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The increasing amount of hashing power that protects major cryptocurrencies like Bitcoin, Litecoin and Ethereum can be useful for security on those networks, but is simultaneously compromising the security of smaller crypto-currencies than Proof of Work (PoW). For example, someone can take a small fraction of the hash power that protects Litecoin, Scrypt's number 1 coin, and conduct a 51% attack on a Scrypt coin with a much lower network hash rate. Vertcoin (VTC) is the last cryptocurrency to experience a series of attacks of 51%, and $ 100,000 USD were lost due to the associated double charges. Also Bitcoin Gold (BTG), Verge (XVG) and MONA have been victims of 51% attacks in the last year.
A 51% attack derives from the intrinsic decentralization of the PoW cryptocurrencies. Who has the greatest hash power creates the longest chain and the longest chain is the blockchain that determines the transaction history of a cryptocurrency. Satoshi Nakamoto designed Bitcoin so miners can essentially vote through their hash power and create the block premium incentive system to discourage 51% attacks, but 51% attacks are always a possibility for PoW's cryptocurrencies.
During a 51% attack, an attacker sends a cryptocurrency to an exchange and is simultaneously extracting an alternative version of the blockchain in which such transactions have never occurred. The attacker then releases the alternative blockchain, which becomes the longest chain since the attacker has 51% or more of the hashing power. This causes the transactions sent to the merchant or exchange to disappear and the cryptocurrency is again displayed in the attackers' portfolio. This is called a double expense. In the time between the initial transaction and the exchange of the alternative chain, the attacker can exchange other types of cryptocurrency and withdraw from the exchange. In this way, an attacker can double his money and receive most of the cryptocurrency mining prizes in addition to the one in the process. Exchanges may require many confirmations to try to prevent a 51% attack, but the last 51% attack by Vertcoin was 307 deep, making the confirmations requirement an ineffective countermeasure.
Vertcoin is particularly vulnerable to 51% attacks because it has banned ASIC mining, the most powerful mining machines, having Scrypt-N PoW algorithm instead of the normal Scrypt. This caused that the hash rate of the Vertcoin network was much lower than that used with Scrypt. The point was to increase profitability for the CPU and GPU miners, but in the end this makes no sense if it helps lead to 51% of the attacks, since a 51% attack is extremely damaging to the reputation and value of a cryptocurrency . Vertcoin is under assault from October 2018 and 51% attacks continue today. Mark Nesbitt eventually brought the audience to 51% of Vertcoin's attacks on the public on December 2, 2018, but exchanges continue to support Vertcoin e the price of Vertcoin has just reacted. This is creating the ideal conditions for the attack to continue.
The reason why Vertcoin, Bitcoin Gold, Verge and Mona have been attacked in the last year is because the network hash rate for major PoW cryptocurrencies has increased in orders of magnitude in a short space of time. This implicitly means that large amounts of hash power have become cheaper than in the past, and many small capitalized PoW coins no longer have a relatively safe amount of hashing power. The Crypto51 site he calculates that numerous cryptocurrencies are susceptible to a 51% attack and that the attacker does not even need the actual hardware, but they can also exploit the hashing power on a cloud mining service like NiceHash to make it happen. Some cryptocurrencies cost less than $ 10 to attack and most are well under $ 1,000 for a 1 hour attack. Cryptocurrencies quite well known as Ethereum Classic are also at risk according to Crypto51.
The lesson that cryptocurrency traders and investors must learn from this is that many small PoW cryptocurrencies are not long-term safe investments, as they can easily be attacked at 51%. It is better to have only cryptocurrencies with the highest network hash rates, such as Bitcoin, Ethereum and Litecoin. There are many other cryptocurrencies that do not use PoW and use algorithms like Proof of Stake (PoS) or Proof of Capacity (PoC) and are safe from attacks of 51%. Exchanges must be proactive about 51% susceptibility to attacks and should be cautious in offering PoW cryptocurrencies with reduced network hash rates to protect themselves and their users.
