Understanding Security Risks: The Example of Vulnerable Blockchain

How Does a 51% Attack Work?

A 51% Attack represents one of the biggest risks that a blockchain can face. When an entity can control more than half of the total computational power of the network, it gains the ability to rewrite the transaction history and disrupt the functioning of the network. This is why decentralized security is crucial for any successful example of blockchain.

The mechanism is simple, but devastating: the attacker uses their majority hashing power to modify the order of transactions, prevent confirmations, and even execute double spending (double-spending). Essentially, it creates a denial of service scenario, where only their transactions are processed while others are indefinitely blocked.

A Practical Case: How the Scam Would Work

Imagine a blockchain example like Bitcoin. A scammer would offer bitcoins in an offline trade, receiving dollars as payment. After the nodes confirm the transaction, he reverts the blockchain to the previous block, creating an alternative version where that transfer never occurred. With 51% of the computational power in hand, he forces the network to accept his false version while keeping the dollars - a perfect theft in theory.

What a 51% Attack CANNOT Do

Although dangerous, this attack has important limitations. The attacker cannot:

• Prevent transaction propagation - the network still receives and sees all operations
• Revert old transactions - the older the block, the more impossible it is to alter it ( that's why Bitcoin requires 6 confirmations )
• Create coins out of nothing or modify rewards
• Stealing funds from wallets that it does not control

The larger the number of blocks mined after a transaction, the exponentially more difficult it becomes to reverse it.

Why is Bitcoin Practically Immune?

The probability of a 51% attack on Bitcoin is extremely low. The network is so large that controlling 51% of the computational power would require astronomical investments in hardware and electricity. As the network grows, it becomes more decentralized, making attacks even less likely.

However, smaller blockchains are vulnerable. Bitcoin Gold, a fork of the original Bitcoin, suffered exactly this type of attack in May 2018, resulting in the theft of $18 million in BTG. This example of a compromised blockchain served as a warning about the importance of security in small networks.

How Blockchains Protect Themselves

Defense against 51% attacks involves multiple layers:

Consensus Mechanisms: Both Proof of Work (PoW) and Proof of Stake (PoS) make it economically unfeasible to control the majority. Attackers would need to invest massive resources or hold impossible amounts of coins - costs that outweigh any potential gains.

Real Decentralization: The more independent nodes distributed across different regions, the harder it is to coordinate an attack. A geographically fragmented network better resists any attempt at domination.

Growing Participation: Encouraging more users to run their own nodes dilutes the power of any individual entity. Each new participant reduces the percentage that an attacker would need to control.

Multiple Confirmations: Requiring several blocks before considering a transaction final protects against reversals. The largest networks use this method as standard.

Understanding these mechanisms is essential to recognize why some blockchains are secure examples of decentralized technology, while others remain vulnerable.