Tuesday, January 8, 2019

Coinbase Suspends Movement of Ethereum: Potential attack on the digital coin’s underlying technology detected

Cryptocurrency exchange Coinbase says it has suspended movement of the cryptocurrency, ethereum classic, after it detected a potential attack on the digital coin's underlying technology.

This is extremely significant.

CNBC explains  (my bold):
The exchange and wallet firm, Coinbase, said it had detected a so-called "chain reorganization" in which nearly $500,000 worth of ethereum classic was spent twice — an anomaly that is extremely rare for cryptocurrencies, but represents one of the biggest threats to the technology's success.

It could have been the result of what is known as a 51 percent attack, exposing a potential flaw in the cryptocurrency's underlying technology known as the blockchain.
In essence, Coinbase is saying that a malicious party may have been able to wrest control of more than 50 percent of ethereum classic's network, and therefore was able to dominate decisions about what did and didn't belong on the digital coin's blockchain — the digital ledger that depends on a widely distributed consensus of users to record the asset's history.
In theory, the records on a blockchain cannot be altered because enough disparate parties are incentivized to maintain an accurate accounting of who owns what. But a 51 percent attack can change that calculus, allowing someone to falsify transactions and spend the same holding more than once, fundamentally damaging the usefulness of a digital payment system — and people's trust in it.
Proponents of blockchain technology often talk up the security of the network, but a 51 percent attack is one of the flaws. They are currently quite rare but have occurred in some instances, particularly with smaller cryptocurrencies. Last year, litecoin cash and zencash both suffered 51 percent attacks. The size of a cryptocurrency's network is thought to therefore be a defense: it becomes prohibitively expensive to take over more than half of a gigantic distributed system.

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