#practice
Hi all! In this post we will talk about such a threat as a 51% attack, and I will also tell you why US regulatory authorities may soon gain control of the Bitcoin network.
Before we move on to the horror stories, let’s remember how the blockchain works using Bitcoin as an example.
The main advantage is the decentralized operation of nodes that support stable and uninterrupted operation of the network. Such nodes are distributed all over the world, literally from Australia to the Irkutsk region. Nodes engage in mining and compete with each other to find a valid hash (block) in order to receive a reward in new bitcoins.
This is what makes the Bitcoin network so stable and reliable, because turning off mining capacity in one part of the globe will not affect the operation of the network. Even if we disconnect all the large miners from the network, the world will have enough Ivans and Johns who keep several ASIC devices in their garages to support the network. This flexibility is one of the main advantages of Bitcoin.
Mining power is evenly distributed among nodes around the world, and thus the hash rate does not fall into the hands of a single entity. At least this shouldn't happen. But what if the hashrate is not distributed evenly enough? What happens if one entity or organization owns more than 50% of the computing power? It is this development of events that is called a 51% attack.
Satoshi's nightmare, or what the 51% attack is
A 51 attack is a situation in which an entity or company captures 51% of the Bitcoin network hashrate. In this situation, attackers will be able to prevent transaction confirmation, change their order, or cancel their transactions. At the same time, “invaders” cannot change the block reward by creating coins out of nothing.
Is there a threat of a 51% attack?
As the price of Bitcoin as a currency increased, more and more miners appeared on the network interested in block rewards (currently the reward is 6.25 BTC per block). It is competitiveness that ensures the security of Bitcoin. No miner will invest so many resources for fraudulent activities and risk his coins. Thus, due to the scale of the network, a 51% attack on Bitcoin is extremely unlikely.
Let’s say an attacker gained access to 51% of the network’s power and wanted to rewrite information about transactions in the last blocks in order to redirect bitcoins from these wallets to his own. But here you need to understand that all blocks are interconnected through cryptographic proofs: the more confirmations a block has, the higher the costs of changing or canceling transactions in it will be. Even if it succeeds in disrupting the network, Bitcoin's software and protocol will be quickly changed and adapted in response to this attack. To do this, it is necessary for other network nodes to reach a consensus and agree to block and exclude wallets from the network that belong to the attacker. Bitcoin is very resistant to attacks and is considered the most secure and reliable cryptocurrency in existence.
What does the USA have to do with it (author’s thoughts)
It is no secret that after the ban on mining in China, many industrial miners settled in the United States. At the moment, more than 30% of the Bitcoin network power comes from American mining giants. I think that in the long term the network may come under the control of US regulators. Mining companies in the United States are public and regulated by local laws.
With the introduction of new legal norms, for example, miners will be prohibited from adding transactions to a block that pass through unverified wallets, thus one of the basic principles of cryptocurrencies will be destroyed - the inevitability and irrevocability of a transaction. The Bitcoin network will become similar to regular bank transfers, for which you need to undergo identity verification and provide documents about the origin of the funds, after which only your wallet will be whitelisted and you will be able to make transactions.
What do you think about the risk of such regulation of the Bitcoin network?
