A bitcoin-replica launched with an aim to discourage miners from forming pools and gain a monopoly over its network has been compromised.
Mark Nesbitt, a security expert, revealed that the blockchain of Vertcoin, a peer-to-peer PoW cryptocurrency, is under a 51% attack. The Coinbase engineer found that some anonymous cybercriminals rented a large amount of ASIC hash rate to attack the four-year-old cryptocurrency network. They eventually got hold of more than 50% of the mining hash rate which allowed them to own and govern the Vertcoin public chain literally.
The integrity of a PoW cryptocurrency depends on the distributed nature of its network. It is considered decentralized when no miner or mining pool possesses more than 50% of the network hash rate. If a mining entity gains control of the majority of the hash power, then it can could create separate blocks from any arbitrary previous block, creating two versions of the same blockchain. And if the alternative blockchain – controlled by a single entity – starts producing more blocks than the rest of the network, then it could lead to a situation termed as chain reorganization.
To worsen the situation, if a miner holds a large number of coins, it can also launch a double spending attack on the network. For instance, a miner can initiate a transaction on the main chain, but it can replicate the same transaction on the alternative fake chain as well. As a result, both the transactions send the same coin, and only one of them can be confirmed while the other remains invalid.
“In 4 distinct incidents, the latest of which is currently ongoing, Vertcoin (VTC) experienced 22 deep chain reorganizations, 15 of which included double spends of VTC,” explained Nesbitt.