$14 000 USD

JANUARY 2019

TAIWAN/SINGAPORE

BITRUE

DESCRIPTION OF EVENTS

"Bitrue is the most secure and advanced online platform for buying, selling, transferring, and storing digital currency." "Bitrue exchange is established by a group of blockchain enthusiasts and focus on cryptocurrency trading. We [are] dedicate[d] to providing safe and convenient service for cryptocurrency trading, and being the best aggregator of qualified cryptocurrency all over the world." "We have offices in US, Europe and Asia Pacific. We make our collective knowledge, experience and global network available to our users."

 

"Ethereum Classic is a decentralized computing platform that executes smart contracts. Applications are ran exactly as programmed without the possibility of censorship, downtime, or third-party interference. Ethereum Classic is a distributed network consisting of a blockchain ledger, native cryptocurrency (ETC) and robust ecosystem of on-chain applications and services." "Ethereum Classic is the product of a hard fork after the Ethereum network split in different ways following an infamous hack in 2016."

 

"“[Grayscale] holds a sizable percentage of the circulating supply in Ethereum Classic, which is locked up in the trust that will never be liquidated,” [Meltem Demirors, the chief strategy officer at CoinShares] said. “So I think some of those natural factors, which can drain the supply of Ethereum Classic on the market, have a dampening impact on the price.”" "Grayscale started its ETC Trust in April 2017."

 

“It would be very difficult for us to comment or point to our operating a vehicle around a particular protocol as being influential to the prices,” Michael Sonneshein, managing director of Grayscale, said in a phone interview with CoinDesk, pointing out his company also has large positions in bitcoin and ether. Grayscale, like CoinDesk, is a unit of Digital Currency Group.

 

"The “honest[y]” of more than half of miners is a core requirement for the security of Bitcoin and any proof-of-work cryptocurrencies based on Bitcoin. Honest action, in this context, means following the behavior described in the Bitcoin white paper. This is sometimes described as a “security risk” or “attack vector,” but is more accurately described as a known limitation to the proof-of-work model."

 

"Failure to meet this 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."

 

"For the Ethereum Classic blockchain, 51% attacks have been a threat for a long time. Unlike Ethereum, from which it was hard forked, the Ethereum Classic network is committed to the Proof-of-Work (PoW) consensus algorithm, which is also used by [bi]tcoin. But for large networks like Bitcoin, a 51% attack is prohibitively expensive to do given the enormous amount of computational power required by PoW to successfully do it. Ethereum Classic’s hashrate is much smaller, making it far more vulnerable to 51% attacks."

 

“The firm found the first attempted malicious transaction was carried out on the trading platform, Bitrue. The attacker executed a double spend worth $14,000. This was corroborated by Bitrue's twitter account.”

 

"We've experienced an ETC 51% attack yesterday morning. The attacker tried to withdraw 13,000 ETC from our platform but got halted by our system." "By the time we conducted our research, there was a total of 88,500 ETC double-spend, among which 13,000 were onto our platform."

 

"We're quite upset about @eth_classic's vulnerability and are seriously concerned about the capability of the ETC team for sustaining the existing POW model! We will keep updating the status here!"

 

Ethereum Classic reported to be "working with Slow Mist and many others in the crypto community. [They] recommend[ed] exchanges and pools significantly increase confirmation times (400-4000+)"

 

A double-spend attack allows a less-mined blockchain (like Ethereum Classic) to be overpowered, enabling the rewriting of history, removing a spend event and allowing the hacker to respend those funds in a different way.

 

"We're further strengthening our security capability by partnering with @AnChainAI, an AI-powered blockchain security solution from Silicon Valley to better protect our customers from potential risks!"

 

"[O]nce Coinbase and other exchanges began blacklisting attacker addresses, the attack basically stopped being useful to the attacker on January 8th."

A double-spend attack allows a less-mined blockchain (like Ethereum Classic) to be overpowered, enabling the rewriting of history, removing a spend event and allowing the hacker to respend those funds in a different way. The Ethereum Classic blockchain is vulnerable to 51% attacks due to the low hash power. Unknown victims (which may include some exchange platforms) fell victim to the attack and lost funds.

 

In the 51% attack, a single group or individual purchases or repurposes a massive amount of hashing power. This enables them to produce a blockchain history in which they didn't make an accepted payment, and feed that back to the network. As a result, they keep their funds, and whatever they received for their payment.

 

The 51% attack was successful since what happened was not realized, and the network made the decision to adopt the longest chain, as produced by the hacker. This resulted in a loss to the Bitrue platform, which they have promised to cover for their users.

HOW COULD THIS HAVE BEEN PREVENTED?

The solution to mitigate 51% attacks is to increase block confirmation times and institute checkpoints, where all miners agree that transactions up to that point are valid. If a large reorganization occurs, it will be rejected by miners, and the attacker will simply lose the funds spent on the attack.

 

Attacks are relatively easy to spot because they result in massive chain reorganizations, which miners can easily decide to reject.

 

Platforms can protect themselves against 51% attacks by ensuring that they only deal with coins which use checkpoints, and have sufficient block confirmation requirements on deposits.

 

Check Our Framework For Safe Secure Exchange Platforms

Sources And Further Reading

 For questions or enquiries, email info@quadrigainitiative.com.

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