What Happens in a 51% Attack?

A 51% attack refers to a situation in a blockchain network, such as Bitcoin, where a single miner or a group of colluding miners gains control of more than 50% of the network's total hash rate (computing power). This enables them to manipulate the blockchain, undermining its integrity and security.

How Blockchain Works

• In a blockchain network like Bitcoin, transactions are verified and added to the blockchain through consensus mechanisms (e.g., Proof-of-Work).
• Miners compete to solve complex mathematical puzzles, and the first one to solve it gets to add the next block to the blockchain.
• The network relies on a decentralized majority to ensure no single entity can control it.

What Happens in a 51% Attack?

If an attacker or group of attackers control more than 50% of the hash rate (computational power), they can:

• Double-Spend Coins: They can spend the same bitcoin twice. For example, they send bitcoin to a merchant, and after receiving the goods, they reorganize the blockchain to remove that transaction, reclaiming the coins.
• Prevent New Transactions: They can block or delay the confirmation of transactions, effectively freezing the network for others.
• Reorganize Blocks (Forking): The attacker can rewrite part of the blockchain to create an alternate chain where their desired transactions (e.g., double-spent coins) are valid.

What Attackers Cannot Do

Even with 51% of the network power, attackers cannot:

• Steal coins that don’t belong to them.
• Alter past transactions that are deeply embedded in the blockchain (beyond a few recent blocks).
• Create new bitcoins out of thin air (the issuance rules remain intact).

Why Is It Called "51% Attack"?

The term "51%" is used because the attacker needs more computing power than the rest of the network combined. This allows their version of the blockchain to be the longest chain, which is considered the valid version of the ledger in Proof-of-Work systems.

Consequences of a 51% Attack

• Loss of trust in the network and its security.
• Reduced credibility and falling value of the cryptocurrency.
• Economic losses for merchants or users who may accept double-spent coins.
• Miners and participants may abandon the network due to lack of confidence.

How Likely Is a 51% Attack?

While theoretically possible, a 51% attack is:

• Extremely Expensive: Gaining over 50% of Bitcoin’s massive hash rate requires enormous computational power, energy, and costs.
• Economically Irrational: Such an attack would harm the value of Bitcoin, potentially making it unprofitable for the attacker.
• Increasingly Difficult: The network’s hash rate grows as more miners join, making an attack harder to pull off.

Smaller Blockchains Are More Vulnerable

• Smaller or newer cryptocurrencies with lower hash rates are more vulnerable to 51% attacks.
• Attacking them is cheaper since the computational power required is lower.
• Examples include attacks on Ethereum Classic (ETC) in 2019 and 2020.

Summary

A 51% attack occurs when a miner or group controls more than half of the network's computing power, allowing them to manipulate the blockchain (e.g., double-spend coins, delay transactions, or reorganize blocks). While highly unlikely for large networks like Bitcoin due to cost and scale, it remains a risk for smaller blockchain networks with less computing power securing them.