While it is undoubtedly complex and necessary for the world of cryptocurrencies and NFTs, the ideas that underpin and connect blockchain technology are relatively simple to understand. One of its most important concepts is the so-called “51 percent attack”: an almost unmatched threat to decentralized technology (and the crypto industry it supports). To understand what that is and its potentially far-reaching implications for Web3, we need to look at the fundamentals of the blockchain itself.
Blockchain is a distributed digital database that moves and tracks data in blocks that are joined together to form a chain-like record of information flow. The important thing to know here is that blockchain systems are managed by a network of users and computers called nodes, which collectively validate transactions rather than a third party like a bank or a centralized data server controlled by a large company. technological.
But what is a 51 percent attack?
In theory, the number of validation nodes in a blockchain system corresponds to the security of that network. To successfully hack the system, a group or individual would need to take control of the majority of the system’s nodes, 51 percent of them, to tamper with the blockchain ledger and falsify transactions involving crypto and NFT, which could result in the loss of countless millions in digital assets. So, in essence, a 51 percent attack allows bad actors to hijack the blockchain, giving them the ability to manipulate transactions on the network with disastrous financial effects.
This could happen through the collusion of groups and individuals who control the nodes or through hackers taking control of them. The higher the number of nodes, the more difficult it will be to do. The Ethereum blockchain reportedly has hundreds of thousands of validators on their network, for example, while other chains have far fewer.
Examples of 51 Percent Attacks
In March 2022, hackers with ties to the North Korean government successfully gained control of five of the nine Ronin validation nodes of the Ethereum-linked sidechain in the popular blockchain-based game Axie Infinity. The hackers faked withdrawals from the network that amounted to approximately $625 million, making it the biggest hack in the history of that network. When Ronin’s team realized what had happened, he took a centralized step and halted the blockchain entirely for months before restarting transactions at the end of June.
Other 51 percent attack happened in 2020 when hackers took control of Bitcoin Gold, a small cryptographic token that separate from the Bitcoin blockchain in 2017. Hackers were able to double spend over $72,000 in cryptocurrency. Double spending is when a cryptocurrency is used twice or more, allowing the person who initiated the transaction to claim the spent tokens from it.
How likely is a 51 percent attack?
Vulnerability to this type of attack directly correlates to the size of the network: the bigger the blockchain, the more secure it is. For systems running on power-hungry proof-of-work (PoW) consensus mechanisms (such as Bitcoin), the computing power required to pull off a 51 percent attack is enormous and decreases its probability; it’s just not worth the hackers time and money to even try to do it.
However, if they can pull it off, there is no way to revoke the physical hardware that allows them to attack the system, which means they could continue to do so until network administrators initiate a “hard fork.” A hard fork is a significant change to a blockchain’s protocol (its basic set of rules) that splits it into two now-incompatible versions of itself. Such events are often the point of origin for new cryptocurrencies, as was the case with Bitcoin Gold.
But there are ways to discourage 51 percent attacks. Proof-of-stake (PoS) consensus mechanisms, like the one the Ethereum blockchain runs on, consume exponentially less power than PoW-operated networks. These are based on validators contributing (staking) an amount of cryptocurrency to be accepted as a validation node. In the case of Ethereum, that’s a hefty 32 ETH. In theory, if enough validators colluded in a PoS system, they could take control of the network. Still, even if this were to occur, Ethereum admins could “cut” this staked ETH, meaning offending nodes would simultaneously lose their investment and their ability to attack again.
Ethereum co-founder Vitalik Buterin has addressed this issue repeatedly over the years, stating that while undesirable, a 51 percent attack would not be fatal to their blockchain.
The decentralization debate
In the days before Ethereum merged with the much more energy efficient PoS consensus system it now runs on, Buterin posted a poll on Twitter in which he asked how long people would want to wait before supporting an “extra-protocol” intervention. The idea was simple: would the community support a centralized authority that would step in and make a decision on the entire blockchain in dire circumstances?
The question is not rhetorical either. Bitcoin is not the only blockchain that was forced to fork in the event of an attack. In 2016, Ethereum instituted a hard fork after the attackers took advantage of the flaws in an application that runs on the blockchain, causing system administrators to reverse exploit-related transactions to return user funds to them.
Such centralized actions are antithetical to the very concept of blockchain technology: while Buterin’s largest group of respondents supported the idea of centralized intervention, the idea of such action is uncomfortable with a significant portion of the Web3 community, such as This is demonstrated by the comments below the same survey. For now, however, they remain an unfortunate necessity to ensure the stability of these systems in times of dire need. Regardless, they remain a controversial hub of discussion in NFTs and in crypto circles. Much like the discussion around decentralized Web3 marketplaces, it may be that decentralization by centralized means is the best, albeit paradoxical, way to go.
