Coinbase, Bitfly Say Reorganizations Detected on Ethereum Classic's Blockchain; ETC Devs Deny Claim

According to an announcement made by cryptocurrency company Coinbase, on Jan. 5 it detected a deep chain reorganization on the Ethereum Classic (ETC) blockchain, including a double spend.

"In order to protect customer funds, we immediately paused movement of these funds on the ETC blockchain," the company wrote in a Jan. 7 blog post announcing what it had discovered. "Subsequent to this event, we detected 8 additional reorganizations that included double spends, totaling 88,500 ETC (~$460,000)."

The company describes the ETC blockchain as being "51 percent attacked."

However, ETC developers tweeted at 11:32 am on Jan 7 that they they did not agree that the network was under attack and that it did not spot any reorganizations. They wrote:

Regarding the recent mining events. We may have an idea of where the hashrate came from. ASIC manufacturer Linzhi confirmed testing of new 1,400/Mh ethash machines #projectLavaSnow - Most likely selfish mining (Not 51% attack) - Double spends not detected (Miner dumped bocks)

At 1:44 they made a follow-up tweet:

To be clear we are making no attempt to hide or downplay recent events. Facts are facts and as the situation develops we'll soon get a full picture of what actually took place. Linzhi is testing ASICS. Coinbase reported double spends; both may be true. In time we will see.

Coinbase not directly addressed the posts from the ETC developers. Bitfly's tweeted this morning confirming Coinbase's findings of multiple reorganizations and a 51 percent attack, and several researchers and others in the community are posting logs of the reorganizations and other data.

As to how the integrity of the ETC blockchain could became vulnerable, in its blogpost Coinbase pointed to this whitepaper as background and explained that without the "honesty" level of core miners reaching 51 percent, there is no way to guarantee the security of any blockchain-based cryptocurrencies using proof-of-work architecture.

The authors wrote in part:

Failure to meet this [honesty]requirement breaks several core guarantees of the Bitcoin protocol, including the irreversibility of transactions. Many other cryptocurrencies, such as Ethereum Classic, have also adopted proof-of-work mining.

... If a single miner has more resources than the entirety of the rest of the network, this miner could pick an arbitrary previous block from which to extend an alternative block history, eventually outpacing the block history produced by the rest of the network and defining a new canonical transaction history.

....This, on its own, might end up being nothing more than a minor inconvenience. After all, the transactions all still exist, but they might have been put into a different order, perhaps delaying some of them. However, imagine a miner who also owns a large number of coins. The miner could send those coins to a merchant in a transaction, T, while also secretly extending an alternative block history. The miner's secret blocks do not include T, but rather include a transaction that sends the same coins used in T to a different address. Call that transaction T'. When the miner reveals this secret history, it will contain T', not T. Because T and T' attempted to send the same coins and T' is now in the canonical history, this means that T is forever invalid, and the recipient of the coins sent in transaction T never even received them in the new, now-canonical history. More info on this can be found here.

Current status for the ETC with coinbase can be found here. As of this writing, the currency sends and receives were still disabled.

About the Author

Becky Nagel is the former editorial director and director of Web for 1105 Media's Converge 360 group, and she now serves as vice president of AI for company, specializing in developing media, events and training for companies around AI and generative AI technology. She's the author of "ChatGPT Prompt 101 Guide for Business Users" and other popular AI resources with a real-world business perspective. She regularly speaks, writes and develops content around AI, generative AI and other business tech. Find her on X/Twitter @beckynagel.

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