Each cryptocurrency token commands a small army of fierce supporters. For many, the only cryptocurrency that deserves such strong support is Bitcoin ( BTC ). But what is Bitcoin really, what is its purpose, and how can it be fully optimized?
The division among those trying to answer these questions led to the creation of Bitcoin Cash ( BCH ), the most successful branch of Bitcoin. While for some BCHs it has been the answer to cryptocurrency problems, the currency has had some significant problems of its own in recent months. From a multi-million dollar hack to a new mining tax, BCH is dividing its community like never before.
Bitcoin Cash: Divider by nature
Bitcoin , in its original form, was invented by a mysterious figure known only as Satoshi Nakamoto. Its creation went from being an ambitious project that was whispered in libertarian circles and enthusiastic coders to the global financial industry in its own right. But while Bitcoin was developing, discussions appeared about the direction in which it was growing, and about the fundamental parameters of the technology.
Scalability is one of the most fundamental issues for any cryptocurrency. Although Bitcoin is the largest and best known cryptocurrency, it still struggles with the same scalability problems. The size of the Bitcoin block was limited to 1 megabyte, but such a limit creates long delays in the processing times of transactions, since it reduces the total number of transactions that can be carried out in each block.
This is where BCH comes into play. The developers resized the block size from 1 MB to 8 MB. They expected this to increase the number of transactions per second to rival payment titans such as PayPal and Visa. But inevitably, philosophical differences arose. The center of the problem was in what people consider the purpose of Bitcoin. For those who believe that Bitcoin is a store of value, slower transaction times are not a big deal. But for those who believe that Bitcoin is an exchange of value, reducing processing speeds and costs, thus maximizing practical applicability, is paramount.
Consequently, Bitcoin Cash was started in 2017 by Roger Ver . A quick glance through Crypto Twitter reveals that the vehement disagreement between the two Bitcoin sectors remains very frequent. But the dispute is not limited to the central nature of Bitcoin. The new cryptocurrency projects not only face new security problems, but also the challenges of living up to the ideals of their creators. And, as the last weeks have shown, it is no different for BCH.
See gets involved in BCH hacking
Investing in cryptocurrency is notoriously risky. Although security has advanced by leaps and bounds, investors still run a significant risk of being hacked. Since it seems that almost every week a high profile hacking takes place in the world of cryptocurrency, not even the most experienced investors are safe from cybercriminals. Earlier this week, BCH again became the center of attention after an attacker stole 30 million dollars in cryptocurrencies from a prominent investor in a purse hack.
While rumors about the victim of the billionaire hack were initially extended, a post now deleted in Reddit on February 22 revealed that the victim is Josh Jones, founder of Dreamhost, the web hosting company. It seems that the hacker compromised Jones' SIM card, but it is not yet known whether it was the result of what is known as a “SIM swap” (Sim Swap). In the deleted Reddit post, Jones asked for help, requesting that BCH miners not validate the transactions:
“He has only had 3 confirmations. If any miner or the community can help in any way, I have the private keys. Help, help, help … A great reward, obviously.”
Hacks occur with a depressing frequency in the world of cryptocurrencies. But when a targeted attack of this type takes millions of dollars in one of the most prominent cryptocurrencies, it attracts attention at the highest level, although perhaps not for the obvious reasons. In an exclusive interview with Cointelegraph, it seems that Ver saw the positive side of Jones' bad fortune:
“Here is someone worth at least 45 million dollars, and is choosing to keep most of that in Bitcoin Cash, not what everyone calls Bitcoin today. Therefore, it is a very, very bullish sign for Bitcoin. Cash the fact that someone with so much money keeps it in Bitcoin Cash and not the same amount in Bitcoin, BTC. That's something very, very important. ”
In fact, Ver's enthusiasm extended beyond his support for Jones for maintaining such a large amount of BCH. See told Cointelegraph that the attack could have positive implications for the cryptocurrency, indicating that despite the tragedy, its intrinsic value is high enough to attract criminal interest:
“The fact that hackers are willing to steal Bitcoin Cash means that it is something worth stealing, that it is something valuable. If it were not valuable, it was not worth it, hackers would not be trying to steal it.”
See was not optimistic about Jones' ability to recover stolen funds. Ver admitted that he thought the impossibility of recovery was due to the intrinsic nature of cryptocurrencies. Answering a question from Cointelegraph, Ver admitted that there is nothing that can be done:
“No, and hopefully, I wish there was to some extent. But, on the other hand, that is the purpose of cryptocurrencies, that transactions are irreversible.”
Although Ver had no wise words for the victim of the attack, he inadvertently seemed to give the hacker advice on how to effectively avoid being brought to justice:
“The fact is that there really isn't anything anyone can do unless the hacker is so dumb as to deposit the coins directly into an exchange without sending them through any type of, you know, fungibility tool of any kind. Something like, you know, CoinShuffle or CashFusion in Bitcoin Cash. There are a lot of great tools in Bitcoin Cash to enable that. In this case, it's a bit sad that those tools are going to be used to help a hacker. ”
Twitter critics discuss the consequences for BCH
Dovey Wan, a founding partner of the Primitive Crypto cryptocurrency asset fund and a loud Twitter commentator, was quick to express his views on the multi-million dollar hack. The Reddit post that Jones deleted did not escape the opportunity for Wan's eagle eye to spot him and she managed to make a screenshot. Wan attached the post in a thread, criticizing him for storing such a large amount of cryptocurrency in a wallet accessible by cell phone.
But the objectives of Wan's timely criticism were not limited only to Jones. Wan postulated that the hacker was probably in the process of dividing stolen funds to make them easier to sell on exchanges.
Wan, a Bitcoin maximalist, also seemed to hint that hacking could have dire consequences for BCH, writing that only “double spending can help this poor guy now.” Wan also tweeted that the hacking, along with an unspecified dispute between Ver and Bitmain's CEO, Jihan Wu, could cause a “slow death” for the cryptocurrency.
Is cryptocurrency security up to par?
BCH hacking brings the issue of security back to the forefront. It seems that Wan criticized the mobile nature of Jones' wallet, but according to Kaspersky's security team chief Pavel Pokrovsky, mobile wallets are not intrinsically risky, but depend on the implementation:
“Normally, purses developed by large cryptocurrency-related companies that have passed security assessments can be considered more reliable compared to purses developed by individuals. Very often we deal with cases of identity theft or phishing, when applications for wallets are developed specifically for the purpose of stealing funds. Targeted attacks also occur, although they are not specifically related to mobile wallets. ”
Although Pokrovsky does not believe that the mobile nature of the wallet is to blame for the hacking, he admitted to Cointelegraph that BCH hacking was unusual, adding: “This situation should be evaluated more deeply. For example, this could be a case in which funds were stored in an abandoned purse or were targeted. ” Pokrovsky explained to Cointelegraph that Jones may have been the target of hackers because his SIM card could have been compromised:
“In this case, some sources claim that a SIM exchange took place. So, if this is the case, it is most likely that the victim was subject to a targeted attack. Someone knew that his purse was connected to a specific telephone number and organized the fraud with the exchange of SIM. Then, if this is true, it could have been easily avoided by storing the funds in an offline storage, for example, in a paper wallet or paper wallet. ”
Although efforts are being made throughout the sector to increase security, the skills of cybercriminals continually adapt. Pokrovsky told Cointelegraph that by virtue of their digital nature and as long as cryptocurrencies continue to grow in value, they will face many of the same security problems as the conventional financial industry. Despite security challenges throughout the sector, Pokrovsky believes that BCH is not easier to steal than other cryptocurrencies:
“BCH is based on the same principles as BTC. The most vulnerable element remains a human. In this case, if it were a SIM-related fraud, it could have been any cryptocurrency: BTC, ETH, etc.”
The tax collector is coming
It is said that only two things are guaranteed in life: death and taxes. Although BCH investors are likely to live to see another day, the tax collector arrived earlier than expected. Last month, BCH's main personalities, including Jihan Wu and Roger Ver, proposed a 12.5% mining tax on the community.
Published on January 22, the “infrastructure financing plan” provides that a percentage of mining rewards go to a Hong Kong-based entity. Co-signing entities accounted for 27% of hash rates. The most controversial aspect of the proposal was its intention to “leave orphans” to miners who did not comply with the regulations, removing the blocks from the chain.
The plans for the tax quickly attracted criticism from some high profile individuals. Brad Mills, a cryptocurrency commentator and partner of Xsquared Ventures, seemed to blame Ver and accused BCH of several defects – including the lack of decentralization and security – in a January 23 tweet :
“[A couple of months ago] Roger announced a huge BCash fund. He knew there was a trap. Today, Roger put a 12.5% tax on BCH! Roger has become all that and even worse than he accused Blockstream during 2016/2017. Taxes, checkpoints, EDA, centralized, 51% attack. BCH is NOT Bitcoin. ”
Only four days later, Ver dissociated himself from the controversial tax initiative in a statement published on Bitcoin.com, in which he flatly rejected the proposed tax until fundamental changes were made: “As it stands now, Bitcoin.com will not support any plan unless there is more agreement in the ecosystem so that the risk of a chain break is negligible. ”
Although Bitcoin.com recognized the visceral reaction of community members, the publication hinted that, at some point, changes would have to be made: “Developer financing is an important issue to solve and that an appropriate financing mechanism will help Bitcoin Cash will continue to grow as fast and reliable money for the world. ” The publication concludes with a call for flexibility on how to reach an effective and permanent conclusion:
“A permanent proposal would, in effect, be a white letter for development and would encourage 'development for the sake of development', which would frustrate the purpose of fundraising […] to create fast and reliable digital money on a stable Bitcoin protocol, largely unalterable and economically rational. ”
Leaving the red zone?
It has been a tumultuous month for investors in the BCH community. The token is firmly in red, although this could be partly attributed to the instability that is currently being observed in world markets due to the effects of the coronavirus globally.
The community could have won a small victory after Ver lowered the mining tax, but reading between the lines, it seems that there will have to be a change to address issues related to the ecosystem agreement.
Regardless of whether the $ 30 million hack was specifically directed at BCH or Jones himself, faith in the token has been somewhat shaken and is likely to have played a role in the 23% price drop that the currency had this week (at the close of the edition). Recent analyzes have shown that the bulls will try to bring the token to 360 dollars, but it remains to be seen if they can succeed and if investors are able to put their trust once again in the cryptocurrency in conflict.
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