Abraham Othman is a visiting scholar in the Operations, Information and Decisions department of the Wharton School (University of Pennsylvania). He is an advisor to a number of blockchain applications including Augur, Codex, and Decent.
Blockchain technologies have a well-earned reputation for hacking and fraud, but the recent theft of more than twenty million dollars of second-tier cryptocurrencies like Bitcoin Gold, Verge, and ZenCash was a fundamental attack on the core mechanisms that allow cryptocurrencies to function. The way that most blockchains (including Bitcoin and Ethereum) function now is called Proof-of-Work; miners must solve hard computational problems to add new blocks of transactions to the chain and the majority (i.e., 51%) of the computational power can determine what transactions appear in the public ledger.
In May and June, these second-tier cryptocurrencies suffered from what is called a “51% attack”, where attackers rented more processing power than the...