51% Attack

What Is a 51% Attack?

A 51% attack, or majority attack, is a security risk for blockchain networks. This type of attack occurs when a single entity or collaborative group of miners controls more than 50% of the network's mining power, also known as the hash rate. By gaining the majority of the computational power, these attackers can manipulate the blockchain to their advantage.

The main danger of a 51% attack lies in the ability of the attackers to alter the transaction history of the blockchain. They can prevent new transactions from being confirmed, allowing them to halt payments or even reverse transactions that have already been confirmed by the network. This can enable the attackers to double-spend coins, essentially using the same digital currencies multiple times fraudulently.

Control over more than half of the network’s hash rate also gives attackers the power to exclude other miners’ blocks, resulting in their blocks being the only ones validated and added to the blockchain. This can lead to a monopoly over mining new blocks and collecting the associated rewards, further centralizing power that should be distributed across the entire network.

How Does a 51% Attack Work?

Accumulating Hash Power: The first step in a 51% attack involves the attacker or a group of colluding attackers accumulating more than half of the network’s total hash rate. This can be achieved through purchasing a significant amount of mining equipment, commandeering other miners' resources, or renting hash power from cloud mining services.

Forking the Blockchain: With the majority of the hash rate, the attacker can now begin mining their own version of the blockchain in secret. This version diverges from the one followed by honest miners who continue validating transactions based on the previously agreed-upon blockchain.

Creating a Longer Blockchain: Because the attacker controls more than half of the mining power, they can add blocks to their version of the blockchain more rapidly than the rest of the network can add to the official version. In blockchain protocols, the longest chain is considered the legitimate one because it represents the majority of the work done by the network.

Overriding the Main Blockchain: Once the attacker's secretly mined blockchain becomes longer than the network’s current blockchain, they release it to the network. Other nodes on the network, programmed to consider the longest chain as correct, will automatically accept this chain. The attacker's private blockchain becomes the new official record.

Double-Spending and Transaction Reversal: During the time they are mining their secret chain, attackers can make transactions in the official blockchain (e.g., sending cryptocurrency to another party). Once their longer blockchain is accepted, these transactions can be erased, allowing them to spend the cryptocurrency again. This is known as double-spending. Additionally, the attacker can include transactions in their chain that block or reverse other users’ transactions.

Maintaining Control: As long as the attacker can maintain control over the majority of the hash rate, they can continue to influence which blocks get added to the blockchain, potentially leading to repeated disruptions and frauds.

History of a 51% Attack

The concept of a 51% attack has been known since the creation of Bitcoin in 2009, as it was discussed in the Bitcoin white paper written by Satoshi Nakamoto. Initially, this was considered a theoretical risk, given the decentralized nature and the collaborative spirit of early Bitcoin users. Over time, as more cryptocurrencies emerged and blockchain technology diversified, the risk of a 51% attack became more apparent, especially in smaller, less secure networks. The first real instances of such attacks began to surface on various altcoins, smaller counterparts to Bitcoin, highlighting vulnerabilities where the necessary computing power to control the network was much lower.

For example, coins like Ethereum Classic and Bitcoin Gold have experienced successful 51% attacks where attackers could double-spend large amounts of cryptocurrency. These incidents not only demonstrated the practical possibility of such attacks but also led to increased awareness and the implementation of new security measures across blockchain networks to mitigate this risk.

Examples of a 51% Attack

Ethereum Classic (ETC)

● January 2019: Ethereum Classic, one of the first major cryptocurrencies to suffer a 51% attack, experienced this security breach when an attacker gained control of over 50% of the network's hash power. They reorganized the blockchain, double-spending approximately $1.1 million worth of ETC. The attack involved deep chain reorganizations which altered the transaction history.

● August 2020: A similar attack occurred again on Ethereum Classic, resulting in the reorganization of over 7,000 blocks and double-spending worth $5.6 million. The repeated attacks raised serious concerns about the security of smaller PoW blockchains and prompted the Ethereum Classic community to consider more security measures.

Bitcoin Gold (BTG)

● May 2018: Bitcoin Gold, a fork of Bitcoin, was hit by a 51% attack where attackers managed to gain majority control over the network’s hash power. They used this control to execute a deep blockchain reorganization that reversed transactions. The attackers double-spent Bitcoin Gold worth approximately $18 million, exploiting the vulnerability posed by the network’s lower overall hash rate compared to Bitcoin.

● January 2020: Bitcoin Gold faced another 51% attack where the same vulnerabilities were exploited as in the 2018 attack. This time, the attacker double-spent BTG worth $70,000, further tarnishing the credibility of the network and highlighting the ongoing risks for blockchains relying on limited hash power.

Vertcoin (VTC)

● December 2018: Vertcoin experienced a series of attacks that involved the alteration of the blockchain’s transaction history. The attacker targeted Vertcoin due to its ASIC-resistant algorithm, which ironically made it more susceptible to rental hash power attacks. The attacker double-spent approximately $100,000 worth of VTC, leading to a significant revision of the network's mining algorithms.

Is a 51% Attack on Bitcoin Possible?

A 51% attack on Bitcoin, while theoretically possible, is extremely unlikely due to the scale and decentralized nature of its network. Essentially, a 51% attack happens when a single entity or group gains control over the majority of the mining power on a blockchain network. This control would allow them to manipulate transactions, reverse transactions to double-spend coins, and potentially halt the processing of new transactions. However, achieving this level of control over Bitcoin would require an immense amount of computational power and coordination, which involves acquiring and operating a massive number of the specialized computers used for Bitcoin mining. The cost and logistical challenges of this make it nearly impractical.

Moreover, the Bitcoin network is one of the largest and most distributed networks across the globe, with thousands of miners and mining pools participating from different countries. This widespread distribution of miners and the enormous amount of hashing power collectively working on the network serve as a defense against a 51% attack. Additionally, the Bitcoin community is highly active and vigilant, likely to quickly notice any unusual accumulation of power or potential threat, thereby taking preemptive actions to prevent such an attack. As such, the probability of successfully orchestrating a 51% attack on Bitcoin is very low, making Bitcoin one of the safest cryptocurrency networks in operation today.

How to Prevent a 51% Attack?

Preventing a 51% attack on a blockchain requires a mix of technical strategies and community involvement to ensure that no single person or group can gain too much control. First, it’s crucial to spread out the mining power among many participants. This can be achieved by encouraging miners to join smaller pools instead of clustering in large ones, which helps prevent any single pool from dominating the network. Additionally, ensuring that mining operations are scattered across various geographic locations can reduce the risk of regional disruptions affecting too much of the network’s power.

Another effective strategy is to update the underlying technology of the blockchain. For example, shifting from a Proof of Work (PoW) system, where mining power dictates control, to a Proof of Stake (PoS) system can significantly lessen the risk of a 51% attack. In PoS, a person's ability to validate transactions and create new blocks is based on how many coins they hold and are willing to "stake" as a form of security. This method reduces the reliance on computational power as the primary resource for influencing the blockchain.

On top of these technical measures, it’s important for the blockchain community to stay vigilant. Implementing systems that monitor the network for unusual activity can help catch potential threats early. Quick response protocols, where rules or settings can be adjusted rapidly in reaction to suspicious changes in mining power, also play a crucial role. Together, these strategies create a defense that makes executing a 51% attack very challenging, helping to keep the network secure and trustworthy.