The 51% attack on Ethereum Classic (ETC) has lasted three days and there is a possibility it will be repeated. Coinbase first detected the double-spend attack on January 5, 2018.
51% attack on Ethereum Classic
219,500 ETC (~$1.1M) has been double-spent so far on Coinbase.
In response, Coinbase “temporarily disabled all sends and receives for ETC”. Users can still buy and sell ETC on the exchange.
After dismissing first news about the attack as “rumors”, Ethereum Classic team told the exchanges and pool operations to substantially increase block confirmation times to over 400 on January 7.
According to Ethereum Blockchain Explorer, Bitfly, the attack remained ongoing as of January 8 (16:30 UTC+1). The possibility of repeated attack is still open.
— Bitfly (@etherchain_org) January 8, 2019
ETC’s developers seemed to be the last to find out about the attack. Coinbase apparently did not contact ETC’s developers after finding out about the double-spend.
So if I understand this correctly, @coinbase detects a double spend on the ETC network and then doesn't bother to contact anyone working on ETC.
— Anthony Lusardi (@pyskell) January 7, 2019
According to the director of ETC Cooperative, Anthony Lusardi, the ETC team was “left in the dark” by the exchange. Lusardi concluded that exchanges prioritize communication with some projects and leave others to fend for themselves.
The attack has resulted in multiple 100+ block reorgs. The depth of block reorganizations and the hash rate of over 6 TH/s have raised suspicions that the attackers are using new ASIC miners. Attackers have acquired over 60% of the entire hash rate at certain points.
As Lusardi noted:
The hashrate doesn’t appear to have come from ETH miners nor Nicehash, appeared out of nowhere. Potentially new ASICs.
Nevertheless, Ethereum Classic is currently 101% Nicehashable. This means that the whole attack can be carried out by renting hash power from the marketplace. A Nicehash attack would cost $4,557 per hour, and the attackers don’t need to own any mining equipment.
ETC: not so immutable after all
Ethereum Classic is a proof-of-work (PoW) coin. It’s the “original” version of the more popular Ethereum (ETH). Ethereum forked from Ethereum Classic after the DAO hack because they chose to protect investors instead of staying immutable.
Over time, the differences between these two cryptocurrencies have continued to grow. Many are expecting Ethereum miners to switch to the ETC chain once Ethereum becomes proof-of-stake (PoS). Nevertheless, until that moment comes, ETC will probably continue to suffer from a lower hash rate than Ethereum.
It is indeed frightening to see one of the top 20 coins (and top 10 PoW coins), with a market cap worth half a billion dollars, falling victim to a 51% attack.
Maybe, as Coinbase’s Balaji Srinivasan said:
The long-tail of PoW chains will find it hard to protect themselves if inducing reorgs becomes financially profitable. PoW space will likely be dominated by a few, large chains.
Price effect: pump before dump?
Even though Coinbase noticed the attack on January 5, ETC’s price remained stable until January 6. At that point, it pumped to $5.49 before falling all the way down to $4.86. The pump was indeed strange given the circumstances.
The price of ETC has since recovered to $5.05 levels.
By zooming out to the monthly chart we can see that the $5.05 is still higher than ETC’s average December 2017 levels.
We’ll have to wait to see how the attack will affect ETC’s long-term demand and whether developers will improve prevention mechanisms in the future.
Developers were quick to point out the relevance of transaction confirmation time (the number of blocks):
The solution is simply to wait a length of time proportionate to the value of the chain.
(January 9, 2019)
Yobit has announced that it lost 130,417 ETC due to 51% attack. Coins will be covered from Yobit Insurance fund. The exchange has enabled ETC deposit and withdrawals.