This is theory no longer as hackers have managed to compromise Bitcoin Gold (BTG), a fork of the original bitcoin.
The result was that at least $18 million has been swindled from online exchanges worldwide.
A 51% Attack works by using a large amount of computing power that is under the control of a single person or entity to manipulate the blockchain ledger. This means that the hacker can technically falsify records which is precisely what happened with Bitcoin Gold.
Bitcoin Gold Official
The hacker carried this out by sending sent a number of BTG tokens to an exchange then trades them for a different coin. This is followed by a withdrawal and then the same coins are returned which creates a double-spending problem as the coins are used for multiple transactions. This is because the hacker is manipulating the network to allow them to do so.
In this particular 51% attack, we can see that a total of 76 transactions took place using this method which roughly accounts to around $18 million being stolen. The BTG network is still very vulnerable to this attack, though the hacker has stopped making more transactions. This was most likely to ensure the viability of BTG since more attacks would result in BTG dropping in value. Right now, BTG has just dropped a few points in value and there is no sign of panic.
BTG Network Taking Precautions
In response to the attack, a BTG developer has announced that although the network is still vulnerable plans have been drawn up for a hard fork. This will result in a decentralization of the network, ensuring that the attack will not happen again. However, the developer did not say anything about restoring all the coins that were swindled.
This 51% Attack represents what many people fear as a nightmare scenario for a cryptocurrency. This hack is currently the most high-profile attack that has taken place so far. Verge, another cryptocurrency has reportedly suffered three such attacks this year. The latest hack saw the hacker swindling as much as $35 million in funds.
The threat of a 51% Attack has always been there. The main protection against it was the fact that as more people became part of the network, it would get harder to control half of it. The trouble is that the rise of large mining groups has ensured that mining power can become concentrated in the hands of few people. If they band together and agree to execute such an attack, then the cryptocurrency has no chance of defending itself.
Bitcoin will probably be safe for the moment since it is the largest network around. However, smaller cryptocurrencies may end up being victimized by such attacks.