Ethereum Classic Risks Permanent Damage After Alleged 51% Attack
Ethereum Classic (ETC) began to unravel Tuesday after Coinbase identified at dozen or more attacks on the network, which allowed the perpetrators to double spend at least $1.1 million worth of ETC. The malicious party has apparently launched a 51% attack on the network, which allows users to falsify transactions and spend the same holdings twice.
ETC Begins Long Descent
Ethereum Classic has fluctuated wildly in the last 36 hours, falling from a high of $5.34 on Monday to a low of $4.86 on Tuesday. After rebounding to $5.12, the ETC price has since fallen back to $4.94, according to CoinMarketCap. That represents a 24-hour decline of 4.9%. It’s also a 10% drop from Sunday’s swing high.
The decline has pushed Ethereum Classic down to 18th spot in terms of market capitalization. At the time of writing, the protocol was valued at $531 million.
Trading volumes have nearly doubled in the last week, reaching a high of $180 million. Despite all the news surrounding Coinbase, OKEx and EXX were the largest spot markets for ETC trades. Each platform processed more than 15% of daily transactions, based on latest available information.
Cryptocurrency exchange Coinbase announced Tuesday it had suspended trading in Ethereum Classic after it identified at least 12 attacks on the blockchain network. Coinbase initially detected eight chain reorganizations where double-spending had occurred. The total amount affected was 88,500 ETC, or roughly $437,000 at current prices. The San Francisco-based exchange later said there were 12 additional reorganizations valued at 219,500 ETC ($1.08 million). It’s not entirely clear whether the reorganizations totaled 12 or 20.
In any case, the perpetrators were able to gain control of more than 50% of Ethereum Classic’s network – a so-called 51% attack. This allows them to falsify transactions (i.e. spend the same holdings more than once) and carry out any decision that requires a consensus. As one might expect, a 51% attack is a potential deathblow to any public blockchain. For more on this story, read: State of Emergency.
Smaller cryptocurrencies are most vulnerable to 51% attacks because controlling more than half of the network isn’t as costly as some of the larger blockchains like bitcoin. Case in point: Litecoin Cash and Zencoin both suffered 51% attacks in 2018.
After maintaining a fairly low profile, Ethereum Classic surged into the spotlight last summer after Coinbase announced it would support the cryptocurrency on its platform. The announcement came as a surprise to many people who were expecting Coinbase to select a more highly touted project. At the time, ETC was the 11th largest cryptocurrency by market cap.
Additional information: Coinbase Cites Regulation for Its Surprise Ethereum Classic Listing; ETC Volumes More Than Double.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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