Despite being backed by blockchain technology that promises security, immutability, and full transparency, many cryptocurrencies such as Bitcoin SV (BSV), Litecoin (LTC), and Ethereum Classic (ETC) have been targeted by 51% attacks several times in the past. . Although there are many mechanisms by which blockchains can and have been exploited by malicious entities, A 51% attack, or a majority attack as it is also called, occurs when a group of miners or an entity controls more than 50% of the hashing power of the blockchain and then assumes control over it..
Arguably the most expensive and tedious method of compromising a blockchain, 51% of attacks has been very successful with smaller networks that require less hashing power to get past most nodes.
How to understand a 51% attack
Before delving into the technique of a 51% attack, it is important to understand how blockchains record transactions, validate them and the different controls that their architecture incorporates to prevent any alteration. Using cryptographic techniques to connect the subsequent blocks, which in turn are records of the transactions that have taken place on the network, a blockchain adopts one of two types of consensus mechanisms to validate each transaction through its network of nodes and record them permanently.
While nodes in a proof-of-work (PoW) blockchain have to solve complex mathematical puzzles to verify transactions and add them to the blockchain, A proof-of-stake (PoS) blockchain requires nodes to stake a certain amount of the native token to gain validator status. Either way, a 51% attack can be orchestrated by controlling the network’s mining hash rate or by controlling more than 50% of the tokens staked on the blockchain.
To understand how a 51% attack works, imagine that more than 50% of all nodes performing these validation functions conspire together to introduce a different version of the blockchain or execute a denial of service (DOS) attack., for its acronym in English). The latter is a 51% type of attack in which the remaining nodes are unable to perform their functions while the attacking nodes are dedicated to adding new transactions to the blockchain or deleting old ones. In any case, attackers could reverse transactions and even double spend the native crypto token, which is similar to creating a fake currency.
Needless to say such an attack can compromise the entire network and indirectly cause huge losses to investors holding the native token. Although creating an altered version of the original blockchain requires a phenomenal amount of computing power or cryptocurrency staking in the case of large blockchains like Bitcoin or Ethereum, it is not so far-fetched for smaller blockchains.
Even a DOS attack is capable of paralyzing the operation of the blockchain and can negatively affect the price of the underlying cryptocurrency. However, it is unlikely that the oldest transactions, beyond a certain cutoff, can be reversed, so only the most recent or future transactions made on the network are put at risk.
Is a 51% attack on Bitcoin possible?
For a PoW blockchain, the probability of a 51% attack decreases as the hashing power or computational power used per second for mining increases. In the case of the Bitcoin (BTC) network, attackers would have to control more than half of the Bitcoin hash ratewhich currently stands at a hashing power of approximately 290 exahashes/s, which gives them would require access to at least 1.3 million of the application-specific integrated circuit (ASIC) minersfor its acronym in English) more powerful, such as Bitmain’s Antminer S19 Pro, which sells for about $3,700 each.
This would mean thatAttackers would have to buy mining equipment totaling around $10 billion just to get a chance to execute a 51% attack on the Bitcoin network.. In addition, there are other aspects such as electricity costs and the fact that they would not be entitled to any of the mining rewards applicable to honest nodes.
Nevertheless, for smaller blockchains like Bitcoin SV, the scenario is quite differentas the hash rate of the network is around 590PH/s, which makes the Bitcoin network almost 500 times more powerful than Bitcoin SV.
Nevertheless, in the case of a PoS blockchain like Ethereum, malicious entities would need to have more than half of the total Ether (ETH) tokens that are locked in staking contracts on the network. This would require billions of dollars just in terms of buying the computing power needed to even have any semblance of launching a successful 51% attack.
Furthermore, in the event that the attack fails, all staked tokens could be confiscated or blocked, which would deal a heavy financial blow to the entities involved in the alleged attack.
How to detect and prevent a 51% attack on a blockchain?
The first check for any blockchain would be ensure that no single entity, pool of miners, or even a mining pool controls more than 50% of the network’s mining hashrate or total number of staked tokens.
This requires blockchains to maintain constant control of entities involved in the mining or staking process and take corrective action in the event of non-compliance. Sadly, the Bitcoin Gold (BTG) blockchain was unable to anticipate or prevent this from happening in May 2018, repeating a similar attack in January 2020 that led to an unknown actor double-spending nearly $70,000 worth of BTG.
In all these cases, the 51% attack was made possible by a single network attacker gaining control of more than 50% of the hashing power and then proceeded to perform deep reorganizations of the original blockchain that reversed completed transactions.
Repeated attacks on Bitcoin Gold point out the importance of relying on ASIC miners instead of cheaper GPU-based mining. Since Bitcoin Gold uses the Zhash algorithm that makes mining possible even on consumer graphics cards, attackers can afford to launch a 51% attack on their network without investing heavily in more expensive ASIC miners.
This 51% attack example highlights the superiority of security controls offered by ASIC minerssince they need a greater amount of investment to obtain them and they are built specifically for a particular blockchain, which makes them useless for mining or attacking other blockchains.
However, in the event that miners of cryptocurrencies like BTC go for smaller altcoins, even a small number of them could potentially control more than 50% of the hashrate of the smallest altcoin network.
Also, with service providers like NiceHash allowing people to rent hashing power for speculative cryptocurrency mining, the costs of launching a 51% attack can be dramatically reduced. This has drawn attention to the need for real-time monitoring of chain reorganizations on blockchains to reveal a 51% attack in progress.
The MIT Media Lab Digital Currency Initiative (DCI) is one such initiative that has built a system to actively monitor a number of PoW blockchains and their cryptocurrencies, reporting any suspicious transactions that may have double-spent the native token during a 51% attack.
Cryptocurrencies such as Hanacoin (HANA), Vertcoin (VTC), Verge (XVG), Expanse (EXP), and Litecoin are just a few examples of blockchain platforms that faced a 51% attack as reported by the DCI initiative.
From them, the attack on Litecoin in July 2019 is a classic example of a 51% attack on a proof-of-stake blockchaineven though the attackers did not mine any new blocks and double-spent LTC tokens worth less than $5,000 at the time of the attack.
This reveals the lower risks of 51% attacks on PoS blockchainsconsidering them less attractive to network attackers, and is one of the many reasons why an increasing number of networks are moving to the PoS consensus mechanism.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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