Gate.io Exchange To Cover Almost $200k Worth of Stolen ETC, After 51% Attack

Cryptoasset exchange Gate.io will cover $184,000 worth of stolen Ethereum Classic (40,000 ETC tokens), after a reported 51% attack on the ETC blockchain occurred days ago, the company said in a press release.

The US-based exchange, which has a daily trading volume of $94 million at the time of writing, said that it had detected seven “rollback” attacks on the chain. Gate have also identified three of the attackers’ addresses, and suggest other platforms should block transactions to and from the addresses.

The minimum number of confirmations to process ETC transactions on the exchange have been raised to 500 as a precaution. Gate also “[suggested to] the ETC dev team and the community build a new consensus mechanism ([Proof-of-Stake] for example).

The ETC community, however, is known to be definitively against adopting a PoS consensus algorithm, and consider a Proof-of-Work (PoW) algorithm one of their main selling points in contrast to Ethereum’s (ETH) planned switch to PoS.

The former business developer of now-defunct ETCDEV, Donald McIntyre, said as much only a couple of days ago in the wake of the attack, commenting that “I think ETC still has a unique positioning as a PoW + Turing-complete network with an active community with sound principles.”

Still a prominent player in the ETC community, he did however express interest in a change in ETC’s PoW algorithm:

With the above in mind I think the best path is to explore a mining algorithm change to put ETC in a unique, incompatible PoW niche. Even if that implies a tradeoff as miners will have less optionality to point their infrastructure to different chains depending on the profitability of the day.

ETC’s 51% Attack(?)

CryptoGlobe wrote this week that the widely reported attack may not, in fact, have been an attack – but rather, an operational test of new application-specific integrated-circuit (ASIC) miners built for ETC’s consensus algorithm. (ETC currently uses the Ethash algorithm, which is still used by Ethereum.)

Interestingly, however, a tweet by the @eth_classic Twitter account, which speculated on the nature of the “attack,” has since been deleted.

It seems now that the ETC community agrees that it was, in fact, an attack. The substance of a community conference call, a diagnosis of the attack and the community’s response, was posted only hours ago, again on McIntyre’s Medium blog – ominously entitled “Post Mortem Meeting.”

McIntyre claimed a total of 15 double spend attacks and “at least ETC 219,500 stolen.” His explanation of the attack was straightforward, saying there is no “root cause internally in the [ETC] system,” and by way of explanationa said that “ETC is still a relatively small PoW blockchain with a mining algorithm that is compatible with larger chains such as Ethereum so attackers can rent hash power on NiceHash to reorg the blockchain.”

He detailed a number of suggestions to strengthen ETC in the future against such attacks, including a change in the PoW algorithm, reorg protection, and higher confirmation times in general (between 2,500 and 5,000). He added finally that “we will not reorg the chain or revert the events on chain under any circumstance.”