Major crypto exchanges are taking a watch-and-wait approach on whether to delist Ethereum Classic

The Ethereum Classic (ETC) blockchain recently suffered two 51% attacks, and major crypto exchanges are now closely monitoring the ETC situation before they decide on whether to delist the coin.

At least one exchange — Poloniex — did consider delisting ETC soon after the attacks, but ultimately decided not to do so, James Seibel, head of wallet engineering at Poloniex, told The Block.

"ETC is a major asset that goes back to the beginning of Ethereum's history and is an integral part of its story," Seibel told The Block. He added that ETC "still has a passionate group of followers that we want to continue to support."

Nonetheless, Poloniex is waiting for the ETC community to strengthen the network. And it isn't the only exchange that is watching and waiting. Kraken, OKEx, Huobi and OKCoin all told The Block that they are continually monitoring the ETC situation as it unfolds. Coinbase, Binance and Binance.US declined to comment, and Bitfinex did not return queries by press time. Most of these exchanges have disabled ETC deposits and withdrawals and have increased confirmation times.

OKEx, in fact, went on to say that it will be "forced to delist" ETC if the ETC community fails to prevent further attacks through additional safeguards. OKEx suffered a loss of $5.6 million in ETC's first 51% attack as the attacker was able to double-spend 807,260 ETC on the exchange.

"We are not yet satisfied that ETC has adequately dealt with the issue or done enough to communicate satisfactorily with its community about how to prevent this type of attack from happening again or at least significantly lower its possibility," OKEx CEO Jay Hao told The Block.

ETC's hash rate remains low, which makes it vulnerable to 51% attacks. According to Crypto51, ETC's hash rate is 3 TH/s (terahashes per second), and the theoretical cost to 51% attack ETC is $6,295 per hour. By comparison, Ethereum's hash rate is 188 TH/s, and it costs $394,015 per hour to 51% attack ETH. The theoretical cost is the amount of money needed to rent hash rate for a particular time period. For ETH, it is likely impossible to rent that much hash rate since there isn’t that much rentable hash rate for the network, making an attack unrealistic. 

In addition to OKEx, Binance also suffered "some losses" due to ETC's recent 51% attacks, CEO Changpeng "CZ" Zhao told Boxmining in an interview last week. But whether those losses are "sufficient for delisting, I'm not so sure," said CZ. He went on to say that Binance goes by the number of users of a network before taking a listing or delisting decision and that ETC still has "a very large user base."

"It's the original ethereum," said CZ.

Overall, exchanges remain concerned about ETC's low hash rate and want the community to take measures to improve the network's security.

Terry Culver, CEO of ETC Labs, which leads the development of the blockchain, told The Block that the "real solution is to make mining ETC more profitable as soon as possible."

"So we are researching ways to adjust the economics to increase miner retention," said Culver. He went on to say that the work with the mining community and exchanges is "immediate and on-going," and that a new mining algorithm will take "at least 6-9 months."

Yaz Khoury, director of developer relations at the non-profit Ethereum Classic Cooperative, told The Block that the organization recommended that ETC Labs move to the SHA-3 algorithm almost a year ago from the current Ethash algorithm. However, ETC Labs declined to switch at the time because "it interfered with their plans of ETH-parity." Both ETH and ETC are proof-of-work coins and currently follow the Ethash algorithm.

Khoury said ETC Labs is also under the impression that when Ethereum moves to a proof-of-stake (PoS) algorithm in Ethereum 2.0, miners will move from ETH mining to ETC mining. That, however, is not necessarily true, Khoury told The Block.

"It's wrong thinking," said Khoury. "Miners only mine what's profitable. If ETC becomes more active and its price doesn't increase, it's not profitable to miners."

Tim Ismilyaev, founder and CEO of Mana Security, which analyses crypto attacks, echoed Khoury's thoughts, telling The Block: "In general, miners usually don't care which coin to mine, if it's profitable. So the upcoming switch of ETH to PoS won't affect the ETC mining market."

The price of ETC has remained almost flat compared to ETH, meaning that mining ETH has turned out to be more profitable than ETC.

Source: CryptoCompare, The Block Research

As for improving ETC's hash rate and security, Charles Hoskinson of IOHK recently proposed to set up a treasury fund, but ETC Labs declined that proposal. Culver told The Block that the treasury proposal "would impose a 20% tax on miners," and would push miners away from ETC and make the network less secure.

Khoury argued that this is not true. "ETC has a monetary policy like bitcoin, with a supply cap. So at a certain block in time, ETC's mining reward decreases. If mining block rewards decrease after a certain time, it won't mean miners abandon the chain," Khoury told The Block.

Vitalik Buterin, on the other hand, suggested the ETC community shift to a proof-of-stake system. But ETC Labs' Culver told The Block: "We intend to remain with PoW [proof-of-work]."

Culver said ETC Labs is taking some other measures to improve the security of the network, including checkpoints, which could be added within the "next two months." Checkpoints help protect a blockchain network from a 51% attack because an attacker cannot reverse transactions made before the last checkpoint.

ETC Labs also recently hired law firm Kobre & Kim and blockchain analytics firm CipherTrace to investigate the 51% attacks. When asked about the progress of the investigation, Culver told The Block: "We have a full analysis of the flow of funds, wallets, and exchange addresses."

"Exchanges and mining pools are all cooperating, and through community collaboration, we have important information about the attackers," said Culver, adding: "We are working on getting governments in the relevant jurisdictions to open criminal investigations." Culver declined to provide specific details.

Khoury thinks that ETC “will find its own path,” because it possesses “historic value with a loyal amount of people using it.” ETC is also cheaper to use for transactions, said Khoury. Overall, he doesn’t think exchanges will delist ETC because the issue of 51% attacks “exists with smaller chains as well.”

But a solution is needed "that brings confidence back in exchanges to allow shorter confirmation times," for ETC, Khoury told The Block.

Culver said: "I expect the confirmation times to come down as we implement solutions to secure the network."