Blockchain networks rely on group consensus to validate transactions and remain secure. 51% attacks, however, can exploit this system. Here’s how 51% attacks work.
Blockchain networks are highly resistant to hackers and bad actors, but that doesn’t mean they are invulnerable. A blockchain relies on the collaborative efforts of tens of thousands of nodes to police itself, relying on consensus mechanisms to ensure transactions are valid.
A 51 per cent (51%) attack, however, can potentially find a way around these safeguards and take control over a blockchain network, adding false transactions, reversing transactions, preventing transactions from occurring, or completely disrupt the operation of a network.
In order to understand how a 51 per cent attack works, it’s necessary to develop a basic understanding of what consensus is within the context of blockchains and how it is obtained.
What is a 51% Attack?
A 51% attack refers to a situation in which a single party or organization is able to gain control over more than 50% of the mining power, computing power or hash rate of a blockchain. Such an attack can have a profound impact on the operation of a blockchain and could allow an attacker to gain control over many different functions of the network.
A successful 51% attack could allow an attacker to do the following:
- Modify the order of transactions
- Exclude new transactions from being recorded
- Reverse transactions allowing double-spending
- Prevent transactions from being confirmed
- Double-spend coins
- Block other miners from mining new coins
A 51% attack would not, however, allow an attacker to prevent transactions from being created, or reverse transactions made by any network participant other than themselves. It’s also impossible for an attacker to use a 51% attack to create new tokens, such as Bitcoin, or take control over tokens on a chain.
Important to remember: Changing block data is difficult because past transactions are hard-coded into blockchain software.
What is Consensus?
Bitcoin and the blockchain technology that drives it operates via a decentralized system that assembles, verifies, and secures data without the need for a centralized authority or third-party arbitrator. The Bitcoin blockchain consists of over 10,000 mining nodes, all of which work together to ensure that the Bitcoin protocol rules are followed and all participants in the network agree on its current state.
This agreement is referred to as consensus — all network participants must agree on the current version of the Bitcoin software in use, mining processes, and how transactions are validated.
The Bitcoin network, for example, uses a consensus algorithm called Proof of Work. Within this consensus mechanism, miners collect groups of transactions into blocks and add them to the blockchain. To prevent miners from adding fraudulent blocks, a miner is only able to add a block to the chain if other nodes collectively agree that the miner found a valid solution to the block. This essentially means that miners must prove that they have made the necessary effort to process transactions.
This process allows the Bitcoin blockchain to self-regulate without the need for centralized authority and prevents any single party from gaining control. The mechanism that prevents a miner from adding a fraudulent block to the blockchain doesn’t enforce correct behaviour through group consensus alone, however.
In order to mine a block in a Proof of Work blockchain such as Bitcoin, a miner must commit a significant amount of computational power to the task, which incurs a significant electricity cost. If a miner attempts to submit a fraudulent block, the block is rejected.
What is Hash Rate?
The performance of a miner is calculated based on the amount of computational power they are able to commit to solving blocks and is measured in computing power, which can also be referred to as hash rate. The Bitcoin network is currently maintained by roughly 10,000 nodes spread around the world, all of which compete to be the single node that finds the next valid block hash and gain a block reward.
Bitcoin’s network assumes that all nodes within the Bitcoin network and, therefore, all hashing power, is more or less evenly distributed across all active nodes — the hashing power directed toward the Bitcoin network shouldn’t be under the control of a single party.
How Easy is it to Execute a 51% Attack?
Blockchain networks are secured and maintained by thousands of different nodes. All nodes cooperate in the consensus process — the larger the network and the higher the number of nodes, the more resistant a network is against 51% attacks.
The likelihood that a miner will be successful in solving the next block and capturing the block reward is determined by the amount of hash power the miner can direct toward mining. The mining process involves performing extremely computationally intensive calculations every second. More hash power means more chances of solving the next block.
Performing a 51% attack on a major blockchain such as Bitcoin is an extremely difficult prospect — Bitcoin is the longest-running blockchain in existence. The larger and older a blockchain network becomes, the more difficult it is to collect enough computing sources to revert the transactions contained in previous blocks.
Each block added to a blockchain not only contains a set of transactions but also contains references to previous blocks, linking all blocks through cryptographic proofs. A block with a high number of confirmations is functionally impossible to revert.
Performing a 51% attack on a smaller network with less hash power directed toward it, however, is feasible and has been proven to be possible. In May 2018, Bitcoin Gold – a Bitcoin fork — was targeted by a successful 51% attack. More recently, the Bitcoin SV network was targeted by a successful 51% attack, resulting in three separate versions of the Bitcoin SV chain being mined simultaneously.
51% attacks occur when attackers control over 50% of the hash power that supports the operation of a blockchain network. While major cryptocurrencies such as Bitcoin are highly resistant to 51% attacks, smaller altcoins or networks with less hashing power securing their blockchain are more susceptible to majority attacks.