Cryptocurrency and blockchains are far more complicated and technical than regular fiat currencies, and as such, there are a lot of different ways to attack them. One of the most well-known attacks is the 51% attack.
What is a 51% attack?
A 51% attack is a type of cryptocurrency attack where an attacker gains control of more than half of the network's mining power, thus allowing them to manipulate the blockchain and confirm fraudulent transactions.
This could lead to major financial losses for businesses and individuals that use the affected cryptocurrency. In some cases, it could also result in a complete loss of confidence in the currency, causing its value to plummet.
51% attacks are a major concern for many cryptocurrencies, especially those with smaller market caps. However, even large and well-established coins like Bitcoin and Ethereum are not immune to these types of attacks.
The cause of 51% attack?
There are a few reasons why a 51% attack can happen in cryptocurrency.
- First, if there is a lack of decentralization in the network, it can be easier for an attacker to gain control of more than half of the mining power. This can happen if there are only a few miners in the network, or if they are concentrated in one area.
- Second, If the hashing algorithm is not secure enough, it can be possible for an attacker to create fake transactions and blocks, which would allow them to control the network.
- Finally, if the difficulty level is not properly adjusted, it could allow an attacker with more than half of the mining power to mine all of the new blocks and prevent other miners from getting any rewards. This would give the attacker a lot of power over the network.
While these are the main reasons why a 51% attack can happen, there are also a few other factors that can contribute to it.
For example, if the block time is too short, it can be easier for an attacker to create a large number of blocks and control the network. Additionally, if there are not enough nodes in the network, it can be easier for an attacker to Sybil attack the network and gain control.
It is important to note that while a 51% attack can be devastating to a cryptocurrency, it is not always fatal. In some cases, the community can come together and fork the chain in order to prevent the attacker from getting any rewards. Additionally, some cryptocurrencies have implemented mechanisms that can make it more difficult for an attacker to 51% attack the network.
For example, Ethereum has a mechanism called "GHOST ", which makes it more difficult for an attacker to create a large number of blocks.
Overall, while a 51% attack is a serious threat to any cryptocurrency, there are ways to prevent it from happening. Some of these include increasing decentralization, using a secure hashing algorithm, and properly adjusting the difficulty level.
In recent years, there have been a number of high-profile attacks on major platforms, including Ethereum Classic, Bitcoin Gold, and ZenCash. As the cryptocurrency industry continues to grow, it is likely that we will see more attacks in the future.
How does 51% attack work?
In order for a 51% attack to be successful, the attacker would need to have control of more than half of the total mining power or hash rate on the network. This is often achieved by consolidating mining power in a single pool or through the use of specialized mining hardware.
Once the attacker has control of more than 50% of the network's hash rate, they can begin to censor certain transactions or even double-spend coins. Censoring transactions means that the attacker can prevent certain types of transactions from being added to the blockchain, while double-spending coins allow the attacker to spend the same coin multiple times.
When the attack happens, it could cause serious problems for the affected blockchain network. The attackers can use their majority control to reverse transactions, prevent new transactions from being confirmed, or even split the network into two separate chains.
This could lead to a loss of confidence in the blockchain and the cryptocurrency associated with it. In some cases, it could even result in the death of the blockchain entirely.
It's important to note that 51% attacks are only possible on Proof of Work (PoW) based blockchain networks. This is because PoW is the only consensus algorithm that requires miners to have a certain amount of skin in the game.
With other consensus algorithms like Proof of Stake (PoS), there is no need for miners to invest in expensive hardware or dedicate large amounts of electricity to mining. This makes it impossible for anyone to control more than 50% of the network.
51% attack examples
In the world of blockchain, there were multiple 51% attacks that successfully reversed transactions and double-spent coins. Here are a few examples.
The Bitcoin Gold blockchain suffered a second 51% attack in May, 2018. The attack resulted in the reorganization of over 100 blocks and the double-spending of around $72,000 worth of BTG. This was the second time in less than two months that the Bitcoin Gold network had been hit by a 51% attack
The first attack took place in March 2020 and saw someone reorganize over 300 blocks and spend around $19,000 worth of BTG. This attacker used a mining pool called "Nicehash" to rent hash power and carry out the attack.
The second attacker used a different mining pool called "MiningRigRentals". This attacker only rented hash power for a few hours, which suggests that they may have been using their own personal mining rigs. This event resulted in $53,000 in double-spending.
The Bitcoin Gold team has responded to both attacks by changing the mining difficulty algorithm. This should make it more difficult for attackers to carry out 51% of attacks in the future.
Both of these attacks highlight the risks of proof-of-work (PoW) based cryptocurrencies. PoW consensus algorithms are often seen as being more secure than other types of consensus algorithms, but these Attacks show that they are not immune to 51% of attacks.
The 51% attack on Ethereum Classic in January 2019 was conducted by a group of unknown attackers who gained control of more than half of the network's hashrate.
They used this power to double-spend coins, preventing other users from completing transactions. The attackers also blocked other miners from confirming transactions, which caused the network to grind to a halt.
The Ethereum Classic team responded quickly to the attack, working with exchanges and other stakeholders to blacklist the addresses associated with the attackers.
This prevented them from being able to sell their coins and cash out their profits. The team also implemented a hard fork to fix the issue, which caused the network to split into two separate chains.
The attackers lost a significant amount of money in the process, and the Ethereum Classic team was able to quickly recover from the attack.
Since then, Ethereum Classic has been working to improve its security features and has not been attacked again. However, other cryptocurrencies have fallen victim to 51% attacks, including Bitcoin Gold, Ethereum Classic's sister chain.
How to prevent 51% of attacks on the blockchain?
It is often said that blockchain is unhackable. However, this is not strictly true - while the underlying technology may be secure, the exchanges and platforms that support cryptocurrencies are not always so well protected. In fact, 51% attacks are a very real threat to blockchain security.
However, there are steps that can be taken to protect against 51% attacks such as:
- Using multiple sources to diversify your holdings: This ensures that even if one source is compromised, your funds are still safe. For example, you can split your holdings into both exchanges and wallets to secure your funds.
- Using a hardware wallet: Hardware wallets are offline devices that store your private keys and allow you to sign transactions without ever exposing your keys to the internet.
- Joining a mining pool: Mining pools allow miners to combine their resources and work together to solve blocks. This reduces the risk of a 51% attack as it would require an attacker to have 51% of the total mining power in the pool.
These precautions can help protect yourself against 51% attacks and keep your funds safe.
In general, 51% of attacks are very difficult to carry out successfully and are not a major concern for most cryptocurrencies.
However, smaller and less well-known coins may be more vulnerable to this type of attack. For investors, it is important to do your own research and understand the risks involved before investing in any cryptocurrency.
If you have any questions, please feel free to leave a comment below. Thank you for reading!