Altcoins Beware: An Overview of Recent 51% Attacks
The so-called 51% attacks are among the major security threats to digital currencies as they allow enable perpetrators to control the network and all transactions passing through it.
What Is a 51% attack?
Cryptocurrencies are bolstered by blockchain technologies or distributed ledgers which store information about all transactions ever made in a network. Miners sustain the functioning of these ledgers – they verify transactions, generate new blocks, and add them to the blockchain. They are rewarded in cryptocurrency for this work.
In networks based on the Proof-of-Work (PoW) consensus algorithm, miners need to perform complex calculations when adding a new block. This is evidence of completing the work. Whichever miner does the math first is the one who gets the reward. The higher a miner’s computation power, the more likely they are to be the first to solve the task.
It’s this use of computation resources that make a 51% attack possible. It boils down to the following: Several miners with a considerable hash rate at their disposal can obtain a “majority stake” in the network, which means they own more hash rate than everyone else. This allows them to create new blocks as they deem appropriate, manipulate bilateral workflows, and leave certain transactions unconfirmed. Consequently, they can engage in double spending of the same assets.
Since pulling off this type of an attack on a long-running and large blockchain requires enormous computation capacity, these incursions typically zero in on emerging and smaller-scale cryptocurrencies whose networks encompass a restricted quantity of miners. Conducting one or a series of test attacks before the main onslaught is a common scenario, too. The adversary may target a similar network, referred to as testnet, prior to raiding the main one.
The Wakeup Calls: Affected Cryptocurrencies
The altcoin known as Coiledcoin, whose authors were reproached from the get-go for mimicking many of Bitcoin’s features, was one of the earliest networks that fell victim to the 51% attack. In 2012, it was reportedly hit by Luke-Jr, a Bitcoin Core developer, who used his proprietary Eligius mining pool to get the job done. When faced with a wave of criticism, he emphasized that his motivation was to dismantle the pyramid scheme that undermined the reputation of Bitcoin, and he would do the same to any future Ponzi scams.
A well-orchestrated incursion against the Krypton network stood out from the crowd. It followed a bilateral tactic, utilizing a combination of majority hashing capacity and distributed denial-of-service (DDoS) to additionally raise the attacker’s relative hashing magnitude. This onslaught allowed the malefactors to steal about 21,000 KR from the cryptocurrency’s blockchain.
Then, they exchanged the assets for Bitcoin via the Bittrex service and rolled back the compromised blockchain. In the aftermath of this attack, Krypton came up with an initiative to make all exchange services increase the minimum verification amount to 1,000, which was supposed to tangle the process of reversing the blockchain to its earlier state. Some analysts think the Krypton incident might have been a rehearsal before a 51% attack against Ethereum which, fortunately, hasn’t yet taken place.
Electroneum was the first cryptocurrency platform to get hit with a majority attack in 2018. The hack was reportedly executed in April. At that point, this altcoin’s functionality was bolstered by the CryptoNight PoW algorithm, although its proprietors have made some tweaks in that context to enhance its security. Thankfully, the attack had a short-term impact on the network and it fully recovered at the end of the day.
Monacoin, one of the most popular altcoins in Japan, underwent a 51% attack in mid-May 2018. This network leveraged the Lyra2REv2 hashing algorithm at the time of the incursion, which is hardly ever abused to pull off majority attacks. In spite of this, the perpetrators were able to manipulate the system, causing losses worth about $90,000. The Monacoin incident demonstrated that mining algorithms that are considered relatively tamper-proof can still be exploited by a tech-savvy adversary.
There was a spree of majority attacks in May 2018, with smaller coins being the most heavily targeted victims. One of these platforms, Bitcoin Gold, experienced two raids of that kind over a four-day timeframe. These offensive operations occurred from May 16 to May 19, 2018, and had some success, forcing Bitcoin Gold to take action to sort out the predicament. Having survived the attack, though, this digital currency continues to be afloat.
An assault bearing a strong resemblance to the Bitcoin Gold double knock-down case was fired at another cryptocurrency called Verge just three days later. Although Verge employs a mining tactic involving five different algorithms, which should stop attackers in their tracks, the villains successfully took advantage of the Scrypt and Lyra2Re mining algorithms to orchestrate a viable 51% attack. The crooks ran off with roughly 35 million XVG, which is worth about half a million USD at the time of this writing.
The 51% attack chronicles got a new entry added on May 31, 2018. That’s when Litecoin Cash, an offspring of the first hard fork of the Litecoin cryptocurrency network, fell victim to another majority hack.
The privacy-centered platform called ZenCash found itself in cybercriminals’ spotlight on June 3, 2018. The malefactors were able to complete three instances of double-spending in the course of the manipulation. This attack, as well as the others preceding it, incentivized cryptocurrency exchanges to demand more transaction confirmations before deposits are credited.
In November 2018, the developers of the little-known cryptocurrency AurumCoin (AU) claimed that their network was hit by the 51% attacked as a result of which 15,752.26 AU were stolen from the Cryptopia exchange. The founders of AurumCoin at the same time claim that they are not responsible for what happened, because the token has an open code, and shifted the blame to the employees of the exchange. It is assumed that the hacker sent about 16,000 AU to the Cryptopia account and exchanged them for another cryptocurrency. After the transaction, the attacker used the available computing power and canceled the transaction.
2019 began with an unpleasant gift for fans of Ethereum Classic. Signs of the 51% attack appeared on January 5. At that time, Coinbase drew attention to eight deep chain reorganizations on the ETC blockchain because of which the attackers managed to double spend for almost $ 460,000. By January 7, the number of reorganizations increased, as did the amount of double-spent coins. On January 9, the Ethereum Classic team recognized the problem. According to the project, the attack lasted from January 5 to 7. The attackers stole at least 219,500 ETC (about $1 million).
Is Bitcoin susceptible to 51% attacks?
It takes enormous hashing power to pull off a viable majority attack against a large blockchain. If you follow this logic, it might appear that compromising Bitcoin this way is an unfeasible objective, given that it’s the world’s largest blockchain with an aggregate hash rate reaching 60 Exahashes (60 million trillion hashes) per second. This is a misconception, though.
The fact is, quite a few mining pools have gotten close to a capacity sufficient for such an attack. For instance, the now-closed GHash.io mining pool reportedly generated more than 51% of Bitcoin network’s hashing power in 2014. Back then, many people in the cryptocurrency community thought an incursion against Bitcoin was only a matter of time. To ease the tension and allay some of these concerns, GHash.io released a statement reassuring everyone that it would not exceed 39.99% of the total Bitcoin hash rate in the future. It also encouraged other mining pools to follow suit and never go beyond a 40 percent threshold for the sake of Bitcoin’s stability.
As time went by, the number of mining pools has grown and therefore the hashing power has become more broadly distributed. Today’s largest Bitcoin pool is BTC.com. It encompasses 18.9% of the network’s overall hash rate share. AntPool, the second largest, comprises 12.8%. Although both of them are owned by the Bitmain company, their combined hash rate still doesn’t suffice to carry out a majority attack.
In the long run, 51% attacks do not pose much risk to major cryptocurrencies, and the growing decentralization will probably cause them to vanish from the threat landscape over time. Nevertheless, these compromises continue to endanger new altcoins, especially if the incident lasts long enough to make the changes irrevocable.
Different market players have their unique options to deal with 51% attacks. To stay on the safe side, mining rig operators are better off steering clear of major pools, no matter how big the temptation is. As for mining pools, there was an idea to mine several coins simultaneously, this concept is called merged mining. Smaller coins may try increasing the number of confirmations for the transaction to be completed. Smaller coins may also try to increase their total hashing power and at the same time fix their algorithms to get protection against a hash rate decrease attack. For a successful attack, hackers need to get as much info as possible about the coin, so basic security like avoiding phishing, getting software updates, and avoiding suspicious links and email attachments should apply.
It is also good to use reliable VPNs, these tools encrypt your traffic and create a secure tunnel that intruders cannot easily break. VPNs also mask your servers’ IP addresses.