How Does a Death Spiral Affect the Security of the Blockchain?
During a death spiral, the security of the blockchain is severely compromised. As the hash rate plummets, the cost for an attacker to acquire 51% of the remaining hash power drops dramatically.
This makes the network highly vulnerable to a 51% attack and double-spending. Even without an attack, the long, unpredictable block times undermine the finality of transactions, eroding user trust.
Glossar
Security Budget
Budget ⎊ This is the total economic value, derived from block rewards and fees, dedicated by the protocol to incentivize honest behavior and secure the network against adversarial takeover.
Death Spiral
Cascade ⎊ The "Death Spiral" in cryptocurrency derivatives, options trading, and related financial instruments describes a self-reinforcing negative feedback loop where declining asset prices trigger margin calls, forced liquidations, and further price depreciation, ultimately accelerating the downward trajectory.
Transaction Finality
Principle ⎊ Transaction finality is the principle that once a transaction is recorded on a blockchain, it cannot be reversed, altered, or canceled, providing absolute and irreversible settlement assurance.