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Understanding a 51% Attack on the Blockchain

December 15, 2021

Blockchain technology is not a new term in today’s digital world. The technology has existed for a few years. It is prevalent when cryptocurrencies such as Bitcoin are mentioned.

However, according to numerous research reports, businesses have not fully adopted the use of cryptocurrencies. Most of these businesses rely on traditional methods in their operations instead of using blockchain technology.

Blockchain technology can be described as a structure that stores public transaction records in various databases in a network-connected environment through peer-to-peer nodes. The transactional records are known as blocks, and the various interconnected databases are referred to as a chain.

Each transaction in a blockchain is authorized using the owner’s digital signature, which safeguards it from tampering. Due to this, the information is highly secured. Blockchain technology utilizes the hash encryption algorithms, in most cases SHA256, to ensure that data is secure.

Blockchain technology involves adding transaction details to digital ledgers through a process known as mining. Mining involves generating the hash for the transaction block, which ensures that blockchain is secure.

This article will cover the 51% attack on the blockchain. The reader will understand what it entails, its risks, and possible ways to prevent it.

Overview

Understanding 51% attack on Bitcoin and Blockchain

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.

The attackers can stop the confirmation and order of new transactions. The malicious agents can then rewrite parts of a blockchain and reverse the transactions. A 51% attack usually bypasses the blockchain’s security protocols. The attack’s impact can be mild or severe, depending on the mining power of the attacker.

The hash power is more critical in the attacks. If the attacker possesses a higher percentage, the likelihood of attacking the system is also high. The damages caused by the attack are also dependent on the same factor.

The impacts of 51% attack on Blockchain and Bitcoin

New transactions are delayed

In a 51% attack, the attackers invaded the hashing power of a bitcoin. They can delay new transactions initiate the use of the same coin several times.

Causes network disruption

Every blockchain utilizes Proof-of-Work (PoW) mechanism to validate the transactions. The attackers cause network disruptions by delaying the confirmation and the arrangement of the blocks in chronological order.

Note that a 51% attack heavily impacts the miner’s computing resources. This causes delays for the transaction to be confirmed and stored in a block. In turn, the blockchain’s network gets corrupted, allowing the attackers to process transactions faster than the miner.

This leads to reduced miner rewards

A 51% attack enables the attackers to reverse a transaction even before it is confirmed. This leads to double-spending a coin. Moreover, genuine miners earn less for updating the blockchain as the attackers steal their shares.

Risks involved with 51% attack

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. The confidence of its users and miners is highly compromised.

The attackers can dupe the new and inexperienced users to validate and confirm the transactions that they can later invalidate. The reason is that the attackers can interfere with unconfirmed blocks and transactions in a blockchain.

In addition, the users’ transactions may not be confirmed or even be reversed by the attackers. 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.

Comparing a 51% attack with a 34% attack

Both attacks aim to manipulate the blockchain’s mining power. However, the two differs depending on the way they manipulate the blockchain.

A 34% attack alters the blockchain’s ledger, which is responsible for validating a transaction using an algorithm known as the Tangle consensus.

A 51% attack, on the other hand, grants an attacker complete control of the blockchain network. This, in turn, can stop further minings or coin reusability.

The platforms faced a 51% attack

Big blockchain platforms such as Ethereum and Bitcoin are believed to be secure from 51% of attacks. They are unlikely to experience a 51% attack compared to smaller projects. However, various smaller projects are prone to this kind of attack.

The following are the blockchain platforms that have experienced a 51% attack:

Grin

According to the news, Grin experienced the attack where the unknown miner accumulated over 57% of the total Grin hash power. The attacker’s intention remained unknown. GRIN, a privacy-focused cryptocurrency blockchain, had to stop its payouts and advised its miners to stop their operations until the issue was resolved.

Later the blockchain was able to regain the network and imposed measures to avoid the reoccurrence of the attack.

Vertcoin

Vertcoin has experienced multiple 51% attacks over the past years. It is a cryptocurrency project that aims to keep mining power decentralized. The attack saw the Vertcoin genuine blocks being replaced by the blocks the attacker wrote.

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.

Bitcoin Gold

In 2018, BTG blockchain suffered a 51% attack for the first time and incurred massive losses. BTG uses a variant of the Equihash algorithm, unlike its fork Bitcoin protocol which uses the SHA256 consensus algorithm.

The developers of BTG blockchain wanted to achieve decentralization by using GPUs for mining instead of ASIC devices. However, an unknown miner managed to control more than 51% of the overall BTG hashrate leading to the attack.

In the year 2020, BTG suffered yet another 51% attack. The blockchain experienced two reorganizations in two days that let it double-spend, totaling a vast amount of money. The BTG community begged the blockchain to change its algorithm to a more secure one. They suspected there might be secret ASIC mining devices on the BTG network.

Ethereum Classic

In 2020, ETC blockchain faced three consecutive 51% attacks in the same month. Ethereum classic uses the PoW consensus algorithm similar to Bitcoin. A 51% attack is expensive when performed on large networks like Bitcoin since a tremendous amount of computing power is required to do it. ETC hash rate is lower hence more vulnerable to 51% attacks.

The decentralized nature of the ETC PoW makes it difficult to avoid or mitigate the 51% attacks. The attacks were reported not to have had any significant impacts on the ETC prices, but the users’ trust was reduced.

Ways to prevent a 51% attack

50% Limit on a single miner

The blockchain should ensure that no single miner or group of miners controls more than 50% of the hashing power. It would be impossible for a single miner or a group to attack the network by outbuilding the longest validated blockchain. To achieve the attack, it would mean that the attacker has to own powerful hardware and requires tremendous energy. Also, an attacker may need luck since the mining process would be random.

A good example is Bitcoin, where its network and hash rate are vast and complex enough to be a substantial initial investment for an attacker to rent mining equipment. Ethereum Classic, on the other hand, is more prone to the attack since its overall hash rate is relatively small compared to Bitcoin.

Using Proof of Stake

A single miner can become the majority player in a small blockchain network. All the blockchain networks that use PoW have a policy that the miners have to upgrade their equipment regularly. Failure to do so, may lead to them not receiving the block rewards, and they will fall behind other miners in the network.

To avoid the risk of a 51% attack, the blockchain can use Proof of Stake (PoS), which is a more secure consensus than PoW. In most cases, the PoS incentives are controlled by most affluent users unlikely to perform the attack. However, blockchains have moved from this structure, and they prefer more decentralized alternatives such as Delegated-Proof-of-Stake (DPoS).

Strong network community

When using the PoS or DPoS, a user with a minimal stake level in a network is voted a block validator. The validators are voted in by the community. In case of collusion to compromise the network, they are thrown out of the network by the community.

This approach prevents the occurrence of a 51% attack. It is also effective in avoiding double-spending as the rules for the malicious validators are coded into the blockchain.

Can a 51% attack reoccur?

There is a high possibility that a 51% attack can reoccur if the attacker embedded a bug in the blockchain’s code. An attacker can manipulate the blockchain to reproduce new blocks faster to initiate the second attack.

In summary, an attacker can attack a blockchain again. It is upon the blockchain to ensure that their systems are more secure and resilient.

Wrapping up

Risks and vulnerabilities will always be expected when growing, fast, promising technology like cryptocurrency and blockchain. This article has covered the risks of 51% attacks and possible ways to mitigate them.

The upcoming technology promises to solve these security hitches and even improve the system. However, these kinds of attacks should help the companies and industries learn new prevention ways and improve their existing platforms for the future. The future is also promising in this field, and we cannot wait to see more improvements in the industry.

Happy learning!

Further reading


Peer Review Contributions by: Willies Ogola