Before we dive into this topic, one should understand the basics of Blockchain technology. A well-distributed blockchain consists of thousands of different nodes that individually support the network’s decentralization and security. These nodes are by itself supported by miners who use their computers’ processing power to solve mathematical equations. All these nodes and mining computers are connected and together make up a distributed datacenter we know as a blockchain. The way of reaching consensus about the given rules within the protocol varies per blockchain. The oldest and most commonly used version is the Proof-Of-Work blockchain, invented by Satoshi Nakamoto. Given the fact thousands of people and institutions around the world support these networks, it’s hard to breach the security. However, it is still possible in theory.
What is a 51% attack?
A blockchain is hard to hack into. That’s not quite as simple as to crack a regular database that usually hides behind admin access gained with a couple of passwords. To breach a blockchain, you would have to perform a 51% attack. It means that you would have to gain access over more than 50% hashrate of the network, thus 51% attack. Hashrate is another word for mining power. The moment one sole entity is in charge of more than half of the network, this party can now change its consensus protocol. By doing so, you could reverse the blockchain years back in time causing many transactions have never occurred, allow more Bitcoin to be created or destroy parts of the entire supply. This means you could cause chaos. The chances of a 51% attack are not that high, but in history, it has happened before.
One of the most famous 51% attacks was on the original Ethereum protocol, Ethereum Classic. After a major hack in the early days of the Ethereum network, the team that we now know as responsible for Ethereum took control of the network and reversed the attack. To the frustration of the core team of Ethereum, that went on to build further on Ethereum Classic, the version that was never forked or whatsoever. Having a smaller market cap would make it less expensive for a single entity to take control of the network, and that is what happened. $1.1 million in ETC was double spent during the attack, causing many major exchanges to halt the trading of the coin. Prices went down but eventually recovered. The hackers got away with it.
This project has suffered multiple attacks over the years. After claiming to be the number one privacy coin, the project called for many haters to come to their front doors. Back in 2018, however, Verge suffered from more than one attack. It started with a hacker who found a way of integrating malicious software into the mining protocol. With their new version of the protocol, they could mine multiple blocks per minute on the Verge blockchain, gaining control over network hashrates, and move XVG to their wallets. At the peak of the second attack, the hackers were mining 25 blocks per minute, or roughly 8250 XVG or $950 every single minute. Reports say over $1.7 million in XVG was stolen in the three attacks. The team behind Verge called it nothing but a DDoS attack. Afterward, a hard fork occurred and now a multi-algorithm style of mining is utilized to minimize the probability of another 51% attack.
How can a 51% attack happen?
You might be wondering, how is this possible? You plug in thousands of mining rigs, and there you have it – you have just gained control of the network. However, this is a very expensive operation. Doing this for the Bitcoin blockchain would cost you around 1 billion dollars. That amount is much lower for smaller coins, though. Have you ever heard of Monero? That would cost you roughly $25,000, according to calculations by Exaking. These are theoretical examples. In practice, many of these projects have built-in warning signs and detectors to go against these kinds of attacks. It is, however, important to be aware of this possibility. You cannot just blindly trust any blockchain out there to be a hundred percent safe.