Blockchain is a Distributed ledger technology (DLT) that is used to store and record data. The ledger is a constantly updated and reviewed distributed list of transactions. One of the most important characteristics of a blockchain is its decentralized network of nodes. These nodes keep the Blockchain running 24 hours a day, evaluating and verifying that everything is still in order before the transaction is executed, and a distributed ledger is generated and recorded in the blockchain by the node. The 51% attack in blockchain, occurs when a group controls more than 50% of the nodes or computing power on the blockchain’s network. In this article, we will find out what a 51% attack in Blockchain is and how to prevent it.
51% attack in Blockchain Explained
Miners validate blocks in the Blockchain proof of work (PoW) system. These miners typically compete by using their machines to generate a hash with an equal or greater number of zeros at the front than the target hash.
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Whoever generates the winning hash that outperforms the target hash wins the right to fill a new block with transaction data and earn free crypto and transaction fees in exchange.
Miners with more machines or higher hash rate machines (capable of producing more hashes per second) have a better chance of beating the target hash and winning the right to fill the next block with transaction data and add it to the chain.
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What happens when a malicious agent gains majority control of the hash rate? As a result, this results in a 51% attack.
What is a 51% attack?
A 51% attack occurs when a single miner (or group of miners) controls more than half of the hash rate of a blockchain network (or computing power). By altering the data embedded in the blockchain, a hacker can prevent transactions from taking place, reroute the priority of new transactions being computed, and even reverse some of their own past transaction records (an issue known as “double spending”).
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The amount of disruption that a 51% attack can cause is somewhat limited. While the attacker can cause the double-spending issue, they cannot reverse other users’ network transactions or prevent users from broadcasting their transactions to the network. Furthermore, a 51% attack cannot create new assets, steal assets from unrelated parties, or change the functionality of block rewards.
How to prevent 51 attack in Blockchain
Because of the size of the network and the prohibitive cost of acquiring that much hashing power, a 51% attack on the Bitcoin blockchain is extremely unlikely. As the network expands, the possibility of a single person or entity acquiring enough computing power to overwhelm all other participants becomes increasingly unlikely. As a result, 51% attacks are typically restricted to cryptocurrencies with lower participation and hashing power.
As a result, 51% attacks are extremely unlikely to occur on large networks, particularly the Bitcoin blockchain, which is widely regarded as the most secure cryptocurrency network. While many of the larger blockchains have yet to be attacked, the majority of attacks have occurred on smaller chains.
Although some may agree that using Proof-of-Stake (PoS) consensus is the best defense against this attack, some advocates believe that Proof of Stake (PoS) is a more secure consensus mechanism than Proof of Work.
Validators who use the PoS algorithm can reduce infiltration risks by keeping the network operational. Looking closer at the 51% attack, the possibility of a PoS crypto being a target is unlikely due to the low profitability.
51% Attack Example
Theoretically, 51% attacks could, but are unlikely to, impact large cryptocurrencies like Bitcoin and Ethereum because the possibility of an individual or group controlling greater than half of all the mining or validation power, is so unlikely as to be essentially impossible. However, smaller crypto networks, which use less computing power or have more concentrated validation authority, are more vulnerable to 51% attacks.
Here are some examples of a 51% attack:
Bitcoin Gold (BTG)
In May 2018, BTG was spent twice as much, totaling 12,239 BTG ($18 million). Recently, in late January, Bitcoin Gold was subjected to another 51% attack, resulting in over 7,000 BTG being double-spent in less than two days. The attack was caused by the removal of two significant blockchain reorganizations.
Ethereum Classic (ETC)
Within a month, the ETC blockchain has been subjected to three 51% attacks. Each of the attacks occurred in the month of August 2020, with the first one occurring on the 1st, 6th, and 29th of August, respectively. Because of this attack, cryptocurrency exchange Coinbase has suspended all ETC deposits and withdrawals.
As an ASIC mining monopolizing resistant cryptocurrency, the multiple 51% attacks on VTC were unexpected. VTC lost $100,000 in October and December of 2018 due to a double spend by an entity that obtained sufficient computing power from Nice Hash. As a result, VTC reorganized over 300 blocks on the VTC network and hard-forked another 600 blocks.
The ZenCash network was subjected to a 51% attack, in which one person or party controls 51% of the hash rate. The attacker was able to reorganize the blockchain several times as a result of the hash rate surge, with the largest rollback reversing 38 blocks. The attacker was also able to double-spend two large transactions worth more than $550,000, totaling 13,000 and 6,600 ZEN.
AurumCoin (AU) is a gold-backed cryptocurrency, with each token worth the same as a gram of pure 24K gold. AurumCoin claims that each AU is backed by 0.75 grams of gold held in secure vaults worldwide. AurumCoin (AU) claimed that it was the victim of a 51 percent attack, and the cryptocurrency’s listing on Cryptopia lost $15,752.26 AU, or approximately $550,000.
Any emerging technology, including blockchain and cryptocurrency, is subject to a variety of risks and vulnerabilities. That is why we need to understand what a 51% attack in blockchain is.
While more technology promises to address this shortcoming, cyber infiltration remains unavoidable. On the plus side, such attacks provide legitimate reasons for the industry and businesses to learn and improve.