What Is the 51% Attack? It’s Impact on Coin Blockchain.
Blockchain main purpose is to store the records by creating new blocks without depending upon a single person or organisation.
Cryptocurrencies use blockchain to keep the currency transactions safely using miners.
Miners task is to create a new block that holds the currency transactions for creating a new block miner uses the computational power.
However, to add a new block to the network, the network nodes (containing a full copy of blockchain) collectively agree that the block provided by the miner is accurate.
If the miner block is verified then, the miner receives the incentives for mining the block.
Also, remember miner can run the full copy of the blockchain and become a node at the same time act as a miner.
All the mining power distribute across different nodes across the world, which means no single entity controls the mining process.
What if a single miner or group of miner control the majority of the blockchain network in cryptocurrency?.
To control blockchain majority constitutes a minimum of about 51%. If a miner or group of miners control the majority of the computing power 51% in a blockchain network, it can operate in a more centralized manner, and the controllers of that majority can manipulate what gets recorded on the chain, accurate or not.
If a miner or group of miner surpass the 51% threshold in blockchain, they can gain the power to manipulate some crypto activities such as.
After gaining the majority of hash power in a network, the miner can double-spend a cryptocurrency.
In this attack, Miner sends coins to person ‘A’, while sending the same coins to person ‘B’. When the coins sent to A publicly displayed on the blockchain, the miner, who has massive hashing power, secretly mines blocks for the double-spend transaction to B, without exposing it to the rest of the network.
When nodes confirm the transaction with A is valid, the miner presents to the network his hidden mined blocks, where transaction B is valid. Remember in blockchain, the version of the chain that gets elongated first wins over the other. Since miner has so much mining power, he can probably create a longer blockchain than the original one and validate his blocks.
In this scenario, the transaction sent to A will cancelled and A ends up with no money since it does not appear on this new, longer blockchain. On the other hand, the miner may have already gotten the service he paid for both A and B.
When a miner passes the 51% threshold, he can decide which transactions to include in the next block. Due to that if the miner decided to block specific transactions from an address, he can do that, and even miner can build an empty block, with no transactions.
Users Lose confident in a Cryptocurrency.
If a miner doing double-spending and blocking transactions after gaining a massive hash power in the coin blockchain network then, users of that coin lose the confidence on the coin and consider not to do any transaction with it and that coin exchange rate might crash down.
The 51% attack can destroy the crypto assets, but a miner who have the massive hash power can not break some important rules of blockchain such as.
#1 Reverse confirmed transactions.
#2 Steal funds from a certain address.
#3 Create fake transactions (that never occurred).
#4 Create new coins.
However, 51% attack have certain limitations. Still, it can destroy the whole cryptocurrency if that currency does not take some preventing measures.
If a miner passe the threshold of 51% in the blockchain it doesn’t mean he can attack right away, it only means that it easy for him to take control over the network.
In top cryptocurrencies like Bitcoin, Etherium it is hard to gain such a massive hash power because it would take an unreasonable amount of money to gain 51% of the top coins network’s mining power also the community of top coins do not let someone take control over the network if miner having massive hash power tries to double spend coin by submitting false block the strong community ignore it and follow the legitimate blocks even if he had longer chain of blocks.
But in case of small cryptocurrencies, they have to take preventing measures such as.
Try as much as decentralization of miners by providing a good incentive for a mining block and also give some freedom to charge transaction commissions.
Clear the fact to miners that much mining power would probably make more money using this power to mine legitimately, by providing a high reward for their work.
Here are some incidents that 51% attack destroyed or damaged to a cryptocurrency.
Quite a small coin during the time of 2012, one of the large mining pool Eligius decided that CoiledCoin is a scam and very bad idea for the crypto ecosystem.
Eligius pool pointed its mining power to CoiledCoin and launched an attack.
This attack involves mining a lot of blocks that reversed days worth of unconfirmed transactions and as well mining a long chain that had empty blocks containing no transaction at all.
At the time of the attack, CoiledCoin users cannot make any transactions, and after some short time, all the users leave CoiledCoin and move on. Now, this coin doesn’t exist.
Feathercoin is a Litecoin clone that shares its block time and scrypt mining algorithm.
An unknown miner or pool launched a 51% attack on Feathercoin in 2013.
The attack caused around 16,000 coins were double-spent in an attack.
Verge Currency (2018).
Verge described as the privacy coin uses five different mining algorithms.
In April 2018 attacker was able to mine multiple blocks one second apart using the same (scrypt) algorithm and stolen round 250,000 XVG (Verge Coin)
A month after the first attack, again an attacker exploited a bug in the Verge code and made away with at least 20 million XVG, worth approximately $170,000.
4 different attacks (including 51% attack) on the Vertcoin network during 2018 concluded in the theft of around $100,000.
Bitcoin Gold (2018).
During 16th and 19th May 2018, an unknown attacker conducted 51% on Bitcoin Gold blockchain using rented hash power from cloud mining services.
In result, more than $18 million stolen through double-spending.
Ethereum Classic (2019).
In January 7th 2019, crypto exchange Coinbase revealed that 51% attack carried out by unknown caused 219,500 ETC worth $1.1 million were double-spent in eleven reorganizations of the blockchain starting on Jan. 5th.
Bitcoin Cash (2019).
On May 15th 2019, two Bitcoin Cash mining pool BTC.com and BTC.top — carried out the 51% attack to stop the unknown miner from taking coins that they weren’t supposed to have access to in the wake of the code change.
That day, an attacker took advantage of a bug unrelated to the upgrade (and subsequently patched) that caused the network to split and for miners to mine empty blocks for a brief time.
In January 2014 a panic created in the Bitcoin community because a mining pool called Gash.io got so big that it neared 51% of the total mining power.
But this situation fixed shortly by miners who left the pool to balance things out. Additionally, the pool committed to a 40% limit for its future operations.
As stated above it is difficult to conduct a 51% attack on top cryptos like Bitcoin and Ethereum because distributed hash power and a strong community behind them.
But from the past 2 years, the rate of 51% attacks are increasing because of high computational power mining rigs like ASIC is boosting mining capacity of individual miner.
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Originally published at https://ccoingossip.com on December 31, 2019.