51% attack: how it works and how to avoid it

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What is an attack 51%

You have repeatedly met in the articles about the blockchain such a term as “51% attack”. In principle, based on the name, you can guess what it means, but why not find out more? In our new review, we will tell you everything you need about the 51% attack.

A 51% attack occurs when a person or group of miners gain control of the processing power, which is 51% of the entire network. This makes it possible to work with greater mining ability compared to other users. An attack can cause irreparable damage to the entire network. Blockchain technology at various stages of its operation faces various problems.

Many of them have been resolved, but the attack of 51% for many years worried the cryptocurrency community. Fear of attack is based on the fatal consequences that can occur after. For example, a critical change in the ecosystem and irreparable financial damage.

How the attack works 51%

It should be clarified how blockchain technology resolves conflicts when it encounters two different chains. If a network encounters two different chains, it will always prefer the largest. The hacker begins to reorganize the blocks, and he needs to overtake all the chains in order for his chain to become valid. In this case, 49% of the network believes that the hash mined by the miner is true, and other nodes have no choice but to accept this as a fact.

The only way to change this is to branch the chain, which is extremely rare. According to the protocol, those who get 51% control over the network can benefit from ecosystem changes or affect the optimal performance of other participants. In principle, less power is sufficient for branching, but only 51% of the hashrate allows you to secretly create an alternative chain with 100% probability.

Costs and consequences of an attack 51%

There are several options for using an attack that can benefit an attacker and problems for all other interested parties.

  • The first scenario that may take place is a significant acceleration of the mining process in comparison with other users. Due to the impact of the attack, most of the mined blocks in the system will be transferred to the attacker, which will reduce the corresponding percentage of production for other miners.
  • The second scenario says that having such power over the network, the attacker can cancel the transaction or prevent its confirmation.

But despite the existence of these scenarios, a person or group that controls more than 51% of network hashing will never be able to perform actions such as:

  1. Determination of addresses of senders and recipients of transactions;
  2. The change in the remuneration that the miner receives for generating the block.

 What is double spending

Double expenses are a waste of the same tokens more than once. Blockchain-based decentralized currencies can be called vulnerable to 51% attack, since an attacker can rewrite transaction history thanks to control over most of the network. It becomes possible to spend digital currency, and then completely get rid of the records associated with this payment and spend the same currency again.

Double cost prevention can be divided into two forms:

  • Centralized (outside the cryptocurrency) – based on trusted intermediaries who can watch the transaction and accept the payment;
  • Decentralized (associated with cryptocurrency) – there is no controlling body, which means that double expenses are impossible due to the fact that all transactions are combined into blocks that cannot be deleted or changed (without 51% attack).

 How to avoid an attack 51%

  • Upgrade to PoS or other consistent mechanism. The Proof-of-Stake algorithm is much safer and makes the system unprofitable for attacks.
  • Using an ASIC-resistant algorithm.
  • Increase the number of required confirmed transactions. All types of platforms that accept cryptocurrencies that may be the target of an attack should increase the maximum allowable transaction limit.

What were the most famous attacks 51%

Ethereum Classic cryptocurrency was attacked in January 2019. Gate.io published an ETC transaction analysis on its platform during the alleged attack, claiming to have detected seven transactions, four of which were committed by an attacker, resulting in a total loss of 54,200 ETC (equivalent to $ 271,500).

Gate.io reports that the incident occurred between 0:40 and 4:20 on January 7, 2019 GMT, during which transactions were confirmed on the blockchain and then canceled. It is curious that the author of the attack returned ETC in the amount of $ 100,000. Most likely, the so-called “white hacker” participated in this incident, who for the most part wanted to remind people of the vulnerability of the system. The Bitcoin Cash cryptocurrency was attacked in May 2018. The fraudster stole 388,200 BCH, which at that time was equivalent to 18.6 million dollars.

The basic theory is that the attack was carried out due to a hacker’s own mining pool and rented objects. The hacker deposited a large number of BCH on various exchanges and transferred the same money to his wallet. When the operators and the automatic exchange systems noticed that the transactions were invalid, it was already too late.

The criminal withdrew his funds and doubled his profit. The Bitcoin cryptocurrency was close to an attack in 2014. The largest pool was GHash, which at the same time is the founder of the CEX.IO exchange.

They were able to overcome the threshold of 51% of the hash rate in the network, however, after a general outrage due to a decrease in resources, they agreed to reduce their capacity to 40%, while asking participants in their project to move to other platforms. However, this situation still led to a drop in the rate of bitcoin by a quarter of its value.

 Review completion

At the moment, blockchain developers continue to search for ideal solutions that will make an attack of 51% absolutely impossible. But in fact, there are not so many reasons for concern. If you calculate the cost of an hour of attack, for example on bitcoin, then the possible profit will be significantly less than the cost. A hacker will have to spend so many resources that his attack simply does not pay off.

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