Updated: Jul 25, 2019
Many in the cryptocurrency community believe that the worst that miners could do with a 51% attack is to freeze your ability to transact for a while, then it would fix itself. Perhaps double spend a few transaction, cheating some people out of their money. While quite bad if such a currency achieves world wide adoption and miners could use this to hold the blockchain hostage for negotiation purposes, it's generally assumed that this is the worst miners can do.
If every user holds on to the entire blockchain, this is true. The problem is that Bitcoin's blockchain is currently 200GB large and rapidly growing. And if it achieves US Dollar level adoption and competes with credit cards and other payment forms, it has to at a minimum handle an average of 5000 transactions per second. At 600 bytes per average transaction, this adds up to roughly 250GB per day or roughly 1 PB per year. And the blockchain only grows every year. Consider that 250GB would fill the average users desktop in less than 4 days.. and clearly this simply isn't possible.
And this is only if you want to support typical transactions, now consider that smart contracts hold a lot of promise and are much, much bigger than a typical transactions. And that it would be nice to support micro transactions and other transactions that might be enabled by this and there is no way around it. A consensus mechanism that doesn't rely on all users processing all transactions must be used.
SPV Mining is the Solution to Compressing the Blockchain
The idea behind SPV mining or any blockchain scaling solution is to throw away most of the transactions as far as the individual users are concerned. SPV mining means that users only need to hold on to blockchain headers, which are only 80 bytes big and many thousands of times smaller.
And though most blockchain don't do this, it's even possible to trim away many of the blockchain headers, leading to highly compressed blockchains.
The Problem is SPV Mining Gives Miners Much More Power
SPV mining now means that miners must be trusted. A mining coalition with over 50% of the mining power now has the ability change the rules of the currency by simply rejecting transactions that do not follow their new set of rules, this allows them to add taxes to transactions, add new transaction fees, tax wealth, etc.
But the easiest attack as it's invisible is that such a coalition also has the ability to print money as they see fit. SPV mining or alternatives work by holding on to a small proof that transactions that were submitted to the blockchain. But there is no way for an everyday user to verify that every transaction that the proof says was valid actually is. This means that such a mining coalition could create and insert fake transactions that print money out of thin air. Even if someone out there does catch them, what can users really do about it? Scary, right?
Unfortunately, at the end of the day, there is no way to get around cryptocurrencies requiring some trust to be place into the hands of the miners. Miners who are effectively running a business that processes transactions in exchange for revenue. And as governments and financial institutions and businesses in general have proven, if there is a way to increase revenue, they'll do it.
Proof of Stake is Particularly Vulnerable
Now consider that if a Proof of Stake currency suffered even a single 51% attack, this attack could lead to the currency no longer being able to be trusted and essentially destroys the currency. This is because such an attacker could insert proof of multiple accounts that together control far more than 50% of the currency he isn't supposed to own into the proof of account balance.
Imagine a network outage due to a bug occurred and only a few miners were able to mine for short period until it was fixed. It isn't unreasonable to believe that a blockchain might be temporarily open to a short 51% attack. With Proof of Work or Proof of Person, this could temporarily cause issues, with Proof of Stake, this could be permanently damaging.
The Solution: Complete Decentralization Removes Anyone From Having More Than Their Share of the Power
This is why it is so important to maximize decentralization. Frink is on a mission to create a fully decentralized coin that allows everyone to mine as an equal, ensuring that no central power exists and that it is as close to impossible as possible to 51% attack the cryptocurrency.
This is the only way to guarantee that no one has more power over your money than you do.