Bitcoin 51% Attack Possible!
GHash hashing power grew beyond 50% making 51% attack a reality for Bitcoin
A week ago, Bitcoin digital currency system was in the verge of 51% attack, after GHash – a British mining pool – amassed over 50% of the total Bitcoin computing power. The threat could destroy the currency’s credibility and render the community’s quest to become an online currency obsolete.
Last week Friday, GHash power grew beyond 50% for a few hours before one of its system participants, BitFury, decided to transfer a share of its hashing power to another pool to tame the situation.
Explaining the 51% Attack
Bitcoins are sequences of numbers produced by computers while solving complex mathematical problems with millions of calculations through a process called mining. The miners maintain the blockchain, a virtual public ledger for recording the digital transactions. Miners need huge computing power and that’s why they pool their power to curb the financial risk of this operation. There is no specific period as to when a single block of coins can be produced, it may take years and there is absolutely no way to know when it will happen.
Miners pool their hashing power and divide the bitcoins they have been rewarded with among themselves through proof of work. And while mining pools existence makes the threat of 51% attack a possibility, these pools to do not stand to gain when the attack happens.
Miners pool their computing power to spread the financial risk of their operations. If GHash mining pool had abused its powers, bitcoin could have been dead by now!
Impacts of the 51% Attack
By GHash amassing more than half of the bitcoin computing power, the pool could have been able to:
- Lockout people out of the network
- Edit transactions without being detected
- Double spend its bitcoins or keeping all the future bitcoin to itself.
The recent scare of 51% attack has put the credibility of bitcoin in question, as it appears that the independence of the bitcoin payment system is at the mercy of its enthusiasts. If GHash had abused its powers, the premise of the bitcoin concept that no single authority would control the mining power would have collapsed and so would have the whole digital currency system.
The value of bitcoins has lost over 6% in a week to trade around $600. However, this cannot be solely blamed on the threat posed by GHash, as the decline is within the normal fluctuations range for the much volatile currency.
Bitcoin is a computer-based digital currency whose backers are seeking its legitimacy. The currency allows people to send money over the internet without middlemen (banks), and thus charge low fees. It is convenient and faster than the traditional methods.
The digital currency critics say the currency is open to use for illegal activities and dirty businesses which such unscrupulous individuals want concealed from the public. Its volatility has also been its greatest undoing as well as attraction. Speculators bet on the latter to make gains.
While bitcoin has been endorsed by a number of Silicon Valley investors including Winklevoss twins, and leading companies including Google, Yahoo, Overstock.com, DISH Network and many more, its main threat still remains the 51% attack.