In this week’s episode of Hidden Forces, Demetri Kofinas speaks with Haseeb Qureshi of MetaStable Capital about the recent 51% attack against Ethereum Classic, its implications for exchanges that continue to list smaller market-cap cryptos like ETC, Dash, Monero, etc., and what it means for the debate between proof-of-work and proof-of-stake.
On January 5th, 2019, the digital currency exchange Coinbase detected a deep chain reorganization of the Ethereum Classic blockchain. In order to protect customer funds, they immediately paused interactions with the ETC blockchain. Coinbase reported the 51% attack on January 7, 2019, but a few people on Twitter had already become aware that something wasn’t right with ETC. Pierre Rochard, an emerging thought-leader in the Bitcoin space, asked ETC developer Donal McIntyre on Twitter: “Was there a deep reorg on Ethereum Classic yesterday?… 75 blocks deep I hear, with a double-spend.” Donal McIntyre replied: “Well ETC is still small and has many enemies so an attack with sufficient GPU power may be plausible, but I will check with others in the ecosystem.”
Cryptocurrencies that are not dominant in their respective mining algorithm, especially ones for which hashing power can be easily rented out, are more vulnerable to being 51% attacked than are other cryptocurrencies with larger market-caps that are not ASIC-resistant. According to Charlie Lee, founder of Litecoin, “ETC has less than 5% of the total Ethash hashrate and is 98% NiceHash-able. 1-hr attack costs $5k,” making it particularly vulnerable according to these two metrics.
Reports of the amount stolen in the attack range from the low six-figures to over one million dollars worth of ETC. Perhaps what is most remarkable is that this is only the latest 51% attack against a smaller-cap currency where the attack did not materially impact the price of the cryptocurrency in question.
Demetri and Haseeb explore the reasons why the price of ETC was largely unaffected, what this latest attack means for the listing (or delisting) of similarly sized cryptocurrencies, and how this is sparking a larger debate about the efficacy of proof-of-work vs. proof-of-stake as mechanisms for securing a cryptocurrency.
Producer & Host: Demetri Kofinas
Editor & Engineer: Stylianos Nicolaou
Haseeb Qureshi is a partner at MetaStable Capital, a leading cryptocurrency hedge fund. Haseeb was formerly a software engineer at Airbnb and Earn.com and teaches a seminar on cryptocurrencies at the Bradfield School of Computer Science. He's collaborated with researchers from Cornell on analyzing blockchain frontrunning attacks and previously made a living as a top-ranked professional poker player.