What Is a 51% Attack in Blockchain?

A 51% attack is a type of security threat in blockchain networks. It happens when a single entity gains control over more than half of the network’s computational power or mining hash rate. At that level, attackers can manipulate the blockchain. They can even rewrite the transaction history and perform fraudulent activities such as double-spending. Blockchain is decentralized, and this is how it prevents a single party from getting control over the network. But when an attacker gets enough computational power, it can disrupt the consensus mechanism. This poses a serious threat to the entire blockchain and the users’ money stored in it. Networks with a low hash rate are more vulnerable to a 51% attack. A low hash rate means that there are fewer minbers who secure the network. Well-established blockchains such as Bitcoin are more secure because they are distributed globally across a big network of miners.

How Does a 51% Attack Work?

When an attacker gets more than half of the hashing power, he can selectively approve or reject transactions. With it, he basically overrides the consensus mechanism and with it, blockchain gets deprived of its main characteristics such as decentralization and security. Now, let’s check in more detail how and why a 51% attack may occur. A blockchain is secured by validators or miners. They confirm transactions and add them to the network. Once a majority of blockchain participants agree on the transaction validity, it is added to the blockchain and becomes immutable. But what if the majority belongs to one person only? It means that this person can agree or decline transactions on his own. In other words, this person can control the entire network and even prevent from new transactions being added. Moreover, that person can double-spend the coins. Under normal circumstances, when a transaction is confirmed, it is irreversible, and the same coins cannot be spent again. But an attacker with the majority of computing power can reverse any transaction and spend the same funds again and again. This undermines the blockchain security and erodes trust among users and investors. Another damage that such an attacker can cause is halting transaction confirmations. This can delay or even prevent some users’ transactions from being added to new blocks and the blockchain. It would impact the operation of blockchain-based applications and eventually would lead to the loss of funds and the collapse of the entire network.

Consequences of a 51% Attack

The consequences of a 51% attack are not limited to financial losses only. The damage impacts the credibility of the network. It may lead to the complete collapse of the network. Double spending is another consequence of the 51% attack. In this scenario, the attacker sends cryptocurrency, waits till it comes to the recipient’s wallet, receives the other coins, products, or services for which the payment was made, and reverts the transaction. So, the attacker stays with the product or service, and with the payment that was supposed to be made for it. It can lead to significant losses for businesses that receive crypto as a payment method. A 51% attack leads to the blockchain centralization. We all know that blockchain is decentralized, and this is one of its main advantages. But if one entity controls 51% of hashing power, the blockchain becomes centralized, and the attacker dictates the rules. This contradicts the blockchain’s security model and may force users to abandon the network at all. If a blockchain network falls victim to a 51% attack, it can also lead to the loss of trust of investors and users, and in most cases, the price of such an asset plummets. Exchanges also often delist such assets, and it impacts their adoption and market value.

Which Blockchains Are Most Vulnerable?

Some blockchains are more vulnerable to a 51% attack than others. For example, smaller blockchain networks that have fewer miners and a lower hash rate are more vulnerable to a 51% attack. Mining power is concentrated among fewer participants, and this is why an attacker needs fewer resources to get a majority of computing power.

Historical Cases of 51% Attacks

A 51% is not just a theoretical risk. Several blockchains have already suffered from it. Here are some examples:

• Ethereum Classic (ETC): In January 2019, attackers successfully reorganized the Ethereum Classic blockchain. They reversed transactions on the blockchain, and as a result, the network lost more than $1 mln.
• Bitcoin Gold (BTG): Bitcoin Gold was targeted in multiple 51% attacks. It led to the loss of millions of dollars because of double-spending.
• Verge (XVG): Verge suffered from multiple attacks in 2018. Attackers managed to exploit vulnerabilities in the network’s hashing algorithm.

Why Bitcoin Blockchain Is More Resistant

Bitcoin is one of the oldest and the biggest blockchains. It requires immense computational power and is distributed among a huge network of miners. This is why it is very difficult to perform a 51% attack. The cost of doing it would be too high, and it would be impractical to perform an attack.

How to Prevent a 51% Attack

Even though 51% attacks are still a problem, there are several ways to try to mitigatfe them. Here is how you can do it.

Increase Mining Difficulty

You can increase mining difficult to prevent a 51% attack. Blockchain can adjust the mining process, and make it more expensive for a single entity to gain control over the network.

Transition to Proof-of-Stake (PoS)

Proof-of-Stake (PoS) is a newer consensus mechanism than Proof-of-Work (PoW). In a PoS blockchain, validators stake their coins and in return, they can be chosen to validate transactions. If validators act maliciously, their staked coins can be blocked. This is why it is more difficult to perform a 51% attack in a PoS network.

Decentralize Mining Pools

You also can encourage decentralization among mining pools. It helps to spread mining power across multiple participants and prevent a 51% attacks.

Real Cases of 51% Attacks

There were several 51% attacks in the history of blockchain. They have proven that a 51% attack is not a myth but a real danger.

Ethereum Classic Attack

Ethereum Classic (ETC) was targeted by attackers several times. In one attack, the attackers managed to reorganize the blockchain and stole more than $1 mln in double-spending.

Bitcoin Gold Attack

Bitcoin Gold suffered a 51% attack in 2018. Attackers managed to manipulate the transaction history and to double-spend more than $18 mln worth of BTG.

Other Cryptocurrencies That Have Been Attacked

Many smaller cryptocurrencies, such as Verge and Vertcoin, have also been victims of 51% attacks. These cases emphasize the need for stronger security measures in blockchain networks, especially those blockchains that have low hash rates.

Conclusion

A 51% attack is a serious threat. It can undermine blockchain security, credibility, and financial stability. It is a real threat, and smaller blockchains are especially vulnerable to it. This is why it is important to implement such security measures as increased mining difficulty, PoS, and decentralization.