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Is the 51% attack the new way to mint millions in cryptocurrencies?

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What is a 51% attack?

A 51% attack occurs when an individual or group of individuals (miners) gain control of more than 50% of a blockchain network’s computing power. Through this control, the miners can then compromise the entire blockchain as they have more than half of the network’s hashing power. Having control of more than 50% of the network hashing power means that the miner(s) can take charge of the blockchain. As such, malicious actors in this capacity can prevent new transactions from being confirmed or reverse already completed transactions hence double spending. They can also prevent other miners from competing for block rewards hence earning all rewards for block confirmations.

The 51% attack in action

There has been a recent wave of 51% attacks on various blockchains with the most recent ones being ZenCash, Verge, and Bitcoin Gold. During all of these attacks, the instigators have made away with cryptocurrencies worth millions of dollars. More precisely, in the Zencash case, the attacker managed to take control of the blockchain thus reorganising it for several blocks effectively double spending on some transactions. At the end of it he/she/they managed to walk away with Zencash tokens worth $550,000 in today’s prices for the four hour job. Not a bad payoff, right? In the Bitcoin Gold case the attacker managed to double spend and make away with a cool $18 million worth of BTG tokens. The verge blockchain suffered its second 51% attack in barely a month with both incidences minting millions worth of dollars in verge tokens for the instigators.

Besides these, elecroneum and monacoin blockchains have been some of the recent victims of these series of 51% attacks that don’t seem to have an end in sight. With this in mind, it therefore begs the question is the 51% attack the new way to mint millions in the cryptocurrency space? Evidently, Bitcoin and majority of the altcoins have not been performing particularly well in the opening half of 2018. There have been losses galore and the coveted Lambo doesn’t appear to be in sight as the market continues to suffer from FUD, increased regulation, and a bearish market. But people got to eat and get that Lambo, right? But how can this happen when the market is extremely bearish with any signs of bullish trends ending up being all dead cat bounces?

The cryptocurrency space has been likened to the Wild West and clearly the rules don’t pretty much apply here. Also, not so many people are interested in playing it fair and accumulating wealth over time is construed as retardation. Patience is not a virtue in this space and weak hands are ridiculed in equal measure. The 1000x return is all that matters and if the MOON doesn’t seem to be in sight then there are multiple other tricks that can be pulled out of the hat. Hence the increased wave of 51% attacks?

Why is there a rise in these attacks?

The 51% attack has for long been hypothesised as a potential threat to Bitcoin but has never materialised due to the huge hashing power required to control the Bitcoin blockchain. However, save for Bitcoin and other top blockchains with huge hashing power requirements, ‘smaller’ blockchains have been left exposed to this threat due to the relatively lower computing power required for running their entire networks. Therefore, with the development of powerful mining equipment, such as ASICs, and GPUs these ‘smaller’ blockchains have become easier to attack and gain control by deploying substantial hashing power onto the network. In addition to this, it has become possible to rent hashing power from platforms such as Nicehash for precise fees on an hourly basis. In this respect therefore, it has become even easier for resourceful individuals with the ability to hire such computing power to launch such attacks.

51Crypto, is a website that calculates the costs and likelihood of launching and completing a successful 51% attack on various blockchains. Based on this website estimates, the ZenCash attack could have cost only $30,000 for a $550,000 pay off. Come to think of it, not a bad day in the office. Further reviewing 51Crypto the theoretical cost of attacking some of these network with millions in dollars’ worth of market capitalization is as low as $500 per hour. With, huge rewards in sight then be sure we haven’t seen the last of these 51% attacks.

51crypto screenshot
51crypto screenshot

Is this a solid concern for cryptocurrencies/blockchains?

The threat of 51% attack has been hanging like a dark cloud over the crypto community over the years and has not been a subject of much concern. There hasn’t been much focus in dealing with it as there has been an unfounded expectation for everyone to act with utmost faith. Sadly this is no longer the case with the growing ease of attack and insatiable greed that is the hallmark of the community. As such there is no doubt that more seriousness should be put into handling malicious individuals. Moreover, with the recent bout of attacks, there is a looming expectation that similar cases will be witnessed at least in the coming future. As such, the casual handling of these incidences as evidence by the verge team should no longer be acceptable. Rather all blockchain devs should be vigilant and dedicate more resources to combating this vice before more damage is done.

What can be done to minimise/control these attacks?

In the strict sense, nothing much can be done to prevent 51% attacks as blockchains are publicly distributed networks and anyone with a computer can set up a node on the network. But technically, a few measures and a number of solutions exist. Firstly, having a highly valued cryptocurrency is a deterrent as attackers will require a fortune to acquire the resources and hashing power to attack blockchains such as Bitcoin. However, not all cryptocurrencies are fortunate enough to have $100B market capitalization. Therefore, they are left to few choices which include hard fork to alter the code in case of such attacks. Secondly, developers and teams can apply mitigation measures. The easiest one entails a two-thronged approach. This entails constantly monitoring the blockchain to evaluate sources of hashing power with any cases nearing or exceeding 50% from a single mining pool. Once such activity is noted, they will then be required to be highly liquid to enable them to rent hashing power from Nicehash to counter the enemy fire.

What are your thoughts on the 51% attack? Are there other ways to counter these attacks? Let me know in the comment section below.

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