51% Attack Occurs In Bitcoin Golds Blockchain Stealing Millions In The Meantime

51% Attack Occurs In Bitcoin Golds Blockchain Stealing Millions In The Meantime

Security
May 25, 2018 by Menajem Benchimol
198
Decentralization within a blockchain has given the power to the community and take it out from a centralized network that can control everything. What happens when a single entity is able to control most of the blockchains computational power? A 51% attack is a reality, and it can happen more than you think. The biggest
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Decentralization within a blockchain has given the power to the community and take it out from a centralized network that can control everything. What happens when a single entity is able to control most of the blockchains computational power? A 51% attack is a reality, and it can happen more than you think.

The biggest nightmare for a cryptocurrency PoW consensus happened this week to Bitcoin Gold, leading to 388,000 BTG being stolen from the network. A miner was able to perform a 51% attack by taking ownership of more than 51% of the computational power within the network and control half the hash of the blockchain. Banks, governments, and other institutional investors have stayed away from blockchain because of attacks like these.

Bitcoin Gold is a fork of Bitcoin with 21 million BTGs as a total supply. Their market cap is $800 million, but today 18$ million was doubled spent with the attack. The majority computational power holder miner then fake deposited Bitcoin Gold to cryptocurrency exchanges that accepted large deposits and had low verification levels. He then traded such Bitcoin Gold for other cryptocurrencies quickly to finally liquidate. The attacks have been happening for a week according to a Bitcoin Gold forum.

Blockchain developers for years have been working on a solution to this issue, thus creating new kinds of consensus.

Proof of Stake (POS)

POS is a consensus that its blocks are validated by the stake “holders” of a specific cryptocurrency, instead of a miner’s computational power. Cryptocurrencies such as Decred, Peercoin and soon Ethereum use  POS to make 51% attacks harder to perform and make a greener network due that little energy is consumed while validating transactions and creating new blocks in the blockchain. Token holders are rewarded based on their holdings.

Delegated Proof of Stake (DPOS)

Created by crypto genius Dan Larimer, holders “delegate” witnesses to validate transactions and form a consensus. The delegates are rewarded for their efforts with cryptocurrencies. This system is more scalable but it has centralization problems.

Bitcoin Gold developers recommend exchanges the following to prevent from double spendings:

You are safe if you don’t receive coins from the attacker (or anyone you don’t know). Usually the targets attacks are Exchanges.

Otherwise you should:

  • Be really careful about large transactions
  • Wait for enough confirmations
  • Watch the known attacker’s patterns and be prepared

Will we see changes in the PoW consensus and more cryptocurrencies moving on to different systems like PoS and DPOS?

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