51% Attack

In cryptocurrency terms, a 51% attack is a hypothetical scenario in which an entity controls more than 50% of a cryptocurrency's hash rate. This controlling stake in the blockchain computing network would give the controlling entity the power to admit or deny transactions by granting or withholding confirmations.

A 51% attack may be carried out by a single miner, or by a collection of mining nodes controlled by a single entity. They can result in the centralization of a cryptocurrency and the possible monopolization of transactions by a single entity.

In the case of proof of work cryptocurrencies, 51% attacks may occur when an entity is able to deliver more than 50% of the computing power required to process of the transactions of a cryptocurrency. Technologies aimed at making mining using application-specific integrated circuits (ASICs) has been incorporated into some cryptocurrencies in order to prevent large mining interests which can afford to invest in specialized computing centers from gaining a 51% share in mining.

In the case of proof of stake cryptocurrencies, a 51% attack may occur when any one entity holds more than 50% of a cryptocurrency’s total coins.

When a mining node gains a majority stake in the hash power of a blockchain, it is able to manipulate that blockchain because algorithms give preference to blocks generated by the node which is able to process the largest volume of transactions. Blocks generated by other mining nodes become orphan blocks and are not recorded on the distributed ledger (the blockchain).

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