51% attack on Ethereum Classic worth $460,000

Article originally appeared on financemagnates

A 51% attack was confirmed to have affected the Ethereum Classic (ETC) network on 7 January, by Bitfly, the operator of the Ethereum block explorer, the Ethernodes node explorers, and an Ethereum Classic mining pool.

When a 51% attack is successfully conducted, hackers gain the ability to “reorganise” a blockchain or even replace a blockchain with their own version. In addition to a number of other opportunities for malicious behavior that this reorganisation or replacement grants to the perpetrators of a 51% attack, hackers can “double spend”–that is, the same coins can be used multiple times in fraudulent transactions.

Rumours of this 51% attack on ETC originally surfaced on 6 January

Reports that ETC may have been experiencing a 51% attack originally appeared nearly 2 weeks ago in CoinNess, a Chinese-based coin journal. The publication wrote that transaction rollbacks had triggered an alert for Chinese blockchain security firm SlowMist.

“The ETC community followed up on the development of the attack immediately and learned that there is a private mining pool…that achieves over 50% of the total network hashrate at certain times,” the report read.

Ethereum Classic itself responded to the report with a social network post claiming that the ETC network was “operating normally.”

However, the ETC team changed its tune a few hours later with another tweet imploring “all exchanges and mining pools” to “please allow a significantly higher confirmation time on withdrawals and deposits (+400).”

Then, without expressly confirming that the attack had taken place, the ETC team then retweeted the original CoinNess report.

At the time of writing, the attack appeared to have subsided–ETHNews reported that the ETC address that is suspected to be associated with the attack has been “silent” since it mined block #7,256,171 nearly twenty-three hours ago.

However, some controversy arose around the attack when US-based crypto exchange Coinbase came forward and said that it noticed a “deep chain reorganisation of the Ethereum Classic blockchain that included a double spend” on Saturday, 5 January, one day before the CoinNess report.

Ethereum Classic responded to the report with a comment saying that “unfortunately [Coinbase] did not connect with ETC personnel regarding the attack.”

Coinbase’s report on the 51% attack was posted on the company’s Medium blog on 7 January. Coinbase Security Engineer Mark Nesbitt, who authored the article, wrote that Coinbase detected “a deep chain reorganisation of the Ethereum Classic blockchain that included a double spend” on 5 January. The post claims that since then, there have been at least eight more chain reorganizations worth around $460K.
Exchanges react to the incident

A number of exchanges and other platforms that interact with ETC have taken precautionary measures to ensure that their users and the ETC community isn’t negatively affected by the attack. Among them, Bitfly has reportedly increased block confirmations on its mining pool.

US-based crypto exchange Kraken wrote in a post that “as the 51% attack appears to be ongoing, we have temporarily halted ETC deposits and withdrawals,” adding that “[we] will bring ETC funding back online only once we believe it is safe to do so.” Originally, the exchange increased the level of transaction confirmations necessary for ETC transactions from 120 to 600 to prevent fake transactions.

Crypto exchange Gate.io posted on its website that although “Gate.io’s censor successfully blocked attacker’s transactions at the beginning and submitted them to the manual exam,” the censor did pass some false transactions, causing about $40,000 in losses.

“Gate.io will take all the loss for the users,” the post said. Finance Magnates interviewed Gate.io’s Vice President of International Affairs Virgilio Lizardo late in 2018. During the interview, Lizardo said that “Gate sets itself apart by prioritising security and [user] experience.”

At the time of writing, ETC’s valuation had sunk roughly seven percent within the last 24 hours to $4.96, according to data from CoinMarketCap.