Most blockchains are not as secure and immutable as their founders like to make them out to be. We know this because we have witnessed successful 51% attacks on numerous chains. In this guide, we explain what a 51% attack is, how it works, and list some of the most notable 51% attacks of recent years.
What Is a 51% Attack?
A 51% attack, also known as a majority attack, is an attack that occurs on a cryptocurrency network when one or a group of miners (or validators) gain control of over 50% of the blockchain’s mining hash (or validation) power.
A blockchain’s hash rate means the amount of computational power utilized by a Proof-of-Work (PoW) crypto network to validate transactions on the blockchain. Validation power refers to how much stake someone has in a Proof-of-Stake (PoS) network. A blockchain, on the other hand, is a type of digital ledger that’s used for recording and storing cryptocurrency transactions.
The group of miners owning 51% of mining power or validation nodes are then able to control the network and alter the blockchain. How? They can prevent new legitimate transactions from getting validated, thus halting payments for some of all users on the network.
Furthermore, they can also reverse transactions that had just been finalized when they gained control of the blockchain network. This means they would be able to double-spend coins, an issue that the PoW mechanism was developed to prevent.
Double-spending is defined as the risk that a cryptocurrency such as BTC or ETH can be used more than twice.
Simply put, a successful 51% attack gives miners complete control of a digital currency’s blockchain ledger, enabling them to double-spend crypto to earn “free money.”
Now that we know what a 51% attack is and how it can be accomplished, let’s take a look at how a 51% attack works.
How Do 51% Attacks Work?
Blockchain networks utilize a validation process to reach a majority consensus for the transactions carried out, after which the blocks become mined and added to the blockchain. These blocks are linked together using cryptographic techniques where past block information is recorded on each block, making them difficult to change as long as they have been validated a number of times.
For a 51% attack to occur, a group of miners or validators must control over 50% of a cryptocurrency’s network hashing or validation power. Next, they will need to introduce an altered blockchain at an exact point in the blockchain network. The altered blockchain will be easily accepted on the network because of the high hash or validation power behind it.
However, while the attackers can halt payments on the network, it’s almost impossible for them to change or reverse transactions that were finalized before the attack. In fact, the older the transactions, the more difficult it is to alter them.
There are two ways that a 51% attack can be achieved:
- Cryptocurrencies that utilize the PoW consensus mechanism to function can be controlled if attackers gain more than 50% of the network’s mining power.
- Cryptocurrencies using the proof-of-stake (PoS) consensus mechanism can suffer a 51% attack if the attackers accumulate over 50% of the network’s cryptocurrency and stake it.
While 51% attacks are highly unlikely, they are not impossible. A cryptocurrency that suffers a majority attack will, in most cases, lose its monetary value and community trust.
High-Profile 51% Attacks
Over recent years, several blockchains have suffered a majority attack. Let’s take a look at some of the most notable cryptocurrencies that have experienced a 51% attack.
Bitcoin Gold (BTG)
Bitcoin Gold (BTG) is a cryptocurrency that was developed in 2017 as a result of a Bitcoin hard fork. In May 2018, BTG suffered a majority attack. The attackers took control of a large amount of the cryptocurrency’s hash rate leading to double-spending for the days that they were in control despite Bitcoin Gold’s repeated attempts to increase its exchange thresholds. In the end, the attackers were able to get away with $18 million worth of BTG. In 2020, BTC was again hit with a majority attack that led to the double-spend of $70,000 BTG.
Ethereum Classic (ETC)
Ethereum Classic (ETC) is an open-source, blockchain-based distributed computing platform that has smart contract functionality. In August 2020, ETC suffered three majority attacks. In the first attack, 3,693 blocks were reorganized, while the second attack saw 4,000 blocks get reorganized. In the third attack, more than 7,000 blocks were altered.
Similar to ETC, Verge (VXG) suffered three 51% attacks in 2018. The first attack happened on April 4, 2018, where the attacker was able to mine blocks using spoofed timestamps, thus accumulating 250,000 VXG. On May 22, 1018, VXG suffered another majority attack that allowed the hackers to get away with $1.7 million worth of VXG. Four days after the second attack, a third 51% attack was reported.
How Much Would a 51% Attack on Bitcoin Cost?
Carrying out a 51% attack on Bitcoin would be a very costly and challenging affair, making it almost impossible to successfully perform such an attack on the Bitcoin network.
For instance, the Bitmain S19 XP Hyd is the most advanced application-specific integrated circuit (ASIC) miner. This ASIC costs over $19,800 and has hash power of 255 terahashes per second.
Currently, FoundryUSA, F2Pool, and AntPool are the top three largest mining pools by hash rate. The three mining pools take up 20.5 percent, 17. 4 percent, and 15 percent of the total Bitcoin network hash power, respectively. Combined, all three mining pools add up to 52.9 percent of Bitcoin’s mining hash rate.
To equal that computing power, the estimated fixed cost would be about $8.1 billion.
Are 51% Attacks Easy to Accomplish?
No. 51% attacks are generally not easy to accomplish. This is because the cost of carrying out a 51% attack is high. Additionally, as the blockchain industry grows, it addresses the potential issue of 51% attacks, developing new techniques to mitigate them.
What are the Outcomes of a Successful 51% Attack?
If hackers manage to successfully carry out a 51% attack, they can double-spend the cryptocurrency in question or reverse transactions that were being finalized at the time of the attack. Double spending is the sole reason why there are various consensus mechanisms that were established to prevent it.
How Can Investors Protect Themselves from a 51% Attack?
As an investor, you don’t have much to worry about if you typically invest in well-established cryptocurrencies, such as Bitcoin (BTC) or Ether (ETH). That’s because these large cryptocurrencies tend to have a secure blockchain, and the cost of carrying out a 51% attack will be ridiculously high. Investors can, therefore, minimize their risk of having to deal with a majority attack by investing in digital currencies that are well-established.
Is There a Solution to 51% Attacks?
Preventing a 51% attack is only possible if blockchain networks can ensure that no single validator or group of validators can control over 50% of a network’s validation power, as that’s the only way that a majority attack can be accomplished.