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What Are The Risks With Public Blockchains?

This blog article looks at three hazards associated with public blockchains: 51 percent assaults, Proof of Stake flaws, and double-spending.


51% Attacks

When blockchains have consensus rules based on a simple majority, there is a danger that malicious actors would collaborate to affect the system's outcomes. In the context of a cryptocurrency, this means that a group of miners with more than 50% of the mining processing power may influence which transactions are confirmed and added (or removed) from the chain. A 51 percent assault on a blockchain that employs the Proof of Work (PoW) consensus protocol method can potentially take the form of malevolent actors creating a "rival" chain containing false transactions.


Because of their better mining capability, these fraudsters may construct an alternate chain that is longer than the "real" chain, and so - because the Bitcoin Nakamoto consensus process states that "the longest chain prevails," all participants must follow the fraudulent chain moving forward.


A 51 percent assault is more difficult in a huge blockchain like Bitcoin, but if a blockchain has split and the pool of miners is smaller, like in the case of Bitcoin Gold, a 51 percent attack is viable.


In 2018, a 51 percent double-spend attack was successfully carried out on the Bitcoin Gold and Ethereum Classic blockchains, resulting in the theft of millions of dollars.


Proof of Work vs Proof of Stake

In January 2019, a 51 percent attack on a new blockchain dubbed Ethereum Classic forced a shift in strategy for the Ethereum blockchain from Proof-of-Work (PoW) mining to Proof-of-Stake (PoS) voting.


Proof of Stake, on the other hand, is more subject to schisms or splits known as "forks," in which major stakeholders make conflicting judgments about the transactions that should compose blocks, resulting in the creation of yet another new currency. Ethereum briefly explored this validation mechanism before reverting to Proof of Work owing to forking concerns. In 2020, a redesigned Proof of Stake validation mechanism is scheduled to be introduced.


Double Spending

There is a possibility that a participant with, say, one bitcoin, may spend it twice and fraudulently get items worth two bitcoins before one of the providers of goods or services realizes the money has already been spent. However, this is a problem with any electronic money system and is one of the primary reasons for clearing and settlement procedures in conventional currency systems.