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A 51% attack happens when a certain person or group of people gain control of a blockchain’s mining power. These people gain 51% control. Then, they attack the network. 51% attack is an attack on the blockchain by malicious actors.
Remember that blockchain is decentralized. This means that its users need to agree on the blockchain’s operations and activities. Another term for this is consensus mechanism.
In Proof of Work, miners compete with each other in validating transactions and creating new blocks. Miners with better or more computers can mine faster and at larger quantities than those with average computing power.
When a person or group with bad intentions mines faster than others, eventually, they will gain a greater share of the network compared to others.
This is when a 51% attack happens.
How Does a 51% Attack Work?
Once someone gains major control over the network or a 51% share of the blockchain’s hash rate, they can disrupt the processes that occur in the blockchain.
These disruptions can take the form of:
- The attackers prevent new transactions from undergoing authentication.
- Tamper with the order of processes.
- Rewrite blockchain records.
- Prevent other participants from mining new coins in the network.
- Reverse transactions lead to double-spending.
Double-spending is a problem that is being actively avoided in the cryptocurrency world. This happens when similar coins or tokens of a cryptocurrency are spent twice. This is one benefit of cash over cryptocurrencies.
Furthermore, The malicious actors behind the 51% attack can insert a wholly altered form of blockchain and perform a denial-of-service (DOS) attack. A denial-of-service (DOS) attack will make the blockchain’s resources unavailable to its users.
Possibility of a 51% Attack
The expansion of a blockchain network means that its developers put in more effort to make it more secure and more decentralized. Its growth involves more nodes linked together. Therefore, a large number of computers working to authenticate validations can still thwart a 51% attack.
For this reason, attempting to take over a network with 51% majority power is expensive. First, the attackers would need a huge electricity source that will enable them to achieve a 51% hash rate. Second, once they engage in behavior that disagrees with the blockchain consensus, they stop receiving rewards from mining activities.
Crypto Companies that Experienced a 51% Attack: Examples
These are companies that were infiltrated by successful 51 attackers.
Bitcoin Gold (BTG)
Bitcoin Gold experienced a 51% attack in 2018. BTG blockchain builders chose to use GPUS instead of application-specific integrated circuits (ASICS) to make decentralization possible. Unfortunately, an unidentified miner was able to control more than 50 percent of their hash rate.
Ethereum Classic (ETC)
2020 was a rough year for the Ethereum Classic. In the same month, they suffered three consecutive 51% attacks. Ethereum Classic uses a Proof of Work mechanism that is somehow similar to Bitcoin’s. However, ETC’s hash rate is lesser that’s why it is easily vulnerable to suffer a 51 attack.
Vertoin experienced numerous 51% attacks over the course of time. VTC is a crypto project with the goal of maintaining a mining power’s decentralized nature. The attack happened when Vertcoin authentic blocks were being replaced by the ones that the attacker created.
This block replacement caused double-spending and resulted in huge losses. Vertcoin now uses a more secure PoW system.
The Michigan Institute for Technology’s Digital Currency Initiative reports that since June 2019, more than 40 incidents of 51% Attacks have been observed or detected on Lite Coin, Bitcoin Gold and other minor crypto coins.
How to Prevent a 51% Attack
Place limitations for miners
The developers of a blockchain need to ensure that no single miner or group of miners will acquire more than 50% amount of computational power.
For instance, Bitcoin’s network is wide and the hash rate is large. Hackers will have a difficult time attacking the Bitcoin blockchain because it is too complex.
Switch to Proof of Stake
Proof of Stake is more secure than Proof of Work. For the most part, incentives of the Proof of Stake are under the control of well-off users. They are trusted because building a good reputation is part of the POS system. Therefore, those with large incentives are the ones who are least likely to carry out a 51% attack.
Strengthening trust within the crypto community
If there is enough trust and confidence among a blockchain’s users, cooperation will be better. Also, in the case of PoS or Delegated Proof of Stake (DPoS) a participant with a lesser stake category compared to other investors is declared as block validator.
Final Word: Unavoidable Risk
In general, a 51% attack is an unavoidable risk that follows cryptocurrencies anywhere. There will always be people with bad plans for technology. Companies need to do their best to anticipate the plans of attackers and hackers.
Finally, investors need to be aware of these attacks. Cryptocurrency technology is still developing today. Also, the potential digital currency grows along with it. Investors need to be careful with their portfolios and manage their investments responsibly.