Ethereum Classic (ETC) Suspended on Coinbase after Reorg, Suspected 51% Attack
The asset, which was seen as promising, stable and liquid, underwent a reorg of the blockchain, with suspected double-spending attempts.
Coinbase, a major exchange service offering a relatively small selection of digital assets, has put Ethereum Classic (ETC) funds on lockdown. The reason is a reorganization of the blockchain registered on January 5, with several instances of double spending detected, as explained in an official blog post.
The attack managed to achieve double spending to the tune of $1.1 million, or 219,500 ETC in total. Compared to larger exchange hacks, the losses are relatively small, but events like this undermine the credibility of both the blockchain and the exchange services.
Following the news, ETC market prices dropped only slightly to $4.96. A significant reorganization is an alteration of the blockchain history - an event that impairs the immutability of a blockchain.
The Ethereum Classic team is attempting to control the situation while suggesting that exchanges and exchange services increase confirmation requirements.
The ETC network saw its hashrate drop in the past three months from 15 TH/s to around 9 TH/s. It uses the Ethash algorithm and was seen as an alternative for Ethereum miners once the network switched to staking and decreased block rewards.
It has turned out that Ethereum Classic is a network extremely vulnerable to attack, and the double spending happened with the help of hired hashrate. The cost of a one-hour attack for ETC is $4,370, according to 51attack data. In addition to the low cost, the Ethereum Classic network is 116% “nicehashable,” which means there is enough hashing power for hire. Supporting this scenario are notable spikes in Nicehash activity on the network, roughly coinciding with the time of the attack. The conditions are now the same for the network, meaning another attack is possible in theory.
Following the attack, Poloniex also disabled its ETC wallet, and now the entire exchange is in maintenance mode, giving technical difficulties as the reason.
The predictions for Ethereum Classic are rather grim. The coin has witnessed sluggish activity and has struggled with rumors of losing its value. The team may now be weighing a hard fork and a new mining algorithm. However, all networks are attackable in theory. ETC may yet see delistings, as was the case with Bitcoin Gold (BTG), where double spending losses reached $18 million, and the coin was abandoned by several exchanges.