Bitcoin futures traded on unregulated exchanges and $6.4B on regulated exchanges versus $1.8B of spot trading.
- Farokhnia & Goharshady model attackers seeking high confidence of profit (example: a 95% probability of earning at least double the cost of the attack) and distinguish outsider attackers (must acquire/rent hash power) from insider attackers (already control sufficient hash power).
- Bitmain is estimated to control about 82% of the mining-rig market; over the past three years the network hash rate rose from ~240 EH/s to ~1,120 EH/s, an increase of roughly 24 EH/s per month, implying substantial lead time to obtain large shares of capacity.
What to watch next
- Relative volumes of Bitcoin derivatives versus spot trading, since large derivatives positions are central to the attack model.
- Manufacturers' production queues and allocation policies (e.g., Bitmain output) that determine how quickly large amounts of new hash power could be acquired.
- not confirmed in the source: any regulatory or exchange measures aimed specifically at preventing coordinated shorting tied to on-chain manipulation.
Quick glossary
- Block-reverting attack: An attempt to replace a sequence of already-mined blocks with an alternate chain so transactions in the original blocks are reversed.
- 51% attack: When entities controlling a majority of mining power can unilaterally decide the canonical chain, enabling double-spends and reorganization of recent blocks.
- Derivatives (options and futures): Financial instruments whose value derives from an underlying asset; can be used to take leveraged long or short positions on Bitcoin's price.
- Selfish mining: A strategy where miners withhold discovered blocks to create a private longer chain, releasing it strategically to gain an advantage over honest miners.
- Hash power (hash rate): The total computational capacity devoted to mining on a proof-of-work blockchain; higher hash rate generally means greater security against reorganizations.
Reader FAQ
Do researchers think Bitcoin can be sabotaged using derivatives and mining power?
Farokhnia & Goharshady argue that derivatives combined with acquired mining capacity can create a profitable incentive to revert blocks; the blog author accepts the technical analysis but highlights practical obstacles.
How realistic is it for an outsider to buy enough rigs quickly?
The blog outlines major hurdles: limited manufacturer capacity, long production queues, facility power and space needs, and an estimate that assembling very large capacity could take on the order of months to years.
Would large derivatives markets actually make such an attack profitable?
The paper contends that derivatives volumes are many times larger than required hardware costs, creating potential profitability, but the conclusion depends on assumptions about costs, timing and execution risk.
Are there documented defenses or policy steps detailed here?
not confirmed in the source
DSHR's Blog I'm David Rosenthal, and this is a place to discuss the work I'm doing in Digital Preservation. Tuesday, December 30, 2025 Sabotaging Bitcoin Source I find myself in…
Sources
- Sabotaging Bitcoin
- Timestamp-based Nakamoto-style Blockchains are …
- Options and Futures Imperil Bitcoin's Security (Long Version)
- A model for Bitcoin's security and the declining block subsidy
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