51% Attack
What is a 51% Attack?
A 51% attack refers to a user, or group of users, gaining control of more than 50% of the total mining power of a blockchain. If done successfully, this move allows them to take control of a network to manipulate and alter its transactions.
The reason this type of takeover can occur stems from a blockchain’s consensus mechanism, which is how the system finds new blocks and verifies the legitimacy of transactions. Nodes are the computers that power the system and provide what’s called “hashing power” to review and verify actions, while also protecting a network’s security. A majority of the nodes, or at least 50%, have to agree that a new block is valid, or that a transaction is legitimate, in order for it to occur.
However, when a single bad actor can “form the majority” by achieving more than half of the total hashing power in a blockchain, they can execute a 51% attack. By gaining control over the network, they can modify the order of transactions, prevent transactions from getting confirmed, and double-spend their funds.
Most blockchain networks decrease the chances of a 51% attack by spreading nodes across the globe, and across a large group of decentralized users. The larger and more diverse the group of nodes, the more difficult it is to gain the majority.
Examples of a 51% Attack
There have been a few attempts to execute the 51% attack in the crypto space. In May 2018, Bitcoin Gold suffered a 51% attack and lost around $18 million worth of BTG at the time. In another instance, hackers targeted Ethereum Classic three times to execute a 51% attack. The 3rd 51% attack, which occurred in August 2020, caused the reorganization of over 7,000 blocks in the Ethereum Classic network.
51% Attack on Bitcoin
Bitcoin is proven to be the most secure network as there is no single successful attempt of 51% attack in its history. It would be highly unlikely to achieve a 51% attack on Bitcoin because the amount of computing power required to gain control over the network would be a massive, incredibly expensive undertaking.
How Does the Proof of Work Consensus Mechanism Prevent 51% Attacks?
Carrying out a 51% attack on Proof of Work blockchains is extremely difficult. The major reason for this difficulty stems from the magnitude of the networks and just how much computing power is required to solve the equations, find new blocks, and verify new transactions.
In Proof-of-Work blockchains like Bitcoin, there is a vast global network of nodes. Over time, the hash power required to solve a block increases tremendously in Proof of Work blockchains. As a result, the possibility of obtaining more than half of the total mining power by a single entity to execute a 51% attack becomes increasingly difficult as time goes on.