A hacker that operates under the pseudonym Geocold promised to conduct a live stream of a 51% attack on an altcoin, and on 13 October 2018, he made an attempt to 51% attack Bitcoin Private. He was successful at gaining a majority of hashing power, and the only reason he didn’t complete the attack was the live stream platforms he was using, Twitch and stream.me, both shutdown his stream.
A 51% attack is one of the greatest weaknesses of cryptocurrency, and it arises out of the inherently decentralized nature of proof of work (PoW) cryptocurrencies. If a miner has greater than 50% of the network hash rate they can mine blocks faster than the rest of the network combined, giving them the ability to fork the blockchain. This can be used to perform a double spend attack, where a hacker sends a transaction to someone on the original chain, and then creates a longer chain where the transaction doesn’t exist, making the transaction disappear.
Bitcoin and Ethereum have far too much hashing power for any real possibility of a 51% attack, however, many smaller cryptos have small enough hash rates where 51% attacks are a real threat. Some cryptos, like Bitcoin Private, have such small hash rates that a 51% attack is very easy. A study found that less than USD 1,000 is needed to 51% attack many cryptos, just by renting hash power from a cloud mining service.
Bitcoin Gold and Verge have already experienced 51% attacks, and the results are crippling. Beyond the money stolen during a double spend, a 51% attack decimates any reputation and trustworthiness held by that crypto. If a crypto is 51% attacked it is usually removed from all exchanges and users dump all their coins.
In this case, Geocold originally said he was going to 51% attack Einsteinium, a crypto with a USD 20 million market cap. However, he gave a week of advanced warning and the Einsteinium community increased the network hash rate by 15 fold, making a 51% attack too costly. Geocold then began live streaming the first stages of a 51% attack on Bitcoin Private, a crypto with a USD 51 million market cap.
With only USD 200 of hash power rented from a cloud mining service, Geocold obtained 62.5% of the Bitcoin Private network hash rate and mined a single block. Other hackers found Geocold’s IP address and knocked him off the Bitcoin Private mining pool before he could fork, and by the time he got his hash power back online, his Twitch live streaming account was banned.
In the 2nd phase of the attack Geocold was successful in mining numerous blocks and was about to fork the blockchain which would have been devastating for Bitcoin Private, but his live streaming account on stream.me was banned. He decided to stop the attack, and plans to do a 51% attack in the future on an altcoin and simply post the video on YouTube once it’s already done.
This incident reveals that crypto users need to be very wary when playing around with altcoins since it takes just one bad actor to 51% attack an altcoin, which would collapse its price. Crypto users should stick to major cryptos like Bitcoin and Ethereum, which are secure. There may be over 2,000 cryptos listed on CoinMarketCap, but far less than that are actually secure in the face of a 51% attack.
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