Updated: Jun 18, 2019
In this article, we discuss some basics about malicious activities any blockchain industry stakeholder must be aware of.
Double spending - the 51% attack
A 51% attack occurred on Ethereum Classic in early January. It was spotted by CoinBase and consisted of double spending coins to the value of $500k. This has been repeated than in the following days on several transactions.
It appears that Ethereum Classic is now the chain where the DAO hack is still considered eﬀective; this chain is particularly suitable for hackers to continue attacking with confidence, knowing that the community is not going to work to reverse the hack.
The takeaway is that small blockchains with a less hashing power are very vulnerable, as there is always someone who can have more computational power than everyone else. This is even truer because, as coins weaken, they become easier to attack—as, in a bear market, hashpower is turned oﬀ.
The vulnerability is not limited to double spending: once in control, an attacker can easily use the power to manipulate prices and build a short position. This is
known as the Goldfinger attack.
A recent case of cryptocurrency exchange being hacked is Cryptopia, based in Christchurch, New Zealand. The hack, which occurred on January 15th, involved a few million dollars. The interesting thing here is that the tokens concerned have been identified as having been transferred to Binance, which took the conservative step to freeze them. This incident sets a very interesting precedent.
Except for privacy-focused cryptocurrencies, it is evident that this safety measure can be deployed for all sorts of cryptocurrencies and is a feature that can be easily implementable in the legacy payment system.
Note that even if the thieves are not identified—and they may very well be, and easily—then the proceeds of the theft should be refused everywhere, thus destroying the profit from the theft, making it pointless.
Check the full version of Blockchain Quarterly (Q1 2019) report for more Insights.