What is a 51% attack?
A 51% attack occurs when a one Bitcoin mining pool gets more than 50% of the mining power (hash power).
How can this happen?
Bitcoin is a permission less network. That is anyone can:
- join the network
- validate a transaction
- thus, it can be attacked by anyone that wants to do it.
In a 51% attack one mining pool has control of the blockchain.
What does one get from a 51% attack?
In a 51% attack, the malicious mining pool has control of the blockchain and can take money from the blockchain by:
- reversing transactions
- double spending
How to do it
- Get more than 50% hash power on the network
- Validate transactions on an alternative network that benefit oneself
- When prepared, broadcast the alternative network.
Since the attacker has more mining power than the remaining part of the network, all bitcoin nodes will change to the alternative network. This is because the rules of Bitcoin state that the longest network is the valid network.
How to profit by reversing transactions
- cancel a transaction from the other Bitcoin network
- send these coins to yourself
- withdraw the coins
How to profit by double spending
- deposit coins
- send these coins to yourself
- withdraw the coins
- cancel the transaction
- send the coins to yourself again
- withdraw the coins
Who will be a 51% attacker?
A conglomerate of mining pools
In 2014, Ghash.io, a Bitcoin mining pool, was near 51% of Bitcoin’s hash power two times. It reached 42% in January 2014 and 50% in June 2014.
A single mining pool
A new Bitcoin mining pool called “Layer1” has started to mine Bitcoin.
The goal of Layer1 is to have 30% of the total Bitcoin hash power by the end of 2021. It was necessary for Layer1 to get only $200 million to get started.
A state actor
Gideon Greenspan lists the conditions for China to undermine the bitcoin network.
Whenever an oligarch decides to do it “A Bitcoin 51% attack will occur!”
On November 24, 2019, Michael Bloomberg officially declared his candidacy for president of the USA. On March 4, 2020 he officially dropped out of the race. During these 100 days, he spent $500 million dollars.
It is too easy for a single mining pool, state actor, or a single oligarch to get more than 50% of the Bitcoin hash power.
