VERGE

DESCRIPTION OF EVENTS

"XVG currently ranks as the 31st-largest cryptocurrency and has a circulating market cap of about $752 million." "As CCN.com reported, Verge recently inked a high-profile partnership with the owner of the world’s largest adult entertainment sites to enable users to purchase premium content using XVG." "Pornhub's vice president Corey Price stated verge was chosen as a payment method for the site in a "very deliberate selection process" to preserve the financial privacy of their customers."

"Unlike many of the cryptocurrency projects out there today, which rely on open-source code, verge's codebase is being constructed in private and so will not get peer-reviewed by the community of blockchain experts that could help the team find vulnerabilities."

"On the morning of May 22, Suprvona, one of the largest altcoin mining pools, informed its 19,000 Twitter followers that verge was suffering yet another 51% attack, causing all blocks to be rejected. The attack was spotted by the same individual who uncovered the previous attack in April. In a post on the Bitcointalk forum, “ocminer” wrote: “Since nothing really was done about the previous attacks (only a band-aid), the attackers now simply use two algos to fork the chain for their own use and are gaining millions”."

"[A]n attacker was able to exploit $1.7 million-worth of the cryptocurrency from the protocol." "The attack appears to have been carried out between blocks 2155850 and 2206272, enabling the attacker to abscond with approximately 35 million XVG — worth $1.75 million at the current exchange rate — in just a few hours. The attack had subsided by the time of writing, though there does not appear to be anything that would prevent an attacker from resuming it again in the future."

"Verge (XVG) appears to have succumbed to a 51 percent attack for the second time since the beginning of April." "The attack appears similar to the one experienced by the Verge network less than two months ago when a malicious miner acquired 20 million XVG, worth more than $1.1 million at the time. Then, as now, Verge developers downplayed the severity of the exploit, drawing criticism from many in the community." "Verge activated an emergency hard fork intended to address the [original] bug, but critics including ocminer argued that the upgrade was merely a “band-aid” and did not eliminate the underlying vulnerability."

"According to researchers, the exploits are a product of simple changes to the underlying code which cryptocurrency protocols are typically built on and the challenges of being able to predict what unintended consequences will arise from those changes." "When the first attack happened, verge developers quickly released a patch, stopping the attacker from printing more money. Yet, with the attack last month, it seems the patch only went so far and the attacker found another way to execute the same hack, displaying how difficult it can be to architect a distributed system that isn't vulnerable to attacks."

"Sure, verge developers were only trying to design a better cryptocurrency for payments, but by tweaking small parameters, such as the length of time a block can be valid, the group has opened its blockchain up to attacks." "[B]lockchains are built on very precariously stacked incentives whereby all stakeholders work together toward a common goal so as to remove the chance that one entity takes full control."

"Getting incentives right and keeping them right is hard," Imperial College London assistant professor and Liquidity Network founder Arthur Gervais said. "I hate to say it, but if I had to summarize: the attacker is doing better due diligence than the developers. I'd try to poach him if I were them."

"To accomplish this, the attacker manipulated a bug in the Verge code that allows malicious miners to set false timestamps on blocks and then rapidly mine new ones in quick succession."

"$XVG @vergecurrency is once again under attack, someone is 51%'ing the chain and invalidating all legit blocks. All pools and miners suffer from this, the attacker is getting all blocks currently."

"The XVG price has declined approximately seven percent over the past 24 hours, which is moderately worse than the market as a whole."

"The Verge protocol uses a rotation of five mining algorithms, and an image supplied by ocminer suggests that the attacker gained control of two of them — scrypt and lyra2re — mined them at virtually no difficulty, and used false timestamps to trick the network into accepting them into the main chain."

"[W]hereas bitcoin transactions are only valid for about 10 minutes before they're verified in a block, verge developers extended that window to two hours. And because there is some information asymmetry in blockchain systems since nodes are spread out across the globe, the attacker was able "spoof" timestamps tied to blocks without some noticing, according to the widely-circulated post by Goldman."

"Verge uses the algorithm "Dark Gravity Wave" to automatically adjust how fast miners find blocks. In verge, this happens every two hours; compared to bitcoin which adjusts every two weeks, verge's algorithm is quite fast."

"The spoofed timestamps paired with this fast-adjusting algorithm led to the problem of "tragically confusing the protocol's mining adjustment algorithm," as Goldman put it."

"The project acknowledged a mining-related issue in a Monday afternoon tweet but attributed it to a DDoS attack directed at several XVG mining pools. The account has not tweeted since."

"it appears some mining pools are under ddos attack, and we are experiencing a delay in our blocks, we are working to resolve this."

"The attacker has accomplished this by manipulating a bug within the Verge code which allowed malicious miners to allocate false timestamps on several Verge blocks. The miners rapidly created new blocks in quick succession after the timestamps were created."

"The entity responsible was coining in $1,000 a minute and is believed to have made $1.7 million already from the attack. Predictably, verge’s fans assigned the attacker’s motivations to “an act of hate” designed to FUD their altcoin. This theory gained short shrift on the Bitcointalk forum, with one commenter retorting: “Verge is being targeted because it has shitty coding and an incompetent developer. This hack is the result of the terrible job he did ‘patching’ the previous hack.” The original attack involved exploiting one of the five hashing algorithms verge uses (most cryptocurrencies such as bitcoin only use one). This time around the attacker is believed to have used two algos after renting power from a service such as Nicehash and then using it to find all the new blocks."

"The blocks affected within the attack appear to have been between, blocks 2155850 and 2206272, which enables the attacker to abscond 35 million Verge coins worth over $1.75 million at the current exchange rate within a few hours."

"As one redditor quipped on r/Cryptocurrency, the attacker “is securing his lifetime porn hub membership”."

"[S]ome developers believe this episode will bring about a heightened sense of responsibility for many organizations to more effectively analyze a blockchain before adopting it." "[I]f an attack makes more economic sense over honest behavior, the attackers will be there," Gervais concluded.

"I wouldn't be surprised by more scrutiny in the near future, both leading to more attacks and to investors more accurately rating the value proposition of smaller altcoin projects," BitGo engineer Mark Erhardt said, adding:

"The absence of an attack is not proof that a system is safe. Quite a few altcoin projects appear to be taking unsafe shortcuts. It's just that nobody has bothered to exploit these systemic flaws or weaknesses, yet."

"After a period of little communication from verge's developers, CryptoRekt, the pseudonymous author of the verge "blackpaper" took to Reddit on May 31, saying, that all of the verge team would "never intentionally do anything to besmirch or hurt this project.""

While it was unclear the exact nature of the events, there are multiple reports that Verge faced a further 51% attack on May 22nd, 2018.

HOW COULD THIS HAVE BEEN PREVENTED?

51% attacks can be prevented through a mix of increased block confirmation times and setting checkpoints to prevent large-scale reorganizations. This means the exchange will not credit newly deposited funds, and nodes will be prevented from accepting attacking chains.

Check Our Framework For Safe Secure Exchange Platforms

Strike Three? Verge Suffers Third Suspected 51 Percent Attack | Bitcoinist.com (Oct 2)
Network Attack on XVG / VERGE  (Oct 2)
Network Attack on XVG / VERGE  (Oct 2)
Unusual Verge Mining Data Suggests Third 51% Attack | Cryptoglobe (Oct 2)
Verge 51 percent attack: developer working on patch, new codebase coming soon - Cryptocoindaddy.com (Oct 2)
Network Attack on XVG / VERGE  (Oct 2)
@vergecurrency Twitter (Oct 2)
Verge (cryptocurrency) - Wikipedia (Oct 2)
https://www.cryptoglobe.com/latest/2018/05/Hackers-Exploit-Verge-Flaw-Again-to-Steal-1_7m-of-XVG/ (Oct 2)
https://medium.com/@johnhinkle_80891/verge-gets-hit-with-51-attack-again-e8fd42970de5 (Oct 11)
Verge Struck by Second PoW Attack in as Many Months – Mining Bitcoin News (Oct 11)
https://www.ccn.com/privacy-coin-verge-succumbs-to-51-attack-again/ (Oct 12)
@SuprnovaPools Twitter (Oct 12)
Verge's Blockchain Attacks Are Worth a Sober Second Look - CoinDesk (Oct 12)
https://blog.theabacus.io/the-verge-hack-explained-7942f63a3017 (Oct 12)
Pornhub Adds Crypto Payment Option With Verge Token - CoinDesk (Nov 13)
A note from CR : vergecurrency (Nov 13)
change drift from 2 hours to 15 mins · vergecurrency/verge@7294e06 · GitHub (Oct 12)

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