Digitization has done a great deal of good to our world, both at personal and professional levels. From financial transactions to social interactions, everything has become faster, more efficient, and accessible. In other words, technological innovations have transformed human lives across domains.
Traditionally, however, digital transformations have not challenged the centralized architecture of legacy systems. As a result, concerns regarding security and privacy have persisted for individuals and enterprises alike. Censorship, espionage, hacks, and breaches are among the primary attack vectors threatening centralized systems.
Over the years, distributed ledger technologies — such as blockchain — along with cryptography and decentralized, peer-to-peer networks have substantially resolved the shortcomings of centralized infrastructures. Decentralized networks minimize — if not eliminate — the role of central authority, leveraging computerized mechanisms for achieving distributed consensus and transaction verification.
A majority of blockchain-powered disruption has been in the financial sector; decentralized finance has gained immense popularity in recent years. Nonetheless, the potential of this technology extends far beyond financial use-cases and into almost every other domain.
However, despite such progress and promise, decentralized networks are not free from attack vectors. To achieve consensus, most existing blockchains, including Bitcoin and Ethereum, use a resource-intensive mechanism, namely Proof-of-Work (PoW). Apart from rapidly depleting the world’s energy reserves, PoW is conducive to the 51% Attack, which threatens the very foundations of decentralization. In this article, then, let us understand this attack vector and how we can solve it.
The 51% Attack: Definition & Consequences
A 51% Attack occurs when an individual or a group gains control of a majority of the network’s node and computational (hash) power. In such situations, the attacker can disrupt the network, reverse particular transactions, and even alter the network’s recent transaction history.
For clarity, suppose that a majority (>51%) of the network’s miners collude with their hashing power. As a result, in a PoW-based blockchain, they can validate malicious transactions or create unsolicited blocks. By doing so, attackers can double-spend at will. On the other hand, they can deliberately leave out or reject valid blocks, turning them into Orphan Blocks; effectively, this is a mining monopoly. The process is commonly known as Denial of Service, where specific nodes lose their ability to transact over the network.
Through a 51% Attack, malicious miners can even hard fork a network, therefore depriving every other node and user. The fact remains, however, that larger blockchains are less susceptible to this form of attack. As a network grows, its overall computational power also becomes higher. Therefore, performing a 51% Attack could be very expensive on more extensive networks; roughly $716,072 for Bitcoin, as opposed to $10 for smaller networks.
A Brief History of 51% Attacks
That economic sanctions have not been enough to curb 51% Attacks is quite clear if we look at their history. On the contrary, they have been somewhat familiar in the global blockchain-cryptocurrency sector, especially among PoW-based systems. In 2016, for instance, the 51 Crew attacked two small blockchains, Shift and Krypton, and double spent on these networks.
Two years later, 2018 turned out to be an ominous year for the industry, as Bitcoin Gold was breached in a three-day-long attack. Monacoin, Zencash, and Litecoin Cash also came under attack that year. Similarly, the Verge coin suffered multiple attacks, resulting in a total loss of over $1.75 million.
In 2020, Ethereum suffered three such attacks, that too, within a month. As recently as January 2021, attackers rolled back 300 blocks on the Firo blockchain, despite the platform’s privacy-oriented architecture.
Preventing 51% Attacks: Innovating a Novel Consensus Mechanism
The PoW consensus mechanism is the primary enabler of 51% Attacks; this is quite clear. Moreover, it is economically very unsustainable. As such, the Proof-of-Stake (PoS) method promises to resolve the crisis.
Instead of computational power, the mechanism requires validators to stake their tokens in special wallets, ensuring that they have their skin in the game. Validating malicious blocks results in the loss of the staked tokens, which is a substantial economic disincentive against 51% Attacks. As opposed to PoW, the PoS mechanism is also significantly more optimized for energy consumption.
Considering the factors above, PoS is already more resilient against 51% Attacks; XinFin, however, modifies it further. The XinFin Delegated Proof-Of-Stake (XDPoS) marks a paradigm shift in preventing the 51% Attack. In this trust-minimized system, token holders proportionately elect Validators or Block Producers. Token holdings determine the individual’s voting right; validators derive legitimacy based on total votes polled in their favor.
Having said that, the XDPoS mechanism does much more than resisting attacks. XinFin’s public-private hybrid blockchain can handle 2000+ transactions per second, mainly due to this consensus protocol. Moreover, it takes only 2 seconds to finalize new blocks on the network.
Above all, energy consumption is minimal under XDPoS and roughly equivalent to that of a personal computer. In a world with finite resources, ensuring sustainability must be among the topmost priorities of technological innovations. Having secured its ranks among the best Green Networks, XinFin is truly exemplary in this regard. Security is necessary, but when it comes along with sustainability, it’s the best possible way forward. To know more, read our documentation on XDPoS.
Please provide me with your view on 51% attack possible on bitcoin or ethereum based network as well?
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