What is attack 51%?
A 51% attack occurs when a person or a group of miners gain control over the computing power of 51% of the entire network. That gather possibility to function with greater extractive ability, in comparison with other users. An attack can cause irreparable damage to the entire network.
Is it safe enough to use a cryptocurrency?
Since Bitcoin was introduced to the market along with the blockchain technology, it had to face many problems. Despite the fact, that many of these problems have been solved it still remains with an urgent problem which worries the community — Attack 51%. It is closely related to mining and, in particular, to the Proof of Work algorithm. Fear of the attack is based on the fatal consequences that may occur. If it eventually happens, it will completely change the ecosystem and cause enormous damage to its work.
How does the 51% Attack work?
It's should be clarified how blockchain technology resolves conflicts when faced with two different chains. If the network faces two different chains, it will always prefer the biggest one. The hacker begins to reorganize the blocks and he needs to overtake the entire chain in order for his one to become valid. In that case, 49% of the network considers this one to be true and other nodes have no choice but to accept it as valid. That is, they will not be able to roll back this attack, except for how to fork the chain. In practice, this process is very rare. According to the protocol, a person, who get 51% control of the network can benefit from the ecosystems change or affect the optimal performance of the other participants.
The benefits of attack can be obtained with less power. But only 51% of the hashrate makes it possible with a 100% probability to secretly create an alternative chain.
Costs and effects of Attack 51%
With an Attack of 51%, many actions can be used, which can have a potentially beneficial result for one side and unfortunate for the other.
The first scenario that can take place on the network is a significant acceleration of the mining process in comparison with other users. Because of the impact of the attack, most of the mined blocks within the system will be provided to the attacker, reducing the corresponding percentage of production for other miners.
The second scenario states that having such power over the network, an attacker can cancel a transaction or avoid confirming it.
Despite the existence of all of these scenarios, the person or group who controls more than 51% of network hashrate can never perform such actions as:
- Identify the sender or recipient of the transaction.
- Change the number of coins generated per block.
What is “Double Spending”?
Double spending is a lack of digital means in which the same tokens can be spent several times. Decentralized blockchain-based currencies, can be called vulnerable to Attack 51% because the attacker can rewrite the transaction history, due to the control of most of the network. It becomes possible to spend digital currency, and then completely get rid of the records that are associated with this payment.
The prevention of double spending can be divided into two forms, centralized (outside cryptocurrency) and decentralized (associated with cryptocurrency):
Centralized. Based on trusted intermediaries who can view the transaction and accept the payment.
Decentralized. In decentralized systems, there is no control apparatus. One of the Blockchain technical features is the impossibility of carrying out double spending, due to the fact that transactions are combined into blocks.
How much is the attack 51% worth?
The resource Crypto51.app has recently appeared, which in real time calculates the cost of an hour of attack on the cryptocurrencies which based on the PoW consensus. The creator of the resource is trying to draw public attention to a potential problem. If we consider the cost of an hour of an attack on Bitcoin, according to the information provided by them, then it is absolutely inexpedient and ineffective to make a profit.
How to avoid the attack 51%?
- Upgrade to PoS or another consensus mechanism. Proof-of-Stake algorithm is much safer and makes the PoS system is disadvantageous bubbled to attack, but it is theoretically possible to hold still.
- Using an algorithm that is resistant to the application-specific integrated circuit (ASIC)
- Increase number of required confirmed transactions. All kinds of cryptocurrency accepting platforms, that may be an attack subject, have to increase the maximum approved transaction limit.
How are Bitcoin and Ethereum protected from an attack of 51%?
Team Ethereum has finally abandoned plans to introduce a hybrid consensus model and is already preparing for the release of a global update called "Serenity". Thanks to it, there will be a network “Ethereum 2.0”, which includes the Proof-of-stake mechanism and other upgrades, which will allow increasing the throughput of Ethereum by 1000 times. Thus, Ethereum developers are planning to move from confirming transactions to miners and that practically eliminates the likelihood of an attack of 51%
This attack is very difficult to perform. Miner will need a larger amount of hashing capacity than all the other half of network users. Due to the fact that millions of people are involved in the extraction of this currency, the attacker will need fabulous sums to try to make a competition for the rest of the network.
Also, it should be understood that this operation grants no benefits to the hacker because it would have to send so many resources, that in the case of Bitcoin, even the most successful attack, does not pay off.
What were the most famous Attacks 51%?
Cryptocurrency Ethereum Classic was attacked in January 2019. Gate.io published an analysis of ETC transactions on its platform during the alleged attack, claiming to have discovered seven transactions, four of which were committed by the attacker, resulting in a total loss of 54,200 ETC (worth $ 271,500). Gate.io reports that the incident occurred in a 4-hour period between 0:40 and 4:20 on January 7, 2019, GMT, during which transactions were confirmed in the blockchain and then cancelled. Curious is the fact that the author of the attack returned an ETC of $ 100,000 to Gate.io. Most likely, so-called "white hacker" was involved in this incident, who simply wanted to remind people of the system vulnerability.
Cryptocurrency Bitcoin Cash was attacked in May 2018. The fraudster had stolen 388 200 BTG, equivalent to $18.6 million. The main theory is that the attack was implemented because of hacker own mining-pool and leased facilities. The hacker deposited large amounts of BTG in various exchanges and transferred the same funds to his wallet. When operators or automatic systems of exchangers noticed that they worked with the blockchain, and transactions were invalid, it was already too late. The offender withdrew their funds and doubled up his profit.
Cryptocurrency Bitcoin was close to attack in 2014. The largest pool was GHash, which at the same time is the founder of the exchange CEX.IO. They came out to go over the threshold is 51% of the network hash rate, however, after general indignation, resource diminution agreed to cross the threshold of 40%, while asking the participants of their project to transfer their capacity to other platforms. However, this situation still led to a fall in the rate of Bitcoin, which fell on a quarter of its value.