What is a 51% Attack?
Before we discuss what a 51% attack is, it's important to have a good idea of what mining-based and block chain.
One of the biggest strengths of Bitcoin and its blockchain system is its distributed way of building and verifying information. The decentralized work of the nodes (nodes) ensures that the protocol rules are followed and that all network participants agree on the current state of the block chain. This means that most nodes need to come to a consensus on the mining process, the version of the program that should be used, and the validation of transactions.
The Bitcoin (Proof of Work) consensus algorithm ensures that miners can only validate new transaction blocks if the “nodes” collectively agree that the block hash provided by the miner is correct (ie, the block hash certifies that the miner tried hard enough to find a solution to that block's problem).
The structure of the block chain — decentralized and distributed — prevents any centralized entity from using the network for its own benefit, and this is the reason why there is no dominant authority of any kind in the Bitcoin network.
The mining process in Proof of Work systems involves a huge use of energy and computational resources. Therefore, a miner's performance is calculated by how much computational power he has, which is often called hash power or hash rate.
There are several mining nodes in different locations and they compete to find the next valid block hash and, if successful, are rewarded with new bitcoin units.
In this context, mining power is distributed among multiple nodes around the world, which means that the hash rate is not in the hands of a single entity. At least this is not what is expected.
But what happens when the hash rate is no longer evenly distributed? What happens when, for example, a single entity or organization manages to get more than 50% of all the hash rate power? One of the possible consequences is what we call the 51% attack, also known as the majority attack.
What is a 51% Attack?
A 51% attack can be performed against Bitcoin or any other block chain network, in which a single entity or organization is able to control the majority of the hash rate, and can cause and exploit system failures. In other words, the attacking agent would have enough mining power to intentionally erase or modify the order of transactions.
An attack of this level makes it possible for malicious entities to roll back transactions they made while in control, which could lead to a duplication of spending problem.
A 51% successful attack would also allow the fraudster to prevent some or all transactions from being confirmed (a process known as a denial of service attack) or prevent some or all miners from continuing their work, resulting in what we call a mining monopoly .
On the other hand, there are some things the 51% attack cannot do, such as revoking transactions from other users or preventing new transactions from being created and transmitted to the network. Furthermore, the invading entity is not able to create new Cryptocurrencies out of thin air, change the block rewards, or steal coins that never belonged to them.
What is the Probability of a 51% Attack?
As the blockchain is maintained by a network of distributed nodes, all participants cooperate to reach consensus. This is one of the main reasons why block chain networks are considered secure. The larger the network, the better its protection against attacks and data tampering.
In chain-block networks that use the Proof of Working algorithm, the more hash rate a miner has, the greater the chances that he will find a valid solution for the next block.
This applies because mining involves a lot of trials to solve the calculation, and the more computing power, the more trials per second and the greater the chances of finding the result.
Several miners have joined the Bitcoin network in an attempt to contribute to its growth and security. Over time, the rising price of Bitcoin as a currency has caused many new miners to join the network to compete for the reward of solving encryption problems (currently 12,5 BTC per block).
This very competitive landscape is one of the reasons why the Bitcoin network becomes very secure. Miners are not encouraged to invest resources if they are not in fair and honest competition in an attempt to obtain the reward.
Therefore, a 51% Bitcoin attack is very unlikely due to the magnitude of the network. Once the block chain becomes large enough, the investment required by a single person or group to get enough computing power to dominate all the other participants reaches an unreachable level.
Furthermore, changing previously committed blocks becomes increasingly difficult as the network grows, as the blocks are all linked by cryptographic evidence.
For the same reason, the more commits a block has, the greater the costs to change or reverse its transactions. Therefore, a successful attack would likely only be able to change the most recent block transactions for a short period of time.
Moving on, let's imagine a scenario where a malicious entity is not motivated by profit, but decides to attack Bitcoin just to destroy it, no matter what the cost. Even if the attack succeeds in bringing the network down, the Bitcoin program and its protocol would quickly be modified and adapted to respond to the attack.
This would require the other nodes in the network to reach a consensus for the changes to take place, but this would hardly be a problem in an emergency situation. Because of this, Bitcoin is very resistant to attack and considered to be the most secure and trusted digital currency there is.
While it's very difficult for someone to get more computing power than the rest of the Bitcoin network, this isn't impossible when it comes to smaller Cryptocurrencies.
When compared to Bitcoin, altcoins typically have little computing power protecting their block chains. Just enough to allow a 51% Attack. Some notable examples of Cryptocurrencies that have fallen victim to this attack include Monacoin, Bitcoin Gold, and ZenCash.
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