Understanding 51% attack
To understand what is 51% attack is, we should cover some basics first. Blockchain technology can be described as a structure that keeps public transaction records in several databases in an environment that is network-connected through peer-to-peer nodes.
These transactional records are also known as blocks, and numerous interconnected databases are referred to as a chain – therefore a blockchain.
Every single transaction in a blockchain is authorized using the owner’s digital signature, which protects it from interference. Thanks to this, the information is extremely secure.
Also, this technology involves adding details about transactions to digital ledgers through mining. This process involves creating the hash for the transaction block, which then ensures that it’s secure.
When a hostile user in a network acquires control of a given blockchain’s mining capabilities, a 51% attack happens. It means that the attackers will have more than 50% mining power and can mine faster than the rest of the users.
They can stop the order and confirmation of the new transactions, then they can rewrite parts of a blockchain and undo the transactions.
Usually, a 51% attack avoids the blockchain’s security protocol, and it can be light or pretty severe, depending on the mining power attacker has.
A more critical problem is the hash power. If the attacker has a higher percentage, the probability of attacking the system is also high. The damages inflicted by the attack are dependent on the same factor as well.
How blockchain uses the Proof-of-Work mechanism to validate the transactions, the attackers cause network disruptions by holding up the confirmation and the arrangement of the blocks in chronological order.
As we mentioned above, these attacks can reverse a transaction before it is confirmed. This causes double-spending a coin. In addition to this, honest miners earn less for updating the blockchain because of the attackers, who steal their fair share.
Risks that come with 51% attack
When a 51% attack occurs, it causes cryptocurrency users to lose digital assets, or worse, cash. This brings up serious concerns about the security, reliability, and trustworthiness of a blockchain because the confidence of its miners and users is very much compromised.
The attackers can mislead the new and inexperienced users to confirm and validate the transactions that they can later overrule.
Also, the users’ transactions may not be confirmed or undone by the attackers. This causes the users not to trust the blockchain, which then reduces its value. These attacks can cause some cryptocurrencies to be unlisted because of security concerns.
Preventing a 51% attack
Proof of Stake
A sole miner can become the majority in a small blockchain network. All the blockchain networks that use proof-of-work have a strict policy that the miners have to upgrade their equipment regularly.
If they fail to fulfill their obligations, they can leave without their block rewards, and they will fall behind other miners.
The blockchain can use proof-of-stake to avoid these attacks, which is a more secure consensus than proof-of-work. In most cases, the proof-of-stake motives are controlled by the most wealthy users unlikely to perform the attack.
However, blockchains have gone past this structure and now they prefer more decentralized alternatives, like delegated-proof-of-stake (DPos).
One of the solutions is that the blockchain can ensure that no single miner or a group controls more than 50% of the hash power.
In this way, it would be impossible for a sole miner or a group to attack the network by outbuilding the longest blockchain which is validated.
To carry off the attack, the attacker would have to own ver powerful hardware and enormous energy. In addition, the attacker would use some luck because the mining would be totally random.
A great example is Bitcoin, where its hash rate and network are complex and wide enough to be a solid initial investment for an attacker to rent mining equipment. On the other hand, Ethereum is more vulnerable to attack since its hash rate is relatively small.
Strong network community
When using the DPoS or PoS, a user with a minimal stake level is voted a block validator in the network. The validators are voted in by the network community and in the case of scheming, they are thrown out of the network also by the community.
This principle prevents the occurrence of 51% attacks. It is also effective in steering clear of double-spending as the rules for the hostile validators are coded into the blockchain itself.
Can a 51% attack happen again?
There is a big possibility that an attack can reoccur if the attacker planted a bug in the blockchain’s code. An attacker can control the blockchain to make new blocks much faster to begin the second attack.
In conclusion, an attacker can attack a blockchain again. Rest is up to the blockchain to make sure that their systems are more resilient and secure.
The platform that faced a 51% attack
Big blockchain platforms such as Bitcoin and Ethereum are allegedly totally secure from 51% attacks. They are very unlikely to face a 51% attack in comparison to some smaller projects. On the other hand, many smaller projects are vulnerable to this kind of attack.
According to the reports and news, Grin has experienced an attack where the anonymous miner gained over 57% of the total hash power Grin has. His intentions remained unknown.
Grin is a privacy-focused cryptocurrency blockchain, and until the issue was resolved it had to stop its payouts, and it asked its miners to stop their operations.
Later, the blockchain was able to recover the network and inflict measures to avoid the attack from happening again.
Back in 2018, the Bitcoin Gold blockchain experienced a 51% attack for the first time and suffered massive losses.
The development team of the Bitcoin Gold blockchain wanted to gain decentralization by using GPUs instead of ASIC devices for mining. Unfortunately, an unknown miner managed to gain control of more than 51% of the overall hash rate, which then led to an attack.
In 2020, Bitcoin Gold has suffered yet another attack. The blockchain faced two reorganizations in just two days that allowed it to double-spend, totaling an extensive amount of money.
The Bitcoin Gold community requested that the blockchain change its algorithm to a more secure one, as they suspected there might be secret ASIC mining devices on their network.
Vertcoin has faced multiple 51% attacks over the years. It’s a cryptocurrency project that focuses on keeping mining power decentralized. The attack saw the Vertcoin authentic blocks being replaced by the block the attacker wrote.
Immediately, the blockchain reorganized and caused double-spending which lost the users huge amounts of money. Then, Vertcoin had to switch to a more powerful proof-of-work algorithm to ensure security. It had to block powerful mining chips from the network to keep its mining more community-based and powerful.
Ethereum Classic blockchain experienced three consecutive 51% attacks in the same month, in 2020. ETC uses the proof-of-work consensus mechanism, much like Bitcoins.
To perform a 51% attack requires a lot of computing power, which means it’s very expensive, especially when performed on large networks, like Bitcoin. Ethereum Classic’s hash rate is lower, therefore more vulnerable to 51% attacks.
The decentralized nature of the Ethereum Classic proof-of-work makes it difficult to avoid or reduce the 51% attacks. The attacks went without any significant impacts on its prices, but the users’ trust was, as expected, reduced.
51% attack and 34% attack – comparison
Both of these attacks aim to control the blockchain’s mining power. On the other hand, these two are different in the way they control the blockchain.
A 34% attack changes the blockchain’s ledger, which is in charge of validating a transaction using an algorithm called Tangle consensus.
However, a 51% attack gives an attacker complete control of the blockchain network. In return, this stops further coin reusability and minings.
When growing a fast and promising technology, such as blockchain and cryptocurrency, vulnerabilities and risks will always be involved and expected. The upcoming technology promises to solve security questions and problems and improve the system.
On the other hand, these attacks should help industries and companies to learn new ways to prevent and improve their platforms for the future, which is also promising in this field.