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.