51% Attack

A 51% attack, also known as a majority attack, is a serious concern for blockchain networks. This type of attack happens when a single malicious user or group of users controls more than 50% of the total hashing power of the network. In such a case, the malicious actor can override the consensus mechanism of the network and commit various malicious acts such as double spending or transaction denial of service.

Additionally, a 51% attack can enable the attacker to prevent other miners from mining, leading to a mining monopoly. For instance, if a malicious actor were to take over 51% of the hashing power of the Bitcoin network, they could potentially make an offline over-the-counter (OTC) trade by sending some Bitcoins to a cryptocurrency wallet in exchange for USD. As soon as the transaction is confirmed by the network nodes, the buyer would naively hand over the USD to the scammer. The malicious actor could then go back in the blockchain to the block before the BTC transfer was confirmed and mine an alternate chain, in which the BTC transfer is not included. The majority share of the networking power would ensure that this is forced to be adopted by the rest of the network as a valid transaction.

It's important to note that a 51% attack does not allow the malicious actor to prevent transactions from being broadcasted or reverse transactions from other users. Changing the block's reward, creating coins out of thin air, or stealing coins that never belonged to the attacker are also very improbable scenarios.

The further back a transaction is, the harder it would be to subvert it, as the number of new blocks to be mined to bring the network up to the current level becomes further and further away. This is the reason why Bitcoin transactions usually require a threshold of a certain number of confirmations before clearing.

It's worth mentioning that a 51% attack on the Bitcoin blockchain is very unlikely because of the magnitude of the network. As the network grows, the possibility of a single person or entity obtaining enough computing power to overwhelm all the other participants becomes more and more improbable. Furthermore, the Bitcoin blockchain is considered the most secure cryptocurrency network.

However, smaller chains have seen majority attacks. For instance, the altcoin Bitcoin Gold, which is a fork from the main Bitcoin chain, suffered a 51% attack in May 2018, leading to the theft of $18 million worth of BTG at the time.

In conclusion, 51% attacks pose a serious threat to blockchain networks, and it's essential for users to take appropriate measures to protect their assets. While the likelihood of a 51% attack on big networks like Bitcoin is low, smaller chains have experienced such attacks. Therefore, it's crucial for users to be aware of this threat and stay informed about any developments that could impact their blockchain networks.

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