Things to Learn from 51% Attacks on Ethereum Classic

Ethereum Classic has become far more vulnerable due to 51% attack and suffered significant losses.
Ethereum Classic

Cryptocurrency community shocked after 51% attack against Ethereum Classic. Shutterstock images

On January 7, Ethereum Classic was dealt a devastating blow, falling victim to a 51% attack that resulted in losses exceeding $1 million.

But it cost much more than that. The concentrated hash attack shook the trust of investors and even forced major exchanges to indefinitely halt trading, with some suggesting the possibility of a permanent ETC delisting[1] from exchanges such as Coinbase.

This will, no doubt, cause the currency’s value and utility to crater in the near future.

It’s a pretty fundamental problem for any network that does not have the mammoth hashing security of dominant chains like Bitcoin and Ethereum.

While these blockchains resist such attacks due to the massive demands on computational power and electricity that would be necessary to overcome them, smaller networks like Ethereum Classic are far more vulnerable.

In fact, in some ways, it’s surprising that more networks haven’t been successfully attacked, considering the relative ease of doing so.

Over the past year, a number of Proof-of-Work networks like Ethereum Classic have been successfully attacked due mostly to the low hashing power that would be required to reorganize blocks and thereby enable double-spending.

To find out insider news, before-the-public, I advise you to bookmark www.blockchainwhispers.com

Bitcoin Gold, Verge, Vertcoin, ZenCash, Aurum, and Litecoin Cash[2], among others, have suffered significant losses, sometimes in the millions of dollars, due to the fragility of their consensus-driven networks.

It’s a problem that is being addressed proactively by some, but neglected by others. While some Proof-of-Work projects are coasting along, blindly crossing their fingers and hoping this doesn’t happen to them, others are looking at different solutions to the problem.

What are some potential solutions to the vulnerabilities of smaller Proof-of-Work networks that want to maintain the advantages of PoW security? Let’s examine a few:

First and foremost; hashing power is the key for blockchain technologies of this nature. Bitcoin demands absolutely massive hashing power compared to all other Proof-of-Work networks,
dwarfing competitors such as Bitcoin Cash and Litecoin.

NiceHash

Services like NiceHash connects sellers of hashing power with buyers of hashing power. Shutterstock Images

Whereas it would cost hundreds of thousands of dollars in electricity to launch a successful 51% attack against Bitcoin, many altcoin networks could be attacked with a simple rental of hashing power via services like NiceHash, costing only a few thousand dollars, or even less in some cases.

So for any network other than Bitcoin, Proof-of-Work is seriously flawed, if not modified in one way or another.

While some networks have discarded Proof-of-Work altogether for different solutions such as Proof-of-Stake — Ethereum (ETH, not ETC) developers are planning to shift to this form of consensus in the future — or Delegated Proof-of-Stake (a form of PoS used by EOS that requires blocks of stakeholders to vote for development and consensus), many are sticking to Proof-of-Work due to its advantages in terms of greater decentralization and the fact that anyone can participate in PoW mining, rather than merely enriching those who already have large stakes in the network.

To find out insider news, before-the-public, I advise you to bookmark www.blockchainwhispers.com

The proactive projects aren’t just hoping beyond hope that things work out, however, developing clever solutions to make PoW a secure form of consensus for networks with much less theoretical hashing power.

Other solutions besides brute hashing power, then, are necessary:

Ravencoin[3], for example, is a successful PoW network that uses a multi-algorithm system to thwart would-be 51% attackers.

The network alternates between the algorithms used to mine the coins between a selection of 16, thus making an attack considerably more difficult, although not impossible. By rotating unpredictably through various algorithms, other less robust networks become more attractive targets, requiring less resources and effort in comparison.

DigiByte[4] takes this concept a few steps further by not only using multi-algorithm mining, but adding in real-time difficulty adjustment that promptly reacts to spikes and drops in hashing power.

The DigiByte network also splits the job of PoW mining between five different algorithms. This way, if an attacker manages to gather enough hashing power to defeat one algorithm, other algorithms must also be overcome in order to exceed 51% control, making the task considerably more daunting.

security

Komodo ecosystem to be secured indirectly via Bitcoin’s hashing power. komodoplatform.com

Komodo[5] has an interesting take on the PoW system. Recognizing Bitcoin as the predominant PoW network, Komodo essentially recycles Bitcoin’s hashing power, using it to backup the entire Komodo network, enabling all protocols living in the Komodo ecosystem to be secured indirectly via the Bitcoin network.

Komodo uses a system called notarization to check the most recent backup of all transactions, stored on the Bitcoin protocol, to secure its own network.
This, of course, is highly efficient, as virtually all the computational and energy requirements are served by the vast Bitcoin network’s superior hashing power.

Vertcoin[6] recently fell victim to a 51% attack, which led to a revision of the network’s PoW algorithm, hard-forking from LyraRev2 on to LyraRev3.

This, in and of itself does not solve the 51% attack vulnerability in the longer term, although it does increase memory demands, making it more difficult to do so. Vertcoin developers are working toward implementing Verthash with the goal being to stop Nicehash rentals and ASICs from being an attractive attack vector.

Read Next: 2018 was a Year of Huge Losses to Cryptocurrency Heists

Most details of Verthash are still tightly guarded, so it may be some time before seeing this implementation in the wild.

Of course, these are just a few examples, but for the networks that wish to retain Proof-of-Work characteristics, it is these kinds of innovations that might just keep projects far enough ahead of the curve to stave off crippling attacks.

In the meantime, for complacent projects that naively sit back and hope to not be attacked, failure and subsequent destruction could just be a matter of time.

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Disclaimer

The writer’s views are expressed as a personal opinion and are for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

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Written by Reviewed by Coin Review Team
Published: Jan 16, 2019
Last Updated: Jan 15, 2019

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