Many cryptocurrencies, including Bitcoin SV, Litecoin Cash (LCC), and Ethereum Classic, have been the target of 51% of attacks in the past, despite being supported by blockchain technology that guarantees security, immutability, and total transparency. While there are numerous ways that malicious parties can and have exploited blockchains, a 51% attack—also known as a majority attack—occurs when a group of miners or another entity holds more than 50% of the hashing power of the blockchain and then seizes control of it.
The majority of 51% of attacks have been successful with smaller networks that require less hashing power to defeat the majority of nodes, making it the most expensive and time-consuming way to compromise a blockchain.
What is a 51% attack?
Understanding how blockchains to record transactions, validate them, and the various controls built into their architecture to thwart any alteration is crucial before diving into the tactic used in a 51% attack. A blockchain adopts one of two consensus mechanisms to validate every transaction through its network of nodes and record it permanently. It does this by using cryptographic techniques to connect subsequent blocks, which are records of transactions that have taken place on the network.
A proof-of-stake (PoS) blockchain requires nodes to stake a certain amount of the native token to earn validator status, in contrast to a proof-of-work (PoW) blockchain, where nodes must solve challenging mathematical puzzles to verify transactions and add them to the blockchain.
Imagine that more than 50% of all nodes that carry out these validating functions band together to introduce a new version of the blockchain or carry out a denial-of-service (DOS) attack to comprehend how a 51% attack operates. The latter is a 51% attack in which the attacking nodes add new transactions to the blockchain or erase existing ones while the remaining nodes are prevented from carrying out their tasks. In either scenario, attackers risk undoing transactions and spending the native crypto token twice, equivalent to printing fake money.
A 51% attack of this kind could compromise the entire network and inadvertently result in significant losses for holders of the native token. For large blockchains like Bitcoin or Ethereum, altering the original blockchain requires incredible computing power or staked cryptocurrency, but it isn’t as difficult for smaller blockchains.
Even a DOS attack has the potential to stop the blockchain from working and have a negative effect on the value of the underlying cryptocurrency. Only the most recent or upcoming transactions made on the network are at risk because it is unlikely that older transactions older than a certain cut-off can be reversed.
Possibility of a Bitcoin 51% attack
As more hashing or computational power is used per second for mining on a PoW blockchain, the likelihood of a 51% attack decreases. In the case of the Bitcoin network, criminals would need to have access to at least 1.3 million of the most potent application-specific integrated circuit (ASIC) miners, such as Bitmain’s Antminer S19 Pro, which costs about $3,700 per unit, to control more than half of the Bitcoin hash rate, which is currently estimated to be 290 exahashes/s.
To have a chance of carrying out a 51% attack on the Bitcoin network, attackers would have to spend around $10 billion on mining equipment. Other factors include the price of electricity and the fact that they would not be eligible for mining rewards offered to trustworthy nodes.
The situation is quite different for smaller blockchains like Bitcoin SV, where the network’s hash rate is approximately 590PH/s, making the Bitcoin network nearly 500 times more powerful than Bitcoin SV.
However, on a PoS blockchain like Ethereum, nefarious parties must control more than half of the Ether tokens burdened in staking contracts. Simply buying the necessary computing power to have a remote chance of launching a successful 51% attack would cost billions of dollars.
Additionally, if the alleged attack is unsuccessful, all staked tokens might be seized or locked, dealing a severe financial blow to the parties involved.
If Developers Had Implemented Simple Security Measures, The Crypto Hacks Of 2022 Might Have Been Avoided
How can a blockchain be protected from a 51% attack?
Verifying that no single entity, group of miners or even mining pool controls more than 50% of the network’s mining hashrate or the total number of staked tokens would be the first step in vetting any blockchain.
This necessitates that blockchains continuously monitor the parties engaged in the mining or staking process and take corrective action when necessary. Unfortunately, the Bitcoin Gold (BTG) blockchain could not foresee or stop this from occurring in May 2018. A subsequent attack in January 2020 resulted in the double spending of nearly $70,000 worth of BTG by an unidentified actor.
In each of these cases, the 51% attack was made possible by a single network attacker seizing more than 50% of the hashing power, followed by extensive reorganizations of the initial blockchain that went back and undid completed transactions.
The frequent attacks on Bitcoin Gold highlight the significance of using ASIC miners rather than less expensive GPU-based mining. Attackers don’t need to spend a lot of money on more expensive ASIC miners to launch a 51% attack on the Bitcoin Gold network because it uses the Zhash algorithm, which enables mining even on consumer graphics cards.
The 51% attack example does demonstrate the superior security controls provided by ASIC miners as they require a higher investment to obtain and are created specifically for one blockchain, rendering them useless for mining or attacking other blockchains.
However, even a small number of them could potentially control more than 50% of the smaller network hashrate of the altcoin if miners of cryptocurrencies like BTC switch to smaller altcoins.
Furthermore, the price of launching a 51% attack can be significantly decreased thanks to service providers like NiceHash that enable people to rent hashing power for speculative cryptocurrency mining. This has highlighted the need for ongoing 51% attacks to be highlighted by real-time monitoring of chain reorganizations on blockchains.
One such project is the Digital Currency Initiative (DCI) of the MIT Media Lab, which has developed a system to track and report any suspicious transactions that might have double-spent the native token during a 51% attack on various PoW blockchains and their cryptocurrencies.
According to the DCI initiative, a few examples of blockchain platforms subject to a 51% attack were Hanacoin, Vertcoin, Verge, Expanse, and Litecoin Cash.
Even though the attackers did not mine any new blocks and double-spent Litecoin Cash (LCC) tokens worth less than $5,000 at the time of the attack, the July 2019 Litecoin Cash attack is a classic example of a 51% attack on a proof-of-stake blockchain.
This does demonstrate the lower likelihood of 51% attacks on PoS blockchains, making them less desirable targets for network attackers. This is just one of the many reasons why more networks are converting to the PoS consensus mechanism.