51% attack

Over the past year or so, a number of cryptocurrencies have come under 51 percent attack.

To understand what 51 percent attack is, we need to step back and understand a few concepts about how blockchains operate.

Decentralized networks have long existed before Bitcoin, the most notorious being Bittorent.

Yet Bitcoin is the first use of a decentralized network for finance.

But what makes Bitcoin’s decentralized network distinct from earlier P2P networks? In Bittorent, the same copy of a movie can be downloaded and shared several times.

However, when it comes to finance, transition of digital value has to be spent only once.

If Brielle sends Reva Bitcoin, we must be able to check that Brielle no longer has the bitcoin and that Reva has it. Nor should Brielle be able to undo the transaction afterwards to own the spent Bitcoins again.

In action, a blockchain is a form of democratic governance with pre-coded rules. The nodes (miners) check the transactions on the blockchain.

The more nodes, the stronger and more stable the blockchain is.

On top of that, the more the lack of confidence between the miners, the more stable the network because transactions can be checked without a vested interest.

51% attack

A 51 percent attack happens when a malicious miner(s) is able to control more than 51 percent of the hashing power in a network, allowing them to carry out unorthodox transactions, such as double-spending.

To understand how this works, we have to go into how Bitcoin records new transactions to its blockchain.

When a Bitcoin owner signs off a transaction, they add to the pool of unconfirmed transactions.

It is from this pool that miners pick transactions to build a block to add to the blockchain.

The Bitcoin blockchain’s speed is sluggish, supporting only 7 TPS. Transactions with higher transaction fees are given priority because they provide higher rewards to the miners.

To link transactions in the waiting pool to the blockchain, miners need to solve a mathematical problem using their computing capacity.

If the solution is found, the miner will broadcast it to the network and other miners will only accept it if all transactions in the block are legitimate according to the current previous transactions on the blockchain (this is consensus) (this is consensus).

The first step of the double-spend attack vector happens when a bad actor decides not to broadcast the solution, instead building a parallel blockchain, and adding more transactions to it.

At this stage, other miners can only add transactions to the true blockchain and not to the malicious actor’s secret blockchain.

The bad actor is still able to spend his Bitcoins on the true blockchain, but he does not record such transactions on his private blockchain.

The result: Bitcoins are invested on the real blockchain and not on the isolated one.

To be able to double-spend the Bitcoin, the miner would need to push the other miners to switch to the private blockchain, as the underlying governance protocol dictates.

This is where the hard part starts.

Miners follow the longest chain. The majority of miners inherently have a higher accumulated computing capacity, thereby they can add transactions to the blockchain faster than on a competing parallel chain run by one person.

Therefore, if the malicious actor can get the majority of hashing power, they can add transactions to the malicious chain quicker, making it the real blockchain.

Once the miner’s private blockchain surpasses the true blockchain’s true length, it can be broadcast to the network. Then, once the rest of the network discovers the current version of the blockchain is actually longer, they are forced to turn into the new chain.

When this occurs, all wallet balances and pending transactions are changed according to the new chain. All transactions not reported on this chain are automatically reversed.

This includes the malicious actor’s earlier spending, which is returned back to his pocket, allowing them to spend it again on the new chain.

This is a double-spend attack, or a 51 percent attack.

51% attack on Bitcoin

It is very difficult to conduct a 51 percent attack on Bitcoin because of the cost factor of obtaining the network’s control.

It will be incredibly costly to buy all the mining hardware to surpass half the Bitcoin network’s hashing capacity. Not to mention the operational risks (electricity cost, storage space for hardware, money laundering) and even the possibility of prosecution.

51% attack on other blockchain

Although Bitcoin is arguably the most stable decentralized network, other blockchains are more fragile.

A large network with a Proof-of-Work consensus protocol is very hard to compromise unlike a smaller blockchain using the same algorithm due to the reduced amount of hashing power for the attacker to deal with in the latter case.

A number of altcoins have fallen to the 51 percent assault in the recent past.

Blockchain Security

Blockchain protection is the umbrella term used to describe safety against attacks on all levels of blockchain networks. Blockchain security can be divided broadly into three parts:

• Infrastructure level: protection of design and implementation. Case in point 51 percent attacks, Sybil and DDoS attacks

• Smart contract: protection of token contracts such as NEP-5, ERC-20

• User level: protection of wallets, websites, passwords 2FA

The double-spend attack is an example of an infrastructure-level blockchain security attack.

The odds of a 51 percent attack hinge on the network’s degree of decentralization; the more nodes on the network, the harder it is to pull off.

In addition, this attack can only be revelled at Proof-of-Work blockchains like Bitcoin or Ethereum.

Most of the forthcoming blockchains are using modern consensus algorithms including Proof-of-Stake, more mixed versions of the two or entirely new ones altogether.

The network’s ability to withstand a 51 percent attack is testament to its security. People will lose trust in a network that has experienced a successful 51 percent attack because a double-spend attack beats the logic of a cryptocurrency in the first place.

Due to the high risk involved, attackers only push through 51 percent attacks to be able to reverse transactions worth significant amounts of money or to threaten highly important parties such as exchanges.

To be more safe, the higher the number of confirmations of a transaction, the harder it is to steal those particular coins.

Other solutions

Using a Proof-of-Stake consensus algorithm is the most straightforward

Building a coin on top of another blockchain. For example, you cannot level a 51 percent attack on an ERC-20 token built on top of Ethereum.

Interchain connecting.