51% attacks are becoming more real

With the development of the crypto-asset sector, users were faced with the need to transfer coins from one network to another. Special applications – cross-chain bridges – were created for this purpose. But along with the convenience comes the threat of multimillion losses due to the so-called 51% attacks.

The creator of Ethereum cryptocurrency Vitalik Buterin was the latest to draw attention to this topic. He outlined his concerns on the Reddit forum, warning that with hundreds of blockchains bridged in the future, such an attack would threaten the entire ecosystem.

What are crosschain bridges and what is the 51% attack scheme?

How do crosschain bridges work?

Such applications are used to move tokens of different standards (such as ERC-20 and BEP-20) and technologies (such as Bitcoin, Ethereum or Dogecoin), as well as between second-tier scaling solutions. There are several tools for this:

• Creating “wrapped” assets;
• the use of liquidity pools across multiple ecosystems;
• Transferring funds through relay nodes.

In fact, this solves the problem of compatibility between different blockchains. Users are relieved of the need to sell the assets they already have in order to buy the coins they need from other networks.

What are 51% attacks?

A 51% attack is a vulnerability in Proof-of-Work model blockchains (such as Bitcoin, Ethereum, and Dogecoin) in which, after gaining more than half of the network’s processing power, attackers can only validate their blocks. This way they not only get all the cryptocurrency from mining, but also can undo the transactions of other network participants.

How the 51% scheme works

Buterin cites the hypothetical Ethereum-Solana bridge as an example of attackers’ actions. A 51% attack would involve several steps:

• Using the bridge, the attacker transfers a large amount of their own funds into “wrapped ether” (WETH) on Solana;
• having attacked the Ethereum network, he waits for Solana to confirm the transaction and cancels it;
• other WETH holders lose money because the “wrapped ether” is no longer fully secured.

“The problem gets worse when you go beyond two chains. If there are 100 chains, you end up with decentralized applications with lots of interdependencies between those chains, and 51% attacks like even one chain will create a systemic contamination that threatens the economy of the entire ecosystem,” Buterin warned.

He called it expensive and difficult to implement a 51% attack even on a single target, so such a threat is infrequent. However, with the growing popularity of crosschain bridges and DeFi-applications, the likelihood of them also increases.

Examples of 51% attacks

In the history of cryptography there are many cases when one group of miners controlled more than half of the network. But it did not always lead to losses:

• July 2014 – the Ghash.io mining pool possessed more than 50% of the Bitcoin network’s processing power for a while, but voluntarily reduced its share;
• August 2016 – hackers from “51 crew” hacked the Krypton and Shift projects and stole about 20,000 Krypton tokens;
• May 2018 – unknown persons, after gaining control of 51% of the Bitcoin Gold network, withdrew $18 million from the accounts of cryptocurrency exchanges Bittrex, Binance, Bitinka, Bithumb and Bitfinex;
• June 2018 – the impact of a 51% attack on Monacoin, Zencash, Verge, and Litecoin Cash networks exceeded $2.2 million;
• November 2018 – hackers hacked Aurum Coin and stole over $500k from the Cryptopia exchange;
• May 2019 – two mining pools carried out a 51% attack on the Bitcoin Cash network, explaining this as an effort to prevent the theft of unsecured SegWit coins that remained on the network after the separation from Bitcoin in 2017.

From January 2011 to December 2021, the cryptocurrency industry lost more than $12.1 billion worth of tokens to various scammers and hackers. A total of 226 major cryptocurrency crimes occurred in the past 10 years.