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Coinbase took to its Twitter to reveal that its internal developers detected a “deep chain reorganization” of the Ethereum Classic (ETC) blockchain. During that ‘reorgs’ nearly $500,000 worth of ethereum classic was spent twice
Mark Nesbitt, a security engineer at the world-renowned $8 billion startup, broke down Coinbase’s findings revealing that Ethereum Classic’s Proof of Work system, which runs on the ETHash algorithm, had fallen victim to “repeated” block “reorgs,” meaning that an unnamed attacker [group] managed to alter blockchain transactions repeatedly in recent memory.
On 1/5/2019, Coinbase detected a deep chain reorganization of the Ethereum Classic blockchain that included a double spend. In order to protect customer funds, we immediately paused movements of these funds on the ETC blockchain. Read more here: https://t.co/vCx89dz44m
— Coinbase (@coinbase) January 7, 2019
However, now developers for the ETC token are making the claim that the blockchain has not experienced a 51 percent attack, in addition to denying the presence of a double spend.
Respond to the allegations, they are now claiming that a mining pool was responsible for some of the suspicious behavior, having accounted for more than 50 percent of the network’s hash rate and engaging in “selfish mining.” I
In a Tweet by the official ETC account, the developers contend that ASIC manufacturer Linzhi was in the process of testing new ETHash machines, resulting in a >50 percent network hash rate as opposed to being a direct attempt at a 51 percent hack. The tweet also states that “double spends [were] not detected,” contradicting some the details in the Coinbase report.
“Regarding the recent mining events. We may have an idea of where the hashrate came from.
ASIC manufacturer Linzhi confirmed testing of new 1,400/Mh ethash machines #projectLavaSnow
– Most likely selfish mining (Not 51% attack)
– Double spends not detected (Miner dumped bocks)
— Ethereum Classic (@eth_classic) January 7, 2019”
However, this Tweet was removed because Linzhi Shenzhen director of operations Wolfgang Spraul pushed back, saying:
“We are categorically denying such claims, they are entirely baseless and may be part of the attack itself.”
“If we would test our ASICs, we would never do that on any mainnet, we would do that on a testnet or a private net. We would most likely invite independent industry figures like David Vorick or Anthony Lusardi to observe what we are doing.”
Afterwards from the company they tweeted:
To be clear we are making no attempt to hide or downplay recent events.
Facts are facts and as the situation develops we'll soon get a full picture of what actually took place.
Linzhi is testing ASICS. Coinbase reported double spends; both may be true.
In time we will see. https://t.co/bbq6eqIoiS
— Ergo (@Ergo_Platform) January 7, 2019
According to Nesbitt’s blog post, the attackers could spend coins twice because of what’s called a 51 percent attack. To do this, attackers took control of more than half of the processing power that computes and stores the Ethereum Classic blockchain. That let the attackers create alternative transactions for some coins, essentially spending them twice.
The coins that attackers allegedly spent twice were worth about $460,000, Nesbitt wrote. He added that potential for an attack like this one is a problem faced by all cryptocurrencies, and doesn’t mean Ethereum Classic was especially vulnerable.
Coinbase Pausing Further Movements of ETC Funds Affected
After we wrote about how Coinbase still hasn’t allowed its users withdraw their BCH SV since November’s hard fork, this seems to be another “stumbling stone” for this company.
Coinbase paused movements of affected ETC funds to prevent any double spends from hitting its users. Meanwhile, the Kraken Exchange temporarily halted ETC deposits and withdrawals and plans to bring ETC funding back online once exchange officials believe it is safe to do so. ETC officials, for their part, have confirmed that double spends are affecting the currency, but they have yet to say more.
A 51 percent attack would be “technically a catastrophic failure,” Emin Gun Sirer, co-director of the Initiative for Cryptocurrencies and Smart Contracts at Cornell University, said in a tweet.
Since immutability is ETC's main claim to fame, this is technically a catastrophic failure. Let's see what the exchanges will do in response.
— Emin Gün Sirer🔺 (@el33th4xor) January 7, 2019
To some investors, Ethereum Classic is the real Ethereum network. After a catastrophic hack threatened to wipe out Ethereum in summer 2016, the network’s developers “forked” the project. Ethereum was split into Ethereum Classic, the original version of the network which allowed the hack to take place, and the new Ethereum where the hack was undone.
Proponents of blockchain technology often talk up the security of the network, but a 51 percent attack is one of the flaws. They are currently quite rare but have occurred in some instances, particularly with smaller cryptocurrencies. Last year, Litecoin Cash and Zencash both suffered 51 percent attacks.
Just for reminder, last year in December, Ethereum Classic Development Team (ETCDEV) became the next victim to freeze in the Crypto winter. The CTO Igor Artamonov then confirmed that dwindling resources resulted in the shutdown.
The size of a cryptocurrency’s network is thought to, therefore, be a defense: it becomes prohibitively expensive to take over more than half of a gigantic distributed system.
As of Tuesday morning, Ethereum classic had a market capitalization of more than $500 million. That pales in comparison to bitcoin’s nearly $70 billion market cap, but still means the token ranks in the top 20 cryptocurrencies measured by CoinMarketCap.