Investing in security is one of the most expensive investments an entity can do if it hopes to sustain its operations. If not, a brilliant idea of preventing any form of criminality to manifest and victimize a target may be enough for perpetrators to discontinue their sinister plan which, in the end, will only be an exercise in futility.
Such was the genius of Satoshi Nakamoto to apply a democratic strategy to discourage a majority attack on his brainchild, Bitcoin. Nakamoto employed the Proof of Work consensus algorithm in validating transactions to secure the Blockchain with uncompromised integrity. It would also solve the issue of double-spending which is a concurring problem in a digital currency ecosystem. He threw the responsibility to miners or nodes that must be brutally honest to a fault to be able to control power over collusion of attacking nodes. Given the massive network Bitcoin has become, so was the resiliency that is keeping it immune to a 51% attack.
The 51% Attack
A 51% attack is a majority attack by an individual or a group which has gained control of 51% or more hash rate or computing power of a Proof of Work blockchain. The Proof of Work (PoW) consensus algorithm is a system of validating transactions and record them on an open or distributed ledger after verification. Confirmed transactions are then arranged in blocks in chronological order to eliminate double-spending.
Miners act as auditors who confirm transactions and records these in chronological blocks owing to their immutability or irreversibility. Miners can do these if their computers are powerful enough to solve complex mathematical equations generated by the system. When miners are able to gain control of 51% or more of the computing power, they will be able to solve the difficult equations faster than other miners. This is the time where they can manipulate the system by double-spending millions worth of coins, using them as many times, as they have reversed past transactions needing verification and not verifying the new ones. They can also double-spend the coins by building hidden blocks. Since the attackers have monopolized the network’s hash power, they will also be the ones to receive mining rewards via newly minted coins.
The (Im)possibility of a Bitcoin Attack
Transaction fees keep nodes honest besides the rewards they receive in successfully solving complex equations and dutifully building blocks. The massiveness of the Bitcoin network’s computing power will discourage any malicious miner from launching an attack where he or they would be needing staggering amounts of electrical power and hardware to start with, with the price tag to stage the feat estimated to run up to more than 15 billion US dollars. That is why less powerful networks and smaller DeFis are more prone to attacks.
While Nakamoto’s Proof of Work incentivizes miners to an extent, the flaw remains that an attack is still possible. That is why others are upholding the superiority of the Proof of Stake consensus algorithm over the Proof of Work mechanism where miners need to place a stake or invest to qualify as such. Still, another viable decentralized option is the Delegated Proof of Stake (DPoS).
The DPoS is a democratic system of voting reputable delegates to become one of the system’s block validators who are elected by the community to act as miners on their behalf. Delegates can number from 21 -100 who are also called witnesses or miners. If, say, in the governance of 21 validators there will be 12 or more conspiring to overpower the network, they can be immediately removed and replaced by better and more competent miners. Thus, a 51% attack is effectively prevented.
It takes a strong community who believes in decentralization and upholds the value of immutability to be able to defend a network from a 51% attack.