Grayscale Investments Stated Zero Risk To Ethereum Classic Assets After The Attack 51%
Investment company Grayscale Investments has assured its customers that it has not been a direct risk to the fund's assets in Ethereum Classic after the attack 51% against cryptocurrency network earlier this week.
According to the company, several clients of the Ethereum Classic Investment Trust (ETCG) were asked to clarify the situation and dispel their concerns about a possible threat to assets. Appropriate replies were sent to all of them, which, among other things, explained how this type of attack works.
According to the company the biggest risk is that this attack could damage the integrity of the Ethereum Classic network, because of the increased risk of re-spending, people may be less likely to accept ETC. However, the coins held by the ETC Trust are not directly at risk of theft or reuse.
On December 31, 2018 Ethereum Classic Investment Trust had assets of $ 24.9 million. At the moment, ETC is trading around $ 4.58 has a loss about 12% over the past seven days. However, this decline largely correlates with fluctuations in the rates of other cryptocurrencies, which also experienced a fall this week.
What Is Blockchain Reorganization And Attack 51%
he Proof-of-Work consensus algorithm has a rule according to which the network recognizes the longest blockchain. If two miners simultaneously mine a new block, then everyone will consider it valid and an unintentional temporary fork will take a place. When one miner overtakes the second by the number of found blocks, his chain will be recognized as the true majority of the network's nodes and the blockchain cryptocurrency will be reorganized in accordance with it.
By itself, the reorganization does not pose a danger to the blockchain, except for delays in processing certain transactions. But fraudsters can use the ability to rewrite blocks from a specific point in time. So, after the reorganization of the blocks in the Ethereum Classic network, cryptocurrency exchanges sounded the alarm and revealed a 51% attack, the damage from which can exceed $ 1.1 million.
The 51% attack implies control by fraudsters of more than half of the cryptocurrency mining computing powers, which makes it possible to reorganize the blockchain at its discretion. The attackers create a secret fork of cryptocurrencies, extracting blocks faster than in the main network. And at the right moment, they simply send their longer block chain to the network and the nodes recognize it as true.
Most often, an attack of 51% is carried out with the aim of double spending funds. For example, cryptocurrency is sent to the exchange, sold there for other tokens or fiat, after which they order withdrawals. When the operation is completed, the fraudsters are reorganizing the blockchain, and in their version of the block chain there was no cryptocurrency transaction on the exchange. It turns out that the website did not receive anything, but already paid for these coins.