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51% Attack

  

Categories: Ethics/Morals, Tech

This one requires a bunch of background information, so we're just going to take it step by step, like we're doing an old school logic puzzle:

  • 1. A cryptocurrency is a kind of digital currency.
  • 2. The basic technology behind a cryptocurrency is a blockchain.
  • 3. Just like it sounds, a blockchain is a chain of blocks, or groupings of data. These data packages record transactions and basically keep track of where a piece of cryptocurrency has been. (It would be like writing your name on a dollar bill every time you got it, and then writing where you were spending it every time you spent it).
  • 4. These blocks are created through a process called mining, which requires computer processing power and a network to connect all the computers doing the processing.
  • 5. If a person or an affiliated group of people controls a majority of a network (this is where the 51% comes in), they can control the mining process and mess up the process of creating the blocks.
  • 6. By controlling the mining, the 51% group can make sure that they get any new cryptocurrency created by the mining process (basically boxing out anyone not affiliated with them... this is the attack part). They can also control the transaction ledger, essentially allowing them to run a cryptocurrency counterfeit ring.
  • 7. In practice, the networks for the larger cryptocurrencies (like Bitcoin) are too big for any one group to take a majority. Imagine trying to corner the market for $5 bills. But there have been 51% attacks on smaller cryptocurrencies.

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