Bitcoin Gold Hacked with 51% Attack

The dreaded 51% attack has hit the BTC alternative Bitcoin Gold, resulting in a slight drop in price with the news, although so far there has been no sign of panic selling.

Using supercomputers to falsify the currency’s ledger, hackers swindled at least $18 million from online exchanges. The incident was reported in a blog post earlier this month. The network is still said to be vulnerable, although the attackers aren’t expected to hit again soon as consecutive security failures could result in massive sell-offs, bringing down the token price. The price of BTG dropped a little after the news broke, but there has been no major panic as yet.

The 51% attack stems from a nasty individual or entity obtaining more than half of the mining power on a network, posing an existential threat to the respective cryptocurrency. The level of computing power domination helps to make it possible to manipulate the distributed ledger on the Blockchain, resulting in double spending.

According to the website Bitcoinist, the records of a digital wallet show hackers made a series of fraudulent deposits in which the money never ended up with the recipient exchange:

“The attacker sends a particular number of BTG tokens to an exchange, trades them for another coin and makes a withdrawal. The hacker then returns those same coins in his/her wallet, hence the double-spending problem. Thus, the attacker can spend and hold the same coins at the same time. Looking at the image above, if all 76 transactions were indeed part of the hack, then the hacker has stolen about $18 million based on the current BTG price.”

A Bitcoin Gold developer wrote in a blog post that there are plans to introduce a software update known as a “hard fork” that will decentralize the mining power on the network, acknowledging the continuing risk on Tuesday.

The current crisis is the most real nightmare for the cryptocurrency world, which could theoretically happen to any existing token network. The threat is believed to be diminishing as the population of the crypto community increases, as that will practically make it harder for someone to take control of more than 50% of the network.

The large networks of Bitcoin or Ethereum seem to be far from the imminent threat, but smaller cryptocurrencies can never stay far from this risk in the near future.

The snowballing of large-scale mining conglomerates deploying specialised computing equipment is gradually taking the cryptocurrency network towards what it was trying to leave behind in the first place: Centralisation.