Introduction
Before I dive into explaining what is the 51% attack and why it matters, it's essential to understand the importance of how decentralization and blockchain protocols work and how correlated they really are.
To begin with, blockchain technology is created to help people build decentralized and distributed systems in a trustless and immutable manner, meaning that there's no central authority per se to govern the system. This way, the protocols eliminate one point of failure and dependence on a single entity.
Blockchain technology is one of the most relevant discoveries of the 21. century.
There are 3 mostly used ways of reaching the consensus, however, in this article, I will describe the Proof Of Work model that demands hardware to process the information.
How about decentralization? How does it fit in this story and why is it so relevant?
Decentralized work of the nodes ensures that the protocol follows the rules written within the code, thus reaching a consensus regarding the current state of the blockchain. This basically means that the majority of the node operators have to agree (reach a consensus) on the same terms (same software version) in order to verify and validate the truthfulness of each transaction.
By being able to validate the data independently, BTC has huge leverage over any other system.
PoW
*The Bitcoin consensus algorithm (Proof of Work) is what assures that miners are only able to validate a new block of transactions if the network nodes collectively agree that the block hash provided by the miner is accurate (i.e. the block hash proves that the miner did enough work and found a valid solution for that block’s problem). *
Since the process of mining requires huge amounts of electricity and computational resources, a miner's performance is based on the amount of computational power he has, we call it #hasrate. Hash rate is a crucial indicator of how healthy the network is. However, It's worth having in mind that the more distributed the hash rate is, the healthier the network.
To get a better grasp, BTC can have a huge Hash rate, but if provided by a single miner it doesn't imply that the network is safe.
Hashrate has to be distributed in a way that will minimize the possibility of being compromised.
But what happens when the hash rate is no longer distributed, or at least not distributed enough?
51% Attack
A 51% attack is a potential attack on a blockchain network, where a single entity or organization is able to control the majority of the hash rate, potentially causing network disruption. In such a scenario, the attacker would have enough mining power to intentionally exclude or modify the ordering of transactions. They could also reverse transactions they made while being in control - leading to a double-spending problem.
The majority attack doesn't allow the attacker to mint or print new supply, reverse transaction from other users, or change the block reward. As far as I know, this never happens, and let's hope it never will.
So it's not actually something that will destroy the network but can have a negative experience on how people perceive security in general.
As the network grows, so does the security, meaning that small networks utilizing PoW are a lot more vulnerable if compared to the big ones.
There's a catch tho, in order to perform an attack, an attacker has to pay the price.
haha, it's like having a menu.
As the industry keeps progressing, new attack vectors will emerge. The never-ending struggle between right and wrong.
Hope you enjoyed it.