- dApp(Decentralized Application)
- 51% Attack
- Smart Contract
- Soft Fork
- Hard Fork
- Token Economy
- Consensus Algorithm
- Digital Signature
- Public key
- Private key
- Block Height
- Merkle Root
- Time stamp
- UTXO (Unspent Transaction Output)
- ERC20 Token
In PoW(Proof of Work) system, coins are given as rewards when creating blocks by mining, and the miner with higher computing ability gets the chance to create the next block. To simply define mining, the authority to create a block is given to who finds a 'nonce' before anyone else does with a computing processing power. Since the nonce is a numerically large number to find, it is designed to combine a lot of mining nodes together to generate computer in order to find the value on time.
When a miner dominates over the half of the CPU power, it can create blocks extremely faster than the others.
Suppose a malicious miner 'X' dominates 51% of the network. X exchanges cash with 100 bitcoins from Y. Then chain '#10002a' is created and attached to the main chain, and X attaches a blank block to the chain '#10001' at the same time.
Right after this, X attaches the next block quickly to the chain '#10002b', where the record is intentionally deleted.
Having the majority of the CPU power, X creates blocks way faster than the other miners, who have smaller remaining CPU power all together than X. Since the longest chain becomes the main chain in a blockchain, the blank chain becomes the main chain in this case and is able to add the new chains along, whereas the honest chains become orphan chains like on the image.
But it is costly to dominate the CPU power of over the half of the network. In fact, the energy use of mining Bitcoin per day approximates the energy use of electricity of one nation per day.
Even if an attacker takes an advantage of modifying the blocks using the 51% attack, there will be a tremendous number of energy cost and resources in consequence. Also this will bring down the value and reputation of the cryptocurrency, the attacker will not get the satisfied profit eventually.
It is hard to use 51% attack on such blockchain like Bitcoin, which retains extremely large scale of computation and miners. On the other hand, relatively small blockchain networks are easily exposed to this attack. It actually happened and inflicted a great loss to Monacoin, ZenCash, Bitcoin Gold in 2018.