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51% Attack on Ethereum Classic

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Satoshi&Co Daily Crypto Newsletter

January 8 · Issue #100 · View online
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Fewer than 7 days into the new year, one of the leading cryptocurrencies has had its blockchain reorganized, resulting in more than $500k being doublespent. According to Coinbase, Ethereum Classic (ETC) had a massive chain reorg that allowed hackers to double spend approx. 88,500 ETC. Labelled as “51% attack” in crypto parlance, chain reorganization allows bad actors to fork a blockchain from a certain block and create a parallel chain with more accumulated hash power than the original one.
The canonical rule for PoW systems is that the chain with the highest accumulated hash power is the chain with legitimate transactions. One of the biggest criticisms leveled at PoW systems is that if a malefactor acquires 51% of the network’s hash power and starts mining new blocks parallel to the original chain, they can reverse the transactions that were confirmed in the original blockchain. ETC is not the first cryptocurrency to suffer from 51% hash power attacks. Other, mostly non-mainstream cryptocurrencies such as Bitcoin Gold, Verge and Zencash have previously suffered 51% attacks at the hands of hackers.
In the case of Ethereum Classic, the attacker managed to amass huge amounts of hash power momentarily to control the majority of the hash power of the network and launched an attack by mining new blocks with reversed transactions. The growing incidence of 51% attacks highlights the vulnerabilities that altcoins with lesser hash power are exposed to. These types of attacks go against the very grain of cryptocurrencies, threatening non-negotiable immutability. Exchanges have, along expected lines, taken remedial measures by halting ETC deposits and withdrawals in order to protect their customers from receiving double spent coins.
It would be interesting to see how Ethereum Classic responds to the attack, especially given that their bold resistance to fork the chain after the DAO check led to the creation of ETC.  
Meanwhile in Crypto Wonderland....
“Kraken On Cost of Government Inquiries”
San Francisco-based cryptocurrency exchange Kraken has said that the cost of handling government subpoenas is fast becoming a “barrier to entry” in the U.S. In an infographic from its “2018 Transparency Report,” the exchange indicating that the law enforcement and other inquiries it has received from various government agencies have almost tripled year on year. The firm received a total of 475 subpoenas in 2018 compared to 160 in 2017, with the majority (315) coming from U.S. agencies.
“ECB Member Slams Crypto”
A member of the Governing Council of the European Central Bank (ECB) has warned that “the [cryptocurrency] bubble has already started to collapse”. Speaking at a conference in Riga, Latvia, Ardo Hansson — also the governor of Estonia’s central bank — stated that digital currencies will end up as a “complete load of nonsense.” He warned that “the bubble has already started to collapse and maybe we should just see how far this collapse goes, and what is left when we’ve reached a new kind of equilibrium”.
“tZERO Receives Crypto Patent”
USPTO has published a patent for a “crypto integration platform” by E-commerce giant Overstock.com’s cryptocurrency subsidiary tZERO. The patent filing describes a system that would be able to receive orders to trade “digital transactional items” — such as securities, tokens, digital shares, cash equivalents and digital assets — from broker-dealers and then translate the orders into crypto orders on a digital exchange. The platform reportedly aggregates various market data from cryptocurrency exchanges and “locate[s] the best price in the crypto market for the digital asset or liability involved in the transaction”.
“Fourth Arrest in India Crypto Scam”
Indian police have arrested an associate of a group accused of conducting a crypto scam involving 5 billion rupees (about $71.6 million). This is the fourth arrest of the ongoing case and reportedly occurred a year after police uncovered the alleged scam in Mumbai. Amit Lakhanpal — the man who launched the scam cryptocurrency — is the CEO of a real estate firm. The police also reportedly said that the token, dubbed Money Trade Coin (MTC), was never listed on a cryptocurrency exchange.
Crypto Twitter Pick
Muneeb Ali
How do blockchains die?

They either break at consensus-level (e.g., deep reorgs) or market cap goes to zero (tech works but no one cares).
What We Are Reading / Listening To
Overnight Performance of Top 10 Currencies
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