51% Attack

A 51% attack on a blockchain network occurs when a miner or group of miners gain control of more than 50% of the network's hash rate. This allows them to manipulate the network by double-spending or blocking transactions. The goal of a successful 51% attack is to make a financial gain at the expense of other users on the network.

The Double-Spending Problem

The double-spending problem is an issue that hinders the development of distributed digital payment networks. It occurs when two or more parties spend the same digital asset, making it impossible to prove that the asset was not spent twice. Proof-of-work (PoW) consensus algorithms, like those used by Bitcoin and Litecoin, are designed to overcome this issue. However, these networks are also susceptible to 51% attacks.

Likelihood of a 51% Attack

The risk of a successful 51% attack on established blockchain networks like Bitcoin and Ethereum is minimal. This is because the attack's impact would be limited, and the cost of execution is economically unfeasible. Additionally, the network is continuously monitored, and the community would quickly detect and thwart any attack.

Implications for Individual Investors

The risk of a 51% attack is relatively low for individual investors who have invested in large projects. However, it is still a possibility. Therefore, individual investors should limit their investments in smaller cryptocurrencies susceptible to manipulation by prominent market players to reduce their risk of being targeted by a 51% attack.