Arguably the most expensive and tedious way to beat the blockchain, 51% of the attacks were largely successful with smaller networks requiring less hashing power to beat the majority of nodes.
Understanding Attack 51%
Before delving into the technology involved in the 51% attack, it is important to understand how the blockchain records transactions, validates them and the various controls built into its architecture to prevent any alteration. Using cryptographic techniques to link subsequent blocks, which are themselves records of transactions made on the network, the blockchain adopts one of two types of consensus mechanisms to validate and permanently record each transaction by its network of nodes.
While nodes in a proof-of-work (PoW) blockchain need to solve complex mathematical puzzles in order to verify transactions and add them to the blockchain, a proof-of-stake (PoS) blockchain requires the contract to obtain a certain amount of native token to earn validator status. Either way, a 51% attack can be orchestrated by controlling the network’s mining hash rate or controlling more than 50% of the tokens stacked in the blockchain.
PoW vs. PoS
To understand how a 51% attack works, imagine if more than 50% of all nodes performing these validation functions conspire together to offer a different version of the blockchain or perform a denial-of-service (DOS) attack. The latter is a type of 51% attack in which remaining nodes are prevented from performing their functions while the attacking nodes add new transactions to the blockchain or erase old ones. Either way, attackers can reverse the transactions and even double-spend the original crypto token, which is like creating a fake currency.
Schematic representation of a 51% attack.
Needless to say, such a 51% attack could compromise the entire network and indirectly cause huge losses to the investors who own the original token. Although creating a modified version of the original blockchain requires a huge amount of computing power or a pooled cryptocurrency in the case of large blockchains like Bitcoin or Ethereum, it is not out of reach for smaller blockchains.
Even a DOS attack is capable of paralyzing the functioning of the blockchain and can negatively affect the price of the underlying cryptocurrency. However, older transactions that exceed a certain cut-off are not likely to be reversed, thus putting only the most recent transactions or future transactions made on the network at risk.
Is a 51% attack on bitcoin possible?
For the PoW blockchain, the probability of an attack decreases by 51% as hashing power or the computational power used per second to mine increases. In the case of bitcoin
network, the perpetrators would need to control more than half of the bitcoin hash rate which is currently around 290 exahash/s, which would require them to have access to at least 1.3 million powerful ASIC miners like Bitmain’s retail Antminer S19 Pro. About $3,700 each.
This would entail that attackers would need to purchase mining equipment totaling about $10 billion just to have a chance to perform a 51% attack on the Bitcoin network. Then there are other aspects such as electricity costs and the fact that they are not entitled to any of the mining rewards applicable to honest nodes.
However, for smaller blockchains like Bitcoin SV, the scenario is very different, with a network hash rate of around 590 PH/s, which makes the Bitcoin network about 500 times more powerful than Bitcoin SV.
In the case of a PoS blockchain like Ethereum, though, malicious entities would need more than half of all Ether
Tokens reserved in staking contracts on the network. This would require billions of dollars just in terms of purchasing the computing power required to have some semblance of launching a 51% successful attack.
Furthermore, in a scenario where the attack fails, all stacked tokens could be confiscated or locked, dealing a huge financial blow to the entities involved in the alleged attack.
How to detect and prevent a 51% attack on a blockchain?
The first check of any blockchain would be to ensure that no single entity, group of miners, or even a mining pool controls more than 50% of the network’s mining hash rate or the total number of observed tokens.
This requires the blockchain to maintain a constant check on the entities involved in the mining or staking process and take corrective action if a breach occurs. Unfortunately, the Bitcoin Gold (BTG) blockchain could not foresee or prevent this from happening in May 2018, with a similar attack repeated in January 2020 that led to the spending of nearly $70,000 of BTG by an unknown actor.
In all of these cases, a 51% attack became possible