Cryptocurrency Gas Fees
21.08.2022
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Probably you have come across the increasing talk about the high energy demands for bitcoin…
A Brief on 51% Attack in cryptocurrency
A 51% attack refers to an attack in the blockchain of a cryptocurrency by the miners who control over 50% of the mining hash rate network. As a trader who owns over 50% of the network’s nodes, you have the power of controlling the blockchain. The attacks occur in different ways and one of them is an owner preventing new transactions from getting confirmations. This process gives people the chance of halting payments among the users.
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The Way 51% Attack Takes Place
Any time a transaction takes place in a blockchain, it is put in a pool of unconfirmed transactions. In return, the miners are given the chance of selecting transactions from the pool in forming a block of transactions. Remember, for any transaction to be added to a blockchain, it is important to get the right answer to a puzzle. They use computational power in getting the right answer. Therefore, if a miner has high computational power, then there are high chances that the miner will get the correct answer. After that, the miner will be allowed to add a block to the blockchain.
When a trader gets a correct answer, it will be broadcasted to the other miners. Moreover, the information will only be accepted in case all the carried-out transactions are valid. Their validity is based on the existing record on the blockchain. Unfortunately, corrupt miners will not broadcast their solutions to the other miners in the network.
Due to the above issue, two versions of a blockchain will be formed. One of them will be the original blockchain that legitimate miners follow. However, the second one will be used by a corrupt miner who does not broadcast the puzzles results in the original network. This miner is the one who will be able to view the information.
The corrupt miner will just continue to spend time and continue with its own blockchain version. You must remember that this version is not broadcasted to the rest of the network. This means that the second blockchain will be isolated from the network. Thus, the corrupt miner may spend his or her bitcoins on the legitimate blockchain version which other miners follow.
Understanding the 51% Attack
A blockchain refers to a distributed ledger that records information and transactions about them and then encrypts the data. The network of the blockchain reaches a majority consensus regarding transactions in a validation process and the blocks in which stored information is sealed. The blocks are linked through cryptographic techniques. The issue makes it almost impossible to alter a block after confirmation.
The 51% attack on the blockchain takes place when a group controls over 50% of the hashing power. The group then introduce an altered blockchain in the network at some points. It is done at a point, which is accepted by the network since there are high chances attackers will win most of them.
The people responsible for 51% attack can do the following:
- Reversing transactions so that they can double spend coins
- Excluding the new transactions from getting recorded
- Preventing the other miners who are in the same network from mining tokens or coins in the network
- Preventing the confirmation or validation of transactions
- Modifying transactions ordering
Flaws in the Democratic Governance Model of Nakamoto
The first blockchain to use the Proof of Work (PoW) consensus system is Bitcoin. It is used in the validation of transactions. In Satoshi Nakamoto’s whitepaper, he outlined that in maintaining integrity and security in a blockchain then miners or honest nodes should collectively control more Central Processing Unit (CPU) power as compared to other cooperating attacker nodes group.
The main reason why Nakamoto developed Bitcoin was due to the aversion and frustration of the financial institutions after the Great Financial Crisis. Currently, Bitcoin is the most popular crypto. It has a market cap of about $190 billion. He also gave the advice to solve double-spending. He believes that it is an inherent problem in the peer-to-peer digital currency system. Thus, he devised the blockchain mechanism and even utilized PoW as a consensus system.
Nakamoto’s motive was to develop a digital currency that is not controlled by financial institutions. Currently, these institutions act as auditors and gatekeepers of fiat currencies. Therefore, in preventing a few individuals from controlling currency and assuming power, he introduced blockchain technology. This was the only democratic way to maintain the transaction records.
From his idea, he assumed that malicious users will not gain majority control over the hash rate. Namakoto also believed that most of the miners will be honest. Through this, the blockchain and currency would endure immune to attacks. Unfortunately, he was wrong after all. The 51% attacks are plaguing the small blockchains and even threatening their survival.
How to Prevent the 51% Attack
An organization or the people having about 51% hashing power are the ones who can run this attack. The best way of preventing it from taking place is not to allow a single entity to be more powerful. Thus, it is important to enhance the decentralization of the miners as well as a robust blockchain.
The blockchain of Bitcoin is very firm. This means that it takes several cash for an individual or an organization to overtake 51% Bitcoin mining power. More sense is made in financially using this power and even mining Bitcoin legitimately. Due to this, there are low chances of experiencing a BTC double spending attack.
The List of 51% Attacks that have taken Place in the Past
- Vertcoin registered about 4 attacks on its network in 2018. However, the motive is unclear.
- In 2018, Bitcoin Gold suffered over an $18 million loss because of a 51% attack
- A Verge 51% in April 2018 led to the loss of 20 million coins
- In May 2018, there was an attack on Bitcoin Cash. Luckily, there were no losses.
- Attackers double spent approximately $ 1.1 million of Ethereum Classic in one ETC 51% attack in January 2019. Although the crypto lost its credibility during that time, it managed to recover.
- Double spending of over $ 70, 000 on Bitcoin Gold in 2020
Safeguarding Against Proof of Work
Even though the techniques are not fully proven, the following techniques may be used in making the attacks difficult. The first technique is migrating to Delegated Proof of Stake (DPoS). The reason is that DPoS utilizes different delegates which change with time in validating every new block. In the DPoS blockchain, 51% of the attackers have to control delegates and hash rate. This makes it more challenging to experience an attack of any form. Therefore, in minimizing risk, people may migrate from PoW to DPoS in minimizing risk.
Another way is by using Modified Exponential Subjective Scoring (MESS) for every parallel reorg chain incoming in the network. It means that for all nodes in the network when they see a potential incoming reorg, they will compare it to the current chain from a split point. Also, arbitrarily demands more quantity of work for the future reorg chain.
The gravity quantity is negligible in the first few reorgs’ blocks. However, it increases when there is a reorganization of more blocks. Due to this, it may be costly for attackers to reorganize many blocks as opposed to cheap without MESS. Therefore, MESS may be utilized in analyzing the block reorganizations in assigning a score. This is to show the reorganization’s trustworthiness.
