A 51% Attack is a type of potential attack on the Bitcoin network where an individual or organization obtains control over a majority of the overall network mining power (hashrate) and then attempts to manipulate the general ledger to approve or disapprove chosen transactions by way of majority approval. Such an attack has not occurred yet on the Bitcoin network, but has happened twice in on blockchains built on Ethereum technology, Krypton and Shift, which will be discussed below.
The basis for this theoretical attack is that Bitcoin is secured by an agreement between different copies of the general ledger. Unless all copies of the ledger are in agreement, a transaction cannot be completed. However, if someone or some organization had ownership of a majority share of the ledger copies they could theoretically attempt to convince the remaining portion of ledgers to accept a change based on the change being made to a majority of the total ledgers. This could possibly give the majority owner power to approve or disapprove any transaction, and even allow their own coins to be spent multiple times through double spending.
How Likely is a 51% attack?
The chances of a 51% attack being successful is extremely low.
Firstly, with the explosive growth of Bitcoin in 2017 it would be extremely difficult and expensive to obtain 51% of the mining power of the network. Mining requires enormous amounts of energy and resources. The only feasible way this might happen is if multiple mining groups combined to share their share of the mining power.
In addition, even if a group owned a majority share the potential benefits would be minimal, and likely wouldn’t be worth the resources or effort. Because of the nature of Bitcoin blocks, it would become increasingly difficult to alter past transactions as time went on. Realistically, such a group wouldn’t only be able to alter transactions within the most recent few blocks. In addition, the owners wouldn’t be able to create more coins at will, eliminating the risk of any alteration in the number of coins in circulation.
In addition, if any group owned a majority share of the mining network, it would most likely be well-known publicly. The result would be a huge decrease in trust in the network, which would drive Bitcoin prices down, making the entire endeavor much less lucrative, and could even cause the coin to lose nearly all its value.
All proof aside, a 51% attack is still technically a possibility, and must still be a concern for all future blockchains to consider.
Past 51% Attacks
There have been two 51% attacks on blockchains, both of which occured in 2016.
Krypton and Shift were two blockchains that were smaller clones of the Ethereum blockchain, that each organization was utilizing to create and manage their own dApps, smart contracts, and currencies. According to CryptoHustle and other reports, a group of hackers called the “51 Crew” were successful in taking a majority share of hashrates of each chain, and went on double spending their tokens. After dramatic random demands, both switched to Proof-of-Stake (PoS) consensus to avoid the issue in the future.
Do other Blockchains Need to be Concerned about a 51% Attack?
In short, the answer is yes. Whenever a blockchain is created, there should be a serious consideration as to the risk of a 51% attack, as the avoidance of such a risk is paramount to the security of any blockchain. Blockchains only work if the users can trust that the network is sound and not susceptible to such attacks.
Although the term is “51% attack”, it must be noted that it doesn’t necessarily need to be 51% to be a “majority”. In other blockchain setups, such as the “Tangle”, a full 51% might not be required to execute a similar attack. In the Tangle’s case, such an attack could theoretically be executed with only a 34% share.
No blockchain can be successful if this is a real risk, so the infrastructure must be created in a way that would make it extremely difficult or impossible for any one party to control what is and isn’t written into the general ledger.