What is a 51% attack
Decentralization of cryptocurrency lies at the heart of the sharing of network power among miners around the world. The most significant drawback of blockchain technology is considered to be the possibility of a 51% attack, which can destroy the reputation of cryptocurrency and harm the entire transaction chain.
An attack of 51% is a capture of the system, in which the attacker’s power exceeds the rest of the system’s power by at least 1%. By mastering a controlling power package, an attacker can single-handedly manipulate the system, control all transactions in it and generate blocks.
In the role of attackers can act as one miner, with a large concentration of computer technology, and the group – the pool.
It is also worth noting that owning 51% of the power of the entire network is not an attack, as long as the participant acts in accordance with the rules and does not interfere with the natural operation of the system. Although this harms other miners and makes mining unprofitable, but if the transactions are confirmed correctly, then the participant does not harm the system. For example, having captured 51% of the Bitcoin network capacity, a user can almost honestly earn about 900 BTC per day. The attack begins where the participant uses his advantage for dishonest prey.
Cryptocurrencies operating on blockchain technology are based on distribution registers, the transactions for which are confirmed by miners. The more computing power is concentrated in the hands of the miner, the more chances there are to find the right solution first, to get the right to create a new block and the corresponding reward for confirming the transaction.
Accordingly, if 51% of the processing power of the entire system is in the hands of a miner or a pool, then this particular participant is guaranteed to be able to individually control all operations on the system, generate blocks, confirm or block transactions.
What does the attacker get
Owning 51% of the network capacity, an attacker can:
- Freeze the system;
- Stop transaction confirmation
- Pause mining;
- Deprive other miners of the ability to confirm transactions;
- Deduct funds again.
The greatest danger to the system is considered to be double spending. So, owning 51% of the power, an attacker can create a hidden alternative blockchain and use it to confirm their own transactions. For example, a transaction confirmation on a Bitcoin network requires six disclosed transaction blocks. Accordingly, the attacker needs to create six blocks. Then he writes off his funds on the main blockchain, for example, transfers to another account or pays for the purchase, and opens his own block chain, causing a conflict in the system. If both miners found the right solution for one block, then the network branches, where both solutions have the right to exist and are included in the next block of transactions.
The remaining 49% of the network’s capacity confirms the withdrawal of funds from the account, but since the attacker has control power, the system recognizes the attacker’s transaction network as correct, in which he did not yet write off the funds, and the transaction confirmed by other miners will be discarded, since the attacker’s block is very difficult. Accordingly, the balance will be reflected in the system before the transaction is completed and the attacker will be able to spend the money several more times, but with each subsequent time the cost of the coins will decrease.
Double debiting of funds is possible even with less control of capacities, but just concentrating 51% provides a 100% guarantee that an attacker’s block will be recognized as a true block.
With 51% of the system’s power in hand, the attacker practically becomes the owner of the blockchain, can independently generate blocks, confirm and reject transactions. Having taken possession of the system, you can also stop its operation by refusing to confirm all transactions.
Attack Cryptocurrencies 51
Unfortunately, an attack in 51% affects all cryptocurrencies where transaction confirmation is carried out by network participants.
For cryptocurrencies operating on the PoW algorithm, where transaction confirmation is carried out through the computing processes of the miners and confirmation of the work done, the attacker should concentrate 51% of the network power in his hands.
For digital currencies running on the PoS algorithm, where transactions are confirmed by validators with large accumulations of coins, an attack is possible when 51% of all coins are concentrated in the hands of the attacker. It is worth noting that an attack on a POS system is disadvantageous, but theoretically possible.
The most at risk of attacks are 51% of cryptocurrencies that have not yet received the proper popularity among users, respectively, the complexity of their network is much less than that of top cryptocurrencies. You can take advantage of the fork network by owning a relatively low power system. In commercial terms, this is less profitable than an attack on large structures, but you can neutralize a competitor.
Known cases ‘Attacks 51%’
In 2016, two cryptocurrencies operating on the basis of Ethereum, Krypton and Shift, were attacked by a group of hackers calling themselves “Team 51”. As a result of the attack, the attackers managed to double charge and steal 22,000 coins through the Bittrex exchange.
The most precedent case occurred with the Verge cryptocurrency, but this attack was made possible due to an error in the code. Anonymous cryptocurrency functioned on several algorithms at once, which were supposed to change with the creation of each new block, but a bug was discovered in the code, due to which attackers sent blocks with a false time stamp to the network.
Blocks were generated and sent every second, instead of the set timer in 30 seconds. The attack lasted three hours, the attackers managed to capture 99% of the blocks. According to official data provided by the developers, the system fraudulently managed to withdraw 250,000 tokens, but, according to users, the real figure reaches almost 4 million.
51 attack on bitcoin
At the moment, to capture 51% of the capacity of large networks of Bitcoin or Ethereum is almost impossible, since the computing power of the network is very large and growing daily.
According to experts, only large manufacturers of mining equipment or pools can take possession of most of the Bitcoin network.
In 2014, 55% of the Bitcoin network was taken over by the Ghash.io pool. Despite the fact that this was not a planned attack, and the pool itself voluntarily agreed to lower power indicators and henceforth promised not to exceed 40% of the threshold, the bitcoin rate fell by a quarter of the cost.
This is explained by the fact that it is economically unprofitable for large pools and manufacturers of computing power, since during an attack, capitalization falls in relation to stolen coins, which inevitably drops the reputation of the cryptocurrency and its value. That is, only those who have earnings from it can take possession of 51% of a large network, but it is not profitable for them.
However, an attack of 51% may become a serious problem for Bitcoin in the future. Every four years, the reward for solving a block is halved. If now it is estimated at 12.5 ВТС, then by 2020 it will be 6.25 ВТС, and if Bitcoin’s value by this time cannot cover the difference in remuneration and production costs, then the miners will leave the production en masse and the system will become vulnerable.
Why is a 51% attack dangerous
A 51% attack on the network entails:
- Possible suspension of mining and verification of transactions;
- Decline in reputation and trust in cryptocurrency;
- Decrease in capitalization;
- Depreciation of tokens.
In recent years, an attack of 51 percent and the fears associated with it have managed to build up a huge number of myths, but according to experts, its destructive effect is too exaggerated, and the costs are not always able to exceed the income from the attack.
An attacker can change the history of transactions only in his blockchain, it is impossible to make changes to the history of transactions made earlier, therefore user funds cannot be stolen. An attacker cannot also change the blockchain technology.
An attack of 51% on large networks is too expensive to invest in equipment. In order to recapture this money, it is necessary to have a huge amount of coins for double debiting in your wallet, since with each subsequent false debiting, their value will decrease.
The highest risk attack is 51% for developing cryptocurrencies. It is easy to get hold of such a system, and although this does not bring significant profit, it will do irreversible harm to the cryptocurrency, which will lose the trust of users and most likely will cease to exist.
In addition, owning 51% of the power deprives the cryptocurrency of decentralization, as it becomes possible to make decisions on transaction confirmations individually. This can even act as a method of controlling the cryptocurrency market by the government.
How to protect yourself from attack
At the moment, to protect cryptocurrencies from attack, you should increase the popularity and, accordingly, the power of the network, offer new ideas and attract a new audience.
As long as mining remains profitable and there are a huge number of users in the system, it is extremely difficult to attack the system. As soon as the profit from mining becomes less than the cost of buying and maintaining equipment, miners will remove their capacities from the system and the network will become vulnerable.
Another solution is the PoS algorithm. Despite the fact that the theoretical possibility of attack exists, it is completely unprofitable. In order to take possession of 51% of the network, 51% of all system tokens should be acquired, which at times exceeds even the cost of computing equipment. In addition, it is not a fact that the developers will not notice this in a timely manner and will not take quick measures to neutralize the attack.
How to beat off the attack
If the attack was detected in a timely manner, then the developers can make a hard fork.
Hard fork – a fundamental change in the cryptocurrency code, after which the connection with the old software will be completely broken. With hard fork, the actual creation of a new cryptocurrency and a network split occurs.
At one time, Bitcoin Gold, the hard fork of the most famous cryptocurrency, appeared. True, the reason for the appearance was not an attack on the Bitcoin system, but personal conflicts with the creator of the first Bitcoin Cash hard fork, which occurred against the background of insufficient capacity of the Bitcoin source code.
Hard fork is not essential for coin holders, since in the future they will have the opportunity to transfer their savings to the new system, but for the attacker, such a solution to the problem threatens to lose the value of the loot.
Theoretically, an attack of 51% is possible on all cryptocurrencies. But the capture of 51% of the power of popular cryptocurrencies is not relevant and will not become critical, but for small projects that did not attract a huge number of miners, it can become fatal. Accordingly, the ability to capture the system also performs the function of natural selection of cryptocurrencies, in which only projects capable of maintaining the functionality and demand of the cryptocurrency at the proper level survive. For ordinary investors and miners, capturing the system is dangerous only by temporarily stopping transaction confirmation and reducing the cost of coins. Before making an attack, a hacker should think twice and calculate the appropriateness of the cost of achieving the goal and the possibility of making a profit from it.