A deep chain reorganization of ethereum classic has been detected by Coinbase Exchange and reported on their blog. The reorganization included a double spend, which forced Coinbase to pause movement of funds on the ETC blockchain.
Following the suspension, at least eight other reorganizations that include double spends were detected. The total amount of funds implicated in the double-spend hack is 88,500 ETC (~460,000 USD).
What is a Chain Re-Organization?
Chain reorganization occurs when a single miner has more resources than the entirety of the rest of the network, allowing them to pick an arbitrary previous block from which to extend an alternative block history. The miner can then outpace the block history produced by the rest of the network and redefine it as they see fit.
A chain reorganization becomes harmful when a miner owns a large number of coins and decides to manipulate the system with malicious intent.
According to Coinbase:
“The miner could send those coins to a merchant in a transaction, T, while also secretly extending an alternative block history. The miner’s secret blocks do not include T, but rather include a transaction that sends the same coins used in T to a different address.”
This would necessarily create a double-spend problem, allowing the miner to extract coins out of thin air without a sender or recipient who isn’t them.
Coinbase is currently monitoring the Ethereum Classic blockchain to determine when it is safe to interact with it once again.
In response to Coinbase, ETC denies the claims and explains it as an “ongoing process”:
Regarding @coinbase account of recent events: they allegedly detected double spends but unfortunately did not connect with ETC personnel regarding the attack.
This is still very much an ongoing process. https://t.co/in1OGdV8T9
— Ethereum Classic (@eth_classic) January 7, 2019