Are cryptocurrency networks at risk? What is a 51% attack?

Introduction

The operation of cryptocurrencies is based on a fundamental principle, that of decentralization. In this way, each of the participants or nodes of a network have a copy of the blockchain, which stores the transactions that have been carried out since the origin of a cryptocurrency.

Every time a new transaction occurs, it must be validated. This is done through a simple mathematical operation and, once validated, said transaction is added to the blockchain.

This process, which is automatic in the nodes, is carried out thanks to the consensus protocols and, when more than 51% of the nodes in a network consider it valid, it is accepted that this transaction has been valid (democracy).

The 51% problem

The question we can ask ourselves is: if with 51% of nodes in favor of the validation of a transaction this is approved, what can happen if 51% of the nodes agree to lie and benefit?

This is where the 51% Attack comes from: a 51% attack is a situation in which a group of miners who own more than 50% of the network, act maliciously to modify the operation of that network. This would allow them, for example, to double the cost of the currencies or prevent validating other transactions.

A 51% attack is feasible

Let's see what would have to be done to carry out a 51% attack:

• In the first place, we should get more than 50% of the network (for example, at the end of 2020, the Ethereum network had about 7,500 nodes, so we would need to control more than 3,750 nodes).
• Second, we need our mining network to be large and powerful enough that we are always the ones to mine each block.

You see the difficulty. For this reason it is quite difficult to make a 51% attack.

But what if a 51% attack were to occur?

As we have seen before, in this case, a double cost of the currency could occur, as well as avoiding transactions and preventing the rest of the miners from mining valid blocks.

In any case, they could not change the number of twin coins per block, create coins from scratch or send coins that are not available.

Some real examples

• In May 2019, two mining groups (BTC.com and BTC.top) carried out a 51% attack on the Bitcoin Clash network, with the intention of preventing an unknown miner from seizing coins that did not belong to him.
• In January 2019, Coinbase detected a 'profuse chain reorganization' on the Ethereum Classic network, so it decided to suspend transactions with ETC.
• In January 2014, the Gash.io group of miners almost came into possession of 51% of the Bitcoin network, triggering all alarms. Soon after, some of the group's miners left to avoid such a situation.

Conclusions

The larger and more established a cryptocurrency network, such as Bitcoin or Ethereum, the more complicated it is to make a 51% attack. However, smaller networks do have to take into account the risk of such an attack.