Staff of the major cryptocurrency exchange Coinbase conducted an investigation into the attack on the Ethereum Classic blockchain. The attack on the Ethereum Classic blockchain was noticed by Coinbase staff on the evening of January 5. As a result of the investigation it was revealed that the network fell victim to a so-called 51% attack, during which 219,000 ETC was stolen - approximately $1.1 million. In response, Coinbase froze all transactions on the ETC blockchain.

How much does this attack harm the blockchain's reputation, and should other cryptocurrencies worry about the possibility of a similar attack?

According to experts' estimates, in order to hack the Bitcoin blockchain, 2.4 million computers would need to operate at full capacity, consuming as much electricity as a country like Morocco consumes. However, in order to hack a small blockchain, far less computing power is required. Thus, carrying out a 51% attack on small blockchains is a fairly affordable undertaking - mainly thanks to mining pools.

Due to the increasing difficulty of mining a block, some miners have to combine their resources into so-called pools. These groupings can be rented out, and along with them the computing power they possess.

Ben Schmidt, head of security at PolySwarm, said: «Based on current estimates from nicehash.com, at this difficulty level an attack on the ETH network would cost approximately $65,000 dollars a day. During an attack, hackers will be able to bypass exchanges' security systems and thereby obtain significantly larger sums of money, which potentially makes such a scheme very profitable.» According to him, at least 8 of the known Ethereum mining pools have enough hashrate to carry out a 51% attack on the ETC network.

The hack of the Ethereum Classic blockchain became a cause for doubts about the immutability and invulnerability of small blockchains. Despite this, such an attack will not harm the reputation of large blockchains like Bitcoin or Ethereum. However it is worth noting that at the peak of the cryptocurrency fever in 2017-2018 a multitude of new cryptocurrencies were created, and there are coins whose hacking can be arranged for a couple of dollars an hour. Moreover, Ethereum Classic is not the first cryptocurrency to suffer this attack. In April 2018, for example, the private blockchain Verge fell victim to a 51% attack.

This case of hacking the Ethereum Classic blockchain demonstrates the need to switch to proof-of-work algorithms during a fork of a large blockchain, since miners of a large network can quickly take over a smaller one. By not implementing precautionary measures, developers put their blockchains at risk, which risk not having enough time to grow to a safe size.