Hackers compromised Bitcoin Gold which is a lesser known sister currency of the original Bitcoin in May 2018. The hackers accomplished this by applying superior computing power to fabricate Bitcoin Gold’s ledger and defraud at least $18 million from different cryptocurrency exchanges.
The hack is significant because it shows how a so-called 51% percent attack is not just a theory anymore, it’s now a reality. This unfortunate new reality poses an existential threat to any cryptocurrency.
What is a 51% attack?
This type of attack gets its name from describing exactly what it sounds like, a hacker gaining control of a cryptocurrency network by gaining control of more than half (51%) of the mining power on the blockchain network.
When a hacker yields this much power over a network, it gives them the ability to alter the transactions on the blockchain ledger, so they can spend and hold the same digital coins at the same time.
What happened to Bitcoin Gold?
The digital wallet records reveal that the hackers made a series of fraudulent deposits and the money never was sent to the other exchanges.
According to the Bitcoinist, this is what happened:
“The attacker sends a particular number of BTG tokens to an exchange, trades them for another coin and makes a withdrawal. The hacker then returns those same coins in his/her wallet, hence the double-spending problem. Thus, the attacker can spend and hold the same coins at the same time. Looking at the image above, if all 76 transactions were indeed part of the hack, then the hacker has stolen about $18 million based on the current BTG price.”
Will this happen again?
The Bitcoin Gold network is still vulnerable to experience more attacks. The hacker has not struck again. But the hackers could be waiting before they strike again because further attacks could trigger a massive sell-off from the coin holders. Another attack and the Bitcoin Gold holders would lose faith in the integrity of the network.
The price of Bitcoin Gold fell only a small amount when news of the 51% attack hit the market, but there hasn’t been any panic selling as a result of the report.
How can this be prevented?
The team at Bitcoin Gold plans to introduce a software update known as a “hard fork.” This update will decentralize the mining power on the network.
If the mining power becomes less centralized, this will help secure the cryptocurrency network. The overall increases in centralized mining over the past couple years make the threat of more 51% attacks more likely for smaller cryptocurrency networks. Bitcoin should be immune from a 51% attack because its network is currently the largest in the world.
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