What is a 51% attack?

Introduction

To understand the phenomenon of a 51% attack, you first need to remember the structure of mining and blockchain systems.

One of the most important advantages of Bitcoin and its blockchain is the distributed nature of the data creation and verification system. The decentralized operation of nodes guarantees compliance with the protocol rules and agreement of all network participants with the current state of the blockchain. This means that the majority of nodes must reach a consensus regarding the mining process, software version, transaction validity, and so on.

The Bitcoin consensus algorithm (Proof of Work) guarantees the approval of a block of transactions only if the network nodes collectively confirm the validity of the provided hash (i.e., the block hash proves that the miner has done enough work and found the correct solution for the block).

The infrastructure of the blockchain as a decentralized ledger and distributed system prevents the network from being used for personal gain, which is why Bitcoin does not have a single governing body.

Since the mining process (in PoW systems) requires huge amounts of electricity and computing resources, a miner's performance will depend on its processing power, which is called hash power or hashrate. Nodes engage in mining and compete with each other to find a valid block hash in order to receive a reward in new bitcoins.

Thanks to this, mining power is evenly distributed among nodes around the world, and thus the hash rate does not fall into the hands of a single entity. At least this shouldn't happen.

But what if the hashrate is not distributed evenly enough? What happens if one entity or organization owns more than 50% of the computing power? It is this development that is called a 51% attack, also known as a majority attack.

What is a 51% attack?

A 51% attack is an attack on a blockchain where one entity or organization captures the largest portion of the hashrate, which can lead to network disruptions. In such a situation, the attacker would have enough mining power to deliberately eliminate transactions or change their order, as well as reverse their own transactions, causing a double-spending problem.

A successful majority attack allows attackers to prevent transaction confirmation (deny transaction service) or the mining process for specific individuals, leading to a phenomenon called mining monopoly.

On the other hand, a majority attack does not allow an attacker to reverse other users' transactions or prevent transactions from being created and broadcast. It is also considered impossible to change the block reward size, create coins from nothing, or steal other users' coins.

Is there a threat of a 51% attack?

The blockchain is supported by a distributed network of nodes, each of which participates in the process of reaching consensus, thereby ensuring the security of the blockchain. The larger the network, the better protected it is from attacks and data corruption.

In the case of Proof of Work blockchains, the chances of finding the correct solution for a new block are as high as the hashrate of the miner. Mining involves many hashing attempts, and more computing power means more attempts per second. Several early miners joined the Bitcoin network to contribute to its growth and security. As the price of Bitcoin as a currency increased, more and more miners appeared on the network interested in block rewards (currently the reward is 12.5 BTC per block). It is competitiveness that ensures the security of Bitcoin. No miner will invest so many resources for fraudulent activities and risk his coins.

Thus, due to the scale of the network, a 51% attack on Bitcoin is extremely unlikely. As blockchain grows, the likelihood of computing power being captured by one person or group of people continues to decrease.

Moreover, modifying previously confirmed blocks becomes more and more difficult because all blocks are linked together via cryptographic proofs: the more confirmations a block has, the higher the cost of modifying or undoing transactions within it will be. Therefore, a successful attack would only be able to change the transactions of the last blocks and only for a short period of time.

Suppose an attacker is not interested in profit and wants to attack the Bitcoin network only to destroy it at any cost. Even if it succeeds in disrupting the network, Bitcoin's software and protocol will be quickly changed and adapted in response to this attack. This requires other nodes on the network to reach consensus and agree to these changes, which would happen quite quickly in an emergency. Bitcoin is very resistant to attacks and is considered the most secure and reliable cryptocurrency in existence.

Although in the case of Bitcoin it would be difficult for an attacker to obtain an amount of computing power that would exceed the rest of the network, it is quite possible to achieve this with small cryptocurrencies. Compared to Bitcoin, altcoins have a low enough hashrate to secure the blockchain that 51% attacks can actually occur on their network. Notable examples of cryptocurrencies that have fallen victim to majority attacks include Monacoin, Bitcoin Gold and ZenCash.