The State Sequester Attack

In mid-February, the Russian government announced that it would take a drastic step to enhance its cybersecurity: it would conduct a one day exercise that would sequester all of its traffic from the outside world. The internet in Russia would become its own entity for one day. The exact day of said exercise is not clear, so far it’s only been slated to occur before April 1st. The feasibility of such an exercise seeing success is questionable according to experts. But it raised alarm bells throughout the international technical community, raising complaints of it being a further step towards balkanization of the internet and a prelude to another Chinese type Great Fire Wall. In short, it attacks the intent of an open and free global internet.

However, very little has been heard from the crypto community on what seems to be a potential threat to bitcoin and other blockchains on both on an existential level and a practical one. On an existential level, the matter is rather simple-a global digital currency cannot exist on a fragmented internet, and therefore any step closer to one is a concern. But even a temporary one-day successful sequester will potentially damage the immutability and therefore credibility of the bitcoin blockchain. Please indulge me in a thought experiment.

If Russia is successful at a one day sequester, nodes within Russia will begin to build their own version of the bitcoin blockchain, starting from the last confirmed block before the sequester began. The nodes not sequestered, will also continue to build blocks, without competition or communication with the Russia nodes. In essence, two versions, a Russian and international version of the blockchain will be created (if the sequester is successful). People both within Russia and outside Russia will continue to exchange bitcoin for goods, services, and cash, unaware that the chain has become temporally fractured. The blockchain, in essence, will have a mirror of itself in the Russian chain, and this mirror will start to allocate block rewards to Russian Miners who meet the hash target.

During this 24 hours, Russian miners will receive block rewards, of which they are likely to exchange for goods, services, or cash. These coins, mined during the sequester, will become problematic. Once the hypothetical sequester is over, the two chains will merge. The longest chain will win and be accepted as the valid ledger. This means that up to 144 blocks will be lost to one group or the other. Because difficulty will have been set based on the greater hash power of the international community, it is highly unlikely that the Russian chain will be the longest, and therefore the chosen one for the continuing version of the chain. But Russians who have accepted the newly mined bitcoin on the sequestered chain will have been jilted because these coins will no longer exist—and the credibility of bitcoin within Russia will have been seriously harmed.

Also, the international chain will have its own challenges. The meme pool will be flooded with transactions from the lost blocks, and a system designed to deal with a stale block once or twice a week will suddenly have close to a hundred to absorb and reorder within ten minutes. At best transactions will slow and fees will spike, at worst conditions will be perfect for a series of double spends for those who lay in wait. We could also consider the highly unlikely scenario that the Russian chain, through trickery, hackery or a probabilistic miracle is the longest chain, in which case the rest of the international community is left holding the bag on over 144 stale and orphaned blocks. This would be roughly 1800 bitcoin that would disappear, or roughly 7.2 million dollars worth of value, at time of writing.

Of course, there are several defeats to this potential threat, here are a few:

1. The sequester is not completely successful, allowing for enough internet communication between international and Russian nodes keep the chain unified.
2. Blockstream nodes and satellites are able to continue communication, keeping Russian nodes in sync with the rest of the network.
3. The hashing power of Russia is not significant to beat the international chain, and indeed only able to produce a few blocks, people within Russia will not participate in the blockchain during this time, aware that the sequester is taking place.

So in the short term, the bitcoin network is probably safe. But this thought experiment alludes to other potential threats. While Russia does not have the hashing power to successful highjack the chain through a state sovereignty attack, one nation does, China. And China also has the greatest capability of pulling off a successful sequester, likely even being able to temporarily block IP addresses associated with Blockstream satellite nodes, so that satellite communication over the blockchain cannot have a meaningful effect. China also has the social compliance and control necessary to pull off such a maneuver, if any country does. Admittedly this potential threat is simply academic—and it is unlikely that a nation would attack the credibility of the very currency it wants to control—but game theory does not take into account for oversights or issues with ‘greater at stake.’ Meaning, if China had to disrupt the blockchain as a matter of national self-preservation, it most certainly would, and also, such an action could simply be taken by mistake and by lack of forethought, such as what seems to be happening with the Russian sequester. Game theory, after all, cannot account for folly, incompetence, blind spots, nor the passions of war.

And most eminent and important of all, while bitcoin may survive a sequester attack through the use of its immense hashing power, the technical proficiency of its developer core and its satellite network, what about the other 4000 plus alt coins that do not have such resilient support systems?