Excerpt from Yahoo
Attackers use 51% attacks to reverse transactions that have already taken place, in a blockchain, in what has come to be known as double spend. For instance, one can spend 5 bitcoins to purchase a motorcycle. Once the bike is delivered, logic dictates that Bitcoins are to be transferred to cater for the cost of the bike and can activate the attack.
However, on performing a 51% attack, an attacker would be able to reverse a transaction resulting in all coins used to fund the transaction being refunded. In the end, the attacker will be the owner of the motorcycle as well as the bitcoins used to buy it.
How A 51% Attack Occurs
Whenever a transaction is carried’ out on a blockchain, be it by Bitcoin or any other cryptocurrency, it is usually put in a pool of unconfirmed transactions. Miners in return are allowed to select transactions from the pool to form a block of transactions.
For a transaction to be added into a blockchain, a miner must find a correct answer to a puzzle. Miners find solutions to complex mathematical puzzles by using computational power. The higher the computational power a miner has, the likelihood of him finding the correct answer to be allowed to add a block to a blockchain.
A correct answer to a puzzle has to be broadcasted’ to other miners and can only be accepted if all transactions in a block are valid according to the existing record on a blockchain. Corrupt miners, on the other hand, don’t broadcast solutions to the rest of the network.
What this practice does is that it always results in the formation of two versions of a blockchain. One, which is the original blockchain followed by legitimate miners and a second block chain used entirely by a corrupt miner who is not broadcasting results of a puzzle to the original network.
A corrupt miner will most of the time continue to work on his own version of the blockchain, which in this case is not broadcasted to the rest of the network. With the second blockchain now isolated from the network, the corrupt miner can spend his or her bitcoins on the truthful version of the blockchain, the one that all the miners are following.
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