Get the weekly summary of crypto market analysis, news, and forecasts! This Week’s Summary The crypto market ends the week at a total market capitalization of $2,17 trillion. Bitcoin continues to trade at around $62,300. Ethereum experiences no changes and stagnates at around $2,400. XRP is down by 2%, Solana by 1%, and Dogecoin by 3%. Almost all altcoins are trading in the red, with very few exceptions. The DeFi sector decreased the total value of protocols (TVL) to around…
51% Attack – Everything You Need to Know About it
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This saying keeps repeatedly circling according to the strength of a cryptocurrency like Bitcoin in its network. The greater the number of individual contributors and supporters of the network, the higher its resiliency towards external threats. In the blockchain, there is a direct correlation between the number of participants and network security. There is strength in decentralization.
The reason for the interdependence between participants and security, at least for Proof-of-Work coins like Bitcoin, is the amount of work put in. The Proof-of-Work algorithm is a resource-intensive system, meaning that you must contribute specific resources to the network if you want to get the network reward; as more people join the network, the network’s appetite for resources increases. Thus, making it harder and harder for any single person to hack it.
But wait, what happens if someone does manage to gain enough resources? What if someone, directly or indirectly, works to gain access to much of the network’s power? Does decentralization still help? Is the network still secure and protected?
How to Attack the Bitcoin Network?
The Bitcoin Mining Process is the backbone of the Bitcoin Network. Briefly, mining verifies transactions by contributing computing power to the network and making it more secure. The “miners” are rewarded with new Bitcoins for contributing computing power. Unfortunately, as more and more people rush in to get the reward, the network’s ask for computing power increases, making it harder to verify a transaction and even harder to get the reward.
You need most of the computing power to make changes to a network. By taking charge of the existing 51% miners or introducing new miners controlled by a single entity, one can start thinking of making changes to the network’s blockchain.
But a 51% majority does not mean one can do whatever he wants. Most blockchain networks are designed such that even if they are not resilient to 51% attacks, they could reduce the damage done by such attacks.
What You Can Do With a 51% Majority
A 51% attack is a potential attack on a blockchain network, where a single entity or organization can control most of the network’s computing power (hash rate). The security of a network is in its decentralization. As no single entity is in control and power is distributed across all participants, hacks are unlikely. But if one manages to control 51% of the network participants or their resources, an attack can be likely.
This majority control can potentially cause a network-wide disruption. In a 51% attack scenario, the attacker should have enough hash rate (at least 51% of the network’s power) by which they could intentionally exclude or modify the ordering of transactions. They could also reverse transactions they made while in control – leading to a double-spending problem. With enough resources, the attackers can reverse past transactions, but only back to a few blocks.
What You Cannot Do With a 51% Majority
There is a limited set of things one can do with a majority. The Bitcoin network, as designed by Satoshi Nakamoto, was not resilient to 51% attacks. And so, as a “Plan B,” the number of things one can do after gaining the majority was minimal. By gaining a majority, one does not become a network owner. The blockchain will remain distributed, and the network’s history will remain intact.
A 51% Attack is unique because it is an expensive attack that has to be carried out from within the network. In most cases, the attacker will lose more money to maintain the computation power than the attack reward. With a majority, one will be unable to reverse transactions or stop other miners from sending their transactions and mining new blocks. Any changes to the network’s protocol also could not be made. For example, one cannot increase the block rewards or change the block rules.
As the strength of the Bitcoin network continues to grow, it gets harder and harder to carry out a 51% attack. Today, Bitcoin uses enough mining resources to compete with several first-world countries. However, tumbling upon computing power equal to an entire country is extremely unlikely.
A 51% attack is possible, given how powerful some mining groups have become. While it is to be noted that the impact of such an attack would be minor, the damage it causes could highly likely lead to the demise of Bitcoin’s trust altogether.
Examples of 51% Attacks
The history of 51% stacks is not that extensive, as there have been only a handful of successful attacks.
The Bitcoin Gold Hack
In January 2020, the Bitcoin Gold network faced a 51% attack, wherein the network users saw about $70,000 worth of losses. A similar attack on the BTG network was also seen in May 2018, where several attackers tried to double-spend $18 million of BTG from an exchange. Thus, key players lost their trust in Bitcoin Gold and its network resiliency.
Ethereum Classic Double Spend
Btc
Bitcoin
$62.547
price
price
0.84959%
price change
In January 2020, again, a group of hackers tried to gain most of the Ethereum Classic network, given its low hash rate. The hackers effectively got away with $1.1 million of ETC tokens by re-organizing the recent blocks and double-spending transactions. The attack was so fast that the attackers got away before the network realized the attack had even happened.
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Sudarshan M
@Sum
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