🚽 Exchange Jams Ethereum ☠️ Binance Syscoin Hack? — Cryptos for the Rest of Us
🚽 Exchange Jams Ethereum
What’s the Story?
The Ethereum network was hit with significant traffic a few days ago. Transaction fees spiked to above $5 to cope and the network remained congested for a while.
It turns out the cause was FCoin, a new crypto exchange launched by the ex-CTO of Huobi exchange.
Many exchanges have a voting mechanism to allow the community to vote in new tokens to be traded on the exchange. FCoin changed this model and used a ‘cumulative deposit’ mechanism for voting. In this model, users ‘vote’ for a token by depositing said token into an FCoin account.
This encourages users to create multiple accounts and send their token into each one. This is known as a ‘Sybil’ attack on a network.
Naturally, every ERC20 project wants to get listed so they all engaged in this process. As a result, the Ethereum network got slammed with traffic.
Is this bad?
FCoin already has a controversial model. They reimburse all trading fees by paying out users in their native token FCoin. This process is known as ‘trans-fee mining’.
As a result, there has been an absurdly high transaction volume reported on FCoin. Coingecko lists their 24-hour volume as over $1.7bn. Binance has $1bn. It’s been suggested that there are significant wash trading and price manipulation going on.
This has caused some prominent community members to speak up:
You pay transaction fees to the platform with BTC and ETH. Then the platform pays ‘100%’ back to you with its token. Isn’t it just buying platform token with BTC and ETH? How is this different from an ICO?
“If an exchange doesn’t get revenue from transaction fees and solely profits from the price of its token. How would it survive without manipulating the token price? Are you sure you want to play against a price manipulator? The same price manipulator who controls the trading platform?”
– CZ, Binance
It’s been suggested that the ‘cumulative vote’ model is designed to generate controversy. If it’s a PR exercise, it’s certainly paying dividends.
🗞️ News Roundup
“Hector”, as the Redditor from Venezuela became known, talks to us on how he has used NANO donations to buy food for his community, and shares his thoughts on cryptocurrencies.
The cryptocurrency market has dropped by over 70% since January, but the world’s largest crypto exchange is still expected to rake in a hefty profit.
Ethereum creator Vitalik Buterin talked about a wide range of topics during an interview with Jon Evans at TechCrunch Sessions: Blockchain. He was surprisingly balanced and stated multiple times that everyone has different needs and it’s hard to live in a world where everything is centralized or decentralized.
Bancor, a crypto company that touts a decentralized exchange service, has lost some $23.5 million of cryptocurrency tokens belonging to its users following a hack.
☠️ Binance Syscoin Hack?
This is an unpublished story from 2 weeks ago.
What’s the Story?
Binance suspended trading mid-week after unusual trading in Syscoin (SYS). The halt came after 1 SYS jumped in price and traded for 96 BTC (~$600,000).
At the same time, people noticed the network processed blocks with output values that exceeded SYS total token supply. This sparked fears of a hack.
While details are scarce, it appears there were two separate incidents with Binance APIs and SYS miners.
Syscoin had a schedule miner update. This update was designed to fix a bug in fee calculations. July 3 was the deadline for this update and failure to do so would prevent miners from operating.
Just ahead of the deadline the larger miners raised their fees. This led most of the transactions to flow to the smaller miners. As a result, hundreds of transactions were batched into blocks with large output values.
The Syscoin team have said that this is expected behaviour. However, they noticed a wallet with 48 million SYS started sending many withdrawal requests. It’s assumed that these requests contributed to the abnormally large blocks.
While investigating this unusual activity the Syscoin team requested exchanges halt trading. Bittrex and Poloniex complied immediately but Binance opened their own investigation.
There is nothing conclusive yet. The Syscoin team have said that the unusual trading activity was not the result of a glitch in their blockchain.
Following the halt, Binance reset their API keys. This could indicate that some of their users’ API keys were compromised which resulted in the unusual SYS trading. It’s been noted that 7,000 BTC was withdrawn from Binance following the unusual activity.
Binance has since set up a fund dedicated to covering losses from such incidents.