The Bitgrail Hack: Is This the End for Nano?

The Bitgrail hack is worse than Mt. Gox as a percentage of supply lost, but what does this mean for the fundamentals of Nano?

On Feb 8th 2018, Francesco “The Bomber” Firano revealed to the Nano core team the Bitgrail situation. Allegedely, Bitgrail was hacked to the tune of 17 million XRB, which is just over $170 Million USD. As a percentage of total Nano supply, the Bitgrail hack is worse than Mt. Gox. The reason for the alleged hack is unclear, but through the conversation that the Nano core team has provided, it seems the devs and The Bomber have had a falling out. Community manager Louis confirmed on the official Telegram that lawyers are involved. Check out the conversation between devs and The Bomber here.

Bitgrail Nano lawyers

Basically, The Bomber asks the Nano team to fork the ledger. With Nano, this itself is impossible, because each account maintains their own blockchain, owing to Nano’s block-lattice structure. When the devs refuse, The Bomber threatens he will claim the Nano code had a vulnerability. So far, it’s unclear where exactly the technical fault lies – but owing to the transparency of the devs as well as tracking the Nano wallets involved, it points towards Bitgrail.

According to the conversation thread, Bitgrail had been hacked for over 17 million XRB, the date of which can’t be properly ascertained but is believed to be some time before November 2017. Starting late December, Bitgrail stopped withdrawals multiple times till it suspended today. On Jan 14th 2018, Bitgrail made KYC mandatory for every account to “comply with regulations”, which was met by the community with the opposite of enthusiasm and zeal. It was quite incongruous, considering most other crypto to crypto exchanges don’t require KYC unless you want to increase your withdrawal amount. They then forced all non-EU users to close their accounts with a grace period of two weeks.

Update: On Feb 10th 2018, The Bomber released a tweet saying he has contacted the police regarding the illegal dissemination of the private chat logs by the dev team.


The conspiracy

There are some rumours about the Bitgrail hack not being a hack at all. People on social media have been talking about Bitgrail’s “double spend” problem over the last few months. Essentially, any time you traded on Bitgrail, there was a chance you would inherit twice the number of coins. Reports suggest this was true not just for Nano but for ETH/BTC trades as well. This created artificial supply, since the double amount only reflected in Bitgrail’s database, and not in the blockchain. This means the fault would lie entirely in the Bitgrail code, and that The Bomber was aware of it and moved the coins on the “hacked” wallet himself. All this is unconfirmed of course; don’t take rumours at face value. (Reddit thread).

What this means for Nano

As of now there’s no evidence that the Nano code itself is responsible for the hack. All evidence points towards Bitgrail’s alleged incompetence. However, the situation doesn’t reflect well one the core team. For one, there is some outrage against the dev team for not revealing the extent of the Bitgrail situation’s lack of clarity earlier. There’s a lot more outrage towards Bitgrail and founder The Bomber, including the community pressing legal charges.

I’ve always believed that as long as there’s no technical failure with a cryptocurrency, and the price goes down, it represents a good buying opportunity. This situation doesn’t seem to be different. Though it’s impossible to tell whether Nano will fall into a Mt. Gox-tier bear market, the faith in the cryptocurrency’s fundamentals haven’t been shattered. We saw something similar with the NEM hack on Coincheck. Considering Nano seems to be hovering around $10 right now, down less than $1 from pre-Bitgrail’s announcement, the overall sentiment in Nano seems to be bullish for the long term.

Basically, it’s a buy signal. You can buy Nano on Binance.

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Written by Upamanyu Acharya

I founded Fynestuff. I play games, write tech articles and look towards putting Buzzfeed out of business someday. Let's talk about crypto: upamanyu@fynestuff.com

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