Are Blockchains really secure and tamper-proof? 51% attack suggests otherwise

Many people think that blockchains are tamper-proof because they are supposed to be extremely secure and unalterable. However, human ingenuity often overcomes these limitations. We have seen enough incidents in the past that prove that seemingly unhackable blockchains can, in fact, be hacked.

One such blockchain hack is the 51% attack, where a group of miners take control of 50% of the mining hash rate of a proof-of-work (PoW) blockchain network. They take control by buying/renting enough hashing power that allows them to take control of more than 50% of the network.

PoW is the original consensus algorithm in a blockchain. It confirms the transactions and creates a new block in the chain. The mining hash rate is the total computing power that a PoW blockchain uses to process said transactions. In simple terms, it means how fast a miner’s machine can complete this process.

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Over the years, the 51% attack has gained notoriety. In 2018, Bitcoin Gold was hit by a 51% attack. The unknown perpetrators stole 388,000 BTG (worth $18 million) from several cryptocurrency exchanges. The cryptocurrency suffered another similar attack in January 2020. Ethereum Classic was also subjected to several 51% attacks.

How does a 51% attack work?

Under normal circumstances, mining nodes create new coins on the network. Mining nodes are the computers that compete with each other to determine valid hashes through trial and error. Once someone finds the right combination, it is approved by the network and a newly mined block is added. This approval or agreement by the network is called consensus.

However, if malicious agents take control of more than 50% of the network, they could:

  • Prevent recording, validation and confirmation of transactions
  • Change the order of transaction processing
  • Spend coins twice
  • Double spending is a problem where hackers rewrite parts of the blockchain and reverse their own transactions.

    Also, the attacking 51% can impact other miners. They can control the computing power of the network and block mining by anyone not belonging to their group. This may eventually impact companies using said blockchain to manage their transactions.

    That said, there are limits to the disruption a 51% attack can cause. For starters, attackers cannot create new coins. Also, while they can double spend, they cannot cancel other people’s transactions on the network or prevent users from broadcasting their transactions on the network. Additionally, attackers cannot destroy the entire blockchain or its native coin.

    How can blockchains prevent 51% attacks?

    A blockchain can prevent a 51% attack in several ways. It can put a cap of 50% so that no miner or group of miners controls more than 50% of the hash power. They can also switch to a Proof of Stake (PoS) mechanism, which is considered more secure than PoW. PoS incentives are mostly controlled by wealthy users who are unlikely to carry out such attacks.

    (Edited by : Priyanka Deshpande)

    First post: STI


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