One of the key strengths of cryptocurrency and blockchain technology is its decentralization – networks are not controlled by a central authority. Blockchain networks rely on a decentralized networks of computers to work together to verify transactions and to remain secure. Although blockchain networks are highly resilient to hackers and bad actors, they are not completely invulnerable. A 51% attack is an attack on a blockchain that occurs when the majority of the mining on a network is controlled by a single entity.
This article will explain what a 51% attack is, how the mining process works and list a number networks that have suffered 51% attacks.
What is a 51% attack?
A 51% attack refers to a situation in which a single entity is able to gain control over more than 50% of the mining power, computing power or hash rate of a blockchain network. Such an attack can have several negative implications on the operation of a blockchain and could allow an attacker to gain control over many different functions of the blockchain.
A successful 51% attack could allow an attacker to do the following:
- Modify the order of transactions on the blockchain
- Exclude new transactions from being recorded
- Reverse transactions allowing “double-spending”
- Prevent transactions from being confirmed
- Double-spend coins
- Block other miners from mining new coins
A 51% attack would not, however, allow an attacker to prevent transactions from being created, or reverse transactions made by any network participant other than themselves. It’s also impossible for an attacker to use a 51% attack to create new tokens, such as Bitcoin, or take control over tokens on a chain.
A 51% attack occurs when an individual or single entity controls more than half of the mining power of a blockchain network.
What is double spending?
Double spending is a risk of digital currencies that cash does not have. It occurs when a blockchain network is tampered and a units of cryptocurrency can be fraudulently spent more than one time. If you pay for an item with a $20 note, you cannot then spend that same $20 at the shop next door. However, when a blockchain network suffers a 51% attack, the miner that controls more than 50% of the mining can dictate transactions network, allowing them to double spend.
How the mining process works
Bitcoin and the blockchain technology that drives it operates via a decentralized system that assembles, verifies, and secures transactions data without the need for a centralized authority or third-party. The Bitcoin blockchain consists of over 10,000 mining nodes (computers), all of which work together to ensure that the Bitcoin protocol rules are followed and all participants in the network agree on its current state.
This agreement is referred to as consensus — all network participants must agree on the current version of the Bitcoin software in use, mining processes, and how transactions are validated.
The Bitcoin network, for example, uses a consensus algorithm called Proof of Work. Within this consensus mechanism, miners collect groups of transactions into blocks and add them to the blockchain. To prevent miners from adding fraudulent blocks, a miner is only able to add a block to the chain if other nodes collectively agree that the miner found a valid solution to the block. This essentially means that miners must prove that they have made the necessary effort to process transactions.
This process allows the Bitcoin blockchain to self-regulate without the need for centralized authority and prevents any single party from gaining control.
In order to mine a block in a Proof of Work blockchain such as Bitcoin, a miner must commit a significant amount of computational power to the task, which incurs a significant electricity cost. If a miner attempts to submit a fraudulent block, the block is rejected.
What is hash rate?
The performance of a miner is calculated based on the amount of computational power they are able to commit to solving blocks. This is measured in computing power, which can also be referred to as hash rate. The Bitcoin network is currently maintained by roughly 10,000 nodes spread around the world, all of which compete to be the single node that finds the next valid block hash and gain a block reward in the process. The hashing power in the Bitcoin network shouldn’t be under the control of a single party.
How easy is it to execute a 51% Attack?
Blockchain networks are secured and maintained by thousands of different nodes. All nodes cooperate in the consensus process — the larger the network and the higher the number of nodes, the more resistant a network is against 51% attacks.
The likelihood that a miner will be successful in solving the next block and capturing the block reward is determined by the amount of hash power the miner can direct toward mining. More hash power means more chances of solving the next block.
The larger and older a blockchain network becomes, the more difficult it is to collect enough computing sources to revert the transactions contained in previous blocks. Each block added to a blockchain not only contains a set of transactions but also contains references to previous blocks, linking all blocks through cryptographic proofs. A block with a high number of confirmations is functionally impossible to revert.
Performing a 51% attack on a smaller network with less hash power directed toward it, however, is feasible and has been proven to be possible.
Is a 51% attack on Bitcoin possible?
Performing a 51% attack on a major blockchain such as Bitcoin is an extremely difficult prospect as it is the largest and longest running blockchain in existence. The more transactions there are on a network, the more difficult it is to alter the network blocks. While it is not impossible for Bitcoin to suffer a 51% attack, the constant addition of new blocks to the chain would only allow a tiny window for the hacker to alter the blocks. The financial costs of doing this would also likely far outweigh the benefits.
Important to Remember
Changing block data is difficult because past transactions are hard coded into blockchain software.
Examples of 51% attacks
In May 2018, Bitcoin Gold – a Bitcoin fork — was targeted by a successful 51% attack. More recently, the Bitcoin SV network was targeted by a successful 51% attack, resulting in three separate versions of the Bitcoin SV chain being mined simultaneously. Ethereum Classic, a fork of the Ethereum blockchain, also suffered a 51% attack in 2019 that led to roughly $1.1 million being stolen.
In addition to stolen funds, a 51% attack can severely damage the reputation of a blockchain networks security.
51% attacks occur when attackers control over 50% of the hash power that supports the operation of a blockchain network. While major cryptocurrencies such as Bitcoin are highly resistant to 51% attacks, smaller altcoins or networks with less hashing power securing their blockchain are more susceptible to majority attacks.