Crypto attacks rising as rogue miners exploit flaw

One of the most-feared quirks of cryptocurrencies is becoming more of a headache.

Over the past few weeks, rogue operators of some of the computer networks that perform the complex calculations that verify transactions for various coins are attacking their own networks again. This time it’s Bitcoin Gold, an offshoot of the most widely known form of digital money, with a US$717 million market capitalization.

Such 51 per cent attacks, in which so-called miners gain control of the majority of the network’s computing power to falsify transactions, are generating ill-gotten gains that risk collapsing the value of the coins. Under attack for more than a week, Bitcoin Gold is down about 25 per cent since May 18.

Similar attacks have targeted Verge, Monacoin and Electroneum, according to Autonomous Research. To gain power over a coin with a market cap of US$500 million, an attacker may need to spend as little as US$778 an hour, according to Autonomous.

After all, many of these smaller coins — and there are now more than 1,600 of just the major ones — have ballooned in value, becoming valuable targets for criminals. Some bad actors also may want

to torpedo one coin to boost the value of another, Spencer Bogart, partner at Blockchain Capital, said in an email.

The stable of miners supporting many of these coins is still small, so reaching that 51 per cent threshold is relatively inexpensive, especially now that manufacturers like Bitmain have begun putting out more powerful and less expensive mining machines that produce more coins. Earlier this year, Bitmain said it’s created machines capable of mining Bitcoin Gold, creating an uproar among some of the network’s users.

“Infrastructure with small communities is fragile, and unless private, has no network effects,” Lex Sokolin, global director of fintech strategy at Autonomous Research. “But the irrationality of the markets recently have priced everything — altcoins, ICOs — highly, which means that the reward to hacking has increased. This creates a fertile ground for more bad actors across the industry ...”

Bitmain said in a statement that its equipment helps prevent attacks by not only exponentially increasing the barrier to entry, but by also making it counter-productive for a bad actor with a high number of its so-called ASIC miners to launch an assault.