A 51% attack occurs when an individual or group controls more than half of the computing or validation power of a crypto network. Moreover, changing the previously confirmed blocks gets more and more difficult as the chain grows, because the blocks are all linked through cryptographic proofs. For the same reason, the more confirmations a block have, the higher the costs for altering or reverting transactions therein.
Blocks were generated and sent every second, instead of every 30 seconds. According to official data provided by developers, it was possible to withdraw 250,000 tokens from the system fraudulently. Alternatively, another reason could be the struggle with other miners who may have managed to create a block.
Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. An entity would need to own more than 6.9 million ETH (more than $9 billion worth) to attempt an attack. Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest.
Giant blockchains like Bitcoin do not experience a 51% attack too often as it is nearly impossible to overtake a high amount of hashing power of the BTC network. Furthermore, some cryptocurrencies operate using Proof of Stake , which requires owning that particular cryptocurrency to validate transactions on the blockchain. Miners in a 51% attack can double-spend coins and block transactions from being confirmed. However, they can’t steal cryptocurrency from your wallet or create coins from thin air and tank the value of the market. According to Crypto51, which records the theoretical cost to carry out 51% attacks on various PoW cryptos, it would cost nearly $2 billion to attack Bitcoin for one hour. And even in this event, it’s unlikely attackers could change more than a few recent transactions for a very brief time.
The attacker secured over 51% of the hashing power, and over a period of days, 18 million USD of Bitcoin Gold was stolen through the attacker’s double-spending. This requires blockchains to keep a constant check on the entities involved in the mining or staking process and take remedial action in case of a breach. Even a DOS attack is capable of paralyzing the blockchain’s functioning and can negatively impact the underlying cryptocurrency’s price.
This has drawn attention to the need for real-time monitoring of chain reorganizations on blockchains to highlight an ongoing 51% attack. The blockchain reorganized and caused double spends which lost the users vast amounts of money. Vertcoin had to switch to a more powerful PoW algorithm to ensure security on its platform. It also had to block powerful mining chips from the network to keep its mining more powerful and community-based. The attacker sends coins to person ‘A’, while sending the same coins to person ‘B’. Individual investors don’t have to worry too much about 51% attacks if they primarily invest in the largest cryptocurrencies, which generally have the most secure blockchains.
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Gate.io, a cryptocurrency exchange, found that a 51% attack resulted in several cases of double-spending and the theft of 54,200 Ethereum Classic. Ethereum Classic is the original Ethereum blockchain that the new Ethereum blockchain split from. Cryptocurrencies like Bitcoin that operate using proof-of-work require mining to verify transactions on the blockchain. In simpler terms, miners have to work to ensure that when two people exchange Bitcoin, that transaction is updated on the ledger so there’s an accurate record.
Failure to do so, may lead to them not receiving the block rewards, and they will fall behind other miners in the network. In 2021, another Bitcoin hard fork called Bitcoin SV suffered a series of 51% attacks. The hackers were able to delete or alter the newest blocks after it took control of the network. At the end of January 2020, the Bitcoin Gold blockchain experienced two 51% attacks.
How to Prevent a 51% Attack?
So if you’re just HODLing your coins or are earning interest with platforms like BlockFi or Celsius, you’re largely safe. Plus, if you invest in popular cryptocurrencies that have a large network, the odds of a 51% attack become slimmer. But if the network can’t reach a consensus on which blockchain is valid or not, it defers to the longest chain. This is because the longest chain theoretically has the most work behind it and a longer history of valid transactions. But miners in the network have to collectively agree that a miner actually did work and found a valid solution before adding a block. This is also known as “reaching consensus” or the “consensus mechanism.”
This leads the users into mistrusting the blockchain, causing it to reduce value. These kinds of attacks may cause some cryptocurrencies to be unlisted due to security concerns. A 51% attack causes cryptocurrency users to lose digital assets or even cash. This raises serious concerns about the reliability, security, and trustworthiness of a blockchain. Note that a 51% attack heavily impacts the miner’s computing resources.
However, such a strategy arose concerns around BCH decentralization and revealed what can be done with too much hashing power in the hands of two entities. On January 24, another attack happened, and this time malicious miners removed another 15 blocks and added 16. The result of attacks as it was – approximately $72,000 was double-spent and stolen. The blockchain industry has experienced several attacks over ten years of its existence.
What are the Ramifications of 51% Attacks?
51% attacks are unlikely, for financial and practical reasons, but not impossible. Before diving into the 51% attack, it is crucial to have a good understanding of mining and blockchain-based systems. Once the attack started, the consensus mechanism would likely recognize it and immediately slash the staked ETH, costing the attacker an extraordinary amount of money.
Attack Explained – a Beginner’s Guide
Controlling the network means the bad actors will be able to double-spend their coins as well as decide what transaction to process and add to the blockchain. To understand a 51% attack in its full, here are brief crypto basics on consensus protocols. Back in 2009, a creator of the first cryptocurrency, Satoshi Nakamoto, introduced a proof-of-work algorithm in his bitcoin white paper. According to the document, all participants of the network have to solve algorithmic tasks using the hashing power of the hardware in order to add new blocks to the blockchain.
Despite the name, it is not necessary to have 51% of a network’s mining power to launch a 51% attack. The key to preventing such heists is the community behind a network agreeing to uphold the value of immutability and to maintain decentralisation. For example, a double-spend scenario would allow someone to pay for something using cryptocurrency, then reverse the transaction after the fact. The malicious actor would effectively be able to keep whatever they purchased along with the cryptocurrency used in the transaction, bilking the seller. To initiate a 51% attack on the network that is built upon a proof-of-stake consensus mechanism, a participant of the network must obtain over 51% of the cryptocurrency.
Such services could easily pick up on suspicious transactions and report them in real-time. That makes it easier to notice double-spending and similar activities within a blockchain. With control of 51% of the crypto network’s resources, the miner or validator can redirect transactions, double-spend currency, and ultimately steal currency from the network. The theft is not complete until the miner or validator converts the illegally-gotten crypto gains into another currency. Whoever produces the winning hash that beats the target hash wins the right to fill a new block with transaction data and earn free crypto and transaction fees in return. A blockchain is a type of ledger technology that stores and records data.
An attack of this kind is possible because blockchains are run by a community effort. It’s necessary to accumulate 51% of the relevant resource to complete a 51% attack. Successful attackers gain the ability to block new transactions from being confirmed as well as change the ordering of new transactions. It also allows the malicious agents to essentially rewrite parts of the blockchain and reverse their own transactions, leading to an issue known as double spending.
This is because miners, stakers, validators, etc. do not broadcast to the blockchain. Once an entity has control of 51% of the network, it can do multiple malicious things that will disturb the blockchain for all participants. Despite the inordinate amount of resources needed to engineer them, small-cap cryptocurrencies are still susceptible to a 51% attacks. There is a high possibility that a 51% attack can reoccur if the attacker embedded a bug in the blockchain’s code.
She holds a Bachelor of Science in Finance degree from Bridgewater State University and helps develop content strategies for financial brands. This article does not constitute investment advice, nor is it an offer or invitation to purchase any crypto assets. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns. If a proof-of-work network is presented with two conflicting chains, the network will choose to go with the longest chain. The method in which this is obtained is different for each consensus mechanism.
Moreover, genuine miners earn less for updating the blockchain as the attackers steal their shares. A 51% attack happens when a malicious user in a network acquires control of a given blockchain’s mining capabilities. It implies that the attackers will have more than 50% mining power and can mine faster than everyone else. It is because a Miner or group of miners will need an astounding amount of computing power to make this real. They will have to outcompete millions of bitcoin miners from around the world. A miner will require billions of dollars worth of equipment to wield such a huge amount of hash power.
They will verify all these transactions to check if they are valid as per the blockchain’s current transaction record. However, if the target is a smaller network, it is not only possible — it happened multiple times. ASIC miners are well known for being rather expensive, which automatically discourages hackers from attacking. Some estimates say that an attack on Bitcoin would cost $752,000 per hour.
Miners have no incentive to invest large amounts of resources if it is not for acting honestly and striving to receive the block reward. In a 51% attack, one miner or mining group gains or purchases enough hash power to take control of 51% or more of a blockchain network and double-spend the cryptocurrency involved. Smaller and new blockchain networks are more prone to malicious tampering than large and established ones like Ethereum and Bitcoin.
On a proof-of-work blockchain , this would be done by acquiring control of the network’s mining capabilities. Interestingly, this 51% attack was actually done to protect the integrity of Bitcoin Cash rather than to double-spend. 4 different attacks on the Vertcoin network (a relatively anonymous coin ranking below #200 in the cryptocurrency charts) concluded in the theft of around $100,000. Now, the first version is followed by the miners with no malicious intent.