Dave Farber
2018-05-26 14:23:25 UTC
Date: May 26, 2018 at 8:10:52 AM EDT
Subject: [Dewayne-Net] Every cryptocurrency's nightmare scenario is happening to Bitcoin Gold
Every cryptocurrencyâs nightmare scenario is happening to Bitcoin Gold
By Joon Ian Wong
May 24 2018
<https://qz.com/1287701/bitcoin-golds-51-attack-is-every-cryptocurrencys-nightmare-scenario/>
Bitcoin Gold is a fork, or spin-off, of the original cryptocurrency, bitcoin. It shares much of the same code and works in a similar way to bitcoin, with Bitcoin Gold miners contributing computational power to process new transactions. That also means it faces the same vulnerabilities as bitcoin, but without the protections that come from the large, dispersed group of people and organizations whose computers are powering the bitcoin blockchain.
In recent days the nightmare scenario for any cryptocurrency is playing out for Bitcoin Gold, as an attacker has taken control of its blockchain and proceeded to defraud cryptocurrency exchanges. All the Bitcoin Gold in circulation is valued at $786 million, according to data provider Coinmarketcap. Blockchains are designed to be decentralized but when an individual or group acting in concert controls the majority of a blockchainâs processing power, they can tamper with transactions and pave the way for fraud. This is known as a 51% attack.
The possibility of a 51% attack has been one of the concerns institutions such as banks and tech companies have had over the years about using the blockchain for transactions; some have worried that the Chinese government could at some point endeavor to do that, ordering all of the Chinese bitcoin miners to act in concert. Itâs unlikely for bitcoin, but for smaller cryptocurrencies, 51% attacks are a concern, one dramatized on a recent episode of HBOâs series Silicon Valley.
Cryptocurrency miners commit their computer processing powerâor hash powerâto adding new transactions to a coinâs blockchain. They are rewarded in units of the coin in return. The idea is that these incentives create competition among miners to add more hash power to the chain. The more hash power is added, the better the chances of winning a reward.
So whatâs a 51% attack? Itâs when a single miner controls more than half of the hash power on a particular blockchain. When this happens, that miner can mess with transactions in a bunch of ways, including spending coins twice. This is the âdouble-spending problem,â a puzzle surrounding digital money that has vexed computer scientists for yearsâand which was solved by bitcoin. But the solution only holds if no single miner controls the majority of the hash power on a chain.
Bitcoin Gold has been experiencing double-spending attacks for at least a week, according to forum posts by Bitcoin Gold director of communications Edward Iskra. Someone has taken control of more than half of Bitcoin Goldâs hash rate and is double-spending coins. Since an attacker must spend coins in his or her possession, and canât conjure up new coins, the attack is somewhat limited.
Whatâs happening now, according to Iskra, is that exchanges that automatically accept large deposits are being targeted. The fraudster deposits Bitcoin Gold into an account at an exchange, where coins are traded. Once the exchange credits the Bitcoin Gold to the attackerâs account, the attacker trades those coins for another cryptocurrency and withdraws it. The attacker can repeatedly make deposits of the same Bitcoin Gold it deposited in the first exchange and profit in this way.
A bunch of other cryptocurrencies have been attacked in similar ways recently. Something called Verge has been hit twice in the last two months, leading to $2.7 million being stolen. The exotic-sounding coins Monacoin and Electroneum have also suffered from 51% attacks not too long ago.
[snip]
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-------------------------------------------Subject: [Dewayne-Net] Every cryptocurrency's nightmare scenario is happening to Bitcoin Gold
Every cryptocurrencyâs nightmare scenario is happening to Bitcoin Gold
By Joon Ian Wong
May 24 2018
<https://qz.com/1287701/bitcoin-golds-51-attack-is-every-cryptocurrencys-nightmare-scenario/>
Bitcoin Gold is a fork, or spin-off, of the original cryptocurrency, bitcoin. It shares much of the same code and works in a similar way to bitcoin, with Bitcoin Gold miners contributing computational power to process new transactions. That also means it faces the same vulnerabilities as bitcoin, but without the protections that come from the large, dispersed group of people and organizations whose computers are powering the bitcoin blockchain.
In recent days the nightmare scenario for any cryptocurrency is playing out for Bitcoin Gold, as an attacker has taken control of its blockchain and proceeded to defraud cryptocurrency exchanges. All the Bitcoin Gold in circulation is valued at $786 million, according to data provider Coinmarketcap. Blockchains are designed to be decentralized but when an individual or group acting in concert controls the majority of a blockchainâs processing power, they can tamper with transactions and pave the way for fraud. This is known as a 51% attack.
The possibility of a 51% attack has been one of the concerns institutions such as banks and tech companies have had over the years about using the blockchain for transactions; some have worried that the Chinese government could at some point endeavor to do that, ordering all of the Chinese bitcoin miners to act in concert. Itâs unlikely for bitcoin, but for smaller cryptocurrencies, 51% attacks are a concern, one dramatized on a recent episode of HBOâs series Silicon Valley.
Cryptocurrency miners commit their computer processing powerâor hash powerâto adding new transactions to a coinâs blockchain. They are rewarded in units of the coin in return. The idea is that these incentives create competition among miners to add more hash power to the chain. The more hash power is added, the better the chances of winning a reward.
So whatâs a 51% attack? Itâs when a single miner controls more than half of the hash power on a particular blockchain. When this happens, that miner can mess with transactions in a bunch of ways, including spending coins twice. This is the âdouble-spending problem,â a puzzle surrounding digital money that has vexed computer scientists for yearsâand which was solved by bitcoin. But the solution only holds if no single miner controls the majority of the hash power on a chain.
Bitcoin Gold has been experiencing double-spending attacks for at least a week, according to forum posts by Bitcoin Gold director of communications Edward Iskra. Someone has taken control of more than half of Bitcoin Goldâs hash rate and is double-spending coins. Since an attacker must spend coins in his or her possession, and canât conjure up new coins, the attack is somewhat limited.
Whatâs happening now, according to Iskra, is that exchanges that automatically accept large deposits are being targeted. The fraudster deposits Bitcoin Gold into an account at an exchange, where coins are traded. Once the exchange credits the Bitcoin Gold to the attackerâs account, the attacker trades those coins for another cryptocurrency and withdraws it. The attacker can repeatedly make deposits of the same Bitcoin Gold it deposited in the first exchange and profit in this way.
A bunch of other cryptocurrencies have been attacked in similar ways recently. Something called Verge has been hit twice in the last two months, leading to $2.7 million being stolen. The exotic-sounding coins Monacoin and Electroneum have also suffered from 51% attacks not too long ago.
[snip]
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