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51% Attack

A 51% attack occurs when a is targeted by a coalition of miners who possess more than 50% of the total hash rate on the network. If this group gains ownership of 51% of the network's nodes, it theoretically grants them the authority to modify the .[1]

Overview

A achieves decentralization by ensuring that no single individual or specific group holds control over the network. This decentralized structure is crucial because all participants within the blockchain ecosystem must reach a consensus on the present state of the blockchain. This requirement for unanimous agreement among the widely distributed network participants establishes a high level of certainty regarding the authenticity of the block's state.[2]

A 51% attack refers to a deliberate attack on a blockchain in which a group gains control over more than 50% of the network's hashing power, which is the computational capability used to solve cryptographic puzzles. This group subsequently introduces a modified version of the blockchain into the network at a precise juncture. Theoretically, the network might accept this altered blockchain due to the attackers' majority control over the network.[1][2][3]

Impacts of 51% Attack

Reduced Miner Rewards

In a 51% attack, a transaction might be reversed even before it is verified. This results in . As the attackers take their shares, legitimate miners also make less money updating the network.[4][2] A 51% assault on a blockchain could adversely impact a 's reputation, which would cause investors to sell their crypto, depreciating its value.[5][6]

Network Disruption

As long as a blockchain employs a mechanism to validate transactions, perpetrators can intentionally disrupt the network by impeding the confirmation and sequential arrangement of blocks.[4] A 51% assault has a significant negative effect on the miner's computational capabilities. As a result, it takes longer for the transaction to be approved and recorded in a . As a result, the network becomes compromised, enabling the attackers to execute transactions faster than the miner.[4]

51% Attack Prevention

Blockchains employ several strategies to prevent 51% attacks. One of such strategies is to incentivize a greater number of participants to join the network and operate their own nodes, thereby bolstering a strong network community. A higher number of participants contributing resources makes it more challenging for a sole entity to exert dominance over the network.[3][4]

In a small blockchain network, a single miner could potentially dominate as the majority participant. Blockchain networks employing the (PoW) consensus mechanism typically implement a requirement that miners regularly update their equipment. Neglecting this can result in them forfeiting block rewards and falling behind other miners within the network. [4]

To mitigate the risk of a 51% attack, blockchain networks can opt for the consensus mechanism, which is generally considered a more secure alternative to (PoW) because it is more challenging for an attacker to acquire the larger majority of the staked cryptocurrency compared to most of the mining power in a .[4][5][8]
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Past Examples of 51% Attacks

The majority of 51% attacks are directed towards smaller cryptocurrencies. Experts suggest that major cryptocurrencies are unlikely to fall victim to a successful 51% attack due to the substantial cost associated with gaining control of over half of the mining power. The following are blockchain networks that have experienced a 51% attack in the past:

  • In 2018, an attack on (BTG) led to the of over $18 million worth of the currency. In 2020, BTG encountered another 51% attack. Within a span of two days, the underwent two reorganizations, enabling double-spending activities that resulted in substantial financial losses. However, this attack was quickly stopped to prevent further loss. [4][6]
  • (ETC), a cryptocurrency that emerged from a hard fork of in 2016, fell victim to a 51% attack in 2020. This incident resulted in the reported theft of several million dollars.[6]
  • (BSV) faced three attacks in 2021. These attacks enabled hackers to manipulate or erase the most recent blocks by gaining control over the network.[6]
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