Ethereum Classic has always had a somewhat tenuous reason for existing. The smart contract blockchain emerged in 2016, when Ethereum’s leaders hard forked that blockchain to reverse transactions involved in the hack of the DAO crypto-venture fund. The team behind Ethereum Classic took over the pre-fork chain, driven by the idea that the DAO rollback undermined Ethereum’s immutability—the irreversibility of transactions that many consider essential to placing trust in a decentralized blockchain system.
Now, there are widespread reports that Ethereum Classic is under an ongoing 51 percent attack, effectively a takeover that allows hostile actors to re-write the chain’s transaction history. As of Monday night, Coinbase detected at least $1.1 million worth of double-spends: payments effectively written out of history, amounting to theft from their recipients.
That’s not much compared to the roughly $55 million stolen in the DAO hack (ETH that would now be worth roughly $7.5 billion). But it’s a potentially crushing blow for the already-troubled Ethereum Classic project, precisely because it undermines the immutability and trust that the Classic community has made the core of its ethos. At this point, there’s no particular reason to be confident that ETC in your wallet will still be there tomorrow.
Related: What Is a 51% Attack?
Any 51 percent attack on a proof-of-work-based blockchain is made possible because a bad actor (or coordinated group) has more computing power than the “honest” miners maintaining a chain. The decline of crypto-token prices in 2018 has made that easier, since honest miners have less economic incentive to keep their machines going. Though difficulty adjustment is intended to help keep mining incentives aligned, a declining hashrate still lowers the amount of computing resources needed for a hostile takeover. ETC’s hashrate has dropped by nearly half since September of last year.
Ethereum’s hashrate has also dropped, but less dramatically, and now stands at roughly 22 times ETC’s. That is itself a major problem for Classic: Because ETC uses the same mining algorithm as Ethereum, attackers can temporarily rent existing Ethereum mining equipment, making it much easier to mount a takeover attack than if attackers had to buy equipment specific to the ETC chain. The cloud mining service NiceHash has been increasingly cited as a factor in that sort of attack, to the point that the site Crypto51 treats the degree to which a chain is “NiceHash-able” as one measure of its overall vulnerability to 51 percent attack. It’s not yet clear if NiceHash or other cloud mining played a role in the Ethereum Classic attack, but it seems highly likely.
There’s currently major speculation about whether this attack spells the end of Ethereum Classic, once one of the most valuable blockchains. It follows, according to ETC developer Igor Artamonov, a battle with shades of corporate espionage that worsened the financial problems of a major ETC developer group, ETCDEV, and contributed to its shutdown in December. That event itself was sadly ironic, insofar as it was described as a “social attack”—in other words, something no amount of immutable code was able to prevent.
As bad as all this is, it’s not necessarily the end of the road for ETC. The ETC community extends well beyond ETCDEV, and as we’ve seen with Ethereum itself, blockchains can recover from major, trust-eroding mishaps. But to do so convincingly, as ETC supporter Donald McIntyre argues, remaining devs will have to marshal the resources to create a new mining algorithm that will make it less vulnerable to NiceHash-style attacks using Ethereum equipment. Only then, it seems, will they be able to claim that Ethereum Classic is truly immutable.