What Is the 51% Attack?
The primary purpose of blockchain is to securely store records by continuously creating new blocks, all without relying on any single individual or organization.
Cryptocurrencies leverage blockchain technology to ensure the safe and transparent processing of currency transactions, facilitated by miners.
Miners play a crucial role in the ecosystem, tasked with creating new blocks that contain currency transactions. This process requires significant computational power.
However, before a new block can be added to the blockchain network, the network nodes, each containing a full copy of the blockchain, must collectively validate the accuracy of the block proposed by the miner.
Upon successful verification, the miner is rewarded with incentives for their mining efforts.
It’s important to note that miners can also function as nodes, maintaining a full copy of the blockchain while actively participating in the mining process.
What Is a 51% Attack?
In a decentralized network, mining power is distributed across numerous nodes worldwide, preventing any single entity from controlling the entire process.
However, if a single miner or group of miners were to gain control of over 51% of the blockchain network’s computing power, they could effectively operate in a more centralized manner. This majority control would allow them to manipulate the contents recorded on the chain, whether accurate or not, posing a significant threat to the integrity of the network.
Impact Of Attack.
If a miner or group of miners surpasses the 51% threshold in a blockchain, they gain the power to manipulate various crypto activities, such as:
Double Spending.
With majority hash power, a miner can execute double-spending attacks.
They send coins to person ‘A’ while simultaneously sending the same coins to person ‘B’. By secretly mining blocks for the double-spend transaction to ‘B’, the miner aims to create a longer blockchain where transaction ‘B’ is valid.
Consequently, the transaction to ‘A’ gets cancelled, leaving ‘A’ with no money while the miner may have already received the service paid for by both ‘A’ and ‘B’.
Blocking Transactions.
A miner controlling over 51% can choose which transactions to include in the next block. They can even decide to block specific transactions from certain addresses or create empty blocks with no transactions.
Loss of Confidence in a Cryptocurrency.
Instances of double-spending and transaction blocking erode user confidence in the cryptocurrency. Users may refrain from transactions, leading to a crash in the coin’s exchange rate.
The 51% attack can destroy the crypto assets, but a miner who have the massive hash power can not break some important rules of blockchain such as.
#1 Reverse confirmed transactions.
#2 Steal funds from a certain address.
#3 Create fake transactions (that never occurred).
#4 Create new coins.
However, 51% attack have certain limitations. Still, it can destroy the whole cryptocurrency if that currency does not take some preventing measures.
Preventing Measures.
If a miner passe the threshold of 51% in the blockchain it doesn’t mean he can attack right away, it only means that it easy for him to take control over the network.
In top cryptocurrencies like Bitcoin, Etherium it is hard to gain such a massive hash power because it would take an unreasonable amount of money to gain 51% of the top coins network’s mining power also the community of top coins do not let someone take control over the network if miner having massive hash power tries to double spend coin by submitting false block the strong community ignore it and follow the legitimate blocks even if he had longer chain of blocks.
But in case of small cryptocurrencies, they have to take preventing measures such as.
Try as much as decentralization of miners by providing a good incentive for a mining block and also give some freedom to charge transaction commissions.
Clear the fact to miners that much mining power would probably make more money using this power to mine legitimately, by providing a high reward for their work.
Examples of 51% attack.
Here are some incidents that 51% attack destroyed or damaged to a cryptocurrency.
CoiledCoin (2012).
Quite a small coin during the time of 2012, one of the large mining pool Eligius decided that CoiledCoin is a scam and very bad idea for the crypto ecosystem.
Eligius pool pointed its mining power to CoiledCoin and launched an attack.
This attack involves mining a lot of blocks that reversed days worth of unconfirmed transactions and as well mining a long chain that had empty blocks containing no transaction at all.
At the time of the attack, CoiledCoin users cannot make any transactions, and after some short time, all the users leave CoiledCoin and move on. Now, this coin doesn’t exist.
Feathercoin (2013).
Feathercoin is a Litecoin clone that shares its block time and scrypt mining algorithm.
An unknown miner or pool launched a 51% attack on Feathercoin in 2013.
The attack caused around 16,000 coins were double-spent in an attack.
Verge Currency (2018).
Verge described as the privacy coin uses five different mining algorithms.
In April 2018 attacker was able to mine multiple blocks one second apart using the same (scrypt) algorithm and stolen round 250,000 XVG (Verge Coin)
A month after the first attack, again an attacker exploited a bug in the Verge code and made away with at least 20 million XVG, worth approximately $170,000.
Vertcoin (2018).
4 different attacks (including 51% attack) on the Vertcoin network during 2018 concluded in the theft of around $100,000.
Bitcoin Gold (2018).
During 16th and 19th May 2018, an unknown attacker conducted 51% on Bitcoin Gold blockchain using rented hash power from cloud mining services.
In result, more than $18 million stolen through double-spending.
Ethereum Classic (2019).
In January 7th 2019, crypto exchange Coinbase revealed that 51% attack carried out by unknown caused 219,500 ETC worth $1.1 million were double-spent in eleven reorganizations of the blockchain starting on Jan. 5th.
Bitcoin Cash (2019).
On May 15th 2019, two Bitcoin Cash mining pool BTC.com and BTC.top — carried out the 51% attack to stop the unknown miner from taking coins that they weren’t supposed to have access to in the wake of the code change.
That day, an attacker took advantage of a bug unrelated to the upgrade (and subsequently patched) that caused the network to split and for miners to mine empty blocks for a brief time.
Bitcoin (2014).
In January 2014 a panic created in the Bitcoin community because a mining pool called Gash.io got so big that it neared 51% of the total mining power.
But this situation fixed shortly by miners who left the pool to balance things out. Additionally, the pool committed to a 40% limit for its future operations.
Conclusion.
As stated above it is difficult to conduct a 51% attack on top cryptos like Bitcoin and Ethereum because distributed hash power and a strong community behind them.
But from the past 2 years, the rate of 51% attacks are increasing because of high computational power mining rigs like ASIC is boosting mining capacity of individual miner.
If this post seems to you an informative one, do share with family and friends.