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Cryptocurrency

Exchanges Start to Compensate the 51% Ethereum Classic Attack

Maya Mandzikasvili | Jan. 10, 2019
Exchanges Start to Compensate the 51% Ethereum Classic Attack

January 10, 2019 | AtoZ Markets - Researchers from the new crypto exchange with a registration address in Virginia, USA, Gate.io confirmed that a recent incident involving Ethereum Classic (ETC) blockchain was a 51% attack.The company which is among the twenty largest exchanges promised to compensate their users loses.

Gate.io Research Team Confirms 51% Attack

Gate.io Research team claims to have discovered seven rollback transactions, four of which were reportedly committed by the attacker, resulting in a transfer of 54,200 ETC (worth $ 271,500) in total.

According to the exchange research team, the hacking incident occurred during 4 hours between 0:40 and 4:20 on January 7, 2019, GMT,when transactions were usually confirmed in a blockchain, and then became invalid after a failed network rollback. Gate.io also provided information on the three ETC addresses allegedly used by the attackers. “The company successfully blocked the intruder’s transactions and sent them for a manual check,” explained the exchange's research team.

Exchange Will Pay their Users’ Damages

Representatives of the exchange added that during the attack, 51% of all transactions "looked valid and were well confirmed on the blockchain and the examiner passed them. This caused a loss of about 40 thousand ETC because of this attack."

Gate.io claimed that they will cover their users's loses and take "on all the damages."

The exchange recommends other crypto-trading platforms to block transactions from the identified suspicious addresses. According to the company, they increased the ETC transaction confirmation number to 500 and launched a more reliable 51 percent detection security mechanism.

Should Gate.io Be Trusted?

Gate.io platform as a part of Gate Technology Inc corporation was launched in fall 2017. The exchange offers to trade in more than 20 digital coins. The company’s website is available in English, Chinese and Japanese, supposedly targeting Asian crypto investors. According to the financial analysts, this is an expected step after China has imposed severe restrictions on Bitcoin and other digital assets including imposing a ban on initial coin offerings (ICO) and a cryptocurrency-based fundraising process. Due to Chinese government activity major exchanges allegedly ceased trading by the end of September 2017. Some financial experts and crypto supporters find Gate.io exchange quite controversial as it is not overseen by the local financial watchdogs, nor holding a NY Bitlicense.

Considering its brief history, this crypto exchange has not yet been hacked. In addition, there are no user reviews yet. Therefore, experts warn investors that it is important to remember that when dealing with unregulated companies like this, there is always a risk.

Gate.io is Not Alone in its Discovery

Gate.io is not the only company that confirmed the 51 percent attack on Ethereum Classic. On January 9, the Chinese blockchain security company, Slow Mist, also published a report confirming aforementioned incident as well as the same rollback transaction Gate.io detected.

Atoz Marketz previously reported that several large crypto-exchanges - Coinbase. bitFlyer and Coincheck have temporarily halted withdrawing and depositing ETC on January 5th. All exchanges responded to the unusual hash power, indicating it as a potential 51% attack.

ETC Keeps Denying 51 Percent Attack

ETC development team denies the 51 percent attack, stating that no double costs were detected. Ethereum Classic officials claimed on their twitter that incident was “most likely selfish mining.” Explaining the reason of the increase in hashing speed, ETC claimed that it might be related to testing the "new Ethash algorithm with a capacity of 1,400 megabits per hour.”

As previously reported, a 51% attack entails seizing the majority of mining resources by a user or control group to monopolize control over the network. This may allow to reverse transactions to double the cost - by conducting cryptographic protection for fiat currency, and then roll back the document to restore the spent cryptography while collecting fiat. While the theoretical risk of most attacks exists, the almost complete seizure of control over a large chain of hashrays is now considered overly expensive.

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Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ Markets.com, nor should they be attributed to AtoZMarkets.