Bitcoin Cash (BCH) hash rate drop below 8% of Bitcoin (BTC) total hash rate makes the Bitcoin Cash network more vulnerable to a block retention attack, which could cause insolvency in some cryptocurrency exchange platforms.
During August, Bitcoin Cash (BCH) hash rate remained below 10% of Bitcoin’s processing power, while it even dropped to 6.5% at some points. That is due to the migration of some mining groups that may not find BCH mining profitable anymore, and the strategy of mining larger blocks in a shorter amount of time, although the number of transactions has not been shown to be growing.
The main risk of a hash rate drop in a network using the Proof-of-Work protocol (PoW) protocol is that a group of miners may control 51% or more of the nodes, and that’s possible because Bitcoin Cash (BCH) uses the same mining algorithm as Bitcoin (BTC), known as Sha-256.
Bitcoin Cash (BCH) hash rate drop increases the risk for double-spending attacks
While Bitcoin (BTC) is a more extensive network that relies on the joint work of groups of miners with greater technical resources, the Bitcoin Cash (BCH) blockchain is not so robust in this regards. Thus, the migration of the resources to the smaller network poses a risk if the miners intend to create a longer chain in secret, which then replaces the short blockchain and invalidates some transactions through a block retention attack.
That would make it easier for them, for example, to make a bulky Bitcoin Cash (BCH) deposit in a cryptocurrency exchange platform, and then to buy other cryptos in exchange on the same trading platform and sell them immediately.
That procedure becomes fraudulent when the perpetrators reverse the initial transaction using a block retention attack, leading to double-spending. There are also other fraudulent procedures that are facilitated by a low hash rate which permits validating transactions with only a few confirmations.