Recent news of a successful 51-percent attack on the Ethereum Classic (ETC) blockchain at the beginning of the year was a major struggle for the platform. However, the hacker, who was able to complete the attack, has since returned the stolen $100K USD to gate.io.
The news broke in a positive light, with some reports calling the attacker a ‘white hat’ — a common term for a well-meaning digital hacker who uses his or her abilities to showcase weaknesses in various digital platforms.
However, others were not so convinced.
The attack resulted in a decline in the value of ETC. By shorting the coin, the attackers would have been able to make money because of the loss, and then return the stolen coins without being caught. This simple procedure would allow them to evade investigators while still profiting from the action.
A 51-percent attack requires that a single miner (or pool of miners) have more than half of the total hash power of a blockchain platform, giving them a centralized control of that chain. At that point, transactions could be reversed, allowing for substantial double spending — spending coins on the chain twice and effectively stealing them.
The reality of this risk was already considered by Satoshi Nakamoto in his Bitcoin whitepaper, now a decade old. The Bitcoin founder made it clear that at least half of all miners would have to be honest. If not, the distributed nature of the ledger would end, creating a centralized and, therefore, controllable transaction chain.
Some have theorized that the attack was carried out not by white hats but by devotees of Ethereum (ETH), who want to see a shift away from Proof of Work (PoW) to Proof of Stake (PoS) — which would not have a 51-percent vulnerability.
Because ETC is the drastically smaller chain when compared to ETH, the Ethereum Classic blockchain could be hacked in this way. However, garnering enough hash power to carry out a similar attack on Bitcoin or Ethereum would be cost prohibitive in the extreme.
Forward thinking take away
Most exchanges, after the attack, have set up new detection mechanisms on the smaller chain in order to be certain that such an attack does not occur again.
Whether the attackers were white hat or not, the potential for this risk remains great. The lesson to be learned is not simply that ETC is vulnerable, nor that PoS is the better route. In fact, PoS carries its own massive risk factors. Rather, just like with bank robberies, embezzlement, and inflation in the fiat world, blockchain devotees must realize the money is always at risk.
When it comes to money, there’s usually someone smart enough to find a way to steal it.
Think the ETC attackers were ‘white hats?’ Was this an elaborate scam to short the coin or prove that PoS is the way forward? Let us know your thoughts in the comments below!