Bitcoin Gold hit by 51 per cent attack

Bitcoin Gold ‘hit by 51 per cent attack’

Bitcoin Gold, the spinoff currency from Bitcoin, has been hit by hackers who stole at least $18m worth of cryptocurrency, and showed that a ’51 per cent attack’, long used as a theoretical threat to cryptocurrencies, is a genuine threat.

The attack was first reported in the Bitcoin Gold forum in mid-May. The announcement said Bitcoin Gold was warning exchanges to increase their security and added: “There is no risk to typical users or to existing funds being held. The only parties at risk are those currently accepting large payments directly from the hacker. Exchanges are the primary targets.”

The 51% attack
Blockchain technology is considered secure because the entire network holds a copy of the ledger of transactions. A fraudster who wanted to, for example, spend the same cryptocurrency coins twice, could try to update the ledger to show that the spent coins were still in their possession, but would immediately be exposed because the rest of the network would spot the mismatch.

That changes, however, if the attacker can gain control of 51 per cent or more of the network. Then they could change the history of the blockchain and it would become the official ledger, because they control the majority of the network. This is what appears to have happened in the Bitcoin Gold case.

It’s ironic that this attack should have targeted Bitcoin Gold because that network originated in an attempt to stop network control being the preserve of a privileged few. Bitcoin Gold is a ‘hard fork’ from Bitcoin – a split in the blockchain that creates an irrevocable divide, with each blockchain’s future transactions incompatible with the other’s.

Bitcoin forks
When the fork happened in October 2017, it was intended to make it easier to mine – that is, to use a processor to compete to verify transactions – and therefore earn new coins. The founders believed that Bitcoin had become too difficult to mine; only those with access to expensive application-specific integrated circuit (ASIC) hardware could reasonably hope to succeed at mining. Bitcoin Gold made it easier to mine using a more affordable graphics processing unit (GPU).

In a statement at the end of May, Bitcoin Gold developers announced a series of measures to deal with the attack and prevent future attacks, including an upgrade to the platform via a hard fork, and security toolkits that “can help exchanges discover the attack even before it succeeds”.

Other cryptocurrencies will be watching how this attack is handled and hoping to learn from it.

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This post is provided for informational purposes only. None of the information presented here should be considered investment advice. Everyone should always do their own research and due diligence before sending funds to any third party.