Categories
Coindesk News

Blockchain Bites: BlockFi Hacked, Block.one Sued, BitMEX Down

Today, BlockFi disclosed a SIM-swapping attack that revealed personal information related to a large swath of the firm’s clients. While customer funds are secure, BlockFi said, their names and addresses were compromised along with their activity histories.

This security breach comes on the heels of a cryptojacking exploit targeting European supercomputers researching COVID-19. Elsewhere, class-action lawsuits have been brought against Block.one and chip-maker Nvidia, while the little-known firm BMA is suing BitMEX for allegedly orchestrating the largest financial crime in American history. Here’s the story:

You’re reading Blockchain Bites, the daily roundup of the most pivotal stories in blockchain and crypto news, and why they’re significant. You can subscribe to this and all of CoinDesk’s newsletters here. 

Top Shelf

BlockFi Hack
BlockFi said an attacker got hold of users’ data by compromising an employee’s phone and taking control of the person’s phone number through a SIM-swap attack. The New York-based crypto lending platform announced in a memo to users on Tuesday that a hacker – whose identity remains unknown – gained access to some of its retail marketing systems for just over an hour early on May 14. The hacker accessed confidential data such as names, dates of birth, postal addresses and activity histories but was unable to withdraw user funds or access other sensitive account information including bank account details, Social Security and tax identification numbers.

BitMEX Down
The trading engine for BitMEX, formerly the largest bitcoin derivatives exchange measured by open interest, went down on Tuesday, according to the exchange’s status page. BitMEX supported roughly $2.2 billion in bitcoin futures trading volume over the last 24 hours, according to Skew, and is investigating the incident.  

RICO Violations?
BMA LLC, the Puerto Rican company that two weeks ago filed a lawsuit again Ripple, has accused the BitMEX derivatives exchange of orchestrating the largest financial crime in American history. The filing envisions a vast racketeering conspiracy designed to reap billions in illegal profit through wire fraud, money laundering, unlicensed money transmission, interstate transport of stolen property and violations of the Racketeer Influenced and Corrupt Organizations Act, or RICO.

Block.one CEO Brendan Blumer speaks at the Voice launch event, June 2019. (Photo courtesy of Block.one)
Block.one CEO Brendan Blumer speaking at the launch of the Voice social media network (Photo from CoinDesk archives)

EOS Class-Action
A cryptocurrency investment fund has launched a class-action lawsuit against Block.one and EOS’ high command, arguing the “fraudulent scheme” failed to deliver on its primary promise of decentralization. In a recent filing, plaintiffs argue CEO Brendan Blumer, CTO Dan Larimer, former Chief Strategy Officer Brock Pierce and former partner Ian Grigg purposefully misled investors and artificially inflated the EOS token price during the yearlong ICO, which raised a total of $4.1 billion between June 2017 and June 2018. Last year, Block.one reached a settlement with the Securities and Exchange Commission over running an unregistered security sale. 

Misleading Games
A recent filing shows that disgruntled investors are still pursuing action against Nvidia, the multinational chip-making giant, accused of under-reporting its sales of hardware used to mine cryptocurrency. The shareholder class-action lawsuit accuses CEO Jensen Huang, CFO Collette Kress and Jeff Fisher, senior vice president and head of gaming, of misleading investors by saying increased sales of its chips came from gamers rather than the unsustainable 2017 crypto mining boom. 

Smashing Private Keys
Tornado Cash, a privacy tool for obfuscating the history of ether transactions, is now fully permissionless. Developers used a cryptographic method known as multi-party computation (MPC), to eliminate their private keys and make the protocol completely trustless. 

vitalik-buterin-2
Vitalik Buterin photo from CoinDesk archives

Monopoly Busting Blockchain
Vitalik Buterin has called for lawmakers to be more accommodating to blockchain protocols, saying they can help antitrust agencies fight monopolies and anti-competitive behavior. Together with a Harvard economist, the creator of Ethereum argued in a newly-published paper that blockchain and antitrust agencies “share a common goal” in decentralizing economies. 

Giancarlo Joins 
Former U.S. Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo is advising a coronavirus relief effort. The Open Initiative is prepared to grant more than $200,000 to tech-driven – and preferably blockchain – solutions to the current crisis. 

Libra Hire
Libra has added a former U.S. government official as its general counsel, its second add from the Financial Crimes Enforcement Network (FinCEN). Announced by the Libra Association Tuesday, Robert Werner joins the project with “a wealth of regulatory, financial crime compliance and enforcement experience” from his previous roles as FinCEN director and director of the Office of Foreign Assets Control (OFAC).

Cryptojacking
European supercomputers programmed to search for a coronavirus vaccine were hijacked last week to mine the privacy crypto monero. The hackers had gained entry via stolen remote access credentials from individuals authorized to operate the machines, and many of the affected computers are still down pending investigation. 

Black Market Mixing
Bitfury’s crypto analytics unit Crystal Blockchain issued a report showing bitcoin mixing services are on the rise. According to the report, the share of bitcoin sent to mixers by darknet entities rose to 20% in Q1 2020 as compared to just 1% in Q1 2019, The Block reports. 

https://www.flickr.com/photos/94861732@N04/45967293594/in/photolist-2d2YoUJ-2guRBmN-2guS5uM-2guRBvR-2guRKhH-2guRKXk-2guScNV-2guScG7-2guRK4S-2guSaPu-QnGa62-2guRKGW-2guRKEw-2guRKzb-2guSdry-2guSdhR-2guSdaS-2guRL5K-2guRL1m-2guSdPn-2guSdLS-2guRKPj-2guRKL3-2guRKoQ-2guRKc2-2guRK8u-2guScZg-2guScUB-2guRJWn-2guScJB-2guRJPi-2guScEP-2guRJJJ-2guRHXt-2guS5xc-2guRBAq-2guS5ub-2guS5qZ-2guRBqv-2guRBtg-2guS5mv-2guRBor-2guRBiS-2guRBk5-2guRyRC-2guRyPZ-2guRJEF-2guScvF-2guRJyJ-2guRJwj
DTCC’s Jennifer Peve, image from CoinDesk archives

Eying Blockchain
Depository Trust & Clearing Corporation (DTCC), a giant of financial markets infrastructure, is studying whether distributed ledger technology (DLT) could accelerate its processing of securities. DTCC revealed two projects Monday aimed at integrating DLT with capital markets: Ion, a proof-of-concept alternative settlement service and Whitney, a security token method of private securities issuance and exchange. The corporation handles nearly $2 quadrillion in securities every year, almost the entirety of the U.S. securities market. 

tBTC Bug
After pausing the tBTC protocol, which brought Bitcoin onto Ethereum, developer Matt Luongo clarified his decision without going into detail as to what went wrong. The Thesis team said it discovered a bug, but will not disclose details until all funds have been safely withdrawn from this iteration of tBTC. The team is helping users withdraw deposited BTC.

Proof of Societal Value
“Much ink has been spilled on the question of bitcoin’s energy footprint. But amid the clarifying details and the energy mix calculations we have lost sight of the most important questions,” CoinDesk columnist Nic Carter writes in his latest op-ed. Central to the debate are the inefficiencies baked into the global energy sector, including line-loses and the overbuilding of energy infrastructure in Chinese provinces, as well as bitcoin’s considerable consumption and CO2 externalities. Ultimately, it’s about tradeoffs. The Bitcoin network is an open system, “which is paid for,” both in fees and energy consumption. 

Market Intel

Difficult Adjustments?
Days after the biggest non-event of the year, the Bitcoin halving, holders are counting down to the next milestone on the blockchain: the latest “difficulty adjustment,” expected Tuesday around 5 p.m. ET. This automatic mechanism occurs roughly every two weeks, and is expected to make mining easier. “And like the halving, it’s expected to be uneventful,” the First Mover team said. However, it’s an essential way to regulate the network, enticing miners to stay on, reducing confirmation times and also ensuring more equitable payouts. You can get First Mover in yer mailbox here.

Bitcoin Burst
Wrapped Bitcoin on the Ethereum blockchain in the form of the WBTC ERC20 token has doubled to nearly $23 million worth in tokens in the last two weeks. This follows a vote at Maker to introduce the token as a form of collateral on the protocol. (Decrypt)

Untethered
Yesterday, Tether, the largest stablecoin tied to the U.S dollar, had fallen below par value for the longest stretch since bitcoin hit 12-month lows in March. This deviation is partially explained by increased demand for bitcoin and bitcoin futures, with investors trading in stable assets for the cryptocurrency. Tether’s dip below $1 also coincides with a brief respite of new token issuances. 

The Breakdown

Albert Wenger on World Historical Shifts
Albert Wenger is a partner at Union Square Ventures and the latest guest on The Breakdown podcast. The conversation touches on core ideas in Wenger’s “World After Capital,” an evolving digital book project that looks at a set of megatrends as the world moves between economic paradigms from the Industrial Age to the Knowledge Age. 

Who Won #CryptoTwitter?

https://twitter.com/aprilaser/status/1262559270706561025

coindesk_newsletters_1200x400_22
Subscribe to receive Blockchain Bites in your inbox, every weekday.
Disclosure Read More

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.



Source link

Categories
Coindesk News

Company That Sued FTX and Ripple Now Sets Its Sights on BitMEX

BMA LLC, the Puerto Rican company that two weeks ago filed a lawsuit again Ripple, has accused the BitMEX derivatives exchange of orchestrating the largest financial crime in American history.

The little-known firm, formerly known as Bitcoin Manipulation Abatement and controlled by Pavel Pogodin, filed suit in the U.S. District Court for the Northern District of California on Saturday, alleging that HDR Global Trading, the parent company of BitMEX, perpetrated a vast racketeering conspiracy designed to reap billions in illegal profit.

This plot featured wire fraud, money laundering, unlicensed money transmission, interstate transport of stolen property and violations of the Racketeer Influenced and Corrupt Organizations Act, or RICO, BMA alleges.

In a statement, an HDR spokesperson said the company was aware of the complaint, “which is clearly rehashed from information culled from the internet,” and that it would be defending itself “vigorously against this spurious claim.”

“BMA has recently emerged as a serial filer of claims against companies operating in the cryptocurrency space, and is widely recognised for operating just like a patent troll,” the statement added. “We will deal with this complaint through a normal litigation process and are entirely confident the court will see the claim for what it is.”

BitMEX’s failure to secure a money transmitter licence and its ties to U.S. customers means it processed $3 billion in illicit finances each day, BMA alleges, “which is the record volume for such unlawful activity in the entire history of the monetary regulation in the United States.”

BMA also alleges BitMEX manipulated the cryptocurrency markets by artificially boosting the price of bitcoin. The exchange allegedly traded against customers, tied its futures indices to illiquid spot market exchanges that it would then manipulate and capitalized on its schemes with staged “technical glitches” that prevented customers from exiting their positions.

Plaintiff fired shots over BitMEX’s 100x leverage trading options and said founder Arthur Hayes was “cryptocurrency’s P.T. Barnum.”

“Describing trading on cryptocurrency as ‘the entertainment business,’ [Hayes] has embraced a role as showman and promoter for the ‘degenerate gamblers he solicits, and encourages speculative trading by flaunting his lavish lifestyle and making bold predictions designed to elicit responses and move the market in a way that is profitable for BitMEX,” BMA claimed in the suit.

BMA and Pogodin have gone after cryptocurrency headliners before. In November BMA targeted FTX on accusations of price manipulation before voluntarily dismissing its case just over a month later. 

Disclosure Read More

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Source link

Categories
Coindesk News

BitMEX Is Making Bitcoin Network More Expensive for Everyone, Researcher Finds

Every day, around mid-morning New York time, the average fee bitcoin users worldwide pay to send the cryptocurrency spikes for up to an hour, then returns to normal. A respected researcher thinks he’s found the reason: BitMEX.

If the crypto derivatives exchange used more efficient technologies when broadcasting transactions, users could save as much as roughly 1.7 bitcoin (worth more than $15,000 at press time) in fees every day, or about 7 percent of total daily fees paid, argues pseudonymous bitcoin engineer 0xb10c.

“The daily broadcast has a significant impact on the Bitcoin network and user fees,” 0xb10c wrote in a recent report

Nearly every time a user sends a bitcoin transaction, they tack on a (usually) small fee along with it. Fees fluctuate all the time, depending on how much congestion is in the network. That’s because there is limited space for transactions to go through. If there are too many transactions sent at the same time, miners will prioritize ushering through those with higher fees. Those with smaller fees will have to wait.

Read more: Bitcoin’s Crash Triggers Over $700M in Liquidations on BitMEX

Because BitMEX broadcasts thousands of transactions at once at the same time every day, it leads to a fee increase every day, 0xb10c contends.

“Every day at around 13:08 UTC (9:08 a.m. ET), multiple megabytes of optimized transactions, mostly user withdrawals, are broadcast by BitMEX. The effect is immediately noticeable as a spike in the feerates, which estimators recommend and users pay,” 0xb10c told CoinDesk. His research indicates that this has been going on since at least September. 

BitMEX, which is based in Seychelles, did not answer a request for comment by press time. 

0xb10c has been writing a series of posts about insights he gleaned as he built the Bitcoin Transaction Monitor, a data tool for exploring transactions on the network in detail. 

Fee pressure

Most bitcoin wallets have fee estimators built in that estimate what fee a user should add to a transaction to ensure it is accepted in a timely fashion. If the network is handling too many transactions at once and the fee is too small, it could take longer for the transaction to go through. 

Because of BitMEX’s many transactions going on at once, clogging the blockchain, the estimators move the fee up and many users pay them.

BitMEX broadcasts thousands of bitcoin transactions at once at the same time every day, leading to a fee increase every day.

While users obviously prefer lower fees, higher fees strengthen the network’s security, especially when block rewards (miners’ main source of income right now) decrease every four years, 0xb10c added. The third halving of mining rewards is expected to take place next week, and has only highlighted long-term worries about network security. 

That said, developers and other bitcoin enthusiasts have long been trying to push big exchanges and wallet providers (far beyond just BitMEX) to adopt scaling technologies that could cut fees and make the network run more efficiently. These include Segregated Witness, or SegWit, a scaling upgrade that became available in 2017.

“It’s a bit strange to realize that fees would be close to 0 if exchanges used better practices. Their profligacy helps maintain the fee pressure,” tweeted Nic Carter, co-founder of crypto data provider CoinMetrics, in response to 0xb10c’s research.

Illustrating the problem, on March 12, the day bitcoin’s price crashed in tandem with the equity markets as the coronavirus pandemic shook the world’s economies, the usage of SegWit-updated nodes dropped 5%.

screen-shot-2020-05-05-at-3-01-42-pm
Source: Blockchain.com

Binance, the world’s largest exchange, saw outsized volume day on March 11-12 — over $1 billion and $945 million respectively instead of the seven-day rolling average across January and February of $637 million, according to CryptoCompare — but hadn’t yet moved to SegWit wallets. Binance spokesperson Jessica Jung said the exchange has not updated to SegWit, “but it’s in the pipeline.”

Read more: BitMEX Restricts Access to Japanese Residents, Citing Changes to Local Law

Beyond SegWit, 0xb10c recommended BitMEX use “output batching,” a years-old technique of cramming many transactions into one to save on transaction space. He also mentioned Schnorr/Taproot, a Bitcoin upgrade that’s been in the pipeline for years that some developers estimate will finally be deployed over the next year.

“By utilizing scaling techniques, some of which have been industry standards for multiple years, the impact could be reduced. BitMEX is stepping in the right direction by planning to switch to nested SegWit. They, however, shouldn’t stop there,” 0xb10c wrote.

William Foxley contributed reporting. 

Disclosure Read More

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.



Source link