UNKNOWN

MAY 2018

PERU

BITINKA

DESCRIPTION OF EVENTS

"Bitinka Limited is a Peruvian-owned fintech. Founded in 2014 with only 15 employees, it now employs almost 90 and has 15,000 transactions per day." "Although the company is wholly Peruvian, it is still headquartered in Hong Kong. This move was immediately read as a desire to operate in a global market." "The company runs two platform-related businesses: Bitinka and Inkapay. The former is fundamental for the exchange of cryptocurrencies, while the latter is a payment gateway based on blockchain technology."

 

"Bitcoin Gold was the second fork of Bitcoin when it went live in November 2017 (amidst a few technical issues that occurred pre-launch). Albeit being marketed as a cryptocurrency supporting decentralized mining through an ASIC-resistant mining algorithm, critics of the cryptocurrency called it a “cash grab.” Yet, most bitcoin holders were given free BCG coins relative to their holdings of Bitcoin, so most welcomed the “free money.”"

 

"In a May 11th blog post, the Bitcoin Gold team made Bitcoin Gold (BTG) holders aware of attempts to attack the Bitcoin Gold network. Exchanges were also asked to guard against the attack since potential attackers were likely to profit by double spending coins in exchange transactions. The blog post was updated on the 24th of May to announce that a dreaded 51% attack occurred on the network between the 16th and the 19th of May 2018. The attack on Bitcoin Gold also involved rented hashpower from cloud mining services."

 

"Traders of the coin, established in 2017 through a hard fork of the main Bitcoin (BTC) network, have been tracing the attack since last week."

 

"Scrutiny of unusual activity on the network has revealed the scheme, in which "double spending" attacks have been launched against cryptocurrency exchanges trading the virtual currency."

 

"A Bitcoin Gold wallet linked to the double spend scheme has received over 388,000 BTG, which is currently worth about $18 million, according to data from CryptoCompare. Most of the coins have now been transferred to various other addresses and only about 13,000 BTG are left in it."

 

"Bitcoin Gold—already one of the worst performing cryptocurrencies in 2018—faced even more problems after the attack. Bittrex delisted BTG following the BTG team’s refusal to pay compensation of 12,372 BTG. Exchanges including Bittrex, Binance, Bithumb, Bitinka, and Bitfinex lost an estimated $18 million worth of coins due to the double spend attack. Bittrex blamed the Bitcoin Gold team for negligence and demanded compensation in order to keep the cryptocurrency listed."

 

"In response, the Bitcoin Gold team stated that 51% attacks are a known risk in the ecosystem. They added that the BTG organization was not responsible for the attack since it was not caused by flaws in the Bitcoin Gold blockchain or code. Additionally, the team cited warnings it gave prior to the attack as well as the assistance it gave exchanges for defending themselves.

 

The BTG team also claimed that the network upgrade carried out in July 2018 will reduce the likelihood of another attack on the network. Bittrex ended up delisting the coin, along with several others. Bitcoin Gold still survived as the 27th most capitalized coins on CoinMarketCap."

In 2018, a string of Bitcoin Gold 51% attacks targeted multiple platforms including Bitinka. In response to these attacks, the block confirmation times were increased.

HOW COULD THIS HAVE BEEN PREVENTED?

51% attacks can be prevented through a mix of increased block confirmation times and setting checkpoints to prevent large-scale rollbacks. This means the exchange will not credit deposited funds, or nodes will be prevented from accepting the attacking chain.

 

Check Our Framework For Safe Secure Exchange Platforms

Sources And Further Reading

 For questions or enquiries, email info@quadrigainitiative.com.

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