Earlier this week BitcoinExhangeGuide reported a story about the 18th largest cryptocurrency, Ethereum Classic appeared to have become the latest blockchain network to succumb to a 51 percent attack, wherein a malicious miner accrues a majority of the network hashpower and uses it to rewrite recent blockchain data.
Coinbase announced that it had identified multiple instances where the attacker exploited that majority hashrate to execute double spend attacks, which are generally directed against cryptocurrency exchanges. The engineers of Coinbase later reported that the attackers had successfully executed “repeated deep reorganizations of the Ethereum Classic blockchain, most of which contained double spends.” Altogether, the firm said, “value of the double spends that we have observed thus far is 219,500 ETC.
Funds safe at Grayscale Investment
In the wake of the attack Grayscale Investments who also created the Ethereum Classic Investment Trust (ETCG), sent an email to its investors explaining the details of the attack. The email read:
“The greatest risk this poses is to the integrity of the Ethereum Classic Network, as people may be less inclined to accept ETC given the increased double-spend risk. However, the coins within the ETC Trust are not at direct risk of theft or double-spending.”
At the end of 2018, the trust had confirmed that they have about $25 million under their management. It was launched in 2017 as a private placement. Currently only verified investors can buy its shares from Grayscale and are contractually bound to hold it for at least a year.
The email further explained the attack by saying:
“Double spending can only be done by the original sender of the coins — so an attacker can only double spend his own coins, not someone else’s. So, the main risk of 51 percent attacks and blockchain reorgs is with people [who] accept the blockchain’s asset; and mostly when they do so in large amounts in exchange for virtual goods or services that are non-reversible.”
The managing director of Grayscale, Michael Sonnenshein, had earlier said:
“As often occurs following developments in the digital asset ecosystem, Grayscale received inquiries from a few investors about the recent 51 percent attack on the ETC network. We provided investors who contacted us with publicly-available information explaining how these attacks occur. These types of network attacks and their implications are also described in the disclosure documents we provide all investors.”
It appears that Grayscale wants to distance themselves from the incident. Yaz Khoury of the Ethereum Classic Cooperative said: “other than provide financial help and advice to the Cooperative, they’re very hands-off in how we manage to help the ETC community and ecosystem.”