What is a 51% attack? A theoretical threat, but why is it so difficult to actually achieve?

Bitcoin, as the world's most credible and valuable "digital currency," is built on the strong foundation of a blockchain that uses a Proof-of-Work (PoW) consensus mechanism. The security of this network relies on the mining power (Hash Rate) of miners around the world who help confirm transactions. Although the system appears robust, we often hear about the recurring risk known as "51% Attack." Today, the admin will walk you through what a 51% Attack is, its basic mechanisms, how likely it is to happen to Bitcoin in reality, and why we might not need to worry about it too much.

What is a 51% Attack?

A 51% Attack is a situation where an individual or a group controls more than half of the network's mining power. This gives the attacker the ability to "manipulate" information on the network as desired and force the network to accept the blockchain created by the attacker as "truth," according to the PoW rule that "the longest and most energy-consuming chain is the correct version."

What could happen if someone controls more than 51% of the total network's mining power?

• Transaction Reversal and Double Spending : The attacker can reverse transactions that occurred while they controlled the network, such as transactions that were confirmed 1-2 blocks earlier. This results in assets that were transferred being returned to the sender, leading to double spending. For example, Mr. A transfers Bitcoin to a merchant, and once he receives the goods or services, he reverses the transaction to get his Bitcoin back. This allows Mr. A to have his Bitcoin again and also receive the goods/services for free, which is a direct major financial impact.
  
• Transaction Censorship and Denial of Service (DoS) : The attacker can use their power to mine blocks that do not include certain transactions, preventing those transactions from being recorded on the blockchain. This amounts to censoring transactions or hindering block confirmations as desired by the attacker.
• Impact on Usability and Trust : When the Bitcoin system is interfered with, causing double spending or censorship of certain transactions that violate the system's censorship resistance principle, it affects general users and businesses that rely on Bitcoin. This impacts the trust of users and investors, and can also lead to a severe drop in Bitcoin's price. Furthermore, it can also affect Bitcoin's quality as "sound money."

These imply that an attacker can "write and edit blocks as they wish" on the network, thereby destroying one of Bitcoin's core properties: its immutable ledger.

Even with over 51% of mining power, an attacker cannot do these things:

• Create more Bitcoin than the system's limit (21 million coins).
• Change the basic rules of the protocol.
• Reverse transactions that have been confirmed multiple blocks deep, as this would require immense electrical power and time to alter.

Brief Mechanism of a 51% Attack

• Gather more than half of the mining power: The attacker must possess over 50% of the total network's mining power.
• Secretly build a "private chain": The attacker mines blocks branching off the main blockchain but does not broadcast them to the network, resulting in two parallel blockchains.
• Outpace the main blockchain with superior power: Due to the greater mining power, the attacker's "private chain" will grow faster than the "main chain" where honest miners are working.
• Execute desired transactions, such as double spending.
• Publish the private chain: Once the private blockchain is longer, the attacker releases the private blocks to the network.
• Original transactions are reversed (Reorg): According to Bitcoin's rule that "the longest chain is the truth," the transactions the attacker initially spent are erased as if they never happened. This means they get the goods for free and still have their Bitcoin back.

The Possibility of a 51% Attack on the Bitcoin Network

Although a 51% Attack sounds frightening in theory, in practice, it is very difficult to achieve due to the following key reasons:

1. Immense Mining Power : The current Bitcoin network is enormous. To control more than half of its mining power would require an immense amount of capital investment and resources. Initial estimates suggest that to control over 50% of the mining power, one would need to invest no less than 7.9 billion USD in ASIC mining machines, not including the enormous electricity costs required to keep the machines running constantly, and other costs such as time, mining facility space, and maintenance. Such high costs present the first significant obstacle.

2. Game Theory and Economic Incentives : "Attacking the Bitcoin system = self-destruction." An attacker contemplating such an attack would have to invest heavily in Bitcoin mining equipment, the value of which is tied to the price of Bitcoin. If the attack succeeds, user and investor confidence in Bitcoin would collapse, causing the price of Bitcoin to plummet rapidly. This would destroy the value of Bitcoin assets held by the attacker and quickly render multi-billion dollar investments in mining equipment worthless. This is another reason demonstrating the economic paradox that makes attacking Bitcoin an entirely irrational act.

And if we look at incentives, "honest mining still yields better returns than attacking." Assuming someone actually possesses mining equipment and power nearing 51%, that person would likely already be generating immense income from normal Bitcoin mining, which is safe and continuously profitable. This is preferable to using mining power to attack the network for a single gain, only to destroy the system's trust. Such an act could lead to long-term losses for Bitcoin's value and the invested mining equipment. 

Simply put, "honest mining still yields better returns than attacking," because honest miners continuously receive rewards for mining, which is a much more stable and sustainable source of income. In contrast, instead of creating risk for themselves and the system, they become contributors to strengthening the system.

Another common concern is the centralization of mining pools, which are concentrated in a few large mining pools. While pools may be large, this does not necessarily lead to the control that people fear. Even if a pool is large, it is made up of a vast number of miners from around the world. If the pool operator behaves suspiciously, miners can immediately withdraw their power and switch to another pool.

In summary, a 51% Attack on the Bitcoin network is highly unlikely in practice. Significant obstacles include the cost of the attack, as well as economic factors and game theory that make such an attack unprofitable, because the damage from destroying Bitcoin's credibility and value far outweighs any potential gains from the attack.

Conclusion

A 51% Attack is a theoretical risk, but in practice, it is almost impossible to execute. This is due to significant obstacles such as the extremely high cost of such an attack and economic incentives that make it unprofitable in both the short and long term. This is why Bitcoin remains secure and trusted to this day.

Therefore, even though Bitcoin maintains high security and efficient operation to date, for all friends interested in Bitcoin, the admin still recommends continuously monitoring, being vigilant, and considering risks. This includes the network size and hash rate, coupled with the economic incentives of stakeholders. All these are crucial factors in evaluating Bitcoin's long-term security and potential.

Don’t Trust Verify

The admin hopes this article has helped friends understand and alleviate some concerns. We hope it's beneficial in some way. If there are any mistakes or if friends have anything to add, please feel free to comment. // Admin T 🟠