Ethereum Classic (ETC), which only has about 3% of the total hashpower (computing resources securing blockchain networks) that’s currently being used to secure the much larger and arguably more secure Ethereum (ETH) network, recently experienced another serious 51% attack.
These types of attacks can occur when a single entity on a blockchain or distributed ledger tech (DLT) based network manages to secure the majority (51% or more) of the hashpower on the platform. This is a lot easier to do when the network is relatively small, like Ethereum Classic, because you don’t need to use nearly as many computing resources – which are required to target much larger blockchains like Bitcoin (BTC), but many experts argue that this is practically not feasible.
On August 29, 2020, the ETC chain (which is the original Ethereum blockchain that chose not to roll back transactions following the DAO attack because its supporters believe in preserving the immutability of blockchains) suffered yet another major 51% attack.
This most recent attack led to the reorganization (chain “reorg”) of more than 7,000 blocks, which is roughly the equivalent of two days of mining on the ETC blockchain. This is notably the third time in only around a month that the Ethereum Classic blockchain has experienced a 51% attack. In previous attacks, crypto exchange OKEx suffered from a loss of $5.6 million due to transactions involving double-spending (where the hacker spends the same set of funds or coins on more than one occasion).
A statement describing the most recent attack noted that “all lost blocks will be removed from the immature balance and we will check all payouts for dropped transactions.”
Ethereum Classic’s developers noted:
“ETC is ~3% of the overall ETH network hash rate. We are well aware of potential repeated attacks while solutions such as ‘reorg caps’ and the subsequent ECIPs are being tested and evaluated. If you haven’t already please increase (which most have) … confs above ~10K.”
Meanwhile, ETC Cooperative, a tax-exempt USA public charity with 501(c)(3) status that aims to support the ongoing development of Ethereum Classic, noted that InputOutputHK, a blockchain-enabled software firm, presented two proposals:
“‘Checkpointing’ which would prevent 51% attacks as well as a treasury system that would provide ETC with long term, reliable, decentralized, and sustainable funding for developers, and ecosystem participants alike.”
The ETC community has not come to a widespread agreement regarding how to proceed further with the DLT-based platform’s development.
However, it now seems that Cardano founder (and also Ethereum co-founder) Charles Hoskinson’s recommendations about establishing a treasury and other suggestions are being seriously considered.
Terry Culver, CEO at Ethereum Classic Labs and ETC Core, shared an ETC Network Security Plan. He noted that it outlines immediate actions that the organization is now taking, in order to prevent more attacks. There will be changes made to Ethereum Classic’s development roadmap during the next six months, Culver said.
It’s possible that some exchanges might consider delisting Ethereum Classic. OKEx had already confirmed that it was thinking about delisting ETC, after the first two 51% attacks.
It’s worth noting that Ethereum Classic is not the only cryptocurrency network that has suffered from serious network attacks. Verge (XVG), a privacy-oriented digital currency, experienced multiple 51% attacks back in 2018. Bitcoin Gold (BTG), one of the relatively more stable Bitcoin (BTC) forks, has also suffered from several 51% attacks. These incidents indicate that small cryptocurrency networks may not survive in the long-term because they are more far more susceptible to damaging attacks by malicious entities.
Donald McIntyre, a former VP at Morgan Stanley and also the former business development manager at ETCDEV, had argued that ETC has an “incredibly unique market positioning.” During an interview in late 2018, McIntyre had pointed out that Ehereum Classic is the only major fully proof of work (PoW) and Turing Complete blockchain platform.
He had claimed that ETC has the “same security philosphy” as Bitcoin (BTC). While it’s true that they have same “philosphy” because they both use PoW type consensus, BTC is a much larger network with many more validators working hard to secure the Bitcoin blockchain.
Meanwhile, ETC is a very small chain and even if it runs a PoW algorithm, it can and has been targeted multiple times – which has led to many 51% attacks. Major changes are needed to ensure that the ETC chain survives.