Ethereum Classic 51% Attack: The Reality of Proof-of-Work

Just two weeks after the start of the new year, the crypto community is grappling with the reality of an alleged “51 percent attack” on the Ethereum Classic (ETC) blockchain.

Although there is still no clear idea who is responsible for tampering with the ETC blockchain by controlling most of the CPU power in the mining pool, the circumstances raise some important questions regarding security and safety. Power of Proof of Work (PoW) algorithms.

It is worth taking a look at the chain of events that led to the confirmation that ETC had been the target of a blockchain shakeup.

January 7, they alerted ETC developers of a possible network attack by Chinese security company SlowMist, which was relayed to the wider community via Twitter.

A tweet from ETC’s Twitter handle, which has since been deleted, speculated that testing new 1,400 / Mh ethanol machines by application-specific integrated circuit (ASIC) maker Linzhi could have been a potential cause.

ETC developers said the attack was “most likely selfish mining”, noting that they had not detected any double spending at the time.

Following this, the US wallet and cryptocurrency exchange service Coinbase also spotted what described as a 51 percent attack. The company then discontinued all ETC transactions.

Coinbase had identified a “deep chain reorganization” of the ETC blockchain that included a double spend on Saturday January 5, and by the night of January 7 the company had inventory multiple double spend on the network:

“At the time of writing this report, we have identified a total of 15 reorganizations, 12 of which contained double expenses, for a total of 219,500 FTE (~ $ 1.1 million).”

The Coinbase team appears to have carried out a thorough analysis of the blockchain and provided specific cases of reorganization of it.

Crypto exchanges Coincheck Y BitFlyer followed suit, announcing the suspension of ETC transactions on their platforms.

On January 9, SlowMist posted a Detailed report about the 51 percent attack, corroborating the same chain reshuffles published by Coinbase, as well as other transactions targeting the Binance and Bitrue wallets. Bitrue too confirmed the attack on Twitter.

SlowMist also believes that a concerted effort by all the exchanges involved could help identify the perpetrator:

“Through our intelligence analysis, the identity of the attacker can finally be located if the relevant exchanges are willing to help.”

Crypto exchange also confirmed that it had captured at least seven double-spend transactions after conducting its own. investigation about the attack. Users of the exchange were guaranteed reimbursement for losses incurred.

Unpacking the blockchain shakeup

The notion of a 51 percent attack is not new, and there have been examples of it over the years, even popularized by the Hollywood comedy Silicon Valley.

An attack on a blockchain that uses a PoW algorithm for consensus is possible if the attackers have more than 50 percent control of the network’s hash rate.

If this is the case, the power of the controlling CPU will allow an attacker to create a chain separate from any previous blocks on the blockchain. Since you have most of the computing power, your new chain will eventually outperform the chain accepted by the network, thus defining a new transaction history.

In this new chain, attackers can spend twice as much virtual money, which means that funds that have already been spent on the network chain could be spent again on the attackers chain.

What Emin Gun Sirer, a developer and professor at Cornell University, told Cointelegraph, a 51 percent attack is bad, but it doesn’t give attackers omnipotent power:

“Miners at 51 percent or more have many powers, but they do not have the ability to change the actual rules of the system, nor can they usurp funds. They can rewrite the existing blockchain in a limited way: they can’t introduce transactions that don’t already exist, they can skip any transaction they want, and they certainly can’t change any of the existing rules. “

The reality of consensus

Proof-of-work consensus requires a network of miners to process transactions. This is clearly stated in Satoshi Nakamoto’s official Bitcoin document, which also makes it clear that more than half of the network must be so-called “honest workers:

“If most of the CPU power is controlled by honest nodes, the honest chain will grow faster and outperform any competing chain.”

Therefore, the vulnerability is inherently embedded in the PdT consensus algorithms, as the network assumes that the mining nodes are honestly validating the transactions. The evolution of mining has seen the rise and dominance of ASIC chips, as well as the accumulation of hashing power by massive groups of mining pool groups, who then share in the rewards of their combined work.

These large pools pose a potential threat to any cryptocurrency that uses PoW algorithms, as a concerted effort to pool resources that combine the hash rate of more than 50 percent of the total network puts them in control. In this case, the network is centralized like a bank.

Following the ETC attack, Litecoin (LTC) founder Charlie Lee said that this vulnerability is a necessary point of weakness for a fully decentralized cryptocurrency:

“By definition, a decentralized cryptocurrency must be susceptible to 51% attacks either by hashrate, stake, and / or other resources acquired without permission. If a crypto cannot be attacked by 51%, it is authorized and centralized. “

Gun Sirer was much less positive in a thread of posts on Twitter, noting that the immutability of the blockchain was completely compromised:

“A deep rewrite is a rewrite of the blockchain, a rewrite of history. As such, it marks a total failure of immutability. Since immutability is ETC’s main claim, technically it is a catastrophic failure. Let’s see what the exchanges will do in response. “

Ethereum Proof of Work Changes

While the ETC blockchain is facing this most recent debacle, Ethereum’s core developers (ETH) reached a tentative consensus to implement a new PoW algorithm on January 4.

The goal of this measure is to address the apparent efficiency divide between ASICs and GPU mining on the Ethereum network.

ASIC mining has been developed to efficiently mine cryptocurrencies using specific algorithms. Ethereum was originally designed to be ASIC-resistant, although ASIC chips were eventually developed that were capable of executing the ethash algorithm.

However, changes have been looming on the Ethereum horizon for some time. Lead developers are expected to make a more detailed call on the “ProgPoW” implementation on January 18.

All of this is in line with the ultimate goal of fully transitioning to a proof of acceptance (PoS) consensus system. The first major step towards this eventuality is the Constantinople hard fork, which is also expected to take place this month.

The hard fork will also include other Ethereum Enhancement Proposals (EIPs) to streamline the transition from PoW to PoS.

As Ethereum moves forward, ETC developers will think about their next move. Smaller cryptocurrencies that use PoW algorithms are at higher risk of these types of attacks, but this does not mean that they will be attacked.

Donald McIntyre, a member of the ETC development team, wrote a short post en Medium, talking about the attack and possible ways forward for ETC.

“My personal opinion is that what happened is a significant setback, but I think ETC still has a unique position as a full PoW + Turing network with an active community with strong principles. The question is whether a recovery in the medium or long term is plausible or whether the network, unless it grows significantly, is perpetually vulnerable and therefore unusable. “

Once the CFE development team and the community have taken stock of the damages, the way forward can begin to be considered. Whether this includes a change in the consensus method remains to be seen.

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Ethereum Classic 51% Attack: The Reality of Proof-of-Work

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