The 51% Shadow: The Real Dangers of a Double Spending Attack on Established Blockchains
The 51% attack is the biggest theoretical threat against the immutability of a Proof-of-Work network, allowing blocks to be rearranged and the same coin to be spent twice.
The Shadow of 51%: The Real Dangers of a Double Spending Attack on Established Blockchains
Blockchain networks are founded on the promise of immutability and decentralization. Thanks to consensus algorithms, thousands of independent nodes around the world agree on which transactions are valid without having to trust a central bank. However, in the classic Proof of Work (PoW) design introduced by Satoshi Nakamoto in Bitcoin, there is a theoretical consensus vulnerability known as the 51% attack.
This exploit represents the biggest threat to the immutability of distributed ledgers.
How is a blockchain altered?
To understand the attack, it is necessary to understand the longest chain rule in Proof-of-Work: honest nodes always accept as valid the blockchain that has required the most accumulated work (the longest chain).
If an attacker accumulates more than half of the network's processing power (hash rate), they can perform the following process:
- Private Mining: The attacker makes a legitimate transaction on the public network by sending coins to an exchange to sell. In parallel, it begins to secretly mine an alternative blockchain where it does NOT include that coin sending transaction.
- Confirmation and withdrawal: The attacker waits for the public transaction to be confirmed, receives his money or currencies and withdraws them from the platform.
- Chain release: Since the attacker owns 51% of the global hash power, he can mine his private chain faster than the rest of the network combined. At one point, it makes its longest alternative chain public.
- Block reorganization: Honest nodes in the network detect the attacker's new chain, which has more work accumulated. Applying consensus rules, they discard previous blocks from public history (block reorganization). The original sending transaction evaporates from history, and the attacker has the original coins back in their balance in addition to the withdrawals. This is double spending.
Actual attack history
Although in Bitcoin a 51% attack is practically unfeasible due to the cost of hardware and energy required, smaller networks with low hash rates have suffered devastating attacks.
Networks like Bitcoin Gold (BTG), Ethereum Classic (ETC) and Vertcoin have suffered block reorganizations and million-dollar losses due to attackers renting computing power on cloud hashing platforms (like NiceHash) to momentarily overwhelm the local network's hash power.
Solutions against hash centralization
To avoid 51% attacks, the blockchain industry has developed different alternatives:
- Transition to Proof-of-Stake (PoS): In Proof-of-Stake networks (like Ethereum after "The Merge"), security depends on capital locked in collateral (staking) instead of electrical energy. Attacking the network would require purchasing 51% of the total supply of tokens, which would skyrocket its price and destroy the attacker's own capital due to a penalty for bad behavior (slashing).
- Checkpointing: Program periodic immutable checkpoints into the code that prevent the software from accepting block reorganizations of great historical depth.
