51% Attack

What is a 51% Attack?

A 51% attack arises within the field of blockchain technology and, at its core, involves an entity or individual gaining control of over half of a network’s hashrate — the total mining power utilized to confirm transactions on the network.

When this control is achieved, the integrity of the blockchain can be undermined and manipulated, leading to invalidated transactions and potential double-spending of coins.

How Does a 51% Attack Work?

Every blockchain maintains a sequence of blocks that record transactions (the distributed ledger).

These blocks are cryptographically linked, and the process of adding them involves solving complex puzzles, especially in Proof-of-Work (PoW) systems.

However, should an entity secure more than 50% of a network’s hashrate, they gain the power to modify the transaction history, potentially double-spending coins.

In Proof-of-Stake (PoS) systems, a similar risk arises when an attacker controls over 50% of staked tokens.

Most Famous 51% Attacks

Within the annals of blockchain history, several coins have fallen prey to this devastating strategy, underscoring the need for robust security mechanisms and constant vigilance in the ever-evolving world of cryptocurrency.

Some of the most notable 51% attacks over the years includes:

• Bitcoin Gold (BTG): BTG faced two significant 51% attacks, one in May 2018 and another in January 2020. Both attacks resulted in substantial double-spends, with the latter costing nearly $70,000.
• Ethereum Classic (ETC): The network faced an attack in 2020 wherein over 1 million USD of its cryptocurrency was misappropriated.
• Litecoin Cash (LCC): In July 2019, a 51% attack occurred on Litecoin Cash’s PoS system, though the damage was minimal, with less than $5,000 double-spent.

Other victims include Feathercoin (FTC), Vertcoin (VTC), and Verge (XVG).

The common factor? Lower hashrates relative to their algorithm family, making them vulnerable targets.

How to Prevent a 51% Attack?

The very essence of blockchain technology rests on its promise of security and immutability, however, as with every technological innovation, vulnerabilities exist.

One of the most discussed threats to a blockchain’s integrity is the 51% attack.

Fortunately, with evolving technology and proactive strategies, there are measures that can be taken to fortify a network against such attacks.

• Keep Miners Decentralized: Ensuring that no single miner or mining pool controls a majority of the network’s computing power is pivotal. For bitcoin (BTC), a 51% attack is seemingly improbable, given the network’s vastness. Still, many altcoins face greater risks, especially when rented mining equipment is considered.
• Opt for ASIC Miners: ASIC miners, custom-designed for specific blockchains, provide a higher security threshold than GPU-based mining. They demand more significant investments, further disincentivizing potential attacks.
• Proof of Stake and its Variants: Proof of Stake and its derivatives, like Delegated-Proof-of-Stake (DPoS), reduce 51% attack vulnerabilities. In DPoS, for example, users who hold the network’s stake can become block validators, and these validators are often elected by the community. Systems like EOS have mechanisms in place that can swiftly dethrone malicious actors.
• Real-time Monitoring: With the advent of services like NiceHash, which allows renting hashing power, monitoring for chain reorganizations becomes imperative. Systems like the one established by MIT’s Digital Currency Initiative can actively oversee multiple PoW blockchains, raising red flags during suspicious activities.

In essence, the prevention of a 51% attack is crucial to maintaining the trust and validity of a blockchain network.

With the right blend of technology, community vigilance, and proactive measures, blockchain ecosystems can ensure their resilience against such threats, thereby safeguarding the interests of their users and the sanctity of their data.

The Bottom Line

While Satoshi Nakamoto might not have envisioned the feasibility of a 51% attack in Bitcoin’s early days, the vast economy of altcoins today has shifted the paradigm.

The intricacies of blockchain, and the economic incentives intertwined with it, mean that networks must remain vigilant against exploits and attacks from bad actors.

The decentralized ethos of cryptocurrencies necessitates robust checks, balances, and ongoing evolution to ensure they remain resilient against such vulnerabilities.

One thing is certain; as the cryptocurrency market matures and evolves, so too must its defences against potential threats.