Let me preface this by stating my relative cryptocurrency ignorance. I am always learning new things about how this technology works and this is very interesting to me. Okay, let’s get started.
On the first Saturday of 2019 the Ethereum Classic (ETC) cryptocurrency was hit by the dreaded 51 percent attack. To control the ledger – accounting book that keeps track of all transactions, kind of the entire appeal of Blockchain tech is that the ledger is distributed across the entire network of computing power – you need to control 51 percent of the network. The attack was executed as a coin sale for cash and then the ledger was reworked so that the perpetrators made off with the cash and the coin to the tune of $1-million over 15 similar transactions.
Don’t panic about Bitcoin, though. ETC is a spinoff of the proper Ethereum (ETH) and these smaller coins are at a far bigger risk to these attacks because of the smaller network. Also, with the dramatic decline in coin price, the cost of mining is reduced because many people leave the market. That effect also generates a lot of spare mining capacity that can be rented on the cheap, this is actually what makes these brute force attacks possible.
While the knee-jerk reaction is always to panic and resort to the old ways, casting off blockchain technology as the eventual savior of our administrative tasks, it is better for us to learn the pitfalls of these systems and recalculate our approach. I’m sure that this latest attack will open the eyes of many enthusiastic investors (if there are any left after the value shedding in 2018) and wise them up to the dangers of smaller coins.
Bitcoin is almost immune to this specific problem as well as ETH, but smaller currencies were defrauded of around $20-million last year. There’s now a call for exchanges to stop listing these smaller, more vulnerable coins. Be careful out there and don’t take too many risks with small coins.
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