Recent news articles and tweets claiming that exchanges have abandoned BSV and speculating that the network is collapsing due to a 51% attack are most definitely not true. While it is correct that there have been malicious attacks on the network, it is not a 51% attack and exchanges are not abandoning BSV. They have simply suspended BSV services until the attacks have been confirmed as over, after being informed by Bitcoin Association, a Switzerland-based non-profit global industry organization that pushes for the enterprise adoption of the BSV blockchain.
Something seems to be happening with BSV. Every major exchange, and now even the liquidity providers are abandoning it. Perhaps related to the 51% attack.
— Cøbra (@CobraBitcoin) July 13, 2021
It’s interesting to watch a cryptocurrency collapse in real time. People can’t even sell. Deposits disabled everywhere. https://t.co/1IyliQ6NQY
“We do not believe exchanges need to completely halt all deposit, withdrawal and trading activity associated with BSV coins. However, Bitcoin Association can only act in an advisory capacity in this instance, as exchanges are independent and will act according to their own procedures and tolerances in such events. Bitcoin Association continues to actively communicate with exchanges throughout this process, and are doing all that we can to support reinstatement of BSV deposit, withdrawal and trading services as soon as possible,” Bitcoin Association stated in a recently released FAQs about the attacks.
What Really Happened
A series of block reorganization attacks geared towards double spending directed at the BSV network occurred on June 24 and on July 1, 6 and 9, 2021. There has been no attacks since July 9; but Bitcoin Association and its development arm, the BSV Infrastructure Team, have already implemented protective measures on the network and are treating it as an active situation.
“This type of attack, known as a ‘block withholding’ attack, involves a malicious actor creating a chain of competing blocks—rewritten to the benefit of the attacker, i.e., containing double spends—in parallel with the correct chain. These malicious blocks are created in secret then released all at once to orphan the correct blocks from honest nodes,” the Association explained.
According to the Association, the first two attacks were not immediately detected as malicious because “block reorganizations are a feature of the Bitcoin system when they occur organically and are used to align participants and nodes on the network.” However, the BSV Infrastructure Team started investigating after the July 1 block reorganization, and became sure of its malicious nature after the attack on July 6. The team immediately took action in the form of implementing reactive and defensive measures to protect the network and mitigate the consequences.
On July 8, Bitcoin Association released a statement on zero tolerance for illegal attacks and informed all exchanges of the events that happened, advising them “to freeze deposits attempted from any addresses associated with the malicious actor’s illegal double-spend activity.” The Association also cautions users against sending and receiving BSV to and from unidentified parties.
“The Bitcoin SV network remains safe to use and is operating as it usually would. However, in the short term, Bitcoin Association recommends only sending and receiving BSV between identified parties where possible. When transacting with unknown or untrusted parties, for an interim period, we advise waiting for at least 20 block confirmations before considering the transaction safe and settled,” the Association clarified.
The Unknown Miner Behind the Attacks
The malicious attacks were done by an unknown miner going by the moniker, “Zulupool,” which—as far as Bitcoin Association and the BSV Infrastructure Team have investigated—is the same moniker used in the block reorganization attacks on the Bitcoin ABC (BCHA) chain. The Association believes that the attacker is an impersonator of a Hathor miner using the same name.
“While we cannot independently confirm that it is the same party who is behind the recent attacks on BSV, the BCHA chain incident had similarities in methodologies and characteristics with the reorganization attacks on BSV, and also used the same “Zulupool” name; these factors strongly suggest it is the same actor,” the Association revealed.
On Double Spending
As of the writing of this article, there have been no reports and evidence found suggesting that an innocent user has been victimized by these malicious attacks on the BSV network. It is true that BSV transactions have been double-spent. It may be that the “Zulupool” attacker has double-spent their own transactions.
Double spending is the act of spending a digital currency twice. It is analogous to using a $5 bill to buy a burger, and then using that same $5 bill to purchase fries. This act leads to a discrepancy in the number of BSV spent against the number of transactions processed. It is the same as an inventory not matching up that implies theft. This is what makes double spending through block reorganization attacks highly illegal; and legal actions are being taken.
“Since the malicious nature of the re-orgs on the Bitcoin SV network were identified following the July 6 attacks, the Bitcoin SV Infrastructure Team have taken action to both help protect the network and collect evidence of the illegal activity. This information is being collated and shared at regular intervals with Bitcoin Association’s legal team. Bitcoin Association’s representatives have already started to contact relevant law enforcement authorities. Bitcoin Association is also preparing to submit criminal complaints in one or more relevant jurisdictions; its affected constituents may also initiate proceedings independently.”
These malicious block reorganization attacks have indeed been a hassle to deal with. However, it will take so much more than this to make the BSV network collapse. What these attacks have actually shown is how powerful the Bitcoin white paper is as it has laid out the risk and defense of these kinds of attacks, which has made the BSV network capable of mitigating these attacks. Again, BSV is not collapsing or is it on the verge of doing so. What it is on the verge of doing is releasing Teranode, which will make the network comparable to that of VISA’s—something that most digital currencies cannot even dream of accomplishing.
