The bad days for cryptocurrencies simply keep getting worse day by day. The prices of all cryptocurrencies have taken a massive hit ever since they peaked in 2017. To make matters more worrying, there have been numerous attempts at hacking the cryptocurrency network. One such attack was on the Ethereum Classic network.
51% Ethereum Classic
On January 5th, 2019, a hacker forced a 51% attack on the Ethereum Classic network. Double spend transactions involving thousands of coins were being made in a very short time. A total of $11 million was stolen when this attack was executed.
With over 100 blocks rearranged, no one expected these funds to be returned. However, to everyone’s surprise, the hacker returned $100,000 worth of cryptocurrency. It is still unclear why the hacker decided to return the stolen funds. However, it is a silver lining in the awful turn of events.
The 51% attack on the Ethereum Classic network was possible due to the decrease in popularity of Ethereum Classic and cryptocurrency in general. When the demand for cryptocurrencies was high, the number of people mining these digital assets were also very high. However, as the prices stumbled, the profitability of mining such coins decreased. This led to the miners shifting to other cryptocurrencies or to them shutting down their mining rigs until the prices recovered.
The hash power of the Ethereum Classic
As a consequence, the total hash power of the Ethereum Classic network decreased to a very low number. The hash power of the Ethereum Classic network was so low that anyone could buy mining power worth $5,000 and launch a 51% attack on the Ethereum Classic network. As this low hash rate was ignored by the exchanges and the developers, the hacker took advantage of it and launched an attack.
After the attack on the Ethereum Classic network, the hacker ended up returning $100,000 worth of cryptocurrency. This might be an indicator that the hacking was the work of a white hat hacker. The hacker might have executed this attack to show the whole world how vulnerable the cryptocurrency network is right now.
Coinbase was able to identify 12 out of the 15 double spend attacks and was able to suspend any further Ethereum Classic transactions r to protect the funds of its users. In order to temporarily fend off another 51% attack on the ETC blockchain, Gate.io has increased the confirmations required to 4,000 block confirmations. Slomist has also recommended the exchanges and the mining pool operators to increase the block time in order to reduce the chances of a successive attack on the network.
However, if the attacker is able to gain 50% of the hash power and launch an attack then increasing the block time will only delay the inevitable doom for the Ethereum Classic blockchain.
This attack on the Ethereum Classic network might just be a wake-up call for all the developers and miners to show them the consequences of reducing the hash power. This attack was, in itself, very devastating; but if this were carried out on more popular networks such as Bitcoin, then the result would have been even worse.
The problem with the decreasing hash power of most crypto networks needs to be addressed soon, or we will see many more 51% attacks on other cryptocurrencies as well.