Last month, one of the world’s largest crypto exchanges – Coinbase – was forced to temporarily suspend the trading of Ethereum Classic (ETC). As this is not the first time a blockchain network has been hacked, MIT’s Technology Review looks at the available options for hackers looking to attack the blockchain network.
In a statement on their official blog, Coinbase noted that it “detected a deep chain reorganization of the Ethereum Classic blockchain,” thus “in order to protect customer funds, we immediately paused interactions with the ETC blockchain.”
Note that the blog post was edited as the original version mentioned the ETC suffered the so-called 51% attack. It means that an attacker has gained more than half of the computing power of the network, which enables them to rewrite the transaction history.
About the same time Coinbase suffered an attack, Gate.io officially confirmed the network suffered a 51% attack, which proved to be successful.
“Gate.io detected 7 rollback transactions. Four of them were created by the attacker transferred 54,200 ETC in total.”
A couple of days later, Gate.io informed the public that the attacker returned around $100,000 of the stolen funds.
“On Jan.10, we found that the recent ETC 51% attacker returned 100k USD value of ETC back to Gate.io. We were trying to contact the attacker but we haven’t got any reply until now.”
There are a few available options for hackers looking to hack a blockchain network. The most famous one is definitely a 51% attack. As explained in the Technology Review article, “a miner who somehow gains control of a majority of the network’s mining power can defraud other users by sending them payments and then creating an alternative version of the blockchain in which the payments never happened.”
The new version of the blockchain is called a fork. The biggest problem with this type of attack is the price. According to certain estimates, it costs approximately $260,000 per hour to rent enough mining power to attack Bitcoin. The lower the value of a cryptocurrency, the higher the chance they may suffer an attack.
“Exchanges will ultimately need to be much more restrictive when selecting which cryptocurrencies to support,” said David Vorick, co-founder of Sia. He also added that the number of 51% attacks will increase in the future.
Other than the (in)famous 51% attack, the so-called “smart contract bugs” are also rising in popularity amongst hackers. In 2016, around $60 million were stolen by “exploiting an unforeseen flaw in a smart contract that governed the (Decentralized Autonomous Organization) (DAO) DAO.”
As the number of hack attacks targeting blockchain network increases, we are recording a rise in the number of startups established to address the blockchain hacking threat. Startups such as AnChain.ai or ChainSecurity work to identify suspicious activities early on. Whether they will be successful, remains to be seen.