Ethereum came under an attack and it has been severe for the cryptocurrency exchange Gate.io as they lost between forty thousand (40,000 confirmed by the exchange) and fifty-four thousand (54,000 unconfirmed media reports) Ethereum classic coins (ETC) to the fifty-one percent attack that rampaged the Ethereum blockchain for about four straight hours on the 7th of January.
What is a Fifty One percent (51%) Attack?
Cryptocurrencies operate on blockchains and these blockchains as the name suggest are divided into small blocks of computing power dubbed Mining Pools. A single pool acts as a single unit when processing, i.e., solving the cryptocurrency ledger that records the transactions of the currency. When a pool is operating, i.e., solving a block all the computers connected to the pool share the computing power reward they receive for mining the block.
A fifty-one percent (51%) attack means that the hackers gain control of fifty-one percent (51%) computers connected to the blockchain and mining the block. In most cases such as Bitcoin (BTC), Ethereum Classic (ETC) and Ripple such an attack allows the jackers to take complete control of the blockchain transaction since it takes at least 51% of the computing power approval to accept, reject or reverse any transaction.
How attackers benefit from fifty-one (51%) percent attack?
Once fifty-one (51%) access is gained the entity in power can play with transaction allowing them to counterfeit transaction thus making the account holders spend double of the same transaction. Since the entity is in control of the blockchain, they can mask the transaction as reversed yet taking away the loot transferred to a wallet address of their own choice.
Ethereum vs. Bitcoin
Now that we are clear on the basic concepts of how an attack works to gain control of a specific blockchain and in turn the currency that is operating on the said blockchain let’s take a look at two major currencies and how vulnerable they are to such an attack.
Ethereum is divided in over twenty (20) mining pools where Ethermine and SparkPool_3 are two major pools controlling over fifty-one (51%) percent of the computing power, where Ethermine controls almost twenty-three percent (22.9%) of the hash power and SparkPool_3 controls over twenty-seven percent (27.2%) of the hash rate.
On the other hand, it takes five pools to cover over fifty-one percent of the mining computing power. Where BTC.com controls about fourteen percent (13.9%), AntPool controls about eleven percent (11.1%), Slush controls almost eleven percent (10.9%), BTC.top controls ten and a half percent (10.5%) and ViaBTC control almost ten percent (10.1%) of the mining hash rate.
The data also reveals that the attack that came on Ethereum was made possible because the attackers had to cover only two major pools to gain control of the blockchain whereas it is a lot difficult to gain control of the Bitcoin blockchain owing to the more centralized nature of the blockchain.