Blockchain 51% attack refers to a mining attack where a
Blockchain 51% attack refers to a mining attack where a particular group or individual miners if hypothetically able to capture 51% of the hash rate required to mine a block, then they can prevent the further blocks to be verified.
If a miner is able to control the 51% of the hash power, they can not only halt the new block confirmation but they would also be able to make a reverse transaction or spend the coins which have been already used for the transactions also known as double spending.
The 51% attack does not hamper the already mined blocks, but only those which are in the pipeline to be verified. The amount spent on the mining process of Bitcoin stands at $7 million per day in 2018, thus those looking to take control over the network for 51% attack need to spend around $2.6billion per year.
This article would help you understand the hypothetical 51% attack in detail and break it down for you to understand what all resources would be necessary to make it a reality even if its hypothetical for Bitcoin. Mind you there has been cases of 51% attack in the past, the most infamous one was on the Ethereum DAO attack, which caused losses of millions.
How Blockchain 51% Attack Can Be Made Possible
Blockchain Technology follows the distributed ledger technology principle where each transaction on the network is registered on a public ledger also known as nodes. Nodes are universal ledger which can be downloaded by anyone for the review.
Each transaction on the ledger is encrypted by a cryptographic signature which requires a certain amount of computational power to solve and verify if the transaction is legit. Mind you these cryptographic signatures are either 64-bit or 256 bit, which can only be verified as each input has a pre-defined output and any smallest of change can alter the output drastically. Thus, no one can alter the ledger to spend the same coin twice.
Now, this makes the ledger almost formidable, but if someone is able to control the 51% of the hash power required to mine a block, they can get control of the block and prevent other miners from mining that block. This can lead to controlling of the transaction verification and they can manipulate the network to spend the coin twice.
The miners are only required to solve the cryptographic message and verify the transaction, thus when they have the control over the hashing power, they can trick the network into thinking that they still have the coins that have been already spent.
The 51% attack is the perfect counterfeit for a technology which is believed to be tamper-proof. However, it would not be able to impact the blocks which have been mined prior to the 51% attack as the block verification and transactions get hard-bined into the core software.
Is There a Slightest Chance that a 51% Attack is Possible
Yes, there are not just chances but 51% attack is a reality which has been encountered in the past. In the current situation, the mining scene has been hijacked by large mining farms who run their operation with the help of high-grade mining rigs and from places where the cost of operations are significantly lower.
The 2018 bearish market has led to many individual miners leaving the mining process as it was not profitable, the chances of 51% attack is even higher under these circumstances, as the individual miners are less and the mining farms have the resources to put in that extra hashing input to make sure they can hijack the mining process.
If someone is able to put in more than 50% of hashing power they would be able to not only gain the complete block reward but also ensure that other miners cannot put in their hash power or try to mine the block.
Some of the Most Famous 51% Attack in the Past
Ghash.io, July 2014
The Ghash.io mining pool briefly exceeded the 50% has the power of the Bitcoin network in July 2014. However, the mining pool voluntarily reduced its hashing service and ensured the community that it would never exceed 40% of the total input hashing power in future.
Krypton & Shift, August 2016
The two blockchains based on the Ethereum network were a victim of 51% attack back in August 2016.
Bitcoin Gold, May 2018
Bitcoin Gold, a hard-fork of Bitcoin Cash was the latest victim of the 51% attack when a group of miners was able to capture its hashing power and used it for double spending. In Spite of the network trying to increase the threshold, the miscreants behind the attack were able to manipulate the network for several days an at the end they caused losses of around $18 million in double spending.
Conclusion
51% attack on the pioneer Bitcoin network is quite difficult but not necessarily impossible, but the attacks on the other cryptocurrency network are standing proof of how the technology can be manipulated by the miscreants. There has been enraging debates among the crypto community on how we can look for alternatives to avoid such failures in the future.