A 51% attack (or majority attack) refers to a potential attack on the integrity of a blockchain system in which a single malicious actor or organization manages to control more than half of the total hashing power of the network, potentially causing a network disruption.
If a single bad user, or group of bad users acting together, control more than 50% of the total network hashing rate for a blockchain, they are able to override the consensus mechanism of the network and commit malicious acts such as double spending. The attacker would have enough mining power to intentionally modify the ordering of transactions, preventing some or all transactions from being confirmed (aka. transaction denial of service). He would also be able to prevent some or all other miners from mining, leading to the so-called mining monopoly.
For example, if a malicious actor was to take over 51% of the hashing power of the Bitcoin network, they could make an offline OTC trade by sending some Bitcoins to a cryptocurrency wallet in exchange for USD. Considering the implied immutability of the blockchain, as soon as the transaction is confirmed by the network nodes, the buyer would naively hand over the USD to the scammer.
The malicious actor could then go back in the blockchain to the block before the BTC transfer was confirmed and mine an alternate chain, in which the BTC transfer is not included. The majority share of the networking power would ensure that this is forced to be adopted by the rest of the network as a valid transaction.
On the other hand, a majority attack does not allow the malicious actor to prevent transactions from being broadcasted nor to reverse transactions from other users. Changing the block’s reward, creating coins out of thin air or stealing coins that never belonged to the attacker are also very improbable scenarios.
The further back a transaction is, the harder it would be to subvert it, as the number of new blocks to be mined to bring the network up to the current level becomes further and further away. This is the reason why Bitcoin transactions usually require a threshold of x number of confirmations before clearing.
A 51% attack on the Bitcoin blockchain is very unlikely because of the magnitude of the network. As the network grows, the possibility of a single person or entity obtaining enough computing power to overwhelm all the other participants gets more and more improbable.
Therefore, 51% attacks are highly unlikely to happen on big networks, especially on the Bitcoin blockchain, which is considered the most secure cryptocurrency network. While many of the large blockchains have not yet suffered an attack of this kind, the majority attacks have been seen on other smaller chains. For instance, the altcoin Bitcoin Gold - which is a fork from the main Bitcoin chain - suffered a 51% attack in May 2018, leading to the theft of $18 million worth of BTG at the time.
To learn more about 51% attacks and how likely to happen they are, check our full article on the Binance Academy.