Bitcoin Gold is now experiencing the cryptocurrency investor’s worst nightmare: a 51% attack. This can turn out to be pretty bad if it continues but at the moment it is manageable.
Bitcoing Gold does have most of its cold just as Bitcoin but there are differences that appeared. While Bitcoin did manage to properly deal with 51% attacks, mainly because of its sheer size, Bitcoin Gold is still vulnerable.
Now, the nightmare scenario is in effect. There is an attacker that did take control of the Bitcoin Gold blockchain and is defrauding exchanges. A blockchain should be decentralized but with 51% attacks this is no longer the case. The Bitcoin Gold available at the moment is valued at around $758 million and can lose a lot of value if the scenario continues.
What Is A 51% Attack?
The 51% attack is when an individual or a group of individuals controls most of the processing power of the blockchain. This has always been a huge concern for institutions like tech companies and banks. With Bitcoin it is close to impossible to have a 51% attack because of the sheer size of the cryptocurrency. However, with Bitcoin Gold it is not that difficult to accomplish.
When a single miner manages to control over 50% of the blockchain hash power, he can mess with all transactions in so many different ways. The one that is happening right now is double-spending.
Bitcoin Gold’s 51% Attack
Reports about double-spending attacks started appearing around a week ago in regards to Bitcoin Gold. There is someone that now controls over 50% of the hash rate and is actively double-spending. The attacker has to spend coins in possession so new coins cannot be conjured. Due to this the attack is limited and did not drastically affect the network.
The exchanges that accept really large deposits in an automatic manner are targeted. Fraudster(s) deposit Bitcoin Gold in exchanges where these coins can be traded. Then, after the currency was credited to the account, the coins are exchanged to other cryptocurrencies. After, the amounts are withdrawn. Then, because of the 51% attack problem, the fraudster can make a deposit with the same exact Bitcoin Gold deposited initially. This offers double, the profit.
This is not the first time that cryptocurrencies had to deal with 51% attacks. Verge was hit 2 times in the past 2 months, with around $2.7 million ended up being stolen. Then, we have Electroneum and Monacoin that suffered 51% attacks in recent history.
The good news is that there is a really low possibility that Bitcoin will be hit by the 51% attack. The bad news with Bitcoin Gold is that its hash rate is much lower than that of Bitcoin. The Bitcoin miners are now contributing a processing power that is around 1 million times higher than that of the Bitcoin Gold miners. In 2013, the Bitcoin network’s processing power was higher than 500 supercomputers combined. Since then the hash rate for Bitcoin went up around 1.4 million times.