51% Attack - Insights on Safety of Blockchain
What is 51% attack?
Blockchain is ‘democratic’ in its nature, and assumes that the majority is right. It means that a group controlling more computing power than the other users combined can have the right to influence and exploit the system, getting away with stolen tokens.
Cryptocurrencies have few ways to protect from fraud, and you cannot simply alter the blockchain ledger. But you can ‘double spend’ your money, and in this way multiply your resources.
You don’t have to choose, whether you want to buy a Lambo or Ferrari.
With overwhelming computing power, you can buy a Lambo. Then you simply race ahead of the rest of the pack, and having the longest sequence of blocks, convince them that your records are correct, and that you’ve bought Ferrari. Actually, both will be true.
While in powerful coins like Bitcoin such attacks are practically impossible due to the huge computing power of the combined network, for small cryptocurrencies it might be a huge problem - mind that computing power does not always have to be your own. The attacker can rent it for an hour.
51% attack example
The biggest public blockchain that experienced 51% attack was Bitcoin Gold, a hard fork of Bitcoin.
In May of 2018, the attackers exploited it using overwhelming computing power and double-spent over $18 million, sending the money to crypto exchanges, and then reversing the transactions.
Is your blockchain project safe?
As long as your blockchain nodes aren’t public, there’s nothing to worry about.
But if you accept public nodes, there’s one particularly good way to protect your blockchain from 51% attacks. You need a reactive shield to protect from such attacks.
The idea is based on fighting back with the same weapon. While the attacker may use rented computing power, as soon as you discover an uncommon peak in the network activity, you rent additional, neutral power as well. It increases the difficulty of a 51% attack and is an effective weapon as long as you can match the attackers power.
Of course, it’s cheaper for you to protect the blockchain, than for them to attack it - long assault is expensive. The goal is to deplete their resources and make them give up the continuous attack.
51% attack is a blockchain’s Achilles' heel, where a person having more computing over than all the other users combined can influence the blockchain functionality and exploit it. It bends the way the new blocks are created, and basically reverses the time in the ledger.
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