With the mainstream introduction of cryptocurrencies, the blockchain has entered a direct competition with fiat currency. The blockchain aims to end the problems of centralization, providing an immutable ledger where all transactions are visible to the public. This allows a person to have more control and privacy over their funds. On the other hand, centralized platforms entail that all data enters a singular point leading to; manipulation, jeopardized privacy, and partial control over your funds (it can be frozen at a moments notice). With that being said, the question arises:
Will Bitcoin and other cryptocurrencies stay secure in competition with hostile governments?
A government theoretically has access to unlimited funds and resources, making it the quintessential adversary to a blockchain’s network. A dangerous scenario would be where a powerful government (such as China, or the US) sees blockchain as a threat to their economy, or perhaps even their environment. For example, the threat of global warming has led to a complete refocus on environmentally friendly practices. Blockchain networks require an immense consumption of electricity, attributing to more electricity use than many countries of the world, becoming even more considerable with increased adoption. But, lets assume a more ominous means; let us assume that the a government refuses to relinquish their power over fiat to the rules of the blockchain.
What if the government wanted to take over the blockchain?
There are a number of ways a government can approach this venture. One approach is known as the “51% attack”. Theoretically speaking, transactions on a ledger are immutable, meaning that any confirmed transactions cannot be altered. The longer the blockchain is being mined, the more this immutability enhances. However, if a government, or any person with ill intent decides to control 51% of the network, an attack of that scale could have devastating consequences on the system.
Controlling 51% redefines a blockchain’s promise of decentralization. Since Bitcoin is a Proof of Work cryptocurrency, a malicious attacker controlling 51% of the network’s hashing power can subvert the blockchain for their own purposes. To achieve this power, there are many different strategies an attacker can employ, the easiest method being accessible to those with the most lucre. An entity with theoretically unlimited finances, in the simplest way, can purchase enough miners to eclipse the hashing power of the other 49% of the network. The entity could also remain anonymous by simply distributing this hashing power to a number of mining pools, remaining hidden from honest miners and exponents. This entity would be, over time, amassing a significant portion of the coins it’s mining, centralizing the currency, exploiting it at its own leisure. 
The double-spending attack is perhaps the “kryptonite” of cryptocurrency. If a person can successfully implement such an attack the cryptocurrencies associated will depreciate instantly, rapidly declining in value.
Double-spending is the result of spending the same coins more than once. Many blockchains claim to protect against such an attack, but it is a potential flaw in digital currency, which can seriously devalue the space. Not only will it devalue the currency, but it will also significantly diminish user trust along with the circulation of the currency. The only way a person can achieve this gambit is by scheming the confirmation system of the blockchain, which can be achieved in a number of ways. 
The attack vectors of employing such an enterprise include the use of either the “race attack”, “finney attack”, “vector76 attack”, “alternative history attack”, or most effectively the “majority attack” (known as the 51% attack).
Each attack is handled with a different number of confirmations, but they all involve altering the path of the blockchain. In the first attack, the “race attack”, traders and merchants who (foolishly) accept payments on a “0/unconfirmed” confirmation, expose themselves to a reversal of a transaction. If the attacker issues conflicting payments to the merchant and himself, the merchant will lose out on his unconfirmed transaction . Similarly, the “finney attack”, is implemented when the merchant accepts payments on the same confirmation, “0/unconfirmed”. This attack, however, requires the cooperation of a miner in conjunction with the use of a block he recently mined. The miner simply withholds that block from the network, processes a transaction on the merchant’s site, then immediately broadcasts that block, preserving the coin he previously sent to the merchant in his alternate wallet . The “vector76 attack”, also known as the one-confirmation attack, is a combination of the the prior two attacks. It integrates the two attacks in such a way that even if there is one confirmation of the transaction the attacker can still double spend his coins .
The success rate of these attacks are considerably high since they are methods that exploit the negligence of unreliable merchants and services.
Regarding the “alternative history attack”, also known as “selfish mining” the probability of success is directly related to the attacker’s hash-rate. With exception to the proposed hash-rate of the attack, it is identical to the “majority attack”. The attack calls for a hidden malicious fork of the blockchain that is unbeatable if the malicious user controls 51% of the network. As the attacker mines their own private chain, he will force the “honest” network to abandon their previous work and switch to the attacker’s chain, once it is released to the network. This will increase the attacker’s hash power, potentially leading to a 51% attack. If the government maintains control of the preponderance of the total hash-rate, these attacks are virtually impossible to interrupt. The attack is formidable on it’s own, but in tandem with a proposal of an accepted hardfork, or a double-spend on an exchange, it could very well be the end of virtual currencies. 
With the proposal of a hardfork, a malicious user may attempt to seize the majority of a blockchain with a relatively low percentage of the total hash-rate.
An attacker could advocate for a hardfork of the blockchain, potentially coaxing up to 95% of the network to switch over to his fork.
An example can be drawn with the proposal of Segregated Witness (SegWit) in August of 2017.
SegWit declared that it would only be adopted if 95% of Bitcoin network’s miners signaled their approval of the soft-fork. If an attacker was successful in his ploy, he could easily sweep control of 51% or more of the network and efface the coin in question. One could also argue that this is not a sufficient attack, since theoretically both networks could flourish with honest miners. Nevertheless, the welt it would put in the coins mining network would be significant enough so that they could strategically attack both networks at their opportune moments (with less than 51% of the network). Moreover, if an attacker also possessed 51% of the network to begin with, one could surmise the potential consequence. 
In the event of a double-spend on an exchange, the ramifications would be irreparable. Exchanges conventionally require 6 confirmations for transactions to be accepted. If an entity with a sizable wallet maintained a majority of a blockchain’s hashing power, it could privately mine its own fork, while dumping all of its coins into alternative coins on the exchange. This dump would be recognized by the exchange as valid transactions, and the user could then pull his new coins off the exchange, into its own ledger. However, once the entity releases its private fork to the rest of the network, where in that fork he committed a transaction to its own wallet, rather than the exchange, the exchange is now in debt the coin he initially deposited and the alternative coins he withdrew – effectively crashing the crypto-market. Even if only one coin is jeopardized by this attack, it would be catastrophic for the future of cryptocurrency. 
There are still people who maintain the position that it would be too costly for a government to go forward with this kind of action. In any case, the government would consider this an operational expense. It would be seen as a threat to national security and they would proceed with any cost to protect their economic authority. Cryptocurrencies are a direct challenge to this authority, forcing governments to take extreme measures.
A government could simply pass laws to combat this phenomena. One could argue that it is even unnecessary for a government to attack the blockchain directly (with double-spending, etc..). A government, like China’s, that governs roughly ~71% of Bitcoin’s hash-power could pilfer the network in under a day, without spending a yuan (China’s currency). The government can simply pass a law that would ban the use of the cryptocurrency, or that would ban its mining. At that point it could either take control of the network itself, or people would stop using it independently because they will be sought after for their illegal activity.
Another approach would be for the government to seize control of the miners, ensuring that there will be no competition, instantly boosting their influence over the network. There is nothing a miner can do if his equipment is seized by a federal organization. The person would be waging an unwise battle, with an already irate administration. The government can then use those miners maliciously, with 71% of the competition eliminated from seizure.
None of these attacks are necessarily going to be executed alone, which proves to be the biggest threat to the network.
If all of these means of attack were to be executed at once, there is no good answer addressing the survivability of the network. The network may survive one attack alone, but with the implementation of multiple strategies, the network would be fighting wars on multiple fronts. Even if the network could combat one government, who says that another government will not join in the battle. With the constant threat that cryptocurrencies issue the government, there is no telling who will make an attempt at taking it down.
Decentralization threatens the centralized institutions we have today. Those institutions may retaliate at any moment, with the sufficient funds and force to ensue a formidable attack. This threat will always loom over this space, until cryptocurrencies develop refined protocols to deal with this prospect. A cryptocurrency must always hope for the best and plan for the worst, especially when they are competing with entities that command entire regions of the globe.
- “Majority is not Enough: Bitcoin Mining is Vulnerable” by Ittay Eyal
*Disclaimer: this article is not intended to provide “investment advice” or “recommendations” regarding a course of action.