A 51% attack takes place where a malicious individual or a group takes control of over 50% of a blockchain network hash rate. In having control of 51% of the hash rate, attackers can influence other blocks that hold their transactions. Figure 1 demonstrates how a 51% attack takes place. Let’s say that the attacker has their transactions in the legitimate chain wherein they send transactions to exchanges, merchants etc. based on which they receive services.

For example, assume that block 40 has a transaction of token A sent to an exchange and as soon as the deposit is confirmed, the attacker converts token A to say ETH. Meanwhile, the attacker is mining blocks with their hashpower. In the private chain, the attacker sends the same transaction in block 40 to themselves instead of the exchange. As the attacker’s chain is longer (implying more work done), the network has to accept the new chain. In the new chain, token A never went to the exchange. Thus, the attacker has token A as well as ETH. The farther back the attacker goes in the chain, the higher is the damage. And the number of blocks that can be re-written by the attacker depends on the hashpower they have compared to the network.

Key incentives for attackers to conduct 51% attacks include the possibility of “double spending”. Double spending takes place where a malicious entity controls more than 51% of the hashing power and can create a copy of a transaction and add it to a blockchain. This erases earlier transactions on the network as if they never took place.

This, in turn, means attackers can spend their tokens multiple times through erasing other blocks.

Over the past few years, there have been a few 51% attacks. In the past 3 months, attackers have been able to fraudulently steal over USD 8 million worth of ETC. The latest Ethereum Classic 51% attack in which attackers were able to ‘reorganize’ over 7000 blocks. This was the third 51% attack the blockchain had faced in recent times and the ETC blockchain is now trialling a strategy to stabilize the networks decreasing hash rate to avoid future attacks. Other major attacks include:

• Ethereum Classic 51% attack in 2019 causing a loss of $1.1m
• Verge 51% attack in 2018 causing a loss of $1.75m.
• Verge was later attacked (51% attack) 2018 resulting in a loss of $1.1m

In Jan 2020, the Bitcoin Gold blockchain was the target of a 51% hack which resulted in attackers double-spending over $85,000 worth of Bitcoin Gold. Some people speculated that attackers were able to obtain mining power through the online mining power market place “NiceHash”. Currently, NiceHash allows users to rent mining power for over 33 major blockchain algorithms.

Blockchains that use a PoW consensus algorithm are vulnerable to 51% attacks because the network is open for anyone to mine, including attackers. The lower the hash rate the blockchain the easier it is for an attacker to gain a majority advantage. Popular blockchains such as Bitcoin or Ethereum (both run PoW) have a very low vulnerability risk to 51% attack as gaining 50% of their networks would require an unrealistic amount of computational and energy resources.

How to prevent a 51% attack?

Blockchains that use a PoW consensus algorithm are vulnerable to 51% attacks because the network is open for anyone to mine, including attackers. The lower the hash rate of the blockchain the easier it is for an attacker to gain a majority advantage. Popular blockchains such as Bitcoin or Ethereum (both run PoW) have a very low vulnerability risk to 51% attack as gaining 50% of their networks would require an unrealistic amount of computational and energy resources. In sum, the higher the hashrate, the more difficult it is to perform a 51% attack.

Sybil Attacks manipulate online systems where one user attempts to overpower a network through the use of multiple profiles. Specifically, with blockchains, Sybil Attacks are when a user attempts to run multiple nodes on a blockchain network.