What is a 51% Attack?
A 51% attack refers to a situation where a single entity or a coordinated group gains majority control over a blockchain network's resources, specifically more than 50% of the network’s computational power in Proof-of-Work (PoW) systems or staking power in Proof-of-Stake (PoS) systems. This dominant position allows the attacker to exert significant influence over the network, compromising its integrity and undermining its its security and reliability.
How does a 51% Attack work?
In a 51% attack, the attacker gains control of over 50% of a blockchain network’s computational power in Proof of Work (PoW) blockchains, or more than half of the native cryptocurrency in Proof of Stake (PoS) blockchains. This level of control enables the attacker to manipulate the blockchain in several ways:
- Reject Transactions: They can block or prevent new transactions from being confirmed, disrupting the normal operation of the network.
- Validate Illegitimate Transactions: The attacker can verify and include fraudulent transactions, compromising the integrity of the blockchain.
- Reorganize Blocks: They can alter the blockchain’s history by reorganizing blocks, allowing them to reverse previously confirmed transactions.
These capabilities allow the attacker to double-spend cryptocurrency, where the same coins are spent more than once, redirect transactions for their own benefit, and ultimately manipulate the network to achieve financial gain.
How to prevent a 51% Attack on a blockchain?
Blockchains use a combination of techniques to prevent a 51% attack:
- Increase Network Participation: Expanding the number of participants ensures a broader distribution of mining power in Proof-of-Work (PoW) blockchains or staking power in Proof-of-Stake (PoS) blockchains. A larger, more decentralized network makes it significantly harder for any single entity to gain majority control, thereby reducing the risk of a 51% attack.
- Employ Robust Consensus Mechanisms: Consensus protocols like Proof-of-Work (PoW) and Proof-of-Stake (PoS) make it economically and computationally expensive for attackers to control the network. These mechanisms require significant resources to control 50% of the network, thereby deterring attacks by increasing their cost and complexity.
- Promote Decentralization: Ensuring that nodes and participants are widely distributed across different regions and entities helps prevent any one group from gaining control. A well-decentralized network enhances security by spreading control and reducing the chances of a 51% attack.
Furthermore, the security of blockchain networks increases over time as transactions accumulate confirmations. The further back a transaction is, the harder it would be to subvert it, as the number of new blocks required to bring the network up to the current block height becomes increasingly distant.
How much would a 51% Attack cost?
The cost of executing a 51% attack varies based on several factors specific to the blockchain's protocol, such as:
- Complexity of the Hashing Algorithm (PoW): More complex algorithms require more computational power, raising the cost.
- Total Amount of Cryptocurrency Staked (PoS): More staked tokens increase the financial barrier to control the network.
- Cost of Electricity: In PoW blockchains, the cost of the electricity needed to power the required computational resources affects the overall cost.
- Total Hash Rate or Staking Power: The available computational or staking power determines the difficulty and cost of achieving majority control.
Smaller blockchains, which often have lower hash rates or staking amounts, are more vulnerable to 51% attacks due to the relatively lower cost required to gain majority control. In contrast, attacking larger blockchains, such as Bitcoin (PoW) or Ethereum (PoS), presents a significantly higher barrier. The extensive computational power or staked tokens needed to override these networks' consensus rules makes such attacks extremely difficult and highly costly to execute (millions to billions of dollars).