51% Attack

A 51% attack is an exploit where an attacker gains control of a simple majority, over 50%, of a blockchain network's total hashing power. With majority control, the attacker can modify transactions, double spend coins, and prevent confirmations in an attack on the network's decentralized consensus.

By controlling the majority power for validating transactions, malicious actors can override the system and bend consensus rules for their benefit at the expense of other network participants. 51% attacks completely subvert a blockchain's core principles.

These attacks are primarily a risk for smaller blockchains with less hashing power security, though no PoW network is ever immune if sufficient resources are acquired by attackers. The term "51% attack" specifically references networks using proof-of-work mining and doesn't directly translate to proof-of-stake.

How 51% Attacks Work to Disrupt Blockchains

Here are some ways attackers with 51% control can exploit their position:

• Double spending - The attacker reverses previously confirmed transactions by rewriting the blockchain's transaction history and redistributing funds back to themselves.
• Censorship - The attacker prevents specific wallet addresses or transactions from being confirmed in new blocks, denying service.
• Consensus disruption - The network cannot achieve consensus on the authoritative version of the blockchain if under 51% control.

These attacks directly compromise security, integrity, censorship resistance and decentralization – the core tenets of blockchain technology. By gaining majority control, attackers breach assumptions.

Impact of Successful 51% Attacks

The effects of majority attacks obtaining 51% control can be devastating:

• Previous transactions can be reversed, destroying trust in transaction finality.
• Exchanges could experience massive losses from double spending of deposited coins.
• Network value deteriorates as trust in security and decentralization vanishes.
• "Goldfinger" attacks could seek to destroy faith in a blockchain rather than steal funds, undermining the entire project.

While rarely executed on major networks, 51% attacks pose an existential threat to affected blockchains when successfully carried out.

Blockchains Most at Risk of 51% Attacks

Smaller proof-of-work coins with lower hashing power security face the greatest risk:

• New projects – During initial launch phases when hashing power is accumulating but still low, new networks are especially vulnerable.
• Low market cap coins – Projects that sustain only small miner networks over time offer attackers cheaper routes to majority control.
• Forks - Miner loyalty between forked chains fluctuates, leaving forked networks susceptible after declines in relative hashing power.

Well-established networks like Bitcoin and Ethereum are less vulnerable currently, but vigilance against rising hash concentration is still warranted.

Notable Examples of Majority 51% Attacks

Some notable incidents include:

• Ethereum Classic – Suffered multiple attacks in 2020. Exchanges lost millions in double spends.
• Verge – Attackers created 35 million coins in hours through 51% control in 2018.
• Bitcoin Gold – Endured a series of attacks using rented hash power to steal funds from exchanges.

While 51% attacks were once mostly theoretical, real-world attacks have demonstrated their reality, especially for smaller networks.

Preventing 51% Attacks

Blockchains can improve resistance by:

• Increasing decentralization of mining distribution across more pools and miners to make 51% takeovers economically prohibitive.
• Implementing use of checkpoints after significant cumulative confirmations to detect deep blockchain reorganizations.
• Adopting hybrid consensus models that combine proof-of-work with other mechanisms for additional security, like proof-of-stake.

Multi-pronged approaches are ideal to deter majority control of the network hashrate and consensus leverage.

Conclusion

While often considered mostly theoretical in the past, 51% attacks pose a real threat to smaller and newer proof-of-work blockchains if hashing power is overly consolidated. Maintaining mining decentralization and implementing supplementary security protocols helps deter these attacks.

Through examples like Ethereum Classic and Bitcoin Gold, 51% attacks have shown their ability to severely compromise blockchains when successfully executed. As the crypto ecosystem grows, ensuring robust protections against mining centralization and takeovers will be key to preventing damaging attacks.