How to recognize a 51% assault and what is it?
Small-cap cryptocurrencies are still vulnerable to a 51% assault despite the excessive amount of resources required to manufacture them.
Many cryptocurrencies, including Bitcoin SV $40.75, Litecoin $59.57, and Ethereum Classic $20.48, have been the target of 51% assaults in the past despite being supported by blockchain technology that guarantees security, immutability, and total transparency. While there are several ways that hostile parties may 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 subsequently seizes control of it.
The majority of 51% of assaults 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 corrupt a blockchain.
How to recognize a 51% assault
Understanding how blockchains store transactions, validate them, and the many protections built into its design to thwart any tampering is crucial before diving into the tactic used in a 51% assault. A blockchain adopts one of two types of 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 themselves are records of transactions that have taken place on the network.
A proof-of-stake (PoS) blockchain needs nodes to stake a set amount of the native currency to acquire validator status, in contrast to a proof-of-work (PoW) blockchain where nodes must solve challenging mathematical problems in order to validate transactions and add them to the blockchain. On any case, commanding more than 50% of the staked tokens in the blockchain or controlling the network’s mining hash rate can be used to launch a 51% assault.
PoS and PoW
Imagine if more than 50% of all nodes that carry out these validating duties band together in order to release a new version of the blockchain or carry out a denial-of-service (DOS) attack to comprehend how a 51% assault operates. The latter is a sort of 51% assault in which the attacking nodes go about adding new transactions to the blockchain or deleting existing ones while the remaining nodes are blocked from carrying out their tasks. In either scenario, attackers run the risk of undoing transactions and even spending the native crypto token twice, which is equivalent to printing fake money.
A 51% assault is depicted in a diagram.
It goes without saying that a 51% assault of this kind may damage the whole network and inadvertently result in significant losses for holders of the native coin. For big blockchains like Bitcoin or Ethereum, altering the original blockchain needs an incredible amount of computer power or staked cryptocurrency, but for smaller blockchains, it isn’t as difficult.
Even a DOS assault has the potential to stop the blockchain from working and have a detrimental effect on the value of the underlying cryptocurrency. Only the most recent or upcoming transactions done on the network are at danger since it is unlikely that prior transactions older than a specified cut-off may be reversed.
Possibility of a Bitcoin 51% assault
As more hashing power or processing power is used per second for mining on a PoW blockchain, the likelihood of a 51% attack lowers. For the Bitcoin $16,849 network, attackers 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 each. This would put them in control of more than half of the Bitcoin hash rate, which is currently 290 exahashes/s.
In order to have a chance of carrying out a 51% assault on the Bitcoin network, attackers would have to spend about $10 billion on mining equipment. Other factors include the price of electricity and the fact that they would not be eligible for any of the mining benefits offered to trustworthy nodes.
The situation is considerably different for smaller blockchains like Bitcoin SV, where the network’s hash rate is around 590PH/s, making the Bitcoin network over 500 times more powerful than Bitcoin SV.
But on a PoS blockchain like Ethereum, it would take more than half of the entire amount of Ether ETH $1,270 tokens that are tied up in staking contracts to be controlled by bad parties. Simply buying the necessary processing power to even have a remote chance of conducting a successful 51% assault would cost billions of dollars.
Additionally, if the alleged assault is unsuccessful, all staked tokens can be seized or frozen, giving a severe financial damage to the parties involved.
How can a blockchain be protected from a 51% attack?
Verifying that no one company, group of miners, or even mining pool owns more than 50% of the network’s mining hashrate or the total amount 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 as necessary. Unfortunately, the Bitcoin Gold (BTG) blockchain was unable to foresee or stop this from occurring in May 2018, and a subsequent assault in January 2020 resulted in the double spending of roughly $70,000 worth of BTG by an unidentified individual.
In each of these cases, the 51% assault was made feasible 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 assaults on Bitcoin Gold do 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 costly ASIC miners to mount a 51% attack on the Bitcoin Gold network since it employs the Zhash algorithm, which enables mining even on consumer graphics cards.
The 51% assault example does demonstrate the greater security controls provided by ASIC miners as they require a larger investment to get and are created particularly for one blockchain, rendering them worthless for mining or attacking other blockchains.
However, even a small number of them might possibly control more than 50% of the smaller network hashrate of the altcoin in the event that miners of cryptocurrencies like BTC switch to smaller altcoins.
Furthermore, the price of conducting a 51% assault might be significantly decreased thanks to service providers like NiceHash that enable consumers to rent hashing power for speculative cryptocurrency mining. This has highlighted the necessity for continuing 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 mechanism to track and report any suspicious transactions that could have double-spent the native token during a 51% assault on several PoW blockchains and associated cryptocurrencies.
Blockchain infrastructure used by cryptocurrencies including Hanacoin (HANA), Vertcoin (VTC), Verge (XVG), Expanse (EXP), and Litecoin are just a few instances that were subject to a 51% assault, according to the DCI project.
Even though the attackers did not mine any new blocks and double-spent LTC tokens that were worth less than $5,000 at the time of the attack, the Litecoin attack in July 2019 is a typical example of a 51% attack on a proof-of-stake blockchain.
This does demonstrate the lesser likelihood of 51% assaults on PoS blockchains, making them less desirable targets for network attackers. This is only one of the many reasons why more networks are converting to the PoS consensus mechanism.