All You need to know about Crypto 51% Attack

 

A 51% attack targets the Bitcoin network or blockchain in general, and is possible under certain conditions. In order for an organization or group to be able to carry out such an attack successfully, it must somehow control most of the Bitcoin network’s hash rate. In such cases, the attacking party can determine which transactions will be approved. Even more worrying is that by controlling the network, they can use their coins to make illicit profits.

However, to understand how to run this attack, you must first have a good understanding of concepts such as blockchain, how Bitcoin works and how to mine it.

 

What is a blockchain ?

In short, Bitcoin is a decentralized currency. Decentralization means that no single central authority controls the entire Bitcoin network. Rather, Bitcoin uses a peer-to-peer network to manage a global head office that contains the details of all the transactions that have taken place so far. This network is called blockchain.

Blockchain is the basic technology of Bitcoin, Ethereum, Litecoin and other Altcoins. As mentioned, this blockchain is a distributed general ledger (or database storage location) that records all transactions made on the network of a digital currency and is made available to all users (network nodes) and the public for review. This procedure ensures that no miner can spend a single coin twice (double spending).

One of the main advantages of Bitcoin is that it offers a lot of privacy to users and protects their privacy like the best VPN services (using encryption).

Transactions are based on a Bitcoin address that is just a collection of random numbers and letters and no one can identify the real owner. Nevertheless, anyone who has your Bitcoin address can send you Bitcoins or see your balance.

In addition, Bitcoin transactions cannot be reversed. This is a convenient solution for many types of scams in which fraudsters fraudulently reverse transactions. Therefore, using Bitcoin is a great way to run in markets where credit card fraud and other virtual payment methods are common.

 

What is Bitcoin mining?

When a new transaction is created, it is transmitted across the network for approval. This process may take up to 10 minutes on average because several different users on the network perform the verification process.

These users are called Bitcoin miners and miners, and they use powerful computer hardware to continuously search for hashes that match a given pattern.

This pattern represents a specific hash that corresponds to a “block”. Miners are rewarded whenever they find the right hash. This reward motivates them to always look for new blocks. The reason that transaction confirmation takes up to 10 minutes is that Bitcoin issues new blocks every 10 minutes.

This process is very important because blocks are used to validate transactions and create new Bitcoins. Creating a block involves confirming a certain number of transactions.

This process may seem time-consuming and uncertain, yet Bitcoin uses a method in which miners can provide proof of work to other miners so that they can simply validate the new block and not have to do the whole process themselves. Other miners can use the “consensus algorithm” to verify the validity of a new block without having to search to find or know the actual hash.

Proof of Work is a complex mathematical puzzle that must be solved quickly by all competing miners, and anyone who can solve the puzzle faster than others will receive the extraction bonus and block the transaction to a permanent part of the blockchain network. It transforms and contains information that can never be changed.

The main purpose of using the proof-of-work mechanism is to make it very costly for hackers to rewrite the blockchain and reverse the transactions that have already been verified and added to the blockchain.

Each node in the network only stores blocks that it has approved. Therefore, when several nodes have the same blocks, it is said that they have reached a consensus and thus the security of the general office is maintained. This situation also makes it difficult for attackers to create a fake head office because they have to do so in many nodes or they will fail.

The transaction verification process is actually a bit more complicated because it depends on many factors such as transaction fees. The sender sets the fee, but transactions for which higher fees are charged are approved faster.

Now that we have the basics of blockchain and transactions, it is time to be acquainted with the 51% attack and its nature.

What is a crypto 51% attack?

As mentioned, the hacker who intends to manipulate the transaction on the blockchain must make sure that he has taken control of most of the hash rate of blockchain network extraction, and this is only possible if the hacker or a group of miners has more than 50 Have a percentage of network extraction hash rate or computing power.

According to these interpretations, the 51% attack is in fact an attempt by a group of miners to attack the blockchain with the aim of gaining more than 50% of the network extraction hash rate. By achieving this goal, hackers can take control of the network and prevent new blocks from being registered by preventing the finalization of blocks by other miners.

 

Crypto 51% Attack

What might happen in a 51% attack?

If a group of miners or attackers succeed in gaining 51% control of the blockchain network, they can inflict the following significant damage to the network:

• They will be able to prevent any new transactions from being approved and disrupt payments to some or all users.

They may use this situation to double spin or spend coins twice. This is done by reversing transactions that were created when hackers controlled the network.

• They can prevent blockchain transactions from being validated and finalized by other miners.

To better understand the 51% attack on Bitcoin, the network creates a new block approximately every 10 minutes. Once a block is finalized or extracted, it can no longer be changed since the network authentication nodes quickly detect and reject fake copies of the general ledger.

This fraud can presumably happen; if a group of minor nodes come together and can capture the majority of the extra hash rate, a so-called 51% attack occurs.

Thus, a hacker or group of hackers can interfere with the process of registering and adding new blocks to a blockchain network by taking over a larger portion of the computing power of the network. They can take advantage of this monopoly and make changes in the extraction of new blocks to make significant profits.

One of the methods of abuse in a 51% attack is double spending, which you can see an example of below.

The hacker sends the coins to person A while sending the same coins to person B. While coins sent to Person A are publicly displayed in blockchain, an attacker with very high hash power secretly extracts the blocks needed for Person B’s double-spent transaction, without posting them on the network.

After confirming transaction A several times in the public blockchain and proving its validity, the hacker now publishes his extracted hidden blocks on the network. Because he has so much extraction power, he can probably create a longer blockchain than the original version and validate his blocks.

In this case, the transaction sent to A will be canceled because there will be no new and longer blockchain. The result is that person A does not receive any money, while the hacker may have already received the services for which he paid.

 

Block trades

Anyone in control of the larger segment has the power to alert the network can decide which transactions to place in the next block. Because of this, a hacker can even create a completely empty block without a transaction.

Potential risks to the currency code

The general view is that a 51% attack destroys the digital currency being attacked since public trust in the network is reduced, and cryptocurrency holders sell their assets at a sharp drop in price.

 

How to prevent a 51% attacks

The main factor that helps to prevent a 51% attack is the decentralization of the miners. The network will be secure as long as no single entity controls more than 50% of the extraction power.

In addition, strong blockchains such as Bitcoin are now inherently secure because gaining 51% of the Bitcoin network’s extraction power requires a lot of money that would be virtually unaffordable for hackers.

One thing to keep in mind is that a person or entity with a lot of extraction power is likely to make more money by using this power for legal extraction than by using it to block transactions or spend money twice. This significantly reduces the risk of such an attack.

 

A few cases of 51% attacks in the past

Bitcoin Cash (May 2019)

Two bitcoin cash mines launched a 51% attack on the bitcoin cash blockchain to prevent anonymous miners from removing the coins that were not supposed to be accessible. Although some believe that the 51% attack was carried out to help the network, but in any case, this incident shows the strength of these two mining pools in the network.

Ethereum Classic (January 2019)

The Coinbase Exchange identified a “deep chain reorganization” in Ethereum Classic Blockchain (ETC) that involved double spending on Saturday, January 5, 2019. Subsequently, Coinbase stopped all classic Ethereum transactions.

Another exchange, Gate.io, said it had noticed at least seven transactions being spent twice after investigating the attack.

Bitcoin Gold (May 2018)

More than $ 18 million was stolen by an unidentified assailant through double spending during a 51% attack on Bitcoin Gold. The exchanges tried to prevent the attack by waiting for longer confirmations before the transactions were confirmed, but this did not seem to be very effective.

Bitcoin (January 2014)

In January 2014, a mining pool called Gate.io grew to 51% of its total mining capacity. Although this created panic in the bitcoin community, miners who left the pool to balance things out soon resolved it. In addition, the pool committed to a 40% limit on its future operations.

FeatherCoin (June 2013)

During a 51 percent attack on a similar version of Light Coin known as FeatherCoin , twice hackers spent 16,000 coins. In those days, this coin was relatively high on the list of digital currencies.

 

In conclusion

A 51% attack is a real threat to fledgling blockchains, whose alert power is largely concentrated. More established networks such as Bitcoin and Ethereum are less likely to be attacked, yet smaller altcoins are always more vulnerable due to their smaller, more centralized miners.