Cryptocurrency is a divisive topic. It’s even more divisive when news about compromised cryptocurrency exchanges or crypto crimes arise. And in February 2018, BitGrail and Nano made it difficult to trace which caused the massive 17M Nano coin theft (approximately $132M).
The Pitfalls of Cryptocurrency
Most people find cryptocurrency difficult to understand and do not appreciate cryptocurrency because the concept is new and complex. Unlike using credit cards, cryptocurrency is not always an option for online payments. There are no banks that regulate these cryptocurrency transactions. Instead, these transactions are strictly person to person and listed in public blockchains verified by miners. The blockchains store the transactions permanently. In traditional banking, customer service helps you rectify wrong transactions. In cryptocurrency, such a convenience does not exist, even in cases where money is stolen.
Cryptocurrency is legal in only a small number of countries. It is not yet widely considered legal and regulated. Most of all, cryptocurrency is an uncertain and volatile digital money system that is always a target for hacks. Corporations and investors refuse to participate in something that is highly unstable, unpredictable, and susceptible to theft.
Blame Game for Blockchains
BitGrail owner, Francesco Firano, claimed that Nano’s software had bugs, making it vulnerable for theft. There was a reported crash in the node that records the transaction, so the exchanges were not witnessed. He insinuated that some coins were “double spent” without detection. Double spending is a form of fraud where the same amount of coins in one transaction is used in another. This is a hefty accusation against cryptocurrency as developers install provisions in the system that prevent double spending.
Nano developers fired back. They said the problem lies in BitGrail’s software as their blockchains ledger did not indicate any double spending occurrences or stolen money. The developers also alleged that Firano had been misinforming the Nano team about the financial competence of BitGrail. They leaked conversations that indicated Firano asking them to change the blockchain. This raised many eyebrows as transactions are immutable in the world of cryptocurrency and therefore should be impossible to fork.
This heated exchange also put Nano in hot water as it revealed their ability to alter the blockchain.
Firano said that there are also issues with the timestamp technology of Nano. Nano then denied these claims by saying that they conducted a re-synchronization of its nodes, effectively giving each transaction with the accurate timestamps.
Both sides are still refusing to take the blame even after the funds were stolen. Users have headed to the courtrooms with a class action lawsuit on behalf of investors. Nano stated that they will sponsor a legal fund for those affected by the hack. This fund would pay for the representation fees in pursuing their legal interests against BitGrail.
BitGrail, in contrast, said that they have plans to refund their users of the stolen money if they did not involve the court in the matter. They intend to pay back their users by creating a token, BitGrail Shares. Users will receive 20% of the lost amount, with the remaining 80% covered by BitGrail Shares. Even with this response, they are not taking the responsibility for the hack and still pointed to the Nano’s alleged protocol issues.
A Lose-Lose Situation
While it is still unclear which party is at fault for the theft, the damage has already been done. People have lost money, and most of all, confidence in trading with BitGrail and Nano. In instances like these, both parties must step up and be accountable as the satisfaction of their patrons are at stake.