DEFINITION of '51% Attack'

51% attack refers to an attack on a blockchain – usually bitcoin's, for which such an attack is still hypothetical – by a group of miners controlling more than 50% of the network's mining hashrate, or computing power. The attackers would be able to prevent new transactions from gaining confirmations, allowing them to halt payments between some or all users. They would also be able to reverse transactions that were completed while they were in control of the network, meaning they could double-spend coins.

They would almost certainly not be able to create a create new coins or alter old blocks, so a 51% attack would probably not destroy bitcoin or another blockchain-based currency outright, even if it proved highly damaging.

BREAKING DOWN '51% Attack'

Bitcoin and other cryptocurrencies are based on blockchains, a form of distributed ledger. These digital files record every transaction made on a cryptocurrency's network and are available to all users – and the general public – for review, meaning that no one can spend a coin twice. (So-called "private blockchains" introduce permissions to prevent certain users of the general public from seeing all the data on a blockchain.)

As its name implies, a blockchain is a chain of blocks, bundles of data that record all completed transactions during a given period of time (for bitcoin, a new block is generated approximately every 10 minutes). Once a block is finalized – "mined," in the jargon – it cannot be altered, since a fraudulent version of the public ledger would quickly be spotted and rejected by the network's users. 

However, by controlling the majority of the computing power on the network, an attacker or group of attackers can interfere with the process of recording new blocks. They can prevent other miners from completing blocks, theoretically allowing them to monopolize the mining of new blocks and earn all of the rewards (for bitcoin, the reward is currently 12.5 newly-created bitcoins, though it will eventually drop to zero). They can block other users' transactions. They can send a transaction, then reverse it, making it appear as though they still had the coin they just spent. This vulnerability, known as double-spending, is the digital equivalent of a perfect counterfeit and the basic cryptographic hurdle the blockchain was built to overcome, so a network that allowed for double-spending would quickly suffer a loss of confidence.

Changing historical blocks, transactions locked in prior to the start of the attack, would be extremely difficult even in the event of a 51% attack. The further back the transactions are, the more difficult it would be to change them. It would be impossible to change transactions prior to a checkpoint, past which transactions are hard-coded into bitcoin's software.

On the other hand, a form of a 51% attack is possible with less than 50% of the network's mining power, but with a lower probability of success.

Ghash.io

The mining pool ghash.io briefly exceeding 50% of the bitcoin network's computing power in July 2014, leading the pool to voluntarily commit to reducing its share of the network. It said in a statement that it would not reach 40% of the total mining power in the future.

Krypton and Shift

Krypton and Shift, two blockchains based on ethereum, suffered 51% attacks in August 2016.

34% Attack

The tangle, a distributed ledger that is fundamentally distinct from a blockchain but designed to accomplish similar goals, could theoretically succumb to an attacker deploying over a third of the network's hashrate, referred to as a 34% attack.

RELATED TERMS
  1. Bitcoin Mining

    Bitcoin mining is the process by which transactions are verified ...
  2. Block Reward

    Bitcoin block rewards are the new bitcoins that are awarded by ...
  3. Uncle Block (Cryptocurrency)

    Uncle blocks are orphan blocks on the Ethereum network, and miners ...
  4. Block Time (Cryptocurrency)

    Block time is the average time for a new block to be generated ...
  5. Bitcoin Cash

    Bitcoin cash is a cryptocurrency created in August 2017, arising ...
  6. Proof of Activity (Cryptocurrency)

    Proof of activity is the blockchain consensus algorithm based ...
Related Articles
  1. Tech

    How Bitcoin Works

    Miners, hashes, keys, cold storage, blocks - it's confusing. We can help you understand how bitcoin works.
  2. Trading

    Bitcoin Cash: The New King of Cryptocurrency?

    Investors are wondering if the popularity of Bitcoin Cash poses a serious threat to the Bitcoin throne.
  3. Tech

    Bitcoin vs. Bitcoin Cash: What's the Difference?

    We break down the difference between Bitcoin and Bitcoin Cash, and what it might mean for the future of cryptocurrencies
  4. Tech

    Speed Is Essential for Bitcoin Platforms

    Why does speed especially matter with Bitcoin technology? It's because Bitcoin platforms using blockchain need to meet the needs of users in times of high volatility.
  5. Personal Finance

    UBS to Test Blockchain Settlement System (BK, DB)

    A team of banks led by UBS is developing a digital cash system using the blockchain technology that forms the backbone of bitcoin.
  6. Tech

    Bitcoin 2.0 Applications (AMZN, EBAY)

    The bitcoin blockchain enables the application of decentralized public ledgers for purposes other than digital currencies referred to as Bitcoin 2.0 or sometimes more generally "crypto 2.0.”
  7. Tech

    Could Blockchain Really Have Better Security Than Banks?

    Some experts believe adopting security measures used by banks could help to strengthen the viability of blockchain technology.
  8. Tech

    Bitcoin Unlimited Thwarted, Again!

    Bitcoin Unlimited is vying for supremacy in the Game of Bitcoins, but it's got some problems.
  9. Tech

    Can Blockchain and Bitcoin Help the World's Poorest

    Bitcoin and blockchain is thought to have practical functionality in various industries, but can it alleviate poverty?
  10. Tech

    How Bitcoin Can Change The World

    Bitcoin has the potential to not only create savings for consumer, but also to transform global transactions.
RELATED FAQS
  1. What's the difference between the general ledger and a general journal?

    Keeping records for most organizations require a double-entry bookkeeping system, which revolves around transactions in the ... Read Answer >>
Hot Definitions
  1. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  2. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  3. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  4. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  5. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  6. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
Trading Center