In today’s information age, blockchain is not a new concept. Technology has been around for a while. When cryptocurrencies like Bitcoin are discussed, it is common. Corporations, meanwhile, haven’t yet fully embraced the use of cryptocurrency, according to various study reports. The majority of these companies operate utilizing conventional means rather than blockchain technology.
Blockchain is a system that uses peer-to-peer nodes to keep public transaction history in multiple databases in a digital world. The numerous connected databases are regarded as a chain, and the transaction data is known as a block.
A blockchain operation is validated by the holder’s digital sign, which protects it from theft. As a result, the data is highly safe. To guarantee data security, blockchain technology employs hash encryption techniques, most commonly SHA256.
Mining is a process that includes contributing transaction data to online ledgers using blockchain technologies. Mining is the process of creating the hash for a transactional block, that ensures the security of the blockchain.
The 51 percent blockchain attack will be discussed in this guidepost. The reader will gain a better understanding of what it includes, the risks it poses, and viable solutions to avoid it.
Importance of Decentralization
A blockchain network is decentralized because it is not controlled by a single individual or a small group of people. This decentralization is critical since all blockchain users must agree on the present state of the network. The authenticity of the block’s data can be guaranteed by requiring a whole system of decentralized users to agree.
Consider it a request for a film suggestion. It’s possible that even if you ask somebody if a film is good and they say yes, it’s still bad. However, if you asked 1,000 different individuals about the picture and they all responded yes, there’s a far better probability it’s good as it’s been confirmed by a large number of individuals. This “consensus” ensures that a miner can only verify transactions to the blockchain if the nodes in the network concur on the block’s validity in PoW blockchains like Bitcoin. The fussy film critics of the crypto space are such consensus algorithms: They will only watch the new film if everybody thinks that it was enjoyable. The consensus algorithm, on the other hand, just asks “everyone,” whether that means ten individuals or a million. If a majority of people think the movie is good, the algorithm will concur.
Mining Process
In the case of a PoW blockchain, “everyone” refers to all of the network nodes, or “miners.” Such miners compete via using their computers to create a code (called a hash) with a similar or greater number of digits at the beginning than the desired hash rate. Whoever creates the successful hash that surpasses the targeted hash gets to create a block with transactional records and receive free cryptocurrency and transaction fees.
Miners with more equipment or equipment capable of creating more hash per second have a better chance of exceeding the desired hash and gaining the opportunity to validate the next blocks with transaction records and add them to the blockchain. This is identical to a lottery system in which somebody who has 1000 coupons has a better chance of winning than someone who only has ten coupons.
But what happens if a malevolent entity gains control of the hash power in a majority of cases?
A Brief Introduction to 51% Attack
When a malevolent user in a network gains access to a blockchain’s mining capabilities, this is known as a 51 percent attack. It means that the invaders will have over 50% mine power and will be able to mine quicker than anybody.
The intruders can prevent fresh transactions from being confirmed or ordered. Malicious actors can then modify portions of a blockchain or undo transactions. The security procedures of the blockchain are frequently bypassed in a 51 percent attack. Based on the attacker’s hash rate, the attack can have a slight or significant effect.
In attacks, hashing rate is more important. If the attacker has a higher proportion, he or she is more likely to attack the system. The attack’s consequences are also determined by the same element.
In a 51 % attack, the hackers took over a bitcoin’s hash power. They have the ability to postpone transactions made and repeatedly use the same currency.
To verify transactions, each blockchain employs a Proof-of-Work (PoW) technique. By prolonging confirmation and arranging the blocks in sequence, the hackers cause system interruptions.
A 51 percent attack has a significant impact on the miner’s computer resources. This creates delays in the confirmation and storage of the transaction in a block. As a result, the network of the blockchain is corrupted, enabling intruders to conduct transactions quicker than the miners.
An attacker can undo a transaction before it is validated using a 51 % attack. This results in a coin being spent twice. Furthermore, since the attacker steals their shares, legitimate miners get minimal for updating the network.
Risks Associated with 51% Attack
Users of cryptocurrencies may lose assets or even funds as a result of a 51 percent attack. This poses fundamental questions regarding a blockchain’s dependability, safety, and integrity. The trust of its clients and miners has been severely shaken.
New and less experienced users can be duped into validating and confirming payments that they can subsequently invalidate. The reason for this is that unvalidated blocks and activities in a blockchain can be tampered with by hackers.
Furthermore, the attackers may not verify or even reverse the victims’ transactions. As a result, consumers begin to distrust the blockchain, lowering its value. As a result of these assaults, some cryptos may be delisted owing to security concerns.
Difference Between 51% and 34% Attack
Both hacks try to interfere with the hash rate of the blockchain. The 2, however, vary in terms of how they influence the blockchain.
A 34% attack modifies the blockchain’s database, that is liable for confirming transactions using the Tangle consensus mechanism.
In contrast, a 51 percent attack gives an attacker entire access to the blockchain. As a result, future mining or currency reusability may be halted.
Can a 51% Attack Reoccur?
If the attacker inserted a vulnerability in the blockchain’s code, a 51 percent attack has a high chance of recurrence. To launch the 2nd attack, an attacker can influence the blockchain to develop new blocks quicker.
In conclusion, a blockchain can be attacked again. It is the responsibility of the blockchain to make its systems safe and robust.
Cost of a 51% Attack
In theory, the more centralized and smaller a blockchain is, the more probable it is to be attacked. The most notable case is Bitcoin SV, which was subjected to a string of attacks last year in which a hostile player tried to double-spend the BSV cryptocurrency by rewriting blocks.
A similar occurrence occurred in 2020 when attackers were able to acquire almost $70,000 value of Bitcoin Gold tokens in an attack that cost them less than $2,500. Last year, many 51 percent of assaults were launched against Ethereum Classic (ETC). Although the attacks, all 3 tokens are still in the top 100, demonstrating that a 51% attack isn’t always deadly to a token’s valuation.
Over the years, the BTC network has shown to be durable enough to sustain a 51 percent attack. In fact, due to the vastness of the Bitcoin blockchain and the decentralized nature of mining power, as well as the expense of mining equipment, attacking Bitcoin is cost-prohibitive. It would cost more than $13 billion, according to our calculations:
On the Bitcoin network, the initial Target Hashrate is 145,472,737.165 TH/s.
Assume the world’s least price of electricity (for retail) is $ 0.01 per kWh.
145,472,737.165 / 100 1,454,727 circuits = Needed Equipment = Desired Hashrate / Equipment Hashrate
Hardware Cost = $ 13,528,961,100.00 * $1,454,727 circuits = $ 13,528,961,100.00
Cost of electricity: $ 1,029,946.72
As a result, the total cost is $ 13.529 billion.
With today’s mining payouts, the miner’s gear investment might theoretically pay for itself in less than a year. Given BTC’s current market capitalization of $ 825 billion, the hypothetical cost of a 51 percent attack is roughly 1.66 percent of the market valuation. One explanation of these findings could be that the present Bitcoin pricing financially encourages a rich miner to participate in the double-spending activity.
Blockchain Platforms that Suffered 51% Attacks
Large blockchain platforms like Ether and BTC are thought to be safe against 51% of attacks. In comparison to smaller initiatives, they are reluctant to face a 51 percent onslaught. Numerous smaller projects, on the other hand, are vulnerable to this type of attack.
The following blockchain platforms were hit by a 51% attack:
Grin
According to reports, Grin was hit by an attack in which an unknown miner amassed over 57 percent of the entire mining power. The attacker’s motivation remained a mystery. GRIN, a security-focused crypto blockchain, was forced to stop rewards and recommended its miners to do the same until the problem was rectified.
Later, the blockchain managed to reclaim the network and take precautions to prevent the attack from happening again.
Vertcoin
Over the last few years, Vertcoin has been subjected to multiple 51 percent attacks. It’s a crypto initiative that intends to Defi hashing power. The authentic Vertcoin blocks were substituted with the attacker’s blocks in the assault.
The blockchain rearranged, resulting in double-spending, costing users a substantial amount of money. To maintain safety on its platform, Vertcoin had to move towards a stronger PoW algorithm. To maintain its mining more effective and community-based, it needed to block strong processing chips from the network.
Gold Bitcoin
For the first time in 2018, the BTG blockchain was subjected to a 51 % attack, resulting in enormous losses. Unlike the fork Bitcoin network, which utilizes the SHA256 consensus method, BTG employs a variation of the Equihash algorithm.
The BTG blockchain’s creators aimed to accomplish decentralization by mining with GPUs rather than ASIC equipment. But, the attack was launched after an unidentified miner gained control of more than 51 percent of the global BTG hash rate.
BTG was hit by another 51% attack 2 years later in 2020. The blockchain underwent 2 reorganizations in 2 days, allowing it to double-spend a large sum of money. The BTG community pleaded with the blockchain to switch to a more robust algorithm. They detected the BTG network having hidden ASIC mining machines.
Ethereum Classic
3 consecutive 51 % attacks on the ETC blockchain occurred in one month in 2020. Ethereum Classic, like Bitcoin, employs the PoW consensus protocol. When used on huge networks like BTC, a 51 percent attack is costly because it necessitates a massive amount of computational power. Because the ETC hashing rate is smaller, it is more susceptible to 51 percent attacks.
Because of the decentralized structure of the Ethereum PoW, avoiding or mitigating 51 percent attacks is challenging. The hacks were said to have had no substantial influence on Ether prices, but they did erode users’ faith.
How to Prevent a 51% Attack
A Single Miner’s Limit is 50%
No individual miner or team of miners should have more than 50 percent of the mining power, according to the blockchain. Outbuilding the longest approved blockchain would make it difficult for an individual miner or a team to attack the network. To carry off the attack, the intruder would need to possess powerful equipment and expend a lot of energy. Furthermore, because the mining process is random, an attacker may require luck.
Bitcoin is a suitable example, as its system and hashing rate are large and complicated enough that renting mining equipment would be a significant starting investment for an attacker. Ethereum Classic is more vulnerable to the exploit since its aggregate hash rate is lower than Bitcoin’s.
Use Proof of Stake
In a smaller blockchain network, an individual miner can be the majority participant. Every blockchain network that uses PoW has a policy requiring miners to update their equipment on a frequent basis. Failing to do so could result in them missing out on block rewards and falling behind other miners on the network.
The network can use PoS, which is a much more secured consensus than PoW, to eliminate the risk of a 51 percent attack. Most well-off users, who are unlikely to carry out the attack, command the PoS incentives. Blockchains, on the other hand, have evolved away from this framework in favor of more decentralized options like Delegated-Proof-of-Stake (DPoS).
Strong Network Community
A user with a low stake value in a chain is voted as a block validator when utilizing PoS or DPoS. The validators are chosen by the members of the community. The community will kick them out of the network if they collude to compromise the network.
This method eliminates the possibility of a 51 percent attack. Because the rules for malevolent validators are programmed into the blockchain, it is also helpful in preventing double-spending.
Probability of a 51%Attack
A 51 percent assault becomes less possible as a blockchain develops and adds new mining nodes. This is due to the fact that the cost of a 51 percent attack climbs in lockstep with the networking hash power. To put it another way, the larger the system and more nodes that engage in it, the more hashing power is required to control more than half of it.
However, even if an intruder obtained more than 50percent of the hash power, the blockchain may provide security. As the blocks in the network are connected together, a block can only be changed if all previously confirmed blocks are removed.
While this is technically conceivable, it would be hugely expensive for the attackers for 2 reasons:
To obtain a 51 percent hash rate, the attacker would need a lot of computer power (cost of energy), especially on larger, more established channels.
As the miners are not participating in the blockchain in a proper manner, they will no longer receive the blockchain incentives associated with mining.
As a result, the greater the number of transactions, the more blocks are added to the chain, and the harder it is to change a block.
On large blockchain systems like Bitcoin, the potential of a 51 percent attack still exists but the economic implications will far exceed the advantages. Even if an attacker dedicated all of its power to attack a blockchain, the ongoing adding of blocks to the blockchain would leave the attacker with only a brief window to modify a tiny number of transactions.
Conclusion
When it comes to fast-growing, promising technologies like bitcoin and blockchain, risks and weaknesses are unavoidable. The threats of 51 percent attacks have been discussed in this article, as well as suggested mitigation strategies.
The new technology claims to fix these security flaws while also improving the system. These types of attacks, on the other hand, should aid firms and sectors in learning new preventative methods and improving their present platforms in the future. In this sector, the future looks bright, and we can’t wait to see more advancements in the sector.
