Blockchain technology is considered immutable, and that’s why cryptocurrency developers use it as a base. Crypto users who send and receive Bitcoin instantly on the blockchain might wonder if their transactions are indeed safe and hack-proof.
Crypto exchange malware attacks are not rare but hacking a Bitcoin blockchain is an entirely different matter. Something like that could only occur if a miner or group of miners decide to use their computing power to take over the blockchain.
This unfortunate event is called a 51% attack. If you’re new to crypto, learning about the potential for this attack can offer valuable insight.
51% Attack Explained
When we think of crypto-related hacking, third-party malware and ransomware attacks come to mind. That’s why users who send and receive Bitcoin instantly through their digital wallets are often reminded to secure it and be careful about clicking suspicious links.
But a potential 51% attack is more of an “inside job” as only miners can execute it. A blockchain is a digital ledger that collects data in groups (or blocks) and links them together in a chain. These blocks are created when the mining computers, operated by miners, solve complex mathematical problems.
These computers function as a network and are responsible for mining new coins and for recording every transaction. This is how crypto miners make money, and those with machines with higher hashrates earn more.
The 51% attack happens when one or more miners highjack 51% of the network’s mining power in the blockchain. This can’t occur by accident, and it would have to be a deliberate attack with a specific agenda in mind.
By gaining control of over 51% of the crypto network, the attackers would be able to reverse transactions and enable double-spending, which decentralised networks don’t allow. They could prevent new transactions from being added to the ledger and even modify them.
Finally, an attack like this could block other miners in the blockchain from mining new tokens. It doesn’t mean that a blockchain would stop working or that you couldn’t buy and sell crypto, but that the entire operation would be severely disrupted.
51% Attack Real-World Examples
The idea of a 51% attack seems like something crypto investors should be very much worried about. In reality, these attacks are rare. And in the case of Bitcoin – nearly impossible.
Bitcoin users don’t need to be concerned about the 51% attack because the sheer size of the blockchain prevents it. For one or even a group of miners to achieve a 51% hashrate to take over the network, they’d have to organise in a way that’s almost inconceivable.
However, even if Bitcoin is safe from a 51% attack, it doesn’t mean other blockchains are. In 2016, two blockchains built on Ethereum suffered 51% attacks.
Bitcoin Gold, one of the largest cryptocurrencies, was also attacked in 2018 and 2020. The hackers managed to steal more than £13 million, making news and significantly shaking the crypto community.
What Does It All Mean for the Crypto Investors?
A 51% attack doesn’t happen often, but it’s still not something to completely brush off as irrelevant. One of the ways a specific cryptocurrency can become vulnerable is if it suddenly becomes devaluated.
Digital currency is volatile enough, and frequent attacks on the network may cause its collapse. Investors holding assets that the market is losing confidence in should be prepared for a potential 51% attack.
The best way any investors can protect themselves from an attack of this magnitude is to stick with larger and more established cryptocurrencies such as Bitcoin.
But it’s also vital to take steps to protect your assets personally. Choosing wallets with two-step verification and diversifying your crypto portfolio allows users to invest from a much safer position.
Keeping the Bitcoin Blockchain Secure
Whether you’re interested in cryptocurrency from the investor or miner’s point of view, understanding the 51% attack provides a clearer notion of how blockchain technology works.
As an investor, this kind of breach leaves your holdings vulnerable and prevents you from completing transactions. Plus, there’s the fear of all the potential for double-spending and fraud.
As a miner, choosing not to be a part of this kind of attack puts you at a disadvantage and prevents you from making any money. While many altcoins are vulnerable to 51% attacks, they’re still not a common occurrence. For some cryptocurrencies, like Bitcoin, they’re virtually an impossible event.