Vertcoin 51% Attack

Notice: This page is a freshly imported case study from the original repository. The original content was in a different format, and may not have relevant information for all sections. Please help restructure the content by moving information from the 'About' and 'General Prevention' sections to other sections, and add any missing information or sources you can find. If you are new here, please read General Tutorial on Wikis or Anatomy of a Case Study for help getting started.

Notice: This page contains sources which are not attributed to any text. The unattributed sources follow the initial description. Please assist by visiting each source, reviewing the content, and placing that reference next to any text it can be used to support. Feel free to add any information that you come across which isn't present already. Sources which don't contain any relevant information can be removed. Broken links can be replaced with versions from the Internet Archive. See General Tutorial on Wikis, Anatomy of a Case Study, and/or Citing Your Sources Guide for additional information. Thanks for your help!

Vertcoin

Vertcoin is a blockchain especially designed to be resistant to ASIC mining, designed to be mined with graphics cards instead. In 2018, the network suffered a series of 4 separate reorganization incidents caused by 51% attacks.

This is a global/international case not involving a specific country.

About Vertcoin

"Vertcoin (VTC) is an open-source cryptocurrency created in early 2014 that focuses on decentralization. Vertcoin uses an ASIC resistant proof-of-work mechanism to issue new coins and incentivize miners to secure the network and validate transactions. Vertcoin's blockchain is maintained by a decentralized coalition of individuals collectively mining using modern graphics cards."

"The 51% attack on the Vertcoin network occurred between October and December 2018. Coinmonks estimated that a total of $100,000 worth of coins were double spent by an attacker in eight reorganizations of the Vertcoin blockchain. A chain reorganization or reorg occurs when a miner with more than 50% of hashrate comes up with an alternative transaction history by creating an extension of any chain and eventually replaces the network’s transaction history."

"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."

"In 4 distinct incidents, the latest of which concluded on 12/2, Vertcoin (VTC) experienced 22 deep chain reorganizations, 15 of which included double spends of VTC." "The largest reorg was over 300 blocks deep."

"In the attack, transactions in some orphaned blocks were double spent in the eventually accepted transaction history. A total of 71,000 VTC ($50,000) were double spent. In the ensuing panic, the price per VTC decreased from $0.7 to $0.3 per coin."

"The first 5 reorgs did not include any double spends, while the [next] 3 all included double spend transactions of a total of 71,243 VTC." "There were [later] 8 reorgs in [another] incident, all of which included double spends for a total of 53,847 VTC. These reorgs were not as deep as the previous incident or either of the two subsequent incidents." "There were 2 reorgs in [early November], and we did not observe double spend transactions in either." The last set of reorgs consisted of "4 reorgs", "all of which included double spend transactions. These were the deepest reorgs observed that also included double spends, suggesting perhaps that the victim of double spends had raised confirmation requirements, forcing the attacker to expend more hashpower for each attack."

"Gert-Jaap Glasbergen, a Vertcoin developer, attributed the attack to the availability of cloud mining services and the release of specialized mining hardware for Vertcoin. Cloud mining services like NiceHash made it easy for an attacker to rent mining power at lower costs (purchasing and installing mining hardware for the same purpose is more expensive)."

"Exchanges make an ideal target for this sort of attack. This is because exchanges allow deposits to be quickly traded into different assets and then withdrawn. An attacker can make a soon-to-be-reversed deposit, trade for another asset, move the new asset off platform, and then reverse the original deposit."

"Exchanges find themselves with very few effective countermeasures for this sort of attack. When an attacker has greater than 51% of hashing power, no number of confirmations can make receiving deposits in the asset safe. An exchange that is under attack has no long term solution other than ceasing interaction with the asset’s blockchain. The fact that the most recent attack had a depth of 307 blocks shows the ineffectiveness of increased confirmations as a countermeasure to this type of attack."

"Some in the VTC community were quick to blame the developers, volunteers who are feverishly trying to fix the problem with an upcoming hard fork and who want to eliminate rented hash power and ASIC-fueled mining on the network. Vertcoin devs aren’t aware of any “culprit” or “victim.”"

"Vertcoin has since updated its mining algorithm to Lyra2REV3 in order to render specialized mining hardware ineffective for mining Vertcoin. There is also on-going development on Verthash, a new algorithm that will completely eliminate the use of specialized mining hardware on the Vertcoin network. The new Verthash algorithm is expected to tackle the problem of surges in hashrate due to rented GPUs. Vertcoin went from 138th in coin rankings in September of 2018 to 162nd today."

This is a global/international case not involving a specific country.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - Vertcoin 51% Attack

Date	Event	Description
December 2nd, 2018	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

Technical Details

This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

Total Amount Lost

The total amount lost has been estimated at $100,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

General Prevention Policies

51% attacks can be prevented through a mix of increased block confirmation times and setting checkpoints to prevent large-scale reorganizations. This means the exchange will not credit newly deposited funds, and nodes will be prevented from accepting an older attacking chain.

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.