A 51 percent attack refers to an attack on a blockchain where a group of miners takes control of over 50 percent of all the network’s computing power or mining hash rate. These attackers prevent new transactions from being confirmed which allows them to prevent transactions to some or all users. By taking control of the network, the attackers are also able to reverse transactions that had been completed while they controlled the network which means they can double-spend coins.
However, it’s important to note that even though the attackers can take control of the blockchain, they are not capable of creating new coins or alter the old blocks. So a 51 percent attack can’t destroy a blockchain based currency out rightly even though it can be highly damaging.
Understanding a 51 Percent Attack
Bitcoin and other cryptocurrencies are based on a distributed ledger technology known as a blockchain. The ledgers are used to record all the transactions that are made on a coin’s network. The records are available for all users and the public to see and review. This means that no individual can spend a coin twice on the network.
However, there are private blockchains that integrate permissions that can prevent specific users of the general public from viewing all the data on the blockchain.
So, simply put, a blockchain just like its name is a chain of blocks made up of data where all complete transactions are recorded within a period. The first blockchain was that of Bitcoin, a cryptocurrency that was launched in 2009. A new block on the Bitcoin network is produced after every ten minutes.
When a block is produced “mined” it cannot be altered since a fraudulent version of the block can quickly be identified and rejected by the network users.
But, if a group of attackers can gang up together and control the majority of computing power on a blockchain network they can interfere with how blocks are recorded. As a result, they can prevent other miners on the network from completing blocks which results in monopoly and earns the attackers all the rewards.
Attackers can also block the transaction of other users. They are also able to send transactions and reverse them making it seem like they haven’t spent their coins. This results in double-spending which is the same as “perfect counterfeiting.”
The blockchain was designed to prevent such a situation, and if it occurs, it can lead to a loss of confidence in a network.
Since Bitcoin was created paving the way for many other crypto coins, many projects have suffered a 51 percent attack. Below we are going to look at five projects that have experienced the attack.
Occurring in Jan of 2019, this is the latest 51 percent attack to happen. Coinbase was the first exchange to identify multiple instances where the attackers had exploited the majority hash rate, and this enabled them to carry out double spend attacks.
According to engineers at Coinbase, the attackers had successfully managed to reorganize the Ethereum classic blockchain with several double spends repeatedly. The value of the double spends according to the firm stood at 219,500 ETC worth around $1.1 million at the time.
Privacy-focused crypto coin ZenCash (ZEN) succumbed to a 51 percent attack last June where the attacker managed to escape with more than 23,152 ZEN valued around $700,000 at the time.
An official statement released by platform indicated that a malicious miner had managed to execute an attack that includes three double spends successfully. One of the double spends saw the attacker reorganize the blockchain by a full 38 blocks.
Last May Verge succumbed to its second attack within two months after the attacker managed to exploit a bug on the Verge code. This allowed him to set false timestamps on blocks and proceed to mine new blocks quickly.
Verge uses a rotation of five different mining algorithms. According to an image shared on BitcoinTalk by ocminer, the attacker managed to gain control of two of them – lyra2re and scrypt – managing to mine them at almost no difficulty. He then used fake timestamps to trick the network to accept them into the main chain.
An in-depth analysis of the Verge blockchain revealed that the attack had occurred between blocks 2155850 and 2206272. This helped the attacker to vanish with around 35 million XVG at the time worth approximately $1.75 million.
Two months earlier Verge had experienced a similar attack where a malicious miner had managed to acquire around 20 million XVG worth $1.1 million at the time.
In May of 2018 Bitcoin Gold, a lesser-known offshoot of Bitcoin was also compromised, and the attackers managed to take more than 388,000 BTG from crypto exchanges at the time. The attackers managed to make a series of false deposits where the money didn’t end up on the recipient exchange.
Explaining the attack, Bitcoinist noted:
“The attacker sends a particular number of BTG tokens to an exchange, trades them for another coin and makes a withdrawal. The hacker then returns those same coins in his/her wallet, hence the double-spending problem. Thus, the attacker can spend and hold the same coins at the same time. Looking at the image above, if all 76 transactions were indeed part of the hack, then the hacker has stolen about $18 million based on the current BTG price.”
The attack would see BTG delisted by Bittrex in September of last year after the Bitcoin Gold Organization declined to compensate them the 12,371 BTG coins they had lost due to the double spend.
May 2018 also saw Monacoin a popular crypto coin in Japan fall victim to a 51 percent attack. As it was discovered later the attack was a result of selfish mining – which occurs when a miner manages to mine a block successfully but doesn’t broadcast the new block to other miners.
So if the secret miner manages to find a second block before the other miners find new blocks, then this mysterious miner can create a branch in the chain which is longer than the chain others have been working on. The attack caused damages worth around $90,000 at the time.
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