Many cryptocurrency enthusiasts have learned of 51% attacks but are unsure of the specifics or if they pose a real danger. This comprehensive guide will clarify all of the information, as well as options for reducing the likelihood of 51% attacks.
What is a 51% attack?
A 51% attack is a form of attack that occurs on a proof-of-work (PoW) blockchain. The blockchain is a digital distributed ledger system that keeps track of all transactions on the network.
PoW is the blockchain's initial consensus form. It's a system in which cryptocurrency miners are rewarded for validating transactions on the blockchain. A effective 51% attack means that one party or person controls the majority of the computing power on the blockchain network.
How does 51% attack works?
Mining for cryptocurrency takes place on strong computers that solve complex mathematical problems. When a miner solves one of the puzzles, a new blockchain section containing just-confirmed transactions is created. The first miner to solve the problem is rewarded with a set sum of cryptocurrency.
The answer to each math problem is referred to as a hash. The hash rate of a blockchain reflects the total processing power of all miners on that blockchain. As a result, a 51% attacker gains power and is linked to the majority of the blockchain's hash rate.
The structure of a blockchain is made up of groups of blocks that contain data bundles. Each block contains information that has been checked on the blockchain in a certain period of time. Every 10 minutes, for example, a new block is added to the Bitcoin blockchain.
The effectiveness of a cryptocurrency miner in solving math equations is largely determined by their computing strength. Normally, the power is spread across the globe. No one can change the details after it has been finalized by a cryptocurrency miner.
However, the main problem with a 51% attack is that it allows the individual or group in charge of the hash rate to interfere with the creation of new blocks. They could make all of the new ones themselves and reap the benefits.
What are the potential dangers of 51% percent attacks?
If a malicious party or entity uses a 51% attack to take control of a blockchain network, there may be a number of unintended consequences. They might, for example, prevent confirmations for any or all transactions, causing a problem known as transaction denial of service.
Furthermore, 51% attacks allow responsible parties to halt all or some blockchain mining operations, resulting in a "mining monopoly." Another problem is that the perpetrator of the 51% attack could lead to a double-spending situation. When people delete transaction proof or post fake versions of transactions to the blockchain without investing any cryptocurrency, this happens.
That person, on the other hand, would be unable to delete the transactions made by other users. They wouldn't be able to produce new currency by bypassing the mining process, nor would they be able to prevent the blockchain from broadcasting its transactions for everyone to see.
What are the chances of a 51% attack?
An attack on a blockchain network with a large number of participants is more complicated. That's because their combined computational power is often greater than what a person or group working together can achieve.
As a result, analysts believe that smaller, mining-based cryptocurrencies are the most vulnerable to 51% attacks. If they use a well-known blockchain to store their coins, a hacker just needs to understand the algorithm to figure out how to attack it.
There were five 51% attacks in one month in 2018, all on relatively small blockchains. Before that, it was assumed that hackers would never mess with the larger companies. Successfully attacking those would necessitate much too much computational power and, as a result, would be prohibitively expensive.
However, as 51% attacks became more common, some people began to worry that larger networks would be vulnerable as well.
How will blockchain networks protect themselves from 51% attacks?
The PoW consensus model was first used in Bitcoin's blockchain. Any miner participating in a blockchain network is a node in this case. To complete work and check the validity of a contract, the node must follow a pre-determined procedure.
Satoshi Nakamoto, the founder of Bitcoin, explained the PoW process in a white paper. The idea was that most miners would be trustworthy, protecting the blockchain from attacks.
Application-specific integrated circuit (ASIC) miners are a form of cryptocurrency mining equipment. That is, it can only be used to mine a specific type of cryptocurrency. People with universal mining equipment will participate in the development of new cryptocurrencies using so-called ASIC-resistant blockchains.
Creating such blockchains prevents people from dominating a network with costly and efficient ASIC machines. Allowing more miners to participate increases the total processing capacity available to them.
Moving to a proof-of-stake (PoS) model will also reduce the likelihood of 51% attacks. People with the computational power to solve the mathematical equations are rewarded under the PoW model.
PoS, on the other hand, distributes mining power to citizens based on how many coins they own. Furthermore, a miner can only confirm a certain amount of transactions based on the cryptocurrency they own.
Outsiders are unable to gain leverage under this model. It also prevents people from planning surprise attacks. This is because holding the majority of available coins would necessitate exceptional resources.
