When it comes to cryptocurrency mining, the key concern for people is that of a 51% attack — where a single attacker or group controls the majority of computational power of the blockchain. The attackers decide which transactions (if any) get processed in the blockchain.
Besides through disrupting or censoring the information of new exchanges, a 51% attack can be leveraged for a double spend.
This means that the criminal mines a different version of the blockchain in secret so they can spend a few coins or tokens in the public chain and later mute the exchange by updating their version of the blockchain in which they hold ownership of the tokens. This is also known as the blockchain reorganization since it replaces the majority of the recent blocks in the blockchain.
Until now, the world hasn’t seen any successful 51% attack on Bitcoin, but there have been attacks on other coins such as Ethereum Classic. If successful, such a kind of attack would probably lead to major harm to Bitcoin’s reputation.
Cryptocurrency trading can be highly opportunistic but it also involves a high risk compared to stock or bond investing. If the trader is considering including cryptocurrencies to their portfolio, it’s crucial to understand the risks of a 51% attack.
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