Vulnerabilities and Hacking

Proof Of Work

  1. The 51% attack is the one known pitfall of the blockchain Proof of Work mining method.
  2. Miners are blockchain building nodes.
  3. Miners get reward for building blocks the fastest.
  4. More mining power (nodes) means you have more chance to wind the reward.
  5. This has resulted is massive investment for mining machines, dominated by only a few groups (companies.)
  6. A corrupt group equaling a minimum of 51% – could intentionally confirm a malicious block containing altered data (in their favor you’d assume) – therefore destroying the integrity of the chain.

Proof Of Stake, The First Solution

  1. Proof of Stake was designed to remove the 51% pitfall, and replace it with mining rewards given to those with the most value staked in the given chain.
  2. So the cost of malicious alteration outweighs the value of their investment.
  3. When a blockchain is deemed corrupt all value is lost, so having a large stake in the integrity becomes much more important.
  4. Proof of Authority designed to use much less resources. PoA 2.0 blends the Byzantine Fault Tolerance (BFT) and Nakamoto Consensus types.
  5. BFT allows distributed networks to agree and execute based on majority say.
  6. The Nakamoto Consensus verifies the authenticity of a blockchain network – eliminating malicious actors in the BFT by randomizing validator selection.

Read about other consensus mechanism solutions here.