What’s a 51% attack?
A decentralized system like Bitcoin has not only advantages, but also some risks, like the 51% attack.
This is the case when more than 51% of the complete computing power of a blockchain is provided and controlled by a miner or mining pool.
Since miners constantly want to add a new block to the blockchain, but a found block must be confirmed by at least 50% of all miners, it is possible to manipulate the blockchain with at least 51% of the total computing power. The attacker could delete or add new coins to the wallets he has selected. The desire for decentralization would be gone.
Should the community support a hard fork in case of an attack?
Should the attacker rewrite the blockchain as described above, he could simply “create” coins from nothing. For example, he could credit his account balance with thousands of coins in a few seconds. This allows the entire network to be manipulated and the value of the other coins to fall. Therefore, in case of such an attack, a hard fork is usually supported by the community. This means that the miners split the manipulated blockchain into two. This results in two coins (Bitcoin Cash, for example, splits from Bitcoin), which, however, have almost the same cryptographic structure. The community now continues with the “real” coin and the attacker only has control over the manipulated coin and its blockchain. Thus a successful 51% attack can be fixed.
What does this look like in practise?
Since the complete blockchain is controlled by miners and thus the control should lie with the majority, the truth looks different.
By means of huge Bitcoin Mining Pools companies like Antpool, ViaBTC and BTC.com can unite a large part of the entire computing power of the network. The three largest pools alone account for about 50% of the network’s total computing power. Therefore the danger of a 51% attack is definitely present at Bitcoin, but almost impossible due to the strong community and its self-control. The three companies could merge, but then something like this would have to pass by the community quietly and secretly, which is quite unlikely.
Has Bitcoin already had an attack in the past?
In June 2014 the startup Cex exceeded the 51% mark for 12 hours. Although the pool called Ghash.io quickly corrected to a lower brand, a certain fear arose in the decentralized community. A few days after the incident, the pool took the floor and did not want to harm Bitcoin in any way. Immediately after the incident, the proportion of total computing power was reduced to less frightening levels.
What are the most recent cases?
The crypto currency Verge had a 51% attack on 04 April 2018. The hackers succeeded in exploiting errors in the coin’s program code and thus creating blocks with fake time stamps. As a result, the mining reward has been paid in full to the attacker’s address.
The 51% attack explained by Binance: