A 51% stake is a majority stake in any sense. But in the majority of the cases, controlling a 51% stake isn’t easy – which is why we rarely hear about successful hostile takeovers. This is the central premise that is said to protect blockchain-based currencies and what makes cryptocurrency markets so successful. But what happens if someone takes control of 51% of a blockchain? This is what happens in the 51% attack.
What Is The 51% Attack
A typical Proof of Work blockchain such as BTC operates on the principle of a decentralized consensus mechanism, which needs members of the network to solve an arbitrary mathematical puzzle to prevent anybody from cheating the system. Typically, the miner with a larger share of the hash rate (or computational power) has a better chance of completing the puzzle and earning the right to fill the next block on the chain. Inherently, any change requires 51% of the blockchain to approve it, in theory making cheating difficult.
What If Someone Gains Control Over 51% Of A Blockchain?
A 51% attack can happen when a single person or miner, or group of miners, gain control of over 50% of a blockchain’s hashing power. With the proliferation of mining hash power being offered on rent by third parties, this can be achieved with a reasonable effort and cost.
A successful attack gives the attacker the ability to block new transactions from being confirmed, as well as the ability to change the order of recent transactions. It also allows the attackers to essentially rewrite parts of the blockchain and reverse their own transactions.
Avoiding The 51% Attack
The more extensive a cryptocurrency network, the more difficult it is to execute a 51% attack. This is because as the network hash rate grows, the cost involved in gaining control over 51% of the network becomes more difficult. Also, as the network grows, the pace of transactions is faster, limiting the amount of damage that an attacker can do.
Another validation scheme that works well to protect against the 51% attack (and is being adopted by Ethereum today) is Proof of Stake. PoS ensures that a miner can only validate transactions linked to the percentage of hash owned by the miner. This essentially disincentivizes a miner who owns 51% from attacking the network – since they are a major stakeholder.
The safest bet, however, would be to go with a trusted cryptocurrency market broker. This ensures that investment happens on safe currencies, and the investor is assured of the best returns. You can invest with Mudrex and generate long-term returns with expert-backed and totally secure investment solutions.