What Is a 51% Attack?

Before we take a closer look at 51% attacks, we need to understand the systems that mining and blockchains are built on. In this article, we'll go over Proof of Work (Bitcoin's consensus algorithm), nodes, and hash rate, and then explore 51% attack scenarios and how likely they are.

Bitcoin and Consensus Algorithms

One of the main strengths of Bitcoin and its underlying blockchain technology is that data is built and verified in a distributed way. The decentralized work of nodes ensures that protocol rules are followed and that all network participants agree on the current state of the blockchain. As a result, most nodes need to regularly reach consensus on things like the mining process, the software version in use, and transaction validity.

Bitcoin's consensus algorithm, Proof of Work (PoW), allows a miner to validate a new block of transactions only if a majority of network nodes agree that the block hash the miner provided is correct. In other words, the block hash proves that the miner did enough work and found a valid solution to that block's problem.

As a decentralized ledger and distributed system, blockchain infrastructure prevents any centralized entity from abusing the network for its own purposes. This is exactly why the Bitcoin network has no single central authority.

Proof of Work, Nodes, and Hash Rate

Mining in a Proof of Work system takes an enormous amount of electricity and computing resources, so a miner's capability is determined by the computing power they have. This is commonly called hash power or hash rate.

There are many mining nodes in countries around the world, and they compete to be the first to find a valid block hash and get rewarded with newly created bitcoin.

Mining power is spread across many nodes worldwide, which means the hash rate isn't in the hands of any single entity.

But what would happen if the hash rate weren't distributed widely enough? For example, what if a single entity or organization managed to gain more than 50% of the hash power? In that case, a 51% attack could take place.

What Is a 51% Attack?

A 51% attack is an attack on a blockchain network in which a single entity or organization gains control of the majority of the hash rate, potentially causing network disruption.

In this situation, the attacker has enough hash rate to intentionally exclude transactions or change their order. The attacker could also reverse their own transactions, which can lead to the problem of double spending.

In addition, if a 51% attack succeeds, the attacker can prevent some or all transactions from being confirmed (a transaction denial of service), or restrict some or all of the mining done by other miners and monopolize mining.

However, an attacker carrying out a 51% attack cannot reverse other users' transactions or stop transactions from being created and broadcast to the network. It's also impossible for them to change the block reward, create coins out of thin air, or steal coins that don't belong to them.

How Likely Is a 51% Attack?

A blockchain is maintained by a distributed network of nodes, and all participants cooperate to reach consensus. This is one of the reasons blockchain security is so strong. The larger the network, the better it can protect against attacks and data corruption.

On a Proof of Work blockchain, the higher a miner's hash rate, the higher their chance of finding a valid solution for the next block. That's because mining requires countless hashing attempts, and more computing power means more attempts per second.

Some early miners joined the Bitcoin network to contribute to its growth and security. As the price of bitcoin rose, a huge number of new miners entered the system to compete for the block reward (currently 6.25 BTC per block). This competitive environment is what keeps Bitcoin secure. Unless they act honestly and work toward earning the block reward, miners have no reason to invest large amounts of resources.

As long as the network stays this massive, a 51% attack on Bitcoin is very unlikely. Once a blockchain grows large enough, the chance of any one individual or group gaining enough computing power to outpace all the other participants drops sharply.

Also, because blocks are all linked together through cryptographic proofs, it becomes increasingly difficult to change previously confirmed blocks as the chain grows. For the same reason, the more confirmations a block has, the more expensive it becomes to change or reverse the transactions in that block. So even if an attack succeeded, the attacker would likely only be able to modify transactions in the most recent few blocks for a short period of time.

Finally, let's consider a case where a malicious actor attacks not to make money, but purely to destroy the Bitcoin network. Even if the attacker succeeded in disrupting the network, the Bitcoin software and protocol would be quickly modified and updated to respond to the attack. This would require the other network nodes to reach consensus and agree to these changes, but in an emergency it could be handled very quickly. In conclusion, Bitcoin can defend effectively against attacks and is considered the safest and most reliable of all existing virtual assets.

While it's extremely difficult for an attacker to gain a majority of the computing power on the Bitcoin network, that may not be the case for smaller Proof of Work virtual assets. Compared to Bitcoin, altcoins have relatively little hashing power protecting their blockchain networks. As a result, 51% attacks can actually happen. Virtual assets that have suffered 51% attacks so far include MonaCoin, Bitcoin Gold, and ZenCash.