What is a 51% attack?
To forcefully control a country, you need to overthrow its leader by controlling their security. In the same way, to control activities on a blockchain, you need to have control of its security. The security of a blockchain, for example Bitcoin, is determined by the platform’s hash power. The hash power on a blockchain is a measurement of how much computing power is dedicated to that certain blockchain. It is dangerous when a single entity has a more than 50 percent of this power since they can initiate a 51% attack.
Simply put, a 51% attack is having more than half of the total hash rate of a blockchain controlled by an individual or an organization. With decisions being made by a single entity, they can choose to delay the confirmation of new transactions, or use the same coin twice, which is commonly known as double spending. Double spending occurs when the controlling miner reverses their own transactions in order to spend the same coin twice and make a profit.
Also, a 51% attack on a blockchain allows the controlling entity to delay or prevent the confirmation of new transactions. Another likely result of a major attack on a blockchain is making it hard for other miners to mine new blocks.
What is not possible with a 51% attack?
Although having a major attack on a blockchain is one of the most dreaded occurrences in the blockchain community, there are some things that an attacker cannot do. They cannot:
- Reverse other blockchain users’ transactions.
- Increase or reduce the reward per block for miners.
- Tamper with the creation and broadcasting of transactions.
- Increase the hard capitalization.
Examples of blockchain platforms that have suffered a 51 percent attack
This attack only appeared in theory until malicious actors pulled it off on some cryptocurrencies. In the recent past, the attack was witnessed on:
- Bitcoin Gold: In mid-2018, more than 50 percent of the blockchain found its way into the hands of a few, and over 18 million US dollars was lost through double spending.
- Vertcoin – An attacker or attackers took control of the hash power and approximately $100,000 was stolen.
- Ethereum Classic – Since 2019, Ethereum Classic has suffered more than one 51 percent attack. In the second attack, the attacker’s double-spends reached $5.6 million.
Due to the massive hash power on the Bitcoin and Ethereum blockchains, it’s theoretically and economically not viable to conduct an attack. It’s estimated that a malicious miner will need to spend $340,232 and $103,487 per hour to launch a 51 percent attack on Bitcoin and Ethereum, respectively. Based on the current Bitcoin price.
A 51% attack is prevalent on blockchain networks using the proof-of-work (PoW) consensus mechanism. This mechanism requires computing power to confirm instructions. Other mechanisms such as proof-of-stake (PoS) requires “miners” to stake an amount of the token to be allowed to confirm transactions. Although approaches such as engineering a 51 percent attack resistance and employing alternate consensus mechanisms have been flaunted to keep blockchains secure, they are yet to be fully implemented. The risk of a 51% attack is usually high on young Proof-of-work networks without enough hash power.