What Is a 51% Attack?
51% attack is a situation in a blockchain system where a person or a group of persons has mining control of the majority of the consensus power of a network, i.e., the hashing power in a PoW (Proof of Work) system or the staking power in a PoS (Proof of Stake) system. Having control of the majority of the consensus power allows the person or persons to manipulate certain operations in the system, like reversing transactions or changing the order of the transactions. It does not, however, allow the person or persons to create new coins.
How It Works
In a 51% attack, the attacker first needs to acquire more than 50% of the network’s computational power or staked coins. Once this is done, the attacker has the power to reorder, delete, or reverse their transactions. This gives the attacker the power to spend the same money twice, a procedure that is called a double-spending attack. The attacker has the power to cause a delay in the network’s consensus, but cannot produce new money or alter unrelated transaction history.
Crypto Example
To illustrate, take a smaller PoW system like Bitcoin Gold or Ethereum Classic. An attacker with a majority hash rate could double spend their own transaction for a service or product, essentially spending the same money twice. This is not a common occurrence in a large system like Bitcoin, as it is quite expensive to do so.
Why It Matters
The 51% attack compromises the trust in the blockchain system, and trust is a key factor in the integrity of the system. The attack also makes the system slow, allows for double spending, and compromises the trust in the system. In a large decentralized system, it requires a tremendous amount of power to control 51% of the system.
Limitations
Even with a majority grip, or 51% of the network, they still can’t steal someone else’s coins from a wallet, they still can’t mint their own coins at will, or modify blocks that don’t have their own transactions. They can’t prevent new transactions from occurring; they can, if possible, only slow it down or restrict the number. The rules restrict attacker success, limiting his ability to cause havoc, and preventing 51% attacks from having complete power, though they are serious.
Prevention & Network Security
Blockchains are secure from 51% attacks due to decentralization, hash or stake participation rates, and validator distribution. The use of consensus algorithms such as PoS makes it difficult for a single entity to control the majority of the network. The confirmation of transactions also plays a role in ensuring security. The active involvement of the community and the increase in network size help to prevent 51% attacks.