The first month of the year started on a great note for Ethereum enthusiasts as it's going to experience three hard forks in the same month itself until Jan 7th, when Ethereum Classic(ETC) experienced a 51% attack by an unknown perpetrator due to either double spends or chain reorganization, which we will discuss in detail in the latter part of the article. This news swept storm in the crypto space, shaving off around 40 million USD off ETC’s market capitalization, decreasing the price by 7.5% in the last 24 hours. Ethereum Classic was the last hard fork of Ethereum, which took place because of the catastrophic hack that happened in 2016.
A chain reorganization happens when a single miner or an entity pool has more resources than the other miners or network, wherein the dominant miner picks up an arbitrary block from whichever to extend alternative block history.
Last May 2018, Husam Abboud, Brazilian researcher of FECAP university calculated that it would take around 70 million USD to conduct a 51% attack on ETC network. Last month, there was news of ETCdev facing financial issues and hence had to shut down, which left ETC at the edge of the cliff. After the incident, most of the exchanges supporting ETC have halted the transactions unless they come up with some solution.
Etherchain has confirmed in a tweet that there was an attack, because of which they are withdrawing any kind of transaction with ETC. After the problem has been resolved, they will notify the users.
Ethereum Classic community responded and clarified to the exchanges to take preventive measures in a tweet:
Last November, Coinbase has started supporting Ethereum Classic (ETC) because of which the price spiked temporarily. Coinbase has very recently reported that at least 8 chain reorganizations or double spends happened which led to sweeping away of 88,500 ETC, which is equivalent to 460,000 USD. It looks like Coinbase had a subtle hint of some mishaps a few days back when they detected a deep chain reorganization on 5th of Jan, 2019 with 12 attacks, which included double spends totaling to around 1.1 million USD ( 219,500 ETC), even informed by Mark Nesbitt, an application security engineer in a blog post.
Coinbase also specified that it was “not the target of this double spend and no funds were lost.”
Donald McIntyre reported a couple of days back about the ETC attack that one miner had more than 60% of the network’s hash power, which gives the person the entire control over the processed transactions in the blockchain, enabling them to mine a disproportionately large amount of the block, which leads to double spending and awarding own selves unjustly.
According to the gas tracker, which projects the list of the top miners, the suspected miner still holds around 45% of ETC’s hash rate(computational power of the block) as measured over 24 hours. This would give around $30,000 ETC block rewards, which is equivalent to a typical payout received for network security.
In response to all of these, the Ethereum community manager, Kevin Lord said that its more of a selfish Ethereum Classic attack, and the miner never double spent. He totally made the assumptions go wrong by saying that the recent mining events and increased hash rate attributed to the testing of 1,400/Mh ethash machines by ASIC (Application Specific Integrated Circuit) manufacturer, Linzhi.
This kind of attack was faced by Bitcoin Gold(BTG) too. But in this scenario, it can’t be called as mere coincidence that this mining attack happened a week before the Ethereum Constantinople hard fork has been scheduled, where the miner's rewards are decreasing from 3 ether to 2. The attack can be seen as a justification to implement ProgPoW for ETH and ETC, as ProgPOW in the hard fork would block ASIC miners. Even the users are demanding for the same, which can be seen as the replies to the tweets, which are as follows:
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2019-03-26 13:07:22.497537 | 2 min
2019-07-26 12:58:32.287354 | 2 min