One of the biggest selling points of cryptocurrencies is their decentralization and security. But, in reality, this technology is not immune to attacks. Among the most feared threats in the crypto space is the 51% attack.
While it may seem like a theoretical risk, history has shown that smaller blockchains have been victims of this attack. In this article, I will explain what a 51% attack is and highlight some real-life examples of it. You will also discover other mechanisms used by blockchain networks to protect themselves from such threats. Follow closely.
KEY TAKEAWAYS:
- A 51% attack happens when an individual or group gains control of more than half of a blockchain’s mining power or staked assets.
- The likelihood of a 51% attack depends on the network size. The larger the blockchain, the more difficult and expensive it is to attack it.
- Things that can happen during a 51% attack include double spending, transaction censorship, block reorganization, and overall network destabilization.
- Decentralized networks can reduce the possibility of a 51% attack through high mining difficulty, chain reorganization limits, and checkpointing mechanisms.
What Is a 51% Attack?
A 51% attack happens when an individual or group gains control of more than half of a blockchain’s mining power or staked assets. This majority control allows attackers to rewrite the blockchain, manipulate transactions, and eventually disrupt the network. It is important to note that the likelihood of a 51% attack depends on the network size. The larger the blockchain, the more difficult and expensive it is to attack it.
Here is a list of what can happen if a 51% attack is successful:
- Double spending: Transactions can be reversed, leading to the possibility of spending the same coin twice.
- Transactions censorship: Specific transactions can be blocked from being confirmed.
- Blocks reorganization: The transaction history can be altered, and past transactions can be erased.
- Network destabilization: The value of the blockchain can drop if users lose confidence in its security.
Read Also – What is Double Spending In Crypto?
Real-world Examples Of 51% Attacks
Below is an overview of some notable 51% attacks:
- Ethereum Classic (ETC): In 2019, a hacker gained control of the blockchain and double-spent $1 million worth of ETC. The network also suffered three attacks in 2020, one of which led to the double spending of $5.6 million.
- Bitcoin Gold (BTG): $18 million worth of BTG, a fork of Bitcoin, was double-spent in 2018 before exchanges detected the fraud. Later, in 2020, the development team stopped hackers’ attempt to reorganize over 1300 blocks, which prevented a major financial loss.
How Blockchains Prevent The Possibility Of A 51% Attack
To maintain trust and security, blockchain networks now implement multiple safeguards that make executing a 51% attack difficult. Let’s examine some of the methods below:
- High Mining Difficulty
The security of proof-of-work (PoW) networks is directly tied to the amount of computational power the network uses. The more miners on the blockchain, the harder it is for an attacker to control it. Another feature that secures PoW blockchains is the difficulty adjustment algorithm. This increases the mining difficulty when more miners join the network. Conversely, it decreases the difficulty when miners exit the chain.
- Chain Reorganization Limits
Block reorganization is one of the major threats of a 51% attack. To prevent this, blockchain networks make chain reorganization either difficult or nearly impossible. For example, Bitcoin has strict block finality rules.
This means that once a block has been confirmed and a set of new blocks have been added on top of it, transactions within that block cannot be altered. Other decentralized networks have fork detection algorithms that automatically alert users if a suspicious reorganization attempt happens.
- Checkpointing Mechanisms
This is done to prevent long-range attacks to ensure the blockchain history remains intact. For example, Ethereum 2.0 uses the finalized checkpoint technique, where snapshots of the blockchain are regularly taken and approved by a majority of validators. Even if an attacker controls the network, they cannot erase or modify these checkpoints.
- Proof-of-Stake (PoS) Security Measures
Proof-of-stake (PoS) blockchains rely on validators to stake their cryptocurrencies to secure the network. Since their staked assets act as collateral, dishonesty is discouraged through slashing. If a validator tries to manipulate the network, they lose a portion or the entirety of their staked funds.
Some PoS networks also implement delegated staking models. Here, users can delegate their tokens to trusted validators instead of securing the network themselves. This additional layer of decentralization further reduces the risk of attack from validators.
Conclusion
51% attacks are a valid threat in the decentralized world. Thankfully, most blockchains now adopt strong security measures to prevent them. It is important to note that a blockchain’s decentralized nature is its greatest defense. As long as moners and stakers remain active, blockchain technology will continue to thrive as one of the most secure and transparent systems in the digital world!
References
- bitpanda.com – What is a 51% attack, and how is it prevented?
- startupdefense.io – 51% Attack Blockchain Guide: Understanding Network Security Risks
- hacken.io – 51% Attack: The Concept, Risks & Prevention
