How 51% Attack Can Disrupt Blockchain?

What is a 51% Attack?

A 51% attack on a blockchain network means a group of miners took control over 50% of the total network’s computing power. Crypto networks are generally decentralized, where miners worldwide validate transactions and maintain the network’s integrity.

However, when a group of miners controls more than 50% of the network, they can manipulate the network by preventing new transactions, invalidating transactions, double-spending, or changing historical blocks.

The most adverse effect of a 51% attack is double-spending, meaning the same coins are spent more than once. This disrupts the entire blockchain network and blocks crypto transactions. However, a 51% attack is not possible on more extensive and established blockchain networks like Bitcoin or Ethereum. Most hackers target smaller networks.

How Does a 51% Attack Work?

Before understanding the 51% attack, let’s discuss how exactly a blockchain network works.

A blockchain works like a distributed ledger, recording all crypto transactions that occur on the network. The blocks are linked to each other through cryptographic techniques, and the information of a block is recorded in its previous block. Thus, once the transaction is confirmed and added to the distributed ledger, it is impossible to alter it.

Miners worldwide validate transactions by solving complex mathematical puzzles. All miners participating in the network must agree that a block of data is valid before it is added to the blockchain. Thus, miners play a crucial role in maintaining the integrity of crypto transactions.

Miners are paid in freshly minted cryptocurrencies as mining rewards for contributing their computational resources. However, in a 51% attack, when an authority controls more than 50% of computing power.

When an individual or a group gains over 50% of mining power, they can disrupt the entire blockchain’s characteristics, rewrite blockchain history, and even attempt to reverse transactions. Since the attackers own most of the network, they can alter the whole blockchain and its functionality.

However, a 51% is nearly impossible, especially on a reputed blockchain like Bitcoin, as it demands tremendous energy. Thus, most hackers aim for smaller networks for a 51% attack.

Threats Associated with 51% Attack

A 51% attack on the blockchain can corrupt the entire network. Here are some possible risks.

1. Double Spending

When a group of hackers controls more than 50% of the blockchain network, they can even create a fork of the blockchain. In that forked network, they can spend the same coins twice, which is commonly called double-spend. Users who accept these coins end up being cheated and suffering financial loss.

2. Network Disruption

The 51% attack can disrupt the entire blockchain network as the hackers can delay the PoW (Proof of Work) confirmations. When the blockchain network is disrupted, hackers can gain access to validating transactions, making those transactions faster while blocking the entire system.

3. Invalidate Transactions

A group of hackers can invalidate transactions by not including them in the blockchain. That often leads to delayed transactions, which can inconvenience the users by preventing them from accessing their crypto funds.

4. Rewrite the Blockchain History

As hackers have maximum access to the network, they can rewrite the entire blockchain history according to their benefits. Thus, a 51% attack can disrupt the whole blockchain, breaking the network’s reliability. That, in turn, will eventually lead to the price drops of that specific cryptocurrency.

5. Centralization

Blockchain and cryptocurrencies are known for their decentralization and security. However, if hackers can invade more than 50% of the network, as with a successful 51% attack, it will lead to network centralization. Thus, hackers can control the entire network and make transactions and other decisions instead of the users.

Past Examples of 51% Attacks

51% attacks are often not possible on established networks like Bitcoin. Hackers target much smaller networks. However, malicious attacks have happened on some big blockchain networks as well. Let’s discuss them in detail.

• Bitcoin Gold (BTG)

Bitcoin Gold (BTG), a hard fork of Bitcoin, underwent a 51% attack in 2018 and another one in January 2020. Both these attacks caused significant double spending, costing nearly $70,000.

• Bitcoin SV (BSV)

Another hard fork of Bitcoin, Bitcoin SV, succumbed to a 51% attack in 2021. The hackers manipulated the network by deleting and altering new blocks and gaining authority over more than 50% of it.

• Ethereum Classic (ETC)

A hard fork of Ethereum, Ethereum Classic (ETC), faced a similar attack in 2020. In this attack, over 1 million USD was compromised.

• Litecoin Cash (LCC)

A 51% attack occurred on Litecoin Cash, which follows a Proof of Work (PoW). The damage was minimal, with around $5000 double-spending.

In all of the above cases, developers implemented new protocols and prevented further malicious attacks. Despite that, the value of all of these cryptos slashed in the following months.

Is a 51% Attack on Bitcoin Possible?

Due to its extensive network size, a 51% attack on Bitcoin is highly unlikely. Moreover, due to its popularity and scarcity, the Bitcoin network will keep growing. Thus, the computing power needed to control the majority of the blockchain network will be significantly high, and it is nearly impossible for any single authority to gain control over the network.

Even in the past, 51% attacks were observed on relatively smaller blockchain networks. For instance, Bitcoin Gold, and Bitcoin SV, which are forks of Bitcoin, underwent 51% attacks.Thus, 51% attacks are less likely on established and larger blockchain networks like Bitcoin.

Preventive Steps for 51% Attack

So, how do we prevent 51% attacks? What are the preventive measures that every miner should be aware of? Let’s discuss.

• Enhance the Hash Rate

When the overall hash rate of the network is higher, it makes it difficult for the hackers to break the network. When more miners join the network, especially with powerful and specialized mining hardware like ASIC miners, the overall hash rate of the network increases, securing the entire network.

Encouraging more miners to join the network, using advanced ASIC miners, and opting for popular cryptocurrencies, which more miners prefer mining, are some potential ways to increase the hash rate and secure the network organically.

• Switch to Proof of Stake (PoS)

Switching from PoW to PoS can help reduce 51% of attacks. While PoW rewards miners who possess significant computing power to solve blocks faster, PoS assigns mining power to people depending on the number of cryptocurrencies they hold. Moreover, a miner can confirm only a few transactions. Thus, the PoS model prevents outsiders from gaining access to the network.

• Conduct Regular Audits

Conducting regular audits will help you spot potential risk vulnerabilities that hackers could use to attack. Thus, you can intervene and address them as soon as possible to prevent any security threats and attacks.