Up until recently, a 51% attack on bitcoin was considered an impossibility.
Increasingly, however, the attack, which involves a hacker gaining control of a majority of systems on bitcoin’s network and altering transactions on its blockchain, is becoming a plausible reality. The latest proof of this comes from bitcoin gold, a bitcoin fork which began trading on exchanges last year. According to a post on one of the cryptocurrency's forums, the hacker is targeting exchanges that trade bitcoin gold. (See also: What Is Bitcoin Gold, Exactly?)
“We have been advising all exchanges to increase confirmations and carefully review large deposits,” Edward Iskra, BTG’s communications director, wrote. The hacker could attempt to double-spend stolen coins from an exchange by exchanging them into fiat currency or another crypto and using the same coins from his or her wallet to buy more crypto. The online publication Bitcoinist estimates that the hacker stole $18 million worth of bitcoin gold.
Not even the first 51% attack
Bitcoin gold is the latest crypto to suffer from a 51% attack. The Verge has reportedly suffered three 51% attacks this year. The latest one occurred yesterday. Last week, a hacker exploited a vulnerability that had caused the previous 51% attack to decamp with $35 million worth of its cryptocurrency.
According to recent research, the costs for hacking cryptocurrencies are declining. This is partly due to the increasing number of forks within cryptocurrencies. For example, according to a recent post on Medium an average of $70 million is required to cripple ethereum classic’s blockchain. That amount can easily be generated by using profits generated from mining ethereum, a cryptocurrency that uses the same algorithm. The same post estimated a cost of $200,000 to instigate a 51% attack on bitcoin gold. (See also: It's Now Cheaper To Bankrupt Crypto Networks).
But Iskra's post suggests that sustaining such an attack for a long period of time could turn out to be expensive for the hackers. "The cost of mounting an ongoing attack is high. Because the cost is high, the attacker can only profit if they can quickly get something of high value from a fake deposit. A party like an Exchange may accept large deposits automatically, allow the user to trade into a different coin quickly, and then withdraw automatically. This is why they are targeting Exchanges," he wrote.
A separate blogpost on BTG’s site outlined a series of steps that the cryptocurrency's developers intend to take in order to make it hack-proof. These include upgrading its network to an Equihash algorithm, which is a customized Proof of Work (PoW) algorithm that does not require as much processing power as the current algorithm. The cryptocurrency is also developing an ASIC-resistant network to ensure that only large machines do not dominate its network.
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