Bitcoin Gold's Blockchain Overtaken by Fraudster

The Bitcoin fork has been hit by a double-spend attack, with a fraudster draining millions from cryptocurrency exchanges.

by Kyzmoff
25 May • 1.5 mins
In Coins
Bitcoin Gold (BTG) is currently going through hell as a single miner has taken control of its blockchain and makes fraudulent transactions on many cryptocurrency exchanges, stealing millions of US dollars.

After warning a week ago that Bitcoin Gold's blockchain has been exploited by "an unknown party with access to very large amounts of hashpower” who “is trying to use 51% attacks to perform double spend attacks to steal money from Exchanges", the Bitcoin Gold team announced on Thursday that it has responded to the attacks by rapidly alerting exchanges, which “dramatically increased their confirmation requirements” or “closed their deposit wallets entirely”.
A 51% attack is when a single miner controls more than half of the computing power on a particular blockchain. When this happens, the intruder can mess up with transactions in many ways, including spending coins twice. In order to perform a 51% attack on Bitcoin, it would take an astronomic amount of hash power, but for a smaller cryptocurrency like Bitcoin Gold with a smaller blockchain, the hashing power needed for the exploitation, although very expensive, is obtainable.
The fraudster has been targeting exchanges that usually deal with larger daily volume in trades. After picking a target, the miner deposits Bitcoin Gold into an account at the exchange. Once the exchange confirms the crypto into the attacker’s account, the attacker trades those coins for another cryptocurrency and withdraws it. The attacker then rewinds the transaction and does it all over again with the same coins.

As exchanges are the primary targets, the only parties at risk are those who currently process large payments directly from the attacker. Hence, there is no risk to the average user or to existing funds.

Bitcoin Gold (BTG) is one of the many forks of the Bitcoin blockchain. Thus, it contains the full transaction history of the Bitcoin blockchain up until the fork date, in October 2017, including the exact balances of Bitcoins held in wallets around the world. Any wallet address, holding a Bitcoin balance immediately before the fork, received an equivalent balance of Bitcoin Gold immediately after the fork. The original Bitcoin blockchain and the new Bitcoin Gold blockchain both continue onward independently after the fork, unaffected by each other.

Bitcoin Gold, the 27th biggest cryptocurrency by market capitalization presently, is the third coin to experience a hack attack recently after Verge (XVG) and Monacoin (MONA). BTG’s price has shed some 10% over the past week, largely in line with BTC’s drop and the overall market decline.

The Bitcoin Gold team underlined it is working on an upgrade, planned to happen at the end of June, that will change the coin's Proof-of-Work (PoW) algorithm so that BTG could not be mined on upcoming ASIC hardware, expected to ship from Bitmain around that date. Thus, it aims to protect its existing miners and prevent future 51% attacks.