As the debate around the digital assets and their potential to be the future of currency is continuing unabated, criminals are finding indigenous ways to loot these virtual assets and showcase how vulnerable they are to attacks. Hackers have reportedly robbed $1 Million worth of the Ethereum Classic digital currency by carrying out a computer-intensive hack which involved re-writing the blockchain. The attack was launched on Coinbase, crypto exchange with hackers getting away with around 88,500 ETC in the first report which was later confirmed to around 219,500 ETC.
Coinbase found out that a ‘deep chain organization’ of Ethereum Classic Blockchain was re-writing transaction history. The heist is being referred to as a 51% attack which suggests that anyone who controls more than half of the CPU power required for mining has the ability to re-write the transaction history, allowing the hackers to reorganize the Ethereum Classic blockchain. Then, they were able to recover previously spent coins and transfer them to a new entity chosen by these attackers. Essentially, stealing the rightful owners of their earnings. This is what is called ‘double spending’ making the earlier transaction void.
“We observed repeated deep reorganizations of the Ethereum Classic blockchain, most of which contained double spends. The total value of the double spends that we have observed thus far is 88,500 ETC (~$460,000),” wrote Mark Nesbitt, Coinbase security engineer, in a blog post. Nesbitt later updated that the total number of organization detected was twelve.
If a majority of CPU power is controlled by honest nodes, the honest chain will grow the fastest and outpace any competing chains, writes Nesbitt. But if more than half of the miners are not of the honest kinds, it puts everyone involved at a security risk. This breaks the core guarantees of the Bitcoin protocol, including the irreversibility of transactions. Bitcoin creator Satoshi Nakamoto had warned of this particular limitation in his white paper while introducing Bitcoins.
Coinbase has temporarily halted the deposits and withdrawals of Ethereum Classic funds to prevent further double spends from affecting its users. Japanese exchange Coincheck, as well as the Kraken exchange, have also halted ETC transactions. Nesbitt assures that the Coinbase team is currently evaluating the safety of re-enabling sends and receives of Ethereum Classic. They shall communicate to their customers what to expect regarding support for ETC.