The most important feature of Blockchain is its security, this makes it reliable. The data stored on it must pass many tests and be certified, by various entities, to be registered on the blockchain. Blockchain also has its risks, one of which is the 51% attack
How is a new blockchain created?
To understand how the 51% attack works, you must first be intimately familiar with the cryptocurrency mining process and how the computers (noodles), tapped into the network of a given cryptocurrency and holding all transaction history, work. Blockchain technology is distributed in nature. This means that the participants in the network agree on the transactions contained within it. That is – the nodes in it must regularly reach consensus on the process of mining, validity and correct transaction. The Proof-of-Work algorithm, on which some cryptocurrencies are based, is designed to allow miners to verify a new block only if the majority of nodes in the network agree that the block hash provided by the miner is correct. The miner that has found the solution to the mathematical puzzle (the hash) thereby lets the other participants in the network know that it has done its job. As you know from our previous lessons, the process of digging cryptocurrencies requires a huge amount of electricity and computing power. The performance of each miner, who are spread all over the world, is based on these two things.
In a blockchain network, computing power is called “hash power” or “hash rate”. In short, the computing power of a blockchain consists of the power generated and shared by different nodes. That is, it is not in the hands of a single person, making the entire network decentralized. When transactions are verified, information is placed in blocks and these are then attached to the longest chain. It contains the most transactions recorded and is the most reliable. It is the one with the most computing power.
So, what if one user has more than 50% of the computing power of the entire network? A 51% attack, also known as a majority of attack, can occur.
Attack 51% – how it works
The 51% attack is an attack on the blockchain network, where a single user owns and controls most of the computing power of the entire network. He then manages the network as he sees fit. He can send cryptocurrencies on the main chain of the network, meanwhile sending them to another spoofed address on the blockchain, which he copies secretly thanks to his enormous computing power. A transaction on the main chain will be approved by other miners without any problem, as it is the longest chain. The same on our chain, which we have been secretly digging. What then? The official chain will cease to be the longest chain and our other chain, which is not quite legal, will become it. All because we controlled more than 50% of the power of the chain in question. As a result, the official transaction will disappear and the transaction from our secretly dug chain will be accepted. In the crypto world, we call this double-spending.
Interestingly, in such a situation, the attacker could lead to a mining monopoly, preventing virtually all miners from digging. At this point, it is worth noting that the person carrying out the 51% attack cannot reverse other people’s transactions or prevent transmission to the network. So, besides taking over the longest blockchain, what else can he do with his attack? Create a cryptocurrency from nothing, change the hash reward or steal funds. Undoubtedly, this is a very unlikely scenario, but always possible.
Probability of attack 51%
Nothing is impossible in the world of cryptocurrencies. However, the attack itself is very difficult to carry out. Remember, it is the distributed nodes that maintain the blockchain, and the users of the network work closely together to reach a consensus. This is why it is so secure. And the bigger the blockchain, the more security it has against attacks and loss of its liquidity. Let’s take Bitcoin under the microscope. A successful attack on this flagship asset is unrealistic. All because it is secured by nodes participating in the network and simultaneously competing for rewards. What’s more – in such a large network, which is constantly growing, making any modifications to previous approved blocks is very difficult. All thanks to cryptographic proofs. And as we know, the more proofs a block obtains, the cost of changes is much higher. Unfortunately, a 51% attack is more likely on altcoins that have little computing power. This unfortunate group will include ZenCash or Monacoin, among others.
NiceHash
In the very early days of cryptocurrencies, when few people had yet heard of them, miners would mine cryptocurrencies on their own. Over time, they began to band together to make it faster and easier to find a block and get rewarded. So, it’s no surprise that cloud-based mining services and other innovative aids have emerged. NiceHash is a platform that allows you to lease computing power from as many machines as you own. In return, you earn crypto, or gain computing power to gain digital assets. You already know where we’re going with this, right? The platform buys and sells computing power from its users and in return offers to connect your computer or platform to the NiceHash mining marketplace. By using other users’ computing power, you don’t have to physically buy and plug in your computers. And if you own diggers and want to increase your power, you take the help of this type of platform. With its help, a 51% attack seems possible.
Ethereum Classic – 51% attack
As we’ve mentioned before, not for every cryptocurrency can you hire enough computing power to attack it. Unfortunately, Ethereum Classic did not fit into this canon and fell victim to this very attack. The attack was launched on August 1, 2021, when Ethereum Classic had just 10 TH/s of computing power on its network. By comparison, Ethereum has 108 TH/s and Bitcoin Cash has 1,500,000 TH/s. The attack that took place then reorganized over 7,000 blocks! That’s as much as two days of mining.
Summary
Cryptocurrencies are secure databases. As they grow and the number of miners and computers grows, and with that comes increased computing power, they make blockchain networks and cryptocurrencies even more secure. It is difficult to take control of them. There is a huge cost involved, sometimes disproportionate to the gain. And the operation itself is hugely complex. If the price of the cryptocurrencies in question rises, the number of people willing to mine them increases proportionately. This involves plugging new miners and cryptocurrencies into the network, i.e., an increase in computing power. Thus – more problems for attackers in case of a 51% attack. The more desirable the blockchain or cryptocurrency, the more secure it is.
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