What is a 51% attack?

Introduction: How Does a 51% Attack Work in Crypto Trading and Cryptocurrency Investments

Understanding a 51% attack requires recalling how mining systems and blockchains operate.

Bitcoin and its blockchain are characterized by their distributed nature, ensuring decentralization and consensus among all network participants. The Proof of Work (PoW) algorithm guarantees block approval only after its validity is confirmed by all network nodes.

Mining requires significant energy and computational resources. A miner's performance depends on their hash rate. Nodes mine and compete to find a valid block hash to earn bitcoin rewards.

This distribution of mining power should be even to prevent monopolization. But what if one entity seizes over 50% of the computational power? This is what's known as a 51% attack.

What Is a 51% Attack?

A 51% attack is when a malicious actor controls the majority of the hash rate, disrupting network operations. In such a scenario, the attacker has enough power to exclude or reorder transactions, causing double spending issues.

A majority attack enables attackers to deny transaction servicing or mine blocks for themselves, creating a mining monopoly. However, it doesn't allow for altering block rewards or creating coins out of thin air.

Is There a Threat of a 51% Attack in Crypto Trading and Cryptocurrency Investments?

Blockchain support relies on a distributed network of nodes, ensuring security. The larger the network, the harder it is to attack.

In blockchains using the Proof of Work algorithm, the likelihood of finding a new block's correct solution depends on the miner's hash rate. Greater computational power means more attempts per second, making the network competitive and secure.

Due to the network's scale, a 51% attack on Bitcoin is highly improbable. As the blockchain grows, the likelihood of seizing computational power continues to decrease.

Even if an attack occurs, altering previously confirmed blocks becomes increasingly challenging as all blocks are cryptographically linked. Bitcoin is considered the safest and most reliable cryptocurrency.

However, smaller cryptocurrencies are more vulnerable to 51% attacks due to their low hash rates. Notable examples include Monacoin, Bitcoin Gold, and ZenCash.