How the Great Schism Can End Badly for Both Ethereum Chains (Part 3 of 3)

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Ethereum Classic is dominating the cryptocurrency news cycle. After a slumber of some days following the Ethereum hard fork that refunded investors of the raided DAO, the unforked and re-named Ethereum blockchain and its native token classic ether (ETC) surged. Exchanges enabled trade in the digital currency, investors bought in, miners pointed their hardware to it, and a new development community began to form.

But Ethereum Classic also has led to chaos and uncertainty. The forked half of the chain — sometimes dubbed “Ethereum One,” and supported by the Ethereum Foundation — is still running as well. Ethereum has, therefore, effectively split into two networks: an unprecedented situation in the cryptocurrency space.

The question on everybody’s mind is, therefore: How will this end?

In this three-part series, Bitcoin Magazine provides an overview of some of the scenarios that circulate throughout the different Ethereum communities and the wider blockchain industry.

Part 1 of this series covered how the great Ethereum schism can end relatively well for Ethereum One (but not so much for Ethereum Classic.) Part 2 covered how the great Ethereum schism can end relatively well for Ethereum Classic (but not so much for Ethereum One.)

In Part 3: How the great Ethereum schism can end relatively badly for both Ethereum Classic and Ethereum One.

Author’s note: Not all scenarios or nuances may be accounted for, nor does inclusion in this list — or the order of it — say anything about likelihood.

Scenario 7: Ethereum Classic and Ethereum One Destroy Each Other

The seventh scenario is mostly attributed to (potential) adversaries of Ethereum — some have suggested adversaries from the Bitcoin-space. In this scenario, Ethereum Classic and Ethereum One engage in a sort of battle to the death that neither survives.

This could happen most obviously by technical failure. Replay attacks — transactions copied from one chain onto the other — already caused significant chaos. Perhaps other, so far undiscovered vulnerabilities, will be revealed soon.

But at this point, social failure scenarios may be a bigger threat.

One failure mode could result from a scenario where Ethereum Classic overtakes Ethereum One. It’s not unthinkable that this would disincentivize Ethereum’s most prolific developers to the point of quitting; especially if they sold their classic ether. And if not many new developers fill that gap, development may grind to a halt, potentially spelling the beginning of the end for both sides of the chain.

Another failure scenario is not unlike a potential failure scenario resulting from a contentious hard fork in Bitcoin. As explained by BitTorrent inventor Bram Cohen on Quora:

“Bitcoin the technical gizmo is very good at one particular thing: Answering the question ‘what is the current state of balances?’ with very strong consensus among everybody doing the answering. That isn’t going to change. What Bitcoin the technical gizmo can’t solve is answering the question ‘What is Bitcoin?’ The biggest immediate threat to Bitcoin is the potential creation of a multitude of hard forks, resulting in the whole thing collapsing in a mess of incompatible squabbling with no agreement over what the ‘real’ Bitcoin is.”

Ethereum Classic and Ethereum One do seem to be co-existing relatively peacefully so far. Both have their own name, their own currency, their own community, and more.

But this may change.

It may change if Ethereum Classic overtakes Ethereum One. A growing number of Ethereum Classic users may at that point logically (at least from their point of view) claim to be the real Ethereum, while the Ethereum One community may do the same.

It may also change through the legal system. At one point, a judge may have to decide which Ethereum is the real Ethereum. This could open up another can of worms — not in the least because the Ethereum protocol itself is sometimes claimed to be “above the law.” Not to mention that different courts in different jurisdictions might come to different opinions.

And these are only the two most obvious scenarios. There is probably a near-endless number of reasons for a divided community to “end up in a mess of incompatible squabbling.”

Scenario 8: Both Ethereum Versions Become Obsolete

This is the scenario expected by the permissioned blockchain-crowd and the “Bitcoin Maximalists” — just for completely different reasons.

For the permissioned blockchain-crowd, the Ethereum split is evidence that an open, permissionless cyrptocurrency-like system with no authority cannot offer a long-term value proposition. The future of this technology, they maintain, lies in adaptations that are better suited to exist within the current legal and financial systems, where responsibility is much better defined. Ethereum-like systems have no place in that future — they think.

Bitcoin Maximalists, meanwhile, believe there can be an open, permissionless cryptocurrency-like system with no authority — but only one: Bitcoin. They maintain there’s very little reason for any altcoins to have any long-term value; Bitcoin has the largest network effect and the most security, and they see in the coin-split a confirmation that Bitcoin has the best development community and most resilient infrastructure. Moreover, they maintain that most, if not all, useful futures from altcoins can be copied onto Bitcoin, either on the protocol level or as a sidechain. That includes Ethereum-like features. Rootstock, an Ethereum-like sidechain, is currently in development. And some Ethereum-like apps can already be applied as specific sidechains (such as Namecoin).

For Bitcoin Maximalists, therefore, all altcoins — including both versions of Ethereum — serve as testbeds for innovation at best, or pump-and-dump scams at worst. And Ethereum Classic and Ethereum One will do that equally well.

The post How the Great Schism Can End Badly for Both Ethereum Chains (Part 3 of 3) appeared first on Bitcoin Magazine.

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German Police to Start Focusing on Darknet Crimes After Munich Shooting

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The gunman who killed nine people in a rampage in Munich on Friday had purchased his 9mm Glock 17 on the deepweb, investigators discovered in a search of his home. As a result, in the latest annual report on cyber crime, German police say they will be making new efforts to fight crime on the darknet.

According to Reuters, Holger Muench, head of Germany’s Federal Police (BKA), told journalists that “We [the BKA] see that the dark net is a growing trading place and therefore we need to prioritize our investigations here.” Encrypted communications through Tor are making it difficult to determine how the Munich shooter got his gun. “The investigation is very difficult,” a police spokesperson told the press.

Muench said that while they had taken five darknet marketplaces out of circulation in the previous year, the BKA wants to start focusing on the criminals who are using the sites for buying and selling, not just the marketplace as a whole. Especially focusing on those who use the darknet to illegally obtain weapons.

A Frankfurt prosecutor who specializes in cybercrime, Georg Ungefuk, acknowledges that drugs are the most common items on the deepweb and “the [weapon] scene is more withdrawn than the drug scene.” He goes on to explain that a special unit of the Frankfurt prosecutors office had arrested several darknet weapons vendors last year, but not enough to make up for how quickly new sellers emerge.

The BKA spokesperson says cyber crime cost Germany $44.5 million last year, and only 32% of cases had been solved. Cyber crime is on the rise and the German Federal Police plan on being more vigilant in their efforts to stop it.

Germany’s firearm laws are well-known as being some of the strictest in the world which makes the situation even more threatening. Officials are concerned that others will realize how easily the 18-year-old was able to illegally obtain the gun and try the process for themselves. Police say that the deepweb makes anonymously purchasing weapons easy – even for those with no criminal ties.

This isn’t the only country cracking down on users of darknet marketplaces; just recently India had its first deepweb related case.

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Tor to Combat Malicious Node Problem

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The discovery of over a hundred malicious nodes has prompted the Tor Network to develop a new design which is designed to fight this ongoing problem.

Developer Sebastian Hahn assured that code has already been written to address this issue, and that the release date is being determined. The Tor Network has said that the attacks do not unmask the operator behind the hidden service, which the law enforcement community has been trying to accomplish for some time now.

Amirali Sanatinia, who is working on his PhD in computer science at Northeastern University, is responsible for this discovery. Alongside his professor at the College of Computer and Information Science, Guevara Noubir; they are set to present their paper next week at DEF CON.

The paper, “HOnions: Towards Detection and Identification of Misbehaving Tor HSDirs”, tells of a framework called Honey onions, or HOnions that Sanatinia and Noubir developed that identifies these malicious HSDirs.

They two launched the framework in daily, weekly, and monthly runs from Feb. 12 to April 24 and found exactly 110 malicious nodes, most of which were hosted in the US. Others from Germany, France, the Netherlands and the UK were found. They exposed Tor relays wish HSDirs capabilities that have been made to spoof hidden services. Tor estimated that there are currently around 3,000 HSDirs within its network.

“What the attack allows you to do is to learn about the existence of a hidden service. This does not mean that the identity of the operator is revealed or anything catastrophic like that,” Hahn said.

“Noubir and Sanatinia’s attack essentially snoops hidden service’s metadata and tells the attacker that a service exists and when it’s available,” Hahn added.

In an interview Noubir said that the hidden service directories they have found to be malicious could be run by researchers studying the dark web, or law enforcement or other state agencies as part of investigations.

“At this stage, hard to tell who is doing what. What we could see is there is some diversity in what they are doing. Some are attacking these hidden services, or in some way collecting information about them,” Noubir said in his interview.

More than 70 percent of the malicious directories they discovered are hosted on cloud infrastructure. A quarter of which are exit nodes. Hosting the services on cloud infrastructure makes it difficult to find out who is behind them. These are paid for in bitcoin, and have no contact information attacked to them.

Hahn reported that the number of exit nodes found in this research is alarming and is most likely and indicator saying that the operators didn’t take necessary care as being an exit node is the default configuration.

“The way we’re working on it for the future is by using a stronger cryptographic protocol that does not allow the Tor servers involved in the regular operation of the network to see a portion of the metadata about hidden services,” Hahn said.

Noubir commented that the ones snooping are trying to learn information about services like the .onion address where it is being operated on. They’re paper explains how the attack could use the information gained to build a list of targets to launch other attacks at.

“They’re trying to look inside the .onion and carry out user enumeration or run cross site scripting attacks, typical attacks you’d see against regular websites which are more interesting in context. If you’re running a hidden service, you don’t want to be discovered,” Noubir said.

The paper described one snooping directory as sending hourly queries to an Apache server for status updates, that are provided by mod status in Apache. More were executed using SQL injection, path traversal attacks, and XSS.

Running their investigation Noubir and Sanatinia used HOnions to detect these malicious nodes. They ran 1,500 at one time, on the daily, weekly or monthly schedule. Each answering to a process running locally that would log visits by those HSDirs. In the paper, they said that most of the 40,000 visits from that were logged were said to be automated and queried the root path of the server, but that they also didn’t detect manual probing in around 20 percent of the requests. Some of them would not visit a service right away after hosting it, to avoid suspicion and be detected.

 

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Controlled Delivery of MDMA Package Leads to Arrests

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A package containing 201 pink tablets of MDMA was intercepted by detectives at the Hernando County Sheriff’s Office in Florida. It was addressed to 23-year-old Daniel Lucht. A controlled delivery was then performed where the package was dropped off at Candlelight apartments, the apartment complex Lucht lived in.

MDMA-

Lucht’s roommate, 19-year-old Zachery Bilinski, arrived home shortly after the controlled delivery. He was met by police officers with a search warrant and the apartment was thoroughly searched through immediately. The search resulted in recovery of the package that contained 200 MDMA pill shaped like dominos (The police reported 201 in the intercepted package and 200 found at the apartment but it’s unclear if this is a typo.), three computers, 93 small Ziploc-type bags, and marijuana paraphernalia.

All three computers were used to order the pills. After the search and arrest, Lucht told detectives that he had purchased the 200 tablets of MDMA for $500 over the internet. He also incriminated Bilinski, claiming his roommate contributed $100 to the purchase. The pills were sold for less than regular street value and that “they” did it to help pay the bills, he told detectives.

Bilinski also admitted that he was involved with the purchasing the drugs online, and also to the inherent possession of them. Both suspects claimed the pills were not sold in Hernando, but instead in Tampa and Orlando where they traveled to clubs to “conduct their business.”

Both Bilinski and Lucht were charged with one count each of trafficking in MDMA, possession of a structure for the purpose of trafficking in a controlled substance and possession of paraphernalia, according to a local news source.

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How the Great Ethereum Schism Can End Well for Ethereum Classic (Part 2 of 3)

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Ethereum Classic is dominating the cryptocurrency news cycle. After a slumber of some days following the Ethereum hard fork that refunded investors of the hacked DAO, the unforked and re-named Ethereum blockchain and its native token classic ether (ETC) surged. Exchanges enabled trade in the digital currency, investors bought in, miners pointed their hardware to it, and a new development community began to form.

But Ethereum Classic also has led to chaos and uncertainty. The forked half of the chain — sometimes dubbed “Ethereum One,” and supported by the Ethereum Foundation — is still running as well. Ethereum has, therefore, effectively split into two networks. An unprecedented situation in the cryptocurrency space.

The question on everybody’s mind is, therefore: How will this end?

In this three-part series, Bitcoin Magazine provides an overview of some of the scenarios that circulate throughout the different Ethereum communities and the wider blockchain industry.

Part 1 of this series covered how the great Ethereum schism can end relatively well for Ethereum One (but not so much for Ethereum Classic).

In Part 2: How the great Ethereum schism can end relatively well for Ethereum Classic (but not so much for Ethereum One).

Author’s note: Not all scenarios or nuances may be accounted for, nor does inclusion in this list — or order thereof — say anything about likelihood.

Scenario 4: Ethereum Classic Overtakes (or Catches Up With) Ethereum One

Ethereum Classic may continue growing to the point where it catches up with, or overtakes, Ethereum One by market share and hash power. While this was originally a long-term plan at best for the Ethereum Classic community, the recent surge suggests it might happen much sooner than anyone expected.

This scenario could play out in several ways. Here are more sub-scenarios.

Perhaps Ethereum Classic draws in a whole new set of users that were never interested in Ethereum before. This could happen for multiple reasons. With the removal of a (perceived) central point of control — the Ethereum Foundation — Ethereum Classic seems to have attracted a new wave of interest already. Meanwhile, Ethereum Classic is cheaper to use than Ethereum One. And its dedication to censorship-resistance and immutability may attract a certain class of users and use-cases as well – especially since all properties of Ethereum One should be offered as well. And, of course, there may be other reasons.

Or, perhaps more and more Ethereum One users will switch back to Ethereum Classic. This could also happen for several reasons. It’s very unclear, for example, how much support the hard fork ever really had; this support may have been severely overstated. And even if the hard fork had much support before it happened, users may reassess their original position now that they are no longer financially invested in The DAO. Perhaps more of them will come to agree that immutability is a vital property of a blockchain, or that the Ethereum Foundation represents a single point of failure. Or maybe the Ethereum Foundation will make more controversial decisions, driving users away. And again, there may be other reasons.

There are also different possible outcomes if Ethereum Classic overtakes Ethereum One.

First of all: Ethereum One software clients will not automatically switch back to the (original) Ethereum Classic chain if it ever becomes the chain with the most proof of work. (This is also referred to as the “longest” chain — though it’s not really about length.) There would still be two separate chains, with two distinct currencies.

Regardless, more users may consider Ethereum Classic the “real” Ethereum from that moment on. Before and shortly after the hard fork, many proponents of the hard fork maintained that the “real” Ethereum would be the one with longest chain. If Ethereum Classic overtakes Ethereum One, by their own logic these users would have to switch back. (Or they would have to re-think their position on what determines the “real” Ethereum.)

Either way, Ethereum inventor and project lead Vitalik Buterin — on behalf of the Ethereum Foundation — has committed to work on the Ethereum One project. Assuming he does, the Ethereum Classic project could still copy code from Ethereum One, even if Ethereum One is much smaller. While it may be strange for the most important developers to primarily develop for a minority chain, it does not have to be a fundamental problem.

It is also possible, though, that the Ethereum Classic project develops a more distinct technological vision over time. In that case, Ethereum Classic and Ethereum One could copy code from each other — and reject what they don’t like.

Scenario 5: Ethereum One Splinters

As mentioned in Part 1 of this series, now that they appear viable, Ethereum coin-splits may happen more often. And, of course, that’s not only true for Ethereum Classic; Ethereum One may experience further splintering as well.

This scenario would closely resemble the scenario where Ethereum Classic splinters, except that it would be the Ethereum One community that branches out, or both Ethereum Classic and Ethereum One do. Perhaps in such a way that there will be no clear “main chain” at all. Instead, all different Ethereum projects could co-exist much like different altcoins do today (not counting Bitcoin.) They would vary in size and popularity over time, providing for different use-cases, with no clear winner.

Scenario 6: Only Ethereum Classic Lives On, Ethereum One Fails

As a sixth scenario, Ethereum Classic may not only overtake Ethereum One, but essentially “defeat” the fork attempt, and “restore” the pre-fork Ethereum chain as the one and only Ethereum chain.

Ethereum One failure scenarios relating to Ethereum Classic resemble the examples in Scenario 4, except that these scenarios would continue to play out until only the Ethereum Classic chain is left — perhaps as a sort of snowball-effect back to the original chain.

And there’s an additional category of scenario’s that could spell the end for Ethereum One entirely: scenario’s pertaining to the Ethereum Foundation. Since Ethereum One and the Ethereum Foundation are closely linked, the foundation may be cause for an exodus from Ethereum One to Ethereum Classic, which does not have such a (perceived) single point of failure.

For one, the Ethereum Foundation might change course itself. If the Ethereum Foundation ever switched focus back to Ethereum Classic, support for Ethereum One might just disappear entirely. This could happen voluntarily, perhaps for one of the reasons described in Scenario 4. Or maybe the Ethereum Foundation will be forced to focus on Ethereum One by court order; it has been suggested that legal cases are already in the making.

Or maybe key members of the Ethereum Foundation quit altogether. Perhaps voluntarily, because they don’t want to develop for the platform any longer. Or perhaps involuntarily, for instance due to mentioned legal trouble. And there are some darker scenario’s as well, scenario’s where “something bad” happens to these key members.

(Though in most of these scenarios, as pointed out in the first part of this series, Ethereum One could still live on as an irrelevant altcoin.)

In Part 3: How the great Ethereum schism can end badly for both Ethereum Classic and Ethereum One.

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