Influence of Recent Cryptocurrency Boom: Does It Still Hurt?

Influence of Recent Cryptocurrency Boom

Crypto Exchange Gate.io Agrees With Reports Showing 51% Attack On Ethereum Classic

Bitcoin is a decentralized digital currency (also known as cryptocurrency). It does not use a central bank or any third party for transactions to be made between peers. Bitcoin is different from the traditional currency in terms of decentralization, limited supply, pseudonymity, immutability, and divisibility.

Bitcoin is fundamentally a computer program that is stored in a digital wallet application on any computer or smartphone. Every transaction is recorded on a public list, also known as the blockchain. The advantage of using a blockchain is that it makes tracing transactions easier. In this way, it becomes easier to catch those people who are making copies or reversing transactions. On the other hand, blockchain also helps in catching those who are spending bitcoins that they do not own.

Recently, Greg Maxwell, developer of Bitcoin Core, scrutinized the latest report on the attack on Bitcoins. Maxwell claimed that any mechanism derived in order to mitigate the threat would be a superior danger to the integrity of Bitcoin.

Background

Conventionally, the “Proof-of-work" (PoW) algorithm was used in a Blockchain network. This algorithm provides a confirmation of the transactions and helps in the production of new blocks into the chain. With the help of PoW, miners are on the continuous race to make more transactions in comparison to their competitors. At the end of the case, the miner with the maximum transaction is rewarded.

One of the drawbacks of the traditional algorithm is the 51 percent attack. In this case, any user can reverse a transaction and doubly spend the cryptocurrency. Individuals have the power to seize control over a miner from generating new blocks and receive rewards in return.

Present scenarios

In response to the latest reports making a round about the 51 percent attack, Greg Maxwell argues that any measure to counter-attack the threat would actually decentralize the whole concept of Bitcoin. He criticized some of the existing centralized systems, such as the IOTA, Ripple, and EOS. He claims that they provide the option of determining the firstness to a single party who would then impose it on the remaining network.

Maxwell also claims that the basic idea behind Bitcoin is that its decentralized nature counts on the “vote” obtained from the computing power with the help of miners. This is without the actual need for a centralized "third party." It means that any change or feature introduced to prevent the “vote” will only replace the entire process of mining. He also added that many complicated schemes had been introduced. However, after careful observation and analysis, it has been found that these schemes have played a fruitful effect. These schemes do centralize the system, but only hide the process of centralization.


Growth of the 51 percent attack

After the confirmation of the successful 51 percent attack on the Ethereum Classic Blockchain, Gate.io has promised to reimburse its users their losses. According to researchers, the attack took place on the 7th of January 2019 for a period of four hours. There was a seven-rollback transaction that was observed. The transactions were initially normally confirmed and then were consequently marked invalid. After the attack, Gate.io has advised fellow crypto trading platforms to take caution and block any suspicious transactions from any unidentified or suspect addresses.

Along with Gate.io, another crypto trading platforms, known as Slow Mist, also confirmed that 51 percent attack, containing the same rollback transactions. In response to growing 51 percent attack, several USA based coinbases and Japanese exchanges (known as bitFlyer) have temporarily suspended deposits and withdrawals of Ethereum Classic Blockchain.

Solution to the 51 percent attack

Komodo developers have suggested a solution to the 51 percent attack. They reckon that their solution is suitable for all cryptocurrencies that use the PoW algorithm. They suggest that the state of coin’s blockchain must be regularly registered into the Bitcoin blockchain. This claim can prove to be advantageous as Bitcoin blockchain is tremendously challenging to attack.

Pirl has also come up with another solution for the 51 percent attack, also known as the PirlGuard protection system. They claim that when an attacker tries to open their respective node for peeling, it will peer with all other nodes present on the network. When such an event occurs, PirlGuard will drop the peer and sentence them to the penalty blocks. The number of penalty blocks assigned to the attacker will depend on the number of blocks it has mined in private.

As cryptocurrencies are being widely used, people are still unaware of the bugs and threats available along with them. As there is no crypto police, it is essential for individuals to be very careful about their cryptocurrencies. It is very important to gather knowledge before investing, analyze the latest tendencies, and understand the code of the particular product being used.