51% Attack in a Nutshell
- 51% of attacks involve the attacker being able to gain control of more than 50 per cent of the hashing power
- By doing so, he or she is able to manipulate the data in the blockchain
- Successful attackers gain the ability to block new transactions from being confirmed as well as change the ordering of new transactions
- It also allows the malicious agents to essentially rewrite parts of the blockchain and reverse their own transactions, leading to an issue known as double spending
- 51% attack is incapable of creating new assets, stealing assets from unrelated parties or altering the functionality of block rewards.
Likelihood of a 51% Attack
- Cost to perform a 51% attack is correlated to the network hash rate
- The more miners, the more hash power, the more hashing power an attacker would require to perform an attack
- Therefore, for large networks like Ethereum and Bitcoin, the financial costs outweigh the cost, and therefore these attacks are unlikely
The Centralization Problem
- Currently, in the mining world, you can either mine with GPUs or ASICs. If you want to learn more about crypto mining: A Simple Introduction to Crypto Mining
- ASICs are so powerful that once a coin-specific ASIC is released, it is usually unprofitable to mine without one
- There are very few manufacturers of ASICs; this means that the space is highly centralized
- When a small number of companies have near-total control over distribution rights to hashing power for a cryptocurrency (via the provision of unequaled ASIC technology), the process of mining itself becomes more centralized
- Therefore, it adds to the 51% attack risk and threatens the existence of the blockchain (because if no one trusts the blockchain, no one will use it)
Examples of 51% Attacks
- Bitcoin Gold – May 2018: In the first attack, just after 18:00 GMT on Jan. 23, 14 blocks were removed from the blockchain and 13 then added. 1,900 BTG worth approximately $19,000 at the time were double spent in the redirect of one transaction. Just over six hours later, in the early hours of Jan. 24, another attack removed 15 blocks and added 16. 5,267 BTG ($53,000 at the time) were double spent in three transactions that were redirected.
- Ethereum Classic – July 2019: Attacker double-spent 807,260 ETC ($5.6 million) during this attack and spent 17.5 BTC ($192K) to acquire the hash power for the attack. The attacker also got 13K ETC as a block mining reward, which we are not including in our double-spent calculation.