What is a 51% attack?
Do you want to know what a 51% attack is? In this article, you can learn directly what a 51% attack is and whether it can also happen to Bitcoin.
Summary about a 51% attack
- In a 51% attack, a group of miners attempts to control more than 50% of a blockchain network
- In a successful 51% attack, the attackers can block or reverse new transactions
- This makes it possible to spend the same crypto multiple times
- A 51% attack is difficult to execute and requires a lot of computing power
What is a 51% attack?
A 51% attack is an attack on a blockchain where a group of miners controls more than 50% of the network’s computing power. During a 51% attack, the attackers can prevent new transactions from being confirmed.
This allows them to halt new payments between some or all users. They can also reverse transactions completed while they had control of the network, which means they can spend coins twice. A 51% attack does not completely destroy bitcoin or another blockchain-based coin, but it does cause many problems.
During a 51% attack, the other miners are sidelined. This means that the people behind the 51% attack have exclusive rights to mine new blocks on the blockchain.
What is proof of work in Bitcoin?
To understand the 51% attack, it’s necessary to zoom in on Bitcoin itself. One of the biggest advantages of Bitcoin and blockchain technology is the fact that there is a decentralized network. This means that no single party can take control over the network, since there must be agreement between the Nodes.
A Node is also a person or computer on the blockchain. This means that the majority of Nodes must agree on how the blockchain works. They confirm executed transactions to prevent the same bitcoin or other cryptocurrency from being spent twice.
Proof of work
The Bitcoin consensus algorithm (Proof of Work) ensures that miners can only validate a new block of transactions if the Nodes collectively agree that the Blockhash provided by the miner is accurate. This is the case when a valid solution has been found for the mathematical problem of that block.
The blockchain infrastructure prevents a centralized entity from using the network for its own purposes. This is also the main reason why there is no authority on the Bitcoin network that has the upper hand.
Hash power and 51% attack
Since mining blocks requires huge amounts of electricity and computing power, a miner’s performance is based on the amount of computing power he puts in. This is also called the hash power.
The hash power is distributed across various Nodes around the world. This means that the hash Rate is not in the hands of a single entity. However, during a 51% attack, one party controls the majority of the specific blockchain.
What are the dangers of a 51% attack?
In a 51% attack, an attacker can perform a double spend. The hacker exchanges their crypto for fiat at an exchange, and then uses their computing power to create an alternative transaction chain by going back a few transaction blocks.
In this case, the transaction to the exchange does not exist, allowing the hacker to possess both the crypto and the fiat.
Disrupting the Blockchain
A hacker can also disrupt the blockchain by mining empty transaction blocks in a 51% attack. In this case, no one can execute transactions within the network.
Users risk having their transactions unconfirmed or reversed due to forks caused by such attacks.
Decrease in Value
A 51% attack reduces trust in the blockchain and cryptocurrencies. Due to the loss of trust, the value may decrease.
In addition, coins can be delisted from exchanges in a 51% attack. For example, BTG was removed from Bittrex after the BTG team refused to pay compensation to the exchange as a result of the May 2018 attack.
Known 51% Attacks in the Past
Now that you know more, it’s time to zoom in on the most significant 51% attacks that have occurred. While Bitcoin itself has not experienced such an attack, this is not the case for other projects. Below are the most well-known and largest 51% attacks that have ever occurred in the crypto market:
ETC Attack in 2020
Between July 29 and August 1, 2020, a 51% attack occurred on the ETC network. The ETC network is the original Ethereum blockchain maintained by the group that refused to support the fork that corrected The Dao Hack of 2016.
During this attack, 807,000 ETC was purchased over a period of four days. This gave the buyer control over most of the coins.
During this period, the buyer made several private transactions that were not made publicly available to other miners until the end of the attack. The length of the attack gave the attacker enough time to split the operation into smaller parts to avoid suspicion. The attacker then published their transactions, causing a fork in the ETC blockchain.
BTG Attack in 2021
Another well-known 51% attack is the attack on the BTG network. Within a span of 6 hours, the BTG network underwent a 51% attack that resulted in the person double-spending BTG worth $70,000. The estimated cost of the attack was a total of $10,200.
However, this attack was small compared to the 51% attack that occurred between May 16 and 18, 2018. This 51% attack resulted in the attacker defrauding exchanges with double spends involving 388,000 BTG. This was worth over $18 million.
No user lost money or cryptocurrencies during this exchange-focused attack. This attack is reportedly the largest 51% attack on one of the largest public blockchains to date.
XVG attack in 2018
The XVG network was also hit by a 51% attack. Between April 4 and 5, 2018, a 51% attack took place on the XVG blockchain (also known as Verge Currency), in which coins worth over $1.1 million were stolen. Unlike other blockchains, XVG uses a rotation of five mining algorithms.
The attacker gained control over two of these algorithms, allowing them to falsify blocks on the blockchain. The developers behind XVG corrected the attack with a hard fork. Within two months of the attack, a second 51% attack took place. In the second attack, the perpetrators made off with 35 million XVG, which was worth approximately $1.75 million at the time.
Protection against 51% attack with ChainLocks
Dash uses ChainLocks to prevent 51% attacks. With a ChainLock, transactions are immediately confirmed and secured after a block is processed. This makes it almost impossible for miners to reorganize the chain.
What is the likelihood of a 51% attack?
The likelihood of a 51% attack is minimal: one computer must compete against millions of other miners and their computing power in Bitcoin. This requires a tremendous amount of electricity and money, making the network almost impossible to hack in practice.
However, hackers sometimes manage to carry out a 51% attack on smaller blockchain networks. A bug in the code can, for example, allow miners to create new blocks much faster, enabling them to set up a corrupt blockchain.
This is especially common in systems with proof of work, where less computing power is required. Therefore, for smaller cryptocurrencies, it is important to be vigilant about the stability and reliability of the network.