Tag: bitcoin blockchain

Bitcoin Experiences the Second-Largest Drop in Mining Difficulty in History

Bitcoin mining difficulty has experienced a decline of 16%, which represents the largest percentage difficulty drop since Bitcoin miners started using the ASIC mining machines in late 2012, according to Glassnode data.

The Bitcoin Difficulty Estimator whose role involves providing updates every second, showed that the Bitcoin network adjusted its mining difficulty at 8:28 UTC on Nov. 3, and therefore placed the current Bitcoin mining difficulty at about 16 trillion, a decline from about 19 trillion, which represents about 16% drop. This phenomenon gives miners a reason to rejoice as their profitability is set to rise significantly.

The difficulty adjustments occur approximately every two weeks. Basically, Bitcoin mining difficulty shows how time-consuming and difficult it is to mine a new block for the Bitcoin blockchain. The difficulty decreases or increases over time, depending on the number of miners in the network.

 However, there are other explanations pointing out factors affecting the mining difficulty. For example, miners have professional experience in their work and therefore know how to respond to their mining activities.

The current difficulty decline is due to the reduction of the average total computing power racing in the network in the past two weeks as several Chinese miners have unplugged their machines to migrate from hydropower plants to fossil fuel power stations.

Jason Dane, a Bitcoin analyst at Quantum Economics advisory and investment analysis company for the cryptocurrency markets, said:

“Most large-scale miners switch off their machines and some even relocate their operations to the Xinjiang region, coming back online a few weeks later. The rest of the network simply takes up the slack and the difficulty adjusts accordingly.”

Dane said that people might think that a major decline in mining difficulty shows a lack of confidence or a low price in Bitcoin. He, however, said that this is not the case based on the current negative adjustment seen yesterday. He mentioned: “This is purely a routine, annual event that just so happens to be in a bullish period for bitcoin, meaning that miners will do very well over the coming 14-day period.”

Based on the time of writing this article, the next adjustment is likely to take place on Nov. 15, 2020.

New Bitcoin Lightning Network Vulnerability Exposed: The Replacement Cycling Attack

A recent revelation on the Lightning Network vulnerability known as a “replacement cycling attack” has prompted notable security researcher and developer, Antoine Riard, to step down from his role on the Lightning Network development team. The disclosure of this attack came to light through a detailed thread shared on Twitter by a developer known as mononaut, on 21st October 2023. This attack exploits a particular mechanism within the Lightning Network’s transaction process, causing potential financial loss to users engaged in a channel.

The Mechanism Behind the Attack

The Lightning Network operates as a second layer on top of the Bitcoin blockchain, with the primary goal of scaling the Bitcoin (BTC) transaction capability by facilitating off-chain, peer-to-peer transactions. Users can establish payment channels within the network, execute multiple transactions off-chain, and then record the aggregate transaction on the Bitcoin blockchain upon completion. The core of this attack lies in the manipulation of the Hash/Time Lock Contract (HTLC) outputs, which are essential for securing transactions while they are routed through the network.

The attack unfolds in a multi-step process. Initially, when a payment is being routed through a user, say Bob, from Alice to Carol, the payment is safeguarded by HTLC outputs in Bob’s pre-signed channel commitments with each peer. A crucial feature of this setup is the timelock mechanism, which ensures that the outgoing HTLC to Carol expires before the incoming HTLC from Alice, providing Bob a window to react in case of any issues.

The attacker’s objective is to exploit this mechanism by forcing Bob to time-out the transaction on-chain when Carol fails to reveal the payment preimage before the timelock expiration at block T. Upon doing so, Bob broadcasts a transaction to close his channel with Carol and reclaims his funds through an “htlc-timeout” transaction. The attackers, upon spotting this transaction, swiftly broadcast an “htlc-preimage” transaction with a higher fee rate, replacing Bob’s transaction in the mempool. This cycle is repeatedly performed to thwart Bob’s attempt to reclaim his funds, ultimately leaving Bob at a financial loss if the cycle continues for Δ blocks, allowing Alice to time-out the HTLC on the other channel.

Antoine Riard’s Resignation and Concerns

The intricacy and potential danger posed by this attack have raised grave concerns among developers. Antoine Riard vocalized these concerns in a conversation on a public mailing list maintained by the Linux Foundation. He highlighted the tough predicament the Bitcoin community finds itself in due to these newly discovered attack vectors, terming the Lightning Network’s situation as “perilous.”

Riard stressed that a substantial remedy can only be achieved at the base layer of the network, which might necessitate modifications to the core Bitcoin network, a move requiring robust community consensus due to its impact on the decentralized ecosystem’s security architecture. The concerns go beyond just this attack, touching on the overall complexity of the network and the high expectations placed on user experience by the Lightning Network developers.

Despite these hurdles, the Lightning Network continues to gain traction with a reported value locked in of $159.5 million, as per data from DefiLlama, marking a steady growth since its inception in 2018. However, Riard’s departure and warning signal looming challenges for the primary cryptocurrency ecosystem, necessitating a thorough examination and resolution of these vulnerabilities to sustain the network’s growth and user trust.

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