So you want to know what exactly a 51 percent attack is?
Here it goes!
A 51% attack refers to a sabotage on a blockchain, like for example bitcoin. It is important to note that this type of attack is hypothetical and has (thankfully!) not occurred yet on major cryptocurrencies.
This sabotage can be carried out by a group of miners that control more than 50% of the network’s computing power (also called hash rate).
When that happens, the group of miners would be able to prevent new transactions from being confirmed by a computer and reverse transactions that were already completed! This makes it possible for them to “double spend” their coins, which could seriously mess up the whole bitcoin network.
However, a 51% attack wouldn’t destroy the bitcoin network or any other blockchain based cryptocurrency. At least not completely.
At the time this post was published, blockchain-based cryptocurrencies are still used by a relatively small niche of tech-geeks (like me!). And therefore, any harm that affects a cryptocurrency will only have an effect on a small percentage of the population…
The “problem” is, that sooner or later cryptocurrencies will be used everywhere and by everyone. This ties currencies like Bitcoin, Ethereum, and Ripple deeply into the local and global economy. And in that context, a 51% attack could be devastating.
Let’s dive a bit deeper into this attack.
So now you know what we are talking about when we refer to a 51 percent attack. But why is it even possible to perform such an attack? Shouldn’t it be possible to “fix this bug”?
The fact that 51 % attacks are possible has NOTHING to do with any computer bugs or sloppy work of the programmers. It’s just the nature of a network.
In order to illustrate this better, I would like you to think of the stock market for a moment.
If somebody keeps buying shares until the point where he owns more than 50% of the stocks of a company, he will be in full control of the business. That person can now do whatever he wants with the company, as long as more than 50% of the shares are in his ownership.
Just please don’t take this comparison too seriously. A cryptocurrency is more or less as similar to the stock market as a watermelon is to a black hole.
Good. Now let’s dive a hell of a lot deeper.
The name block chain cryptocurrency is very accurate. Currencies like Bitcoin or Litecoin that are based on this technology actually form a chain of so-called blocks (bundles of data) that record all transactions performed in a certain period of time. Every time one of such blocks is created (mined), it cannot be altered anymore. Since then it would be rejected by the network.
However, in a 51 percent attack, the attacker can interfere in the process of recording recently created blocks. This enables him to eventually monopolize the mining and earning all the rewards.
Finally, as ironically as this may sound, a 51% attack can also be performed when the attacker controls less than 50% of the network’s computing power. But the probability of succeeding is extremely low.
And that’s all for today!
Please let me know what you think about this post in the comment section below.