51 Percent Attacks – What You Need to Know

A few of the main components that make blockchains an intriguing innovation is safety, verifiability, and trust, if these components are taken out of the picture or removed in any way, the blockchain and its associated network lose its underlying valuable characteristics.

A good blockchain network is designed to disincentivize the occurrence of potential security threats such as a 51% attack as it can de-legitimize the network and destroy overall value.
Here’s all you need to know about 51% attacks.

What is a 51% Attack?
A 51% attack is an issue where a single miner or several powerful miners come together to take over more than 50% of the network’s mining power. This excess control of computing power can allow the miner group to block transaction verification, conduct double spend operations, and stop the flow of transactions from one user to another.

Why Are 51% Attacks a Concern?
A 51% attack can potentially destroy value if it is used to reverse transactions and conduct double spend operations thus destroying the inherent trust and added value of the blockchain network.

To understand why 51% attacks are a problem it is necessary to understand a few of the basic components of cryptocurrency network and why it has value.

Cryptocurrency networks utilize blockchains to provide a distributed and public ledger. The keyword here is ledger, everyone trusts in the process that run the ledger (the interaction between the miners, the rewards, developers, and investors) and conduct transactions.

The public and transparent ledger allows everyone to know the exact state of the system, from recent transactions to the number of transactions, to which specific addresses are involved in the transaction. Public and transparent blockchain networks such as Bitcoin and Ethereum allow for curious individuals, with a little more incentive, to find out exactly which parties were involved in a specific transaction.

As such, these distributed ledgers, don’t rely on a centralized party to process and conduct transactions, the whole process occurs in a decentralized and automated fashion. Transactions are processed, recorded on the ledger, and the system keeps moving along.

A 51% attack disrupts this flow and centralizes the system, eroding trust and allowing one party to control the public ledger. The centralized control of the ledger can inflict significant damage on the trust in the processes of the system and destroy the value accrued to the digital asset over time.

Fortunately, 51% attacks are difficult and require a significant amount of resources to conduct on larger networks. Experts state that proper 51% networks would require great timing, computational power, and expertise to execute.