The Ethereum Classic blockchain may have been successfully hijacked through a rare, so-called ‘51% attack,’ resulting in a $500,000 payout.
Coinbase is one of the several cryptocurrency exchanges that have frozen trading of the token following the alleged hack.
According to Coinbase, the reorganisation of the blockchain has led to the attacker taking control of tokens worth almost £400,000.
Patrick McCorry, assistant professor of computer science at King’s College London, told Sky News it was important to distinguish Ethereum, the second-largest cryptocurrency behind Bitcoin, and Ethereum Classic, which is in the top 20 and split from Ethereum in 2015.
He added: “The underlying technology of a cryptocurrency, the blockchain, is responsible for recording all transactions on the network.
“It gets this name because it is a chain of blocks, and every block is simply a list of authorised transactions. In Ethereum Classic, a transaction is only considered ‘final’ and ‘confirmed’ if it is in the blockchain with the most blocks.”
A 51% attack would see an attacker who controlled more than 51 per cent of the mining on the network double-spend certain coins, creating a major payout. They would do this by creating a fork in the network by transmitting contradictory information to different users – allowing them to send the same coin to multiple parties.
McCorry said: “The issue in a 51% attack is that a single person has more than half the network’s computational power (i.e. they have a much bigger warehouse of computers) and they can create blocks faster than everyone else.
“What happened in Ethereum Classic is that a single person managed to repeat the entire network’s effort for 100 blocks, create a longer blockchain and reverse a transaction that paid out around $500,000.”
There is an ongoing investigation into the supposed attack, according to Sky News.