Blockchain technology has facilitated the growth of the crypto network by using the crypto owner's digital signature as authorisation for every transaction. Users can add transaction details to digital ledgers to generate a hash through mining.
However, when an individual or network acquires majority control of a blockchain’s mining capabilities, it disrupts the mining process.This article discusses the 51% attack and how Bitcoin users can detect malicious activity.
What is the 51% attack?
Often, human ingenuity overcomes limitations set by the validation power of a cryptocurrency network. Most cryptocurrency networks based on the proof of work (POW) consensus algorithm utilise computing power to remove potentially malicious instances.
Usually, the consensus algorithm confirms transactions in the blockchain to create new blocks. However, users with malicious intent can prevent the recording or validation of transactions, thereby changing transaction processing orders. By controlling the majority of the computing power on the network, a group of miners can control more than 50% of a network’s hash rate.
This 51% attack can lead to double spending, forcefully verifying unconfirmed transactions and reversing transactions. The 51% attack can affect the entire cryptocurrency network and potentially block the entire system.
How does the 51% attack work?
The decentralised nature of the Bitcoin blockchain may make it susceptible to attacks and fraudulent activities. However, blockchain requires a series of confirmed transactions to mine more hash. Thus, technically the 51% attack is difficult to arise, although not impossible.
With more than 50% mining power, an individual or group can stop the confirmation and acquire control of the entire network. They can disrupt the blockchain’s mining capabilities and rewrite blockchain information, thereby attempting to reverse transactions.
Attackers can use their 51% control to reject confirmed transactions by reorganising blocks in the blockchain. They will need immense computing power or the lion's share of the crypto network to initiate an attack. However, controlling 51% of the BTC blockchain requires enormous energy and capital. Hence, launching a 51% attack on larger crypto blockchains is logically impossible.
Impact of 51% attack on the Bitcoin network
The impact of the 51% attack on the Bitcoin network is multi-faceted. They are as below:
- Delay in new transactions: When Bitcoin's hashing power rests solely on the attackers, confirmation of new transactions will face hurdles. It can even lead to double spending and reversed transactions.
- Network disruption:The 51% attack can disrupt the entire blockchain network by delaying the POW confirmations. The absence of timely validations puts the blocks in disarray. When a blockchain network is corrupted, it allows hackers to process transactions faster, thereby technically blocking the entire system.
- Reduction in rewards:Since hackers technically steal miners' shares, miners earn less for updating transactions. Since 51% of attacks can cause double-spending, hackers can technically reverse transactions.
- Losing position in market capitalisation: The 51% attacks take a toll on a blockchain's market capitalisation and rankings. With losses amounting to millions, exchanges lose interest in them, leading to their eventual downfall.
Instances of 51% attacks
The cryptocurrency network has seen numerous 51% attacks in recent years despite the security apparatus guarding it. Sometimes, attackers target crypto hard forks and not necessarily the primary blockchain.
- The 2021 attacks on Bitcoin SV blockchain reveal that even the fork closest to Bitcoin is not safe from 51% attacks. Over 100 blocks were affected, and attackers wiped out 10 hours’ worth of transactions (about 570,000).
- 2019 saw similar 51% attacks on Bitcoin Gold with losses amounting to nearly $18 million. The eventual double-spending destabilised the entire network, and many exchanges delisted BTG.
- The 51% attack is not restricted to BTC alone. Ethereum Classic (a fork from Ethereum) faced massive 51% attacks after hackers acquired nearly 11 blocks and double-spent nearly $1.1 million. Another attack led to double spending of nearly $5.6 million. However, unlike BTC, Ethereum forks regained their position even after the 51% attacks.
Prevention of the 51% attack
Most cryptocurrency blockchains have capped the maximum individual shares at 50%. Despite all measures, the complete elimination of the crypto blockchain cannot be promised. Following are certain measures that mining networks follow to eradicate the 51% attacks:
- Cryptocurrencies using ASIC miners are enormously expensive to initiate and maintain. The growing energy requirement and maintenance costs may prevent it from such attacks.
- Bitcoin cash and other networks with ASIC miners use a more complex system of ten-block checkpoints that makes transactions irreversible after a while.
- A chunk of the BTC fraternity favours a shift to the Proof of Stake mechanism, which chooses validators to validate transactions.
Final Word
The current hash rate of cryptocurrency blockchains like Bitcoin is around 220 Exohashes per second, implying that it would require huge power to sustain a potential attack. Hence, the likelihood of 51% attacks is relatively less, although not impossible.
