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LINKS FOR ADDITIONAL READING FOR THIS VIDEO & ALL INFO IN TEXT DOWN BELOW
DAO attack explained: https://www.coindesk.com/understanding-dao-hack-journalists Understanding a Reorganization of a POW Blockchain: https://blog.coinbase.com/ethereum-classic-etc-is-currently-being-51-attacked-33be13ce32de
Cost per hour of 51% attacks: https://www.crypto51.app/?fbclid=IwAR2FOi6dCSasJws4t_9o0c53agPplbcOII4f_taU633r4ZMNdZQlgyQoKkM
Welcome to a new episode, today I want to address what’s been happening with Ethereum Classic and also bring to light what this event means for other cryptocurrency blockchains as well.
For those of you new to this space, or are unfamiliar with the origins of Ethereum Classic, here’s a brief breakdown.
Ethereum launched a DAO (which stands for Decentralized Autonomous Organization) as a way to facilitate decentralized, self-governance, in the Spring of 2016. Shortly after, a hacker took advantage of a bug in this code and was able to steal 3.6 million ether. The community was divided on how to address this problem. The decision was ultimately made to hard fork the code, roll back the blockchain and restore the stolen funds for those who lost lots of coins. Not everyone in the Ethereum community agreed with this decision and a group of devs and nodes continued the original blockchain. That blockchain is what we now call Ethereum Classic. It’s a bit ironic that the “original” chain is the one with the altered name, but that’s to be expected if you go against the Ethereum Foundation and their team.
Ok, getting back to today’s topic. Ethereum Classic has experienced what many are calling a 51% attack. This means that someone or a group of people were able to control the network by having enough computing power to comprise over 50% of the network. In the world of Proof of Work blockchains, the majority rules. In the case of Ethereum Classic in the past two days, they saw a private mining pool gain enough hash power to be able to rewrite their blockchain and double spend Ethereum Classic coins. More than 100 blocks of the Ethereum Classic blockchain have been “reorganized”, which explains how 88,500 ETC were able to be double spent. Ethereum Classic devs aren’t all on the same page with classifying this as a bonfide 51% attack, some believe it to be a “selfish mining attack”.
In reaction to this news, some exchanges have increased the block confirmations for ETC transactions to 400 or more. So you should expect long transaction times for Ethereum Classic for the foreseeable future. Others like Poloniex have disabled ETC wallets altogether for the time being.
The fact that this blockchain was in a position to be vulnerable to an attack like this emphasizes the importance of a large and decentralized network. The larger and more decentralized the network, the more difficult and expensive it is to have enough computing power to overrun it.
There is a company called Nicehash which gives people the ability to rent hash power for a number of different blockchains, for those wanting to mine without actually purchasing a mining rig. They also have a nice and scary tool that shows how much it would cost you to rent enough hash power to perform 51% attacks per hour on different blockchains using their service. By the looks of that web page there are a few other blockchains that aren’t exactly safe from 51% attacks. In regards to these types of attacks, there is room for the argument in favor of Proof of Stake consensus, but before I begin to digress, I’ll leave it to you all down in the comments to voice your opinions on that topic.