The distributed nature of Bitcoin is one of its main highlights. Through the decentralized work of the nodes, all participants in the blockchain are aware of the current state of the blockchain and are in agreement about it. In other words, nodes must regularly agree on the mining process, software versions, transaction validity, etc.
By virtue of the Bitcoin consensus algorithm (Proof of Work), the hash of a block provided by the miner is only valid if all network nodes agree on it (i.e. the hash confirms that the miner has worked hard enough to solve the problem of a block).
Due to the nature of blockchain, as a decentralized ledger and distributed system, there can be no single entity that controls the Bitcoin network for their own reasons. Mining (in PoW-based systems) requires enormous amounts of electricity and computing power, and therefore a miner’s performance is determined by how much computing power they have, also known as hash power. Each mining node competes for the next block hash to be rewarded with newly generated bitcoins.
It means that the hash rate is not controlled by a single entity in such a situation, since the mining power is distributed across several nodes around the world.
However, what happens when the hash rate is no longer distributed evenly? What if one entity or organization gets over 50% of the hash power? It may result in a majority attack, also called a 51% attack.
What is a 51% attack?
A 51% attack occurs when one entity or organization controls most of the hash rate on a blockchain network, potentially causing the system to go down. It would be possible for the attacker, in such a scenario, to alter the order or exclude transactions intentionally, if they have sufficient mining power. In addition, they might reverse transactions they made while in control, causing the double spending problem.
An attacker might also be able to prevent some or all transactions from being confirmed (transaction denial of service) or to prevent other miners from mining (so-called mining monopoly) during a successful majority attack.
In contrast, a majority attack does not allow the attacker to reverse the transactions of other users, nor does it stop the creation and sending transactions over the network. It is also impossible to change the block reward, create new coins from scratch, or steal coins that did not belong to the attacker.
Probability of a 51% attack
Blockchains operate on a distributed network of nodes, which means all participants work together to build consensus, resulting in them being very secure. Data corruption is less likely to occur in large networks because they are stronger against attacks.
Blockchains based on proof-of-work are more likely to find valid solutions when a miner has more hash rates. Since mining involves many hash attempts, more processor power means more attempts per second.
New miners entered the Bitcoin system as the value of bitcoin skyrocketed, competing for the block rewards (currently 6.25 BTC per block). Bitcoin is safe because of such a competitive environment. If miners do not act honestly and earn the block reward, they have no incentive to invest large amounts of resources.
As a result, a 51% attack on Bitcoin is highly unlikely. The probability of a single person or group getting enough computing power to overwhelm all other participants on a blockchain drops significantly with its size.
Furthermore, as the chain grows, it becomes increasingly difficult to change previously confirmed blocks, since the blocks are all cryptographically tied together. A block with more confirmations, therefore, will have higher costs to modify or cancel transactions. Consequently, a successful attack would most likely only affect transactions of a few newer blocks.
For instance, imagine an attack on the Bitcoin network by an entity that is not motivated by profit. In the event that the attacker managed to disrupt the network, Bitcoin’s software and protocol would be rapidly tweaked and modified to counter this attack.
Bitcoin is relatively tough to attack because it takes a lot of computing power, but smaller cryptocurrencies aren’t as hard to attack. Altcoins have much lower hash power than Bitcoin for securing their blockchain. Low enough to allow 51% of attacks to actually occur. Cryptocurrencies including Monacoin, Bitcoin Gold, and ZenCash have all been victims of majority attacks.