Changing the Past of Ethereum – Not an Ordinary Divorce

Tomorrow 20 July Ethereum are going to invalidate more than 50M$ worth of Ethereum stolen by some rogue hacker group.
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Congratulations to our community for this brave decision!

Support for this decision must be shown by all honest citizens of crypto space by upgrading ASAP geth.exe and mist wallets to the new version, for example now, and voting FOR THE FORK and against the illicit gains.

Remarks

This will NOT be the end of the story, as people who do NOT agree will be operating their own fork of Ethereum. There is a lot of sympathy out there for this sort of organized hacker groups which exhibit a high level of skills and ability. So we will have TWO Ethereum blockchains: the normal official Ethereum blockchain and a darker less well supported version of it. We expect that starting from tomorrow both chains will operate. Or the old chain will operate for some time until it possibly declines [or not]. 

Questions:

    1. Discarding the obsolete Ethereum clients not yet upgraded, will there be enough peers to support the second peer network which does not support the fork?
    2. Will some bitcoin exchange also list the “other” Ethereum coins???? Will the market share of Ethereum be divided in two separate market capitalizations? Will the supporters of dark forces actually succeed to steal some business from Ethereum???

 

A Messy Divorce

EDITED and ADDED 24-27 July 2016.

YES! We have the dark/old/orphaned/illegitimate Ethereum coins trading. Poloniex has started listing them under the name of ETC = Ethereum Classic. Also Bitfinex lists them.

  • On 24 July we had 1 ETC = 0.065 ETH. At this moment  the bounty was no longer worth 50M$ and it became 3M$ and it was quickly decreasing, it went down -85% in 24h.
  • On 26 July however the illegitimate Ethereum went up by 400% in ETH value. By 3PM UK time it raised to 0.23 ETH. The ETC trading volume on Poloniex has exceeded the ETH volume [and any other coin daily volume].
  • On 27 July the price of ETH has oscillated around 0.18 ETH which is remarkably close to the percentage of ETH holder who opposed the fork.

It is very difficult to explain what is going on here. Few points:

  • Initially, most of ETC are not those which belong to some hackers. Most holders of ETH also automatically have ETC and they will also be selling them in panic, possibly.
  • It is easy to see that most people who have these assets would NOT for some time realize that they have them, and they do not realize that they can sell them making some unexpected extra money and still keep their ETH. Most holders of ETH simply have not heard about a separate asset ETC that they now have and can sell it.
  • We expect increased criminal activity overall in ETH blockchain in the coming days, why, because in order to sell these assets as their price goes down rapidly, people have to unlock their wallets, dig out their private keys from cold storage, or type in passwords etc. Now these are the same private keys as in the main ETH blockchain, already more valuable, so just having lots of people trying to sell whatever is left of their ETC will be a juicy time period for hackers to steal these private keys and withdraw money from both sides.
  • Also replay attacks against ordinary ETH users are possible, cf. here.
  • ETC is an illegitimate clone of Ethereum which has essentially stolen some 20% of their market share from Ethereum developers and all people who work hard on FinTech applications of Ethereum. It is a sophisticated form of theft or free-riding which now went far beyond just stealing 50M$ from the DAO owners.
  • The question of who is buying these coins [90M$ volume in 24h] is a mystery.
  • ETC has at moments become very interesting for miners, as initially most miners deserted it and some could earn more. ETC is also at risk of 51% attack by miners in ETH community. Now in a space of hours the hash rate of ETC has increased so much that the risk is no longer taken seriously [which is rather a bet that miners are probably too good, or too naive, or not well organized enough to do such an ugly thing].
  • This shows that ETC exists because some wealthy miners and other important people support it. Many people were shocked to learn that Vitalik partly supports the fork, promises to tolerate it, and even gave some advice to the team which will support this fork from now on.

Remarks/Related: This older blog post by Dr. Courtois regarding a crypto currency divorce/splitting into two is cited, cf. pages 49 and 84, in a report by the British government Chief Scientific Adviser, Sir Mark Walport, “Distributed Ledger Technology: beyond block chain, here, 19 jan 2016.

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