In a space of 24 hours, the cryptocurrency market has been hit by not 1 but 2 massive hacks costing the market over $US 20 million in losses. While the hack itself may not cost the market much in terms of dollar value the repercussions of these reports in quick succession will no doubt spread FUD across investors worldwide as we begin to not only see a sell-off in affected currencies Verge and Bitcoin Gold but the market in general
To find out more about yesterdays hack on Verge check out my post - Verge (XVG) Hacked AGAIN! 35 Million Coins Stolen
How was Bitcoin Gold Hacked?
This was no ordinary hack like we've seen before where a certain algo was exploited or keys were phished but an actual loss of control of the blockchain.
A malicious miner successfully executed a double spend attack on the Bitcoin Gold network last week, making BTG at least the third altcoin to succumb to a network attack during that timespan.
So how does one perform a double spend attack when the blockchain was the very concept that solved the problem?
Well hacker was able to the obtain enough hashpower to control the entire network. This is incredibly expensive — even on a smaller network like bitcoin gold — but it is worth it if you can be monetized by using it in tandem with a double spend attack.
To execute the attack, the miner acquired at least 51 percent of the network’s total hashpower (Here's looking at you Pied Piper), which provided them with temporary control of the blockchain. After gaining control of the network, the attacker began depositing BTG at cryptocurrency exchanges while also attempting to send those same coins to a wallet under their control.
Ordinarily, the blockchain would resolve this by including only the first transaction in the block, but the attacker was able to reverse transactions since they had majority control of the network.
The hacker or hackers were then able to deposit funds on exchanges and quickly withdraw them again, after which they reversed the initial transaction so that they could send the coins they had originally deposited to another wallet.
This may sound simple enough but its no easy feat and a lot had to go unnoticed for a hacker to pull off a job of this magnitude. Just goes to show some projects in crypto really seem to be asleep at the wheel.
Proof of weak security
It has been reported that a bitcoin gold address implicated in the attack has received more than 388,200 BTG since May 16 (mostly from transactions it sent to itself). Assuming all of those transactions were associated with the double spend exploit, the attacker could have stolen as much as $18.6 million worth of funds from exchanges.
From BTG block Explorer
The last transaction was sent on May 18, but it's not over just yet. The attacker could theoretically attempt to resume it if they still have access to enough hashpower to gain control of the blockchain once again.
Its safe to say you should start dumping your BTG as of right now if you want to protect against losses or hodl and pick up cheap sell orders now hoping that the price will pick up at a later date, all up to you and your appetite for risk.
A response from the Bitcoin Gold Team
Bitcoin gold’s developers advised exchanges to address the attack by increasing the number of confirmations required before they credit deposits to customer accounts. Blockchain data indicates that the attacker successfully reversed transactions as far back as 22 blocks, leading developers to advise raising confirmation requirements to 50 blocks.
To me, this doesn't really sound like they take much responsibility given the fact that they lost control of their own network. Shifting the onus on exchanges to update their protocal is fine but tell us what you're doing to stop it too. When coin projects release statements like this it only serves to prove that they are a shitcoin project in my eyes.
The effect on Bitcoin Gold's price
Since the news broke about 16 hours ago we've seen a sell-off begin naturally and the price has taken a beating losing 15% in the last 24 hours form a high of $51 to around $45 at the moment.
In the last day or so we've seen Bitcoin Gold lose about 100 million dollars in market cap as it continues to tumble as a result of the hack news.
Check out the live chart on Coin Market Cap
What I think of the hack
I am still of the opinion that any coin that hard forks from Bitcoin are a shitcoins. If a project cannot legitimately stand on its own due to its technology, application and ideologies around digital fiance then should it be around in the first place? Bitcoin gold in my eyes is just another me-too currency that uses the Bitcoin brand as leverage and confusing investors who want to get into cryptocurrency and see a cheaper Bitcoin alternative.
The hacks on these hard forked coins only serve to prove my point as to why we should not be fragmenting the community and perhaps these hacks are a necessary evil pushing investors out of projects going nowhere. We can then use that money to consolidate bitcoin and create a sizeable market cap that can support the industry going forward and help power alt coins that actually have a purpose and bring value to the market
Have your say
What do you think of Bitcoin Gold? How do you fork from the worlds safest protocal and suffer from a hack and a double spend hack at that, which was what the Bitcoin and blockchain protocal solved initially.
Do you own any hard forked coins? Is this bad for the Bitcoin brand? Should all Bitcoin forked coins be scrapped?
Drop me a comment like its hot!
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