It is really frustrating when cryptocurrencies fall prey to very plain frauds. This was just the scenario for Coinbase to delist Ethereum Classic(ETC) after the digital coin was spent twice, according to a blog shared by Coinbase on 07 January.
Coinbase substantiated on the issue quoting that it had identified around 88,500 ETC being double spent to 460,000 U.S. dollars. The much talked about security of the blockchain had been attacked with almost 100 blocks being ‘reorganized’.
Mark Nesbitt, a security engineer at Coinbase, further continued in his blog that this form of security lapse is called a 51 percent attack. The modus operandi of this attack involves monopolizing more than half of the computing power of ETC blockchain and setting up an alternative blockchain.
Regarding @coinbase account of recent events: they allegedly detected double spends but unfortunately did not connect with ETC personnel regarding the attack.
This is still very much an ongoing process. https://t.co/in1OGdV8T9
— Ethereum Classic (@eth_classic) January 7, 2019
ETC further tweeted that the flood of hashrate (rate of producing a hash, used in mining) may be originating from the new mining machines being tested by Linzhi, an Ethereum mining hardware company. Linzhi, however, squarely dismissed this remark as baseless and recommended to focus on the problem.
SlowMist, a China-based security firm, first struck the alarm bells by alerting users of a fishy activity on the network. While tweeting, SlowMist tried to reassure users by hoping to find the cause of the compromise. SlowMist was, however, hesitant to provide an official comment.
There was some difference of opinion when Ethereum Classic development advisor Cody Burns said that this incident cannot be called 51 percent attack, rather ‘a selfish mining attack’. He added on Twitter that a malicious user would have discovered ETC nodes and engulfed them.
Burns further suggested that irrespective of the source of the problem, companies should now work on contingency measures to protect the interest of its users who use ETC. For any Ethereum based blockchain project, the number of confirmation blocks should be more than 400, he added.
As a fallout of this incident, technically called deep reorganization, the popular cryptocurrency exchange Kraken said in an official post that it would be taking measures by increasing the number of confirmations required to make ETC deposits.
Another exchange, Poloniex, took to social media to announce that it would be disabling ETC wallets. They made it clear that there would be no fixed date when this facility would be re-enabled.
This frivolous issue marks a deep loophole in the infrastructure of cryptocurrencies and blockchain. There is no doubt that the technology is complex and has to evolve organically, but unless petty issues are not resolved, the outreach may not be effective.