51% Attack on Cryptocurrency- Everything you should know

Getting it straight, a 51% Attack or the double-spend attack is a group of miners on the Blockchain trying to spend crypto's on Blockchain, not once but twice. By doing this, they get complete control over 50percent of the network. Once they get the control over the Blockchain or cryptocurrencies, they can do reverse transactions, halt payments, and also prevent new transactions. In addition to this, 51% attack will engage in creating 'free' money, later selling it for other cryptocurrencies in exchange of cash-out on attack.

What is 51% Attack?

According to the Bitcoin.org, 51% Attack is the ability to control the network harsh rate to revise transaction history and preventing new transactions.

To get things clear, below is the sample how 51% attack takes place:

Imagine you spent 10 Bitcoin on a new car, which will be delivered to me in a week. During this, your 10 Bitcoin is transferred to the dealer. Now if you are among 51% attack team, you can reverse the Bitcoin transfer. If the reverse succeeds, you will own both- the car and 10 Bitcoin. Like this, there are different methods followed by attackers, to gain access to Blockchain.

Deeper Attack:

Well, such attacks are now becoming regular and the cryptocurrency industry is facing a huge loss. In a recent study, it was found that cryptocurrency worth $2 billion are hacked, giving the profit of $1.5million. To track down deeper, let us check crypto51.app, created by one of the Reddit user xur17. This app helps in tracking the cost of performing hourly 51 percent attacks on cryptocurrencies. When finding the result, it was found that it will not take $2,990 for keeping the attack going on Bitcoin Gold for an hour. Moreover, for lesser cryptocurrencies ranges between $1-$500.

Recent Cryptocurrency 51% Attack cases ;

Recently, there have at least five cryptocurrencies have faced this attack. In each attack, 51% attackers were successful in amassing enough computing power that re-arranged the transaction and abscond with millions.

One such attack which got noticed was on privacy-centric digital currency Verge (VXG). In the initial month of 2018, Verge faced three 51 percent attacks.

According to Bitcointalk forum, on April 4, 2018, a malicious miner named Ocminer successfully mined the blocks using fake timestamps. This is to trick the network into new block showcasing as the block was mined hour ago. It reportedly blocked one block per second which is around 250,000 XVG.

Similarly, Bitcoin Gold (BTG) faced as the attack, allowing the miner to loot $18.6 million. Also, the attacker successfully gained ownership over 50 percent of BTGs hash rate. Following this attack, Bitcoin Gold director Edward Iskra warned users about how malicious miners were stealing BTG from exchanges. Unless and until the Blockchain is designed with powerful features, attackers can manage to gain access to the virtual currency world.

Recently, the biggest victim of 51 percent attack was ZenCash, which witnessed three double spends. The attackers after gaining access to ZenCash gained 23, 152 ZEN worth $700,000.

How does the 51 percent attack work?

To know how miners attack cryptocurrency, it is important you learn how 51 percent attack works.

In general words, when a transaction is conducted by the Bitcoin owner, it later kept under the pool of unconfirmed transactions. Miners, then select the transaction from the pool so that they can create a block of transactions. However, there is a mathematical problem which should be solved by the miners. It can be said as it is the gateway to the Bitcoin transaction. Using computational power, miners have to solve the mathematical power. If the miner is strong with mathematical power, then he can break the problem. Once the solution is found, the miner will display the solution to other miners to accept the transactions.

However, one has to note here that, miner to create the transaction for other miners will need Digital Signature (private key).So it becomes impossible to send Bitcoin from someone else's account.

What is Mining?

There are 13 million Bitcoins; about 25 new Bitcoins are added every 10-15 minutes which is done through mining. Miners, to mine the Bitcoin need the software. This is to allow computer to join other computers having similar software. If the any of the computer is able to solve the mathematical problem, it is rewarded with the block according to the worth Bitcoin carries.

To complete the process, powerful computer is needed for forming the pools of mining. Apart from just mining, there is Selfish Mining too.

In selfish mining, a group of miners should have the ability to mine the Bitcoin according to the computing power. Once the entity has the ability to control 51 percent of computing power, the entity can mine for more.

Is 51% Attack is a really threat?

Well, there is still no clear answer whether 51% attack is a really threat? However, considering the recent attack and billions of loss Bitcoin or cryptocurrency faced, it looks 51% attack is the biggest threat. Ghash.io, a largest pool of Bitcoin miners has been continuing to cause threat. Till date, the miner community has obtained 51% of Bitcoin network's hashing power twice.

Why Bitcoin shouldn’t worry about 51% Attack?

Although, many cryptocurrency sites have been attacked by 51% miners, but Bitcoin doesn't need to actually worry. Since Bitcoin is quite old, developers are aware about 51% issues for long time. Gaving Andreson- chief scientist at the Bitcoin Foundation says miners could find network that can outright reject 51% attack. A simple line of code to Bitcoin can bring down the attack.

With this 51% attackers will need to have majority of mining power along with majority of high-priority transactions in the network. Furthermore, hypothetical code would reject fraudulent Blockchain built by the attacker.

Andreas Antonopoulos, founder of RootEleven, a technology incubator focusing on cryptocurrencies is also much worried about 51% attack on Bitcoin. During the Bitcoin meet up in Los Angeles, when someone asked about potential attack on Bitcoin, he said, "So unless we were all not paying attention — and trust me, we are, because GHash.io has now become a huge topic in this community — there’s nothing they can really do with that. You can’t run away with everyone’s coins just because you got 51%. All you can do is affect the next block. So you can affect the next block and create a double-spend."

In clear sense, 51% attack can only lead attacker to hijack the Blockchain for limited amount of time. So it is quite clear that, Bitcoin isn't in threat from 51% attack.

Cryptocurrencies Losing Real Money:

With so many recent 51 percent attacks on cryptocurrency, it is sure that this virtual currency isn't secured. One of the primary selling points of this virtual currency is the level of security it has and the difficulty attackers have to face. In Proof of Work (POW) cryptocurrencies, when miners are able to accumulate 51% of network's hashing power and send the fund to the chain address. Here, hashing is known for protecting data from string of numbers acting as protective key.

Attackers while doing 51 percent attack use rented computing power or software available on the web.

Defence mechanism against 51% Attack:

Although, cryptocurrency/Bitcoin is facing a major hindrance because of malicious attacks happening, but there are some defense mechanisms that can help to bring down the attack. The four lines of defense work best to bring down the attack. One such way is by boycotting the attacking entity via Distributed Denial of service attack.

Among the four lines of defence, the first line of defence is by increasing the confirmation list before completing the transaction. For instance, Reddcoin increased their confirmation from 6 to 60 after its first 51% attack.

This is further followed by boycotting the attacking entity which decreases hashing power below 51%. This defence is majorly done when the attack takes place.

Final Words;

There are millions of miners on Bitcoin Blockchain, malicious miners have to spend huge amount on mining hardware. Many attackers are also worried about getting caught and money that need to spend on renting space. This mining operation requires patients and effort, and if the attacker is prosecuted it would be a waste. As a part of security, Blockchain needs to be decentralized to avoid getting attacked.