The 51% Attack - Are You At Risk?

As the price of cryptocurrencies fall, and the hash rate of smaller coins dwindle, more coins will be susceptible to 51% attacks. You may be wondering… what is a 51% attack, and am I vulnerable?

A 51% attack is an attack on a consensus network, typically a blockchain, that occurs when a malicious majority overwrites a distributed ledger. This usually causes double spending, allowing the attacker to profit. 51% attacks are difficult to pull off for a few reasons.

On Proof of Stake (PoS) blockchains, 51% attacks require a majority of the stakers or holders to act maliciously. While PoW blockchains require mining rigs to generate hash rate, proof of stake cryptocurrencies require the buying of actual coins. This provides an interesting line of defense on high market cap coins as an attacker would have to first buy or own an enormous amount of the cryptocurrency. Due to basic supply and demand, this would cause a massive price increase making the attack very costly. This causes the risk to reward for an attack to be very poor.

On proof of work (PoW) blockchains, 51% attacks require the intruder to obtain 51% (duh!) of the total hash power. This is near impossible to pull off on established coins such as Bitcoin and Ethereum, due to the massive amounts of electricity and hash power put towards securing the network.

Looking at a Bitcoin energy consumption index, the Bitcoin network’s currently estimated electricity consumption level is around 73.12 TWh. To get an idea, that's almost enough to supply the entire country of Austria.

However, smaller PoW coins like Bitcoin Private and Einsteinium are one coordinated strike away from doom.

Last week, a hacker who goes by the alias “Geocold livestreamed” a 51% attack on the Bitcoin Private network. The attack was broadcasted on Twitch.tv bringing in over 750 viewers before getting shut down by Twitch.

What makes this most recent BTCP attack so intriguing is that Geocold announced several days prior that he would attempt a 51% attack live.

Many exchanges are delisting small PoW coins such as Bitcoin Gold and Bitcoin Private to avoid the risk of an attack. If an attack happens, it usually is the exchanges expense to refund their users.