Ethereum classic (ETC) fell more than 11 percent today after a suspected 51 percent attack, according to data from CoinMarketCap.
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The price of ETC is $4.93, down 9.26% at press time.
On Jan. 5, Coinbase detected a deep chain reorganization of the Ethereum Classic blockchain that included a double spend.
In order to protect customer funds, Coinbase immediately paused movements of these funds on the ETC blockchain.
Subsequent to this event, the company detected 8 additional reorganizations that included double spends, totaling 88,500 ETC (~$460,000).
Page 3 of Satoshi Nakamoto’s whitepaper, Bitcoin: A Peer-to-Peer Electronic Cash System, states the following:
“If a majority of CPU power is controlled by honest nodes, the honest chain will grow the fastest and outpace any competing chains.”
The “honest[y]” of more than half of miners is a core requirement for the security of Bitcoin and any proof-of-work cryptocurrencies based on Bitcoin.
Honest action, in this context, means following the behavior described in the Bitcoin white paper. This is sometimes described as a “security risk” or “attack vector,” but is more accurately described as a known limitation to the proof-of-work model.
Failure to meet this requirement breaks several core guarantees of the Bitcoin protocol, including the irreversibility of transactions.
Many other cryptocurrencies, such as Ethereum Classic, have also adopted proof-of-work mining.
The function of mining is to add transactions to the universal, shared transaction history, known as the blockchain.
This is done by producing blocks, which are bundles of transactions, and defining the canonical history of transactions as the longest chain of blocks*.
If a single miner has more resources than the entirety of the rest of the network, this miner could pick an arbitrary previous block from which to extend an alternative block history, eventually outpacing the block history produced by the rest of the network and defining a new canonical transaction history.
This is called a “chain reorganization,” or “reorg” for short. All reorgs have a “depth,” which is the number of blocks that were replaced, and a “length,” which is the number of new blocks that did the replacing.
This, on its own, might end up being nothing more than a minor inconvenience.
After all, the transactions all still exist, but they might have been put into a different order, perhaps delaying some of them. However, imagine a miner who also owns a large number of coins.
The miner could send those coins to a merchant in a transaction, T, while also secretly extending an alternative block history.
The miner’s secret blocks do not include T, but rather include a transaction that sends the same coins used in T to a different address. Call that transaction T’.
When the miner reveals this secret history, it will contain T’, not T.
Because T and T’ attempted to send the same coins and T’ is now in the canonical history, this means that T is forever invalid, and the recipient of the coins sent in transaction T never even received them in the new, now-canonical history.
More info on this can be found here.
The Coinbase team is currently evaluating the safety of re-enabling sends and receives of Ethereum Classic and will communicate to our customers what to expect regarding support for ETC.
Coinbase takes security very seriously.
As part of that commitment, they monitor blockchains for activity that could be harmful to their customers and take prompt action to safeguard funds.