What is a 51% Attack? 1 97

With the constant talk about the blockchain being immutable, one could be forgiven for thinking that it is, in fact, impossible to alter a transaction made on the blockchain. There are, however, certain circumstances in which this is not entirely true. And one of them is called a 51% attack.

51% Attack Explained

Bitcoin and other cryptocurrencies are produced by miners who contribute their computing power and technical expertise to the network. Since the blockchain is run by consensus, in which there is no centralized owner, a 51% attack is when an individual miner (or group of miners) manages to control more than 50% of a network’s computing power.

This would allow the miner (often referred to as a bad actor) to disrupt the network and rewrite history if they so desired, making the blockchain, in fact, mutable.

So, The Blockchain is Insecure Then?

Most cybersecurity experts agree that the blockchain is to all intents and purposes the most secure technology the world has ever seen. Thanks to its decentralization, there is no single point of failure, in which one database could be hacked. There is also no way of tampering with records without rewriting the whole network, unlike our current system, in which transactions can be modified an unlimited amount of times.

But, there is the potential for a 51% attack.

Why aren’t people more concerned about such a threat? Mainly, because if we’re referring to a massive network like Bitcoin, because it’s night impossible to pull off.

To gain the majority of such a gigantic network, the perpetrator would need vast sums of money, mining hardware, and electricity to do it. As more and more miners join the Bitcoin network, they bring their computational power with them. And 51% of the computational power of the Bitcoin network is rather a lot, to say the least.

And in actual fact, all they would achieve in doing so is devaluing the currency, which would leave them with less money than the fiat currency they had invested in the attack. So, the financial incentive to carry out such an attack is simply not there. The benefit of carrying out a 51% attack then, is significantly outweighed by the cost and logistical hassle.

Other Cryptocurrencies and a 51% Attack

Altcoins are more susceptible to a 51% attack, as they are not as mature nor have as much computational power as bitcoin. But there are responses to a 51% attack that a cryptocurrency under attack can apply. The most common is known as a “hard fork.” Forking is essentially another way in which the blockchain can be changed and history rewritten, but it is done with the consensus of the majority.

For example, Ethereum decided to hard fork its entire chain to recover after the DAO ‘hack’ in 2016. The majority of Ethereum miners created a fork to keep the blockchain’s history intact, but erase the hack and make it look as if the DAO attack never happened.

This led to a split among those who were not in agreement, and the emergence of Ethereum Classic, which trades at a fraction of Ethereum as we all know it. While purists are against the notion of forking to right a wrong (believing that the “code is law”), forking is starting to become common practice. Had it not been for forking, after all, Ethereum would surely have collapsed.

Similarly, a recent possible 51% attack on the Verge network produced uncertainty and concern about this privacy-oriented cryptocurrency. Close to $1 million of the currency was stolen as one single miner was able to trick the system into thinking it had the consensus. While the Verge team claim to have the “bug” under control, it’s more than likely they will have to carry out a hard fork to prevent attacks like this from happening in the future.

So, just when you thought you were getting your head around the blockchain and getting to know its undisputed qualities, you found out there’s more to this beast than meets the eye. The blockchain is not, in fact immutable. However, the chances of a 51% attack on a major network are smaller than an ant moving a mountain.

Previous ArticleNext Article
Christina is a technology and business communicator who has worked with high profile ICOs and blockchain influencers to break industry news.

1 Comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Chinese Crypto Leader Li Xiaolai Suddenly Retires 0 36

One of China’s most prominent Bitcoin investors has announced his retirement from the crypto world. Billionaire Li Xiaolai is the founder of BitFund, a crypto venture capital firm that has fostered a slew of Bitcoin-related startups.

Li’s announcement of his decision to withdraw from cryptospace—and investing otherwise—came unexpectedly via his page on Chinese social media site Weibo.

“From this day on,” his post reads, according to TechNode’s translation, “I, Li Xiaolai, will personally not invest in any projects (whether it is blockchain or early stage). So, if you see ‘Li Xiaolai’ associated with any project (I have been associated with countless projects without my knowledge, 99% is not an exaggeration), just ignore it.”

Li is a former school teacher, and claims to be the first person in China to openly trade Bitcoins, rather than hiding behind its famous anonymity. Now, retired from both teaching and investing, he says he’s not sure where to go next. “I plan to spend several years to contemplate on my career change. As for what I’m doing next, I’m not sure just yet.”

Li closed his post by expressing that he still maintains a long term optimism about the blockchain.

Li’s Ventures Grew Crypto Capital, Controversey

Through BitFund, Li has incubated a number of blockchain related startups, including an off-chain wallet called Bitfoo, the crypto exchange YUNBI, and HashRatio, a miner manufacturing company. Li organized 2014’s Global Bitcoin Summit in Beijing, back when you could get a BTC for as little as $440, and years before China instated its full ban on cryptocurrencies.

Earlier this year, Li also acted as managing partner of Hangzhou Xiong’An Blockchain Fund, a billion dollar fund backed by the Hangzhou government. Li stepped down after fellow venture capitalist Chen Weizing introduced a series of accusations against him.

Included in the eleven accusations, which Chen broke on social media and messaging platform WeChat, were a supposed debt of 30,000 BTC that Chen says Li failed to pay on time. Li published a point-by-point response to Chen’s accusations, addressing the 30,000 BTC debt by saying “it’s not true… Chen is just muddying the water.”

Though Li called them “defamations,” and Chen did not offer supporting evidence for his allegations, Li said Chen’s antics “brought material and negative impacts on the reputation of Xiong’An Blockchain Fund” and that his resignation would “let the Hangzhou government continue its push for blockchain development.”

Li was the subject of controversy on another occasion when, in a candid conversation he did not know was being recorded, he outed several influential organizations as scams and said that the best way to succeed in blockchain, even if your project is worthless, is to get famous and build consensus.

The State of Crypto in the People’s Republic

All crypto and blockchain related websites are blocked by the Chinese government, and citizens are forbidden from engaging in crypto transactions. The People’s Bank of China released a statement on August 24th warning against ICOs, which they consider to be “illegal fundraising, pyramid schemes, and fraud.”

But the rules have been difficult to enforce, and crypto still enjoys an active user base in China. Beijing Sci-Tech Report, China’s oldest technology publication, is now the first Chinese publication to accept BTC as payment from its subscribers. Chinese crypto channel cnLedger announced in a tweet on September 25th that Ethereum Hotel, China’s first hotel to accept ETH as payment, is open for business in Sichuan Province.

A Crypto Landscape Without a Leader

The sudden exit of Li Xiaolai from the Chinese crypto scene could have caveats, or greater implications. Weibo users expressed their support and gratitude following his announcement, but some also speculated that his choice of words leaves room for Li to continue investing in crypto indirectly, perhaps through funds or corporate entities. Whether that will be the case or not, for many, his resignation marks the loss of a public blockchain leader.

The Block Talk Award Winners Announced 1 1040

Thanks to everyone for submitting your favorite blockchain innovators and influencers. Our editorial team had a great time learning about new projects and individuals that are building a foundation for our future with blockchain technology, and realizing amazing technological feats in the present.

While it was difficult to select just one project or individual in each category, we’re excited to announce the winners of our first inaugural Block Talk Awards.

  • Best ICO Analysis & Commentary – Tatiana Koffman, Various Outlets
  • Most Engaged Community – Rod Turner, Various Outlets
  • Favorite Blockchain Blogger – Rachel Wolfson, Forbes
  • Best Crypto Journalist – Jordan French, The Street
  • Innovative Female Founder – Amber Baldet, Clovyr
  • Best Podcast Host(s) – Joel Comm and Travis Wright, Bad Crypto
  • Favorite Blockchain Event Host – Adryenn Ashley, Loly.io
  • Top Crypto Speaker – Ian Balina, Crypto World Tour
  • Most Innovative Blockchain CEO – Trevor Koverko, Polymath
  • Top Social Entrepreneur – Evan Caron, Swytch

Winners in each category will receive a $1500 media credit on The Block Talk, access to a network of TBT Award honorees, and VIP access to TBT events in 2019.

Most Popular Topics

Editor Picks