The Ethereum Classic (ETC) blockchain recently suffered the first high-profile hack of 2019. In a cryptocurrency nightmare scenario, a malicious actor successfully performed a 51% attack. As a result, they were able to siphon almost 220,000 ETC tokens from the blockchain – the rough equivalent of over $1 million USD. The attack targeted multiple exchanges and rewrote the blockchain’s ledger at will – reorganizing in a way that allowed the hacker to ‘double spend’ ETC.
The idea of a 51% attack is not new. The process itself was theorized years ago, in relation to the Bitcoin blockchain itself. If a single entity can secure the majority of a blockchain’s hash rate, they can reverse their own transactions. This allows a ‘double spend’, or a coin existing in both the sender and the receivers wallet after the transaction is completed. However, with the staggering size of Bitcoin’s overall mining pool, a 51% attack is unlikely. This is not the case for smaller Proof of Work altcoins like Ethereum Classic.
Ethereum Classic: Genesis and Exodus
Ironically, Ethereum Classic’s original creation hinged upon vulnerability in security. When $168 million USD in Ether went missing from the Ethereum blockchain, the user base sundered. Some wanted to reverse the transaction and return the tokens to their original owner – venture capital firm DAO. Others insisted on preserving the immutability of the chain. The main Ethereum branch chose to reverse the transaction – creating a hard fork of their blockchain to do so. ETC’s splinter group hard forked from the original chain a week later, without the added reversal. They included several small technical changes.
Ethereum Classic enjoyed some success, including a much coveted position on Coinbase. However, the long bear market of 2018 ultimately took its toll. In early December, ETC’s main developer team abandoned the project due to lack of funds. Without dedicated developers to quickly respond to issues, the chain became ripe for an attack.
Coinbase Halts Trading
In another major blow to Ethereum Classic, Coinbase quickly halted trading in the token after they identified the attack. While no double spend transactions occurred within the Coinbase ecosystem, the exchange still felt it prudent to pause ETC until the situation could be resolved.
In Ethereum Classic’s favor, the price of ETC tokens moved very little in response to the attack. Losing only a total of 10% between their recent high and current value, Ethereum Classic weather the storm better than could be expected. However, given the success of the attack and the loss of their main development team, Ethereum Classic’s future is far from certain.
Article By: Adam Stone