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ETC 51% Attack: Is this the End for Ethereum Classic?

ETC 51 Attack Is this the End for Ethereum Classic

Confusion is currently reigning with Ethereum Classic amid reports of a 51% attack on the network. The official Ethereum Classic Twitter account initially downplayed the rumors, before urging exchanges take extra precautions when processing ETC deposits, before finally admitting that an attack “may” have taken place.

Major fiat-to-crypto gateway Coinbase was among the first to take notice of the attack, releasing a blog post warning that the Ethereum Classic blockchain was under attack. Coinbase asserts that its systems flagged double spending on the Ethereum Classic blockchain on the evening on January 5. Coinbase’s reaction was to immediately halt all spend and receive interactions between Coinbase customers and Ethereum Classic. Coinbase initially reported double spends accounting for 88,500 ETC, which would place the attack’s dollar cost at as much as $460,000. An update on January 7 claims that this has since risen to 219,500 ETC, or $1.1 million.

The response from Ethereum Classic has sparked much debate about whether reports of the attack were overblown, or if the team behind Ethereum Classic is initially downplaying a major security breach. The first response from the @eth_classic Twitter account stated that the network appeared to be “operating normally,” with the blockchain explorer Block Scout displaying no evidence of the blockchain reorganization that would be associated with a 51% attack.

Five hours later, another Tweet warned exchanges and mining pools to allow significantly longer for transaction verification, suggesting 400 confirmations be required.

11 hours after that, @eth_classic retweeted an article related to the incident from CoinNess and suggested exchanges and mining pools require between 400 and 4000+ confirmations.

The retweeted CoinNess article states that security team SlowMist detected rollbacks on many blocks within the Ethereum Classic blockchain, and that a mining pool has been discovered with more than 50% of the network hashrate, thus making a 51% attack a possibility.

Subsequent tweets have only added to the confusion about what exactly has happened. @eth_classic first suggested that the extra hashrate had come from ASIC manufacturer Linzi’s testing of new mining machines, and that the panic was likely caused by selfish mining rather than an outright attack on the network.

https://twitter.com/eth_classic/status/1082359420590288896

Three hours later, @eth_classic tweeted that both Linzi’s ASIC testing of new machines Coinbase’s claim of double spends may be an accurate explanation for the detected suspicious network activity.

Others have been forthright, with blockchain analytics and mining pool group BitFly’s official Twitter stating that a 51% attack had definitely taken place, with more than 100 blocks being reorganized.

51% Attacks: The Achilles Heel of Blockchain Security

Decentralized blockchains rely on network-wide consensus to verify that transactions on the blockchain are legitimate. With a 51% attack, an entity which is able to claim more than 51% of a blockchain network’s computing power, or hashrate, is able to alter transactions after they’ve taken place. For example, they could send an amount of the affected cryptocurrency to another location, such as an exchange, and then immediately reverse that transaction. This creates a “double spend,” with the malicious entity in control of the network still holding funds that were supposedly used on a transaction.

Figures on GasTracker.io show that a private mining pool was able to claim as much as 60% of Ethereum Classic’s network hashrate. The spikes on the above chart show the moments were the alleged malicious mining group was able to assume control over the network and enact the double spends which Coinbase and others are claiming occurred.

Ethereum Classic wouldn’t be the first blockchain to be affected by a 51% attack. In theory, it is a peril that could afflict any blockchain. In practice, the size of networks such as Bitcoin and Ethereum would make a 51% prohibitively expensive. However, Bitcoin Gold was hit with a similar 51% attack in May 2018. That same month, Verge suffered the third in a string of 51% attacks. A similar but ultimately unsuccessfulstrategy was attempted to take over the Bitcoin Cash network after the hard fork which create Bitcoin Cash Satoshi Vision in November.

Can Ethereum Classic Recover From This?

A 51% attack is widely regarded as the death knell for any blockchain project, as it completely obliterates trust in the network. News of the alleged attack has caused Ethereum Classic’s value to fall, from a high of $5.49 on January 7 to $4.95 at the time of writing. This is still considerably higher than ETC’s low of $3.36 on December 7, although a further fall is possible as the story develops.

Ethereum Classic was created in 2016 in a contentious hard fork following an attack on crypto investment fund The DAO. While the newly-minted version of Ethereum has far surpassed its “traditionalist” namesake blockchain, Ethereum Classic has continued to have a smaller but none-the-less committed pool of developers and devotees. It has also persistently ranked high among cryptocurrencies by market cap, remaining in the top 20 since its creation and at times being ranked among the top 10. Even amid a year-long downturn in the cryptocurrency market, ETC retains a market cap in excess of $500 million.

However, many commentators were wondering about the coins future after prominent development team ETCDEV announced via Twitter they were abandoning the project in December due to funding difficulties.

Only time will tell whether this latest setback proves fatal. It’s worth noting though that while many consider a successful 51% attack to mean the end of a blockchain project’s credibility, both Bitcoin Gold and Verge have remained within the top 50 cryptocurrencies by market cap since being stung with widely-reported similar attacks.

About Christopher Williams

Christopher Williams is a British writer based in South Korea with a strong interest in emerging technologies, cryptocurrency, and the development of decentralized apps.