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What is a 51% attack and how do you recognize it?

Published on

January 13, 2023
Read Time:6 Minute, 25 Second

Regardless of being backed by blockchain expertise that guarantees safety, immutability and full transparency, many cryptocurrencies reminiscent of Bitcoin SV (BSV), Litecoin (LTC) and Ethereum Traditional (ETC) have been victims of 51% assaults a number of instances previously. Whereas there are lots of mechanisms by which malicious entities can and have exploited blockchains, a 51% assault, or majority assault as additionally it is identified, happens when a gaggle of miners or an entity has greater than 50% of the hash Efficiency of the blockchain controls after which takes management of it.

51% of assaults had been arguably the costliest and tedious option to compromise a blockchain. On smaller networks, which require decrease hashing energy to beat nearly all of nodes, 51% of assaults had been largely profitable.

Perceive a 51% assault

Earlier than delving into the strategy of a 51% assault, it is necessary to grasp how blockchains document transactions, validate them, and what numerous controls are embedded of their structure to stop modifications. Through the use of cryptographic strategies to attach subsequent blocks, that are themselves information of transactions which have taken place on the community, a blockchain makes use of certainly one of two kinds of consensus mechanisms to validate and completely document every transaction throughout its community of nodes.

Whereas nodes on a Proof-of-Work (PoW) blockchain should resolve advanced mathematical puzzles to confirm transactions and add them to the blockchain, a Proof-of-Stake (PoS) blockchain requires nodes to stake a certain quantity use native token to achieve validator standing. In any case, a 51% assault may be orchestrated by controlling the community's mining hash price or by controlling greater than 50% of the staked tokens on the blockchain.

PoW vs PoS

To grasp how a 51% assault works, think about that greater than 50% of all nodes operating these validation capabilities are conspiring to introduce a distinct model of the blockchain or a denial of service assault (DOS) to run. The latter is a kind of 51% assault the place the remaining nodes are prevented from performing their capabilities whereas the attacking nodes add new transactions to the blockchain or delete previous ones. In both case, the attackers may doubtlessly reverse transactions and even double-spend the native crypto token, which is akin to creating pretend foreign money.

Schematic representation of a 51% attack

For sure, such a 51% assault can compromise the complete community and not directly trigger big losses for buyers holding the native token. Whereas creating an altered model of the unique blockchain requires an outstanding quantity of computing energy or staked cryptocurrency within the case of huge blockchains like Bitcoin or Ethereum, it isn't that far-fetched for smaller blockchains.

Even a DOS assault can cripple the functioning of the blockchain and negatively have an effect on the value of the underlying cryptocurrency. Nonetheless, it's unlikely that older transactions will have the ability to be reversed past a sure restrict, thus placing solely the latest or future transactions made on the community in danger.

Is a 51% assault on Bitcoin doable?

On a PoW blockchain, the chance of a 51% assault decreases as hashing energy, or the processing energy used per second for mining, will increase. Within the case of the Bitcoin (BTC) community, the perpetrators would want to manage greater than half of the Bitcoin hash price, presently at ~290 exahashes/s hashing energy, which might require them entry to at the least 1.3 million of most high-performance ASIC (Software Particular Built-in Circuit) miners like Bitmain’s Antminer S19 Professional, which retail for round $3,700 every.

This might imply that attackers must purchase round $10 billion price of mining gear simply to have an opportunity of executing a 51 p.c assault on the Bitcoin community. Then there are different facets like the price of electrical energy and the truth that they aren't eligible for the mining rewards that go for trustworthy nodes.

Nonetheless, for smaller blockchains like Bitcoin SV, the state of affairs is sort of completely different because the community hash price is round 590 PH/s, making the Bitcoin community virtually 500 instances extra highly effective than Bitcoin SV.

Nonetheless, within the case of a PoS blockchain like Ethereum, malicious entities would want to have greater than half of the full Ether (ETH) tokens locked in staking contracts on the community. This might require billions of {dollars} simply to accumulate the required computing energy to have even the illusion of a profitable 51% assault.

Moreover, within the state of affairs the place the assault fails, all deployed tokens might be confiscated or blocked, which might deal a extreme monetary hit to the businesses concerned within the alleged assault.

Methods to detect and forestall a 51% assault on a blockchain?

The primary test for any blockchain can be to make sure that no single entity, group of miners, or perhaps a mining pool controls greater than 50% of the community's mining hashrate or the full variety of tokens staked.

This requires blockchains to maintain a continuing eye on entities concerned within the mining or staking course of and take remedial motion within the occasion of a breach. Sadly, the Bitcoin Gold (BTG) blockchain was unable to anticipate or forestall this in Could 2018, as the same assault repeated in January 2020, leading to practically $70,000 price of BTG being double-spent by an unknown actor.

In all of those circumstances, the 51% assault was enabled by a single community attacker taking management of greater than 50% of the hashing energy after which performing deep reorganizations of the unique blockchain that reversed accomplished transactions.

The repeated assaults on Bitcoin Gold point out the significance of counting on ASIC miners relatively than cheaper GPU-based mining. As a result of Bitcoin Gold makes use of the Zhash algorithm, which permits mining even on shopper graphics playing cards, attackers can afford to launch a 51% assault on its community with out having to take a position a lot within the dearer ASIC miners.

This 51% assault instance underscores the superior safety controls that ASIC miners supply, as they require a better funding quantity to supply them and are particularly designed for a selected blockchain, making them ineffective for mining or attacking different blockchains will.

Within the occasion that miners migrate from cryptocurrencies like BTC to smaller altcoins, even a small variety of them may doubtlessly management greater than 50% of the altcoins' smaller community hashrate.

Moreover, the price of operating a 51% assault may be drastically lowered as service suppliers like NiceHash enable individuals to hire hashing energy for speculative crypto mining. This has drawn consideration to the necessity for real-time monitoring of chain reorganizations on blockchains to focus on a sustained 51% assault.

MIT Media Lab's Digital Foreign money Initiative (DCI) is one such initiative, having constructed a system to actively monitor quite a lot of PoW blockchains and their cryptocurrencies, and to report suspicious transactions involving the native token throughout a 51% -Assault might have double spent.

Cryptocurrencies like Hanacoin (HANA), Vertcoin (VTC), Verge (XVG), Expanse (EXP), and Litecoin are just some examples of blockchain platforms which have confronted a 51 p.c assault, in keeping with the DCI Initiative.

Of them, the Litecoin assault in July 2019 is a traditional instance of a 51% assault on a proof-of-stake blockchain, regardless of the attackers not mining new blocks and double-spent LTC tokens price lower than $5,000 was the time of the assault.

This underscores the decrease dangers of 51% assaults on PoS blockchains, which they think about much less engaging to community attackers, and is among the many causes extra networks are transferring to the PoS consensus mechanism.

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Azeez Mustafa
Azeez began his FinTech career path in 2008 after growing interest and intrigue about market wizards and how they managed to become victorious on the battlefield of the financial world. After a decade of learning, reading and training the ins and outs of the industry, he’s now a sought after trading professional, technical/currency analyst and funds manager – as well as an author.
Last Updated : January 13, 2023
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