The plotline of the recently-aired season finale of the fifth season of Silicon Valley eerily came to life this past week when nearly $20 million worth of cryptocurrency was stolen from online exchanges.
Crypto-mining thieves reportedly took over the digital currency platforms and proceeded to claw whatever they could from user accounts, capturing tens of millions of dollars’ worth of Bitcoin Gold, Verge and Monacoin.
The real-life heist occurred just days after a similar fictitious one was depicted on an episode of Silicon Valley. Known as a “51 percent” attack, a grouping of crypto miners on the show collectively seized control of a crypto platform and proceeded to rob it blind.
At the time when the episode aired, 51 percent attacks were believed to be merely theoretical – a far-fetched possibility that could one day strike the crypto world. But when one occurred just a few days later, it revealed the true vulnerability of the crypto world. (Related: Wall Street Journal confirms Bitcoin is a bust.)
The way it works is that, similar to more popular cryptocurrencies like Bitcoin and Ethereum, the three aforementioned cryptos are verified by the larger crypto-owning community. Thousands or even millions of computers worldwide essentially independently verify the movement of each crypto blockchain, tracking and updating the distributed ledgers that basically keep track of the total amount of digital money that’s present.
During a 51 percent attack, however, this independent, open-source model is replaced by a smaller grouping of malicious users who essentially hijack the majority of the network’s total computing power – hence the 51 percent – in order to redirect other people’s online funds into their own accounts.
In essence, by capturing a majority of the network, hackers are able to forge transactions in their own favor. This includes giving them the power to spend the same coins twice, for instance, completely undermining the integrity of the blockchain network.
“In cryptocurrencies, the longest chain of transactions becomes ‘the’ blockchain that describes the current state of the system,” explains Motherboard.Vice.com. “Malicious miners can take advantage of this if they control the majority of the network’s computer power. A miner that achieves this can privately mine blocks at a pace that overtakes the original blockchain, essentially creating a fork.”
Researchers familiar with how cryptos work have long warned that such attacks are a theoretical possibility. When two attacks of this nature occurred to smaller and more unknown cryptocurrencies back in 2016, this theoretical possibility became an actual possibility – especially for the major cryptos like Bitcoin and Ethereum.
The reason nobody’s been concerned since about a 51 percent attack on a major crypto network is that it’s much more difficult, if not impossible, to hijack a blockchain of any notable size. One would need an inordinate amount of computing power – enough to fill multiple large, dedicated warehouses full of servers. It would also be prohibitively expensive to hijack, say, the Bitcoin network, because its market cap has reached the hundreds of billions.
Another disincentive is the fact that performing such a heist on a major crypto could destroy its value, which would make it essentially worthless for the hackers trying to steal it. Still, there are concerns among some that the Wild West of online cryptocurrency is on the verge of becoming even wilder.
“In the past, miners have been quite docile and compliant, partly because they lacked the technical sophistication to launch attacks, and partly because there weren’t that many options on which coins to attack,” says Emin Gün Sirer, an assistant professor researching distributed systems at Cornell University. “We are now beginning to see miners act more strategically.”
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