Understanding 51% Attacks on Blockchain Networks

51% Attack

51% Attack

Cryptocurrency and blockchain technology have transformed the financial landscape, offering decentralised and secure transaction methods. However, like any technological innovation, blockchain is not without its vulnerabilities. One of the most significant threats to a blockchain network is the 51% attack.

This article explores what a 51% attack is, who is at risk, notable examples, and the costs involved.

What Constitutes a 51% Attack?

A 51% attack occurs when an entity or group gains control of more than 50% of a blockchain network's hashing power or computational resources. This majority control allows the attackers to manipulate the blockchain's operations in several detrimental ways. They can prevent new transactions from being confirmed, effectively halting payments between users.

Moreover, they can reverse transactions that are not yet confirmed, which facilitates double-spending—a critical vulnerability that blockchain technologies like Bitcoin's proof-of-work mechanism are designed to prevent.

Blockchains function as distributed ledgers, recording every transaction within the cryptocurrency network. When attackers seize control, they can disrupt the normal recording of new blocks and exploit the network. However, altering historical blocks is exceedingly difficult, especially in well-established blockchains like Bitcoin. Smaller networks, in contrast, are more susceptible to 51% attacks due to their relatively lower computational power and security.

Mechanics of a 51% Attack 

A blockchain operates as a distributed ledger, storing transactions in blocks linked together via cryptographic techniques. Each block contains information about the previous block, creating an immutable chain of records. Consensus about transactions is reached through a validation process involving all network participants.

In a 51% attack, the attacker controls a majority of the network's hashing power, enabling them to create an altered blockchain. This altered blockchain is introduced at a specific point, and because the attackers control the majority, the network theoretically accepts their version. However, changing historical blocks is nearly impossible because the further back the transactions are, the more confirmations they have, making alterations highly impractical.

Cost of Attacks

Executing a 51% attack is challenging and expensive, especially on large networks. Attackers need to control 51% of the network's hashing power and create an alternate blockchain to introduce at the right moment. For instance, the WhatsMiner M63S, a leading ASIC miner, costs over $10,000 and has a hash rate of 406 terahashes per second (TH/s). To outpace the Bitcoin network, attackers would need thousands of these machines, making the attack cost-prohibitive.

Ethereum's Transition to Proof-of-Stake

After Ethereum transitioned to proof-of-stake, a 51% attack became even more expensive. Attackers would need to control 51% of the staked Ether (ETH). As of May 8, 2024, more than 32.3 million ETH were staked, meaning an attacker would need over 16.5 million ETH, valued at over $49 billion, to attempt an attack. Moreover, the consensus mechanism would likely detect and punish the attackers by slashing their staked ETH, resulting in significant financial losses.

Timing of Attacks

Besides the costs, the timing of a 51% attack is critical. Even with 51% control, attackers must introduce the altered blockchain precisely to outpace the creation of new blocks by honest participants. This is feasible in smaller networks with lower participation and hash rates, but nearly impossible in large networks like Bitcoin.

Results of a Successful 51% Attack

If an attack succeeds, the attackers can block or reverse transactions, leading to double-spending. Double spending is the digital equivalent of counterfeiting money, where the same cryptocurrency is spent more than once. Attackers may also launch a Denial-of-Service (DoS) attack, blocking other miners from adding new blocks and ensuring their altered chain becomes permanent.

Who Faces Risk from a 51% Attack?

Smaller cryptocurrencies with lower hash rates are more vulnerable to 51% attacks. Networks secured by ASIC miners are less susceptible than those that can be mined using general-purpose GPUs, as ASICs are more efficient and faster. Cloud mining services also pose a risk by making it easier to rent enough hash power to launch an attack.

Bitcoin Gold, a smaller cryptocurrency, has been targeted by numerous 51% attacks. Since June 2019, more than 40 such attacks have been recorded on Bitcoin Gold, Litecoin, and other smaller cryptocurrencies.

Bitcoin's 51% Attack Likelihood

As of May 8, 2024, Bitcoin's network hash rate stood at 569.29 exahashes per second (EH/s), with the top three mining pools collectively controlling 72.1% of this hash rate. FoundryUSA held 175.76 EH/s (30.9%), followed by AntPool with 161.77 EH/s (28.4%), and ViaBTC with 73.11 EH/s (12.8%). 

If FoundryUSA and ViaBTC were to collaborate, they could potentially surpass the 51% threshold of the network's hash rate. However, it's noteworthy that these pools have demonstrated stability over the years without any major issues, and any abrupt malicious activity would likely lead to a loss of trust from honest miners.

Cost of a 51% Attack on Bitcoin

A 51% attack on Bitcoin would require more than 304 EH/s of computing power, an enormous cost given that a single top-tier ASIC miner hashes at 406 TH/s and costs over $10,000. This translates to needing about 84,000 such units, a prohibitively high expense.

Conclusion

A 51% attack is a significant threat to cryptocurrency networks, particularly smaller ones. While larger networks like Bitcoin and Ethereum are less vulnerable due to their high security and participation, the risk remains. The cost and complexity of executing such an attack on a large network make it unlikely, but the potential impact underscores the importance of decentralised and secure blockchain networks.

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