Blockchain technologies have only grown in popularity ever since their appearance in 2009, as the anonymous developer Satoshi Nakamoto implemented the first public distributed ledger, Bitcoin, along with the promise of a world running on decentralized currencies.
There’s still a long way to go to fulfill that promise, but it is undeniable that we’ve seen a significant advancement toward blockchain mass adoption. Although Bitcoin is still the largest blockchain, many new competitors have emerged, with higher scalability, better indexes for energy consumption, and different degrees of decentralization.
Bitcoin and its innovative blockchain system broke ground due to their ability to allow users to make worldwide transactions safely, securely, and without compromising their privacy, with no need for any type of intermediaries. However, this has some notable risks.
One of the most commonly acknowledged risks of blockchain is what’s known as the 51% attack or blockchain majority attack, which roughly refers to the possibility of someone being able to take control of the entire blockchain system via controlling over half of the computing power required for it to operate.
However, before we can go into detail about the 51% attack and whether it’s plausible in practice, we first need to go over how blockchain works.
How Does Blockchain Work?
A blockchain is essentially a digital ledger that is recorded and distributed among multiple devices known as nodes, which contribute computing power to allow the blockchain system to function.
Every time a user makes a transaction in the blockchain, information about the transaction is recorded in the ledger and distributed among all of the nodes.
To process the transaction, the information contained on each of the nodes is verified and compared among all of them automatically, making sure that it coincides with every node. This is called reaching a consensus, for which there are different mechanisms on each blockchain.
Along with the validation process, nodes in a public blockchain like Bitcoin need to employ high amounts of computing power to solve complex mathematical problems for new tokens to emerge, rewarding said tokens to the users who provide the power for the blockchain’s functionality, in a process known as mining.
Nodes are essential for the blockchain’s functionality and they are one of the main elements that allow it to be fully decentralized. No single entity can have full control over the blockchain, because many different unrelated users provide the computing power needed for the system’s operations.
What is a 51% Attack?
If a single entity was able to get ahold of 51% of the blockchain’s operational capabilities, which is to say 51% of its nodes, they could exercise enough control over the network to manipulate or even stop the validation processes of new transactions.
51% attacks a type of cyber-attack that occurs as an entity, group, or individual deliberately takes control of 51% or more of the nodes within a blockchain network and exercises that power to alter the distributed ledger’s transactions to gain tokens illegitimately.
These alterations on the ledger can vary, from creating fake transactions to gain tokens to altering the process of validating transactions to create double accountability within the ledger to take over the new tokens.
Because the value of the blockchain network’s token is reduced as a result of these operations, a 51% attack is essentially a way to steal money from other users within a blockchain system.
The Possible Consequences of a 51% Attack
If a single entity or person managed to control over 51% of the devices that allow the blockchain to function, the network would no longer be considered decentralized, as the entity would have the ultimate say on the way in which transactions are processed.
This could have all manner of negative consequences for the users of the blockchain, as the independence of the network would no longer be the base that maintains a relationship of mutual trust.
Upon a 51% attack, the attackers would be able to invalidate transactions at will, and deliberately alter data blocks that have not yet been confirmed, meaning they could alter essential data from transactions, including the dates and even the amounts.
These possibilities would make the blockchain impossible to trust, which in turn would result in a drastic loss of its value. Therefore, all of the users in the blockchain would be harmed by the 51% attack, regardless of whether or not their own transactions are altered by the entity carrying it.
Is a 51% Attack Possible?
The short answer to whether it’s possible to carry a 51% attack on a blockchain is yes. However, on large blockchains such as Bitcoin and Ethereum, it is highly unlikely that it could ever happen.
For there to be a Bitcoin 51%, for example, it is estimated that attackers would need to purchase around 13 billion dollars worth of computing power equipment and electricity to be able to influence the blockchain’s network enough to control its validation processes.
In the case of an ETH 51% attack, it would be even more difficult because the blockchain utilizes a proof-of-stake system, meaning that the attackers would need to have an exceptional amount of ETH cryptocurrency to pull it off, equivalent to 51% of the validation stakes.
Although 13 billion dollars aren’t impossible to attain, just having that amount and investing it in computing power and electricity would not be enough, as all of the computing equipment would need to be set entirely for the purpose of mining Bitcoin, requiring incredible amounts of logistics and effort
If someone made a 51% attack on Bitcoin, it would take a whole year for them to recoup their 13 billion dollar investment if the attack was successful, assuming that the hash rates and token prices remain the same. However, a 51% attack would drastically reduce the value of the tokens that are created in a blockchain. In turn, a large part of the reason why such an attack is unlikely is that it simply isn’t worth the effort.
Smaller blockchains and altcoins, however, are an entirely different story, because the expenditures of the attack are smaller and can be recouped much more quickly. As a matter of fact, many altcoins have already suffered 51% attacks in the past, including Bitcoin Gold and Bitcoin SV, Ethereum Classic, Vertcoin, Grin, among various others. Some of these blockchains have even suffered multiple 51% attacks in their lifetimes.
In all of these cases, the platforms have incurred massive losses and the attackers have often recouped what they invested in the attack. Despite this, most of the aforementioned blockchains managed to mitigate the effects of their attacks and remain strong options in the crypto market.
Can 51% Attacks be Prevented?
While smaller blockchains and altcoins tend to be particularly vulnerable to these types of attacks, there are various preemptive measures that can be taken to avoid them.
Perhaps the most general way to prevent these types of attacks is by building blockchains with a safer consensus mechanism. A consensus mechanism refers to the way in which the nodes of a blockchain assess the information in the ledger to reach a consensus.
Bitcoin uses what’s known as a Proof of Work (PoW) consensus mechanism, in which consensus is reached through sheer computing power, making it a relatively easy target for 51% attacks.
Other types of consensus mechanisms such as Proof of Stake (PoS) require attackers to employ different strategies and, when the programming behind the consensus mechanism is more sophisticated, proof-of-stake 51% attacks are harder to pull off, albeit not impossible.
When blockchains employ Proof of Stake (PoS) and Delegated Proof of Stake (DPoS) systems, block validators are voted in by the community, and they can also be voted out to prevent or detract a collusion.
This approach is particularly useful when there is a strong community supporting the blockchain.
The 51% attack is a topic that has been discussed and analyzed ever since the first blockchain was created. Although the largest blockchains such as Bitcon and Ethereum are unlikely to suffer these types of attacks due to the amount of resources that it would entail, the 51% is a real possibility that has been fulfilled in smaller blockchains.
51% attacks can have all manner of consequences, from attackers gaining an unfair advantage to the coins that emerge from mining to their ability to alter transaction data in their favor, effectively stealing money from users.
Nonetheless, blockchain attacks can be prevented by implementing more sophisticated consensus mechanisms in blockchain platforms, such as advanced PoS and DPoS mechanisms that have failsafe systems and make it more difficult for attackers to succeed.
If you’re interested in learning more about blockchain security, how blockchain systems work, and the multiple uses they can have outside of the realm of finances, you may visit the largest mass adoption blockchain event in the world, Expoverse.