When a nefarious entity is able to gain control of the majority of a network’s hashing power, it is termed as a 51 percent attack on a crypto exchange. Theoretically, it grants the entity/entities control of the confirmation transactions such as reversing transactions, stopping new transactions and double spending coins.
In May, at least five cryptocurrencies were hit with a 51 percent hacking attack. In each of these cases, hackers have been able to accumulate enough computing power to compromise smaller networks, re-arrange their transactions and flee with millions of dollars.
Cryptocurrencies intended to solve a long-standing computer science issue know as the “double spend problem”. Basically, without creating an incentive for computers to prevent and monitor suspicious behavior, messaging networks were unable to function as money systems. They failed to prevent someone from spending the same piece of data five times or more at once.
On November 11, the AurumCoin (AU) website released a notice stating that the Cryptopia crypto exchange was attacked. The notice claimed that all AU coins are missing from the exchange wallet. Strangely, AurumCoin pointed out that Cryptopia doesn’t seem to have acknowledged any hack. AurumCoin claimed that a total of 15,752.26 AU is missing from Cryptopia wallets, as reported on CryptoGlobe.
Hackers can’t do anything they want when they’ve amassed a majority of the hashing power. However, under certain conditions, they are able to double spend transactions. Generally, it wouldn’t make sense for an attacker to amass this expensive hashing power to double spend a $3 transaction on a cup of coffee. They can only benefit if they are able to whisk away with thousands or millions of dollars.
Hackers seem to have found smart ways of ensuring that the conditions are just apt for them to make extra money. That’s the reason attackers of Bitcoin Gold, Monacoin, Litecoin and Zencash have all targeted exchanges holding millions in cryptocurrency, as reported on CoinDesk.
The only way in which crypto exchanges or users can ensure they are not defrauded is to accept money that is older or has been buried by more blocks of transactions known as “confirmations”. If the number of confirmations has been more, the tougher the funds are to steal in a 51 percent attack.[The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and/or the official policy of the website. ]