Almost $500,000 in Ethereum coin stolen by forking its blockchain

Attackers have stolen almost $500,000 worth of the Ethereum Classic digital currency by carrying out a compute-intensive hack that rewrote its blockchain, officials with Coinbase, one of the leading crypto currency exchanges, said on Monday.

The heist was the result of carrying out what's known as a rollback attack, which allowed the attackers to reorganize the Ethereum blockchain, Coinbase security engineer Mark Nesbitt said in a blog post . From there, the attackers were able to "double spend" about 88,500 ETC, meaning they were able to recover previously spent coins and transfer them to a new entity. As a result, the coins were effectively transferred from the rightful recipients to new entities chosen by the attackers.

"We observed repeated deep reorganizations of the Ethereum Classic blockchain, most of which contained double spends," Nesbitt wrote. "The total value of the double spends that we have observed thus far is 88,500 ETC (~$460,000)."

Rollback attacks are often referred to as 51-percent attacks, because, in theory, they require an attacker to control a majority of the CPU power generating a blockchain. Such an arrangement violates a core requirement of any blockchain-based currency: it allows a single entity to write the contents of its universal, shared transaction history.

Nesbitt wrote:

The function of mining is to add transactions to the universal, shared transaction history, known as the blockchain. This is done by producing blocks, which are bundles of transactions, and defining the canonical history of transactions as the longest chain of blocks. If a single miner has more resources than the entirety of the rest of the network, this miner could pick an arbitrary previous block from which to extend an alternative block history, eventually outpacing the block history produced by the rest of the network and defining a new canonical transaction history.
This is called a "chain reorganization," or "reorg" for short. All reorgs have a "depth," which is the number of blocks that were replaced, and a "length," which is the number of new blocks that did the replacing.

Stated a different way, a rollback attack generates a new fork of the blockchain. This causes nodes to replace the original blockchain with the new one and makes it possible for attackers to reverse previously made transactions. Rollback attacks require control of a substantial fraction of the total hashpower devoted to generating the coin's blockchain for a period long enough to pull off the attack. Bitcoin creator Satoshi Nakamoto warned of the key limitation in his white paper introducing the digital coin .

Coinbase suspended trading of ETC after detecting the attack in order to prevent any double spends from hitting its users. ETC officials, for their part, have confirmed that double spends are affecting the currency, but they have yet to say more.