Exchange hacks have always been one of the major setbacks associated with the cryptocurrency space, with several renowned platforms falling victim to security breaches. Even Binance, one of the world’s largest cryptocurrency exchanges in terms of trade volume was no exception after the platform reported a loss of 7000 BTCs following a security breach. So far, one of the most controversial hacks of the year was the Cryptopia hack, a New Zealand-based exchange which lost almost all of its Ethereum holdings to hackers.
The platform, following a security breach in mid-January 2019, fell prey to another attack towards the end of the month. A report by blockchain analysis company, Elementus, revealed that the exchange lost around $16 million worth of ETH and ERC20 tokens to the first hack. Dentacoin, Oyster Pearl, DAPS, Lisk ML, Pillar, Mothership, Everus, Enjin Coin, Cappasity, LINA, and Bytom were among the coins stolen in huge amounts by the attacker.
Now, according to Coinfirm, most of the stolen coins were recorded to have landed in top exchanges. The tweet by AMLT Token and Network read,
#CryptopiaHack story continues to unfold, almost all tokens landed on major exchanges while the #ETH still sits on a hackers address according to @Coinfirm_io http://coinfirm.com Below is @0xProject $ZRX @KyberNetwork $KNC @PowerLedger_io $powr going to exchanges”
The platform followed up this news with an update on the Ethereum coins stolen by the hacker. Coinfirm stated that 10 ETH out of the 30790 stolen coins were transferred to “major crypto exchanges”. However, the exchange did not provide any details of the exchanges these tokens were transferred to. The tweet read,
The hacker sent 30790 #ETH (~$7.67M) to a new address (Yellow) and then sent 10 ETH (~$2500) to an exchange address (green) that then landed on their Hot Wallet. https://t.co/xJ5bGphf44 pic.twitter.com/GqOUMgi7Kh
— Coinfirm (@Coinfirm_io) May 20, 2019
The cryptocurrency exchange had recently announced entering the liquidation phase because of the hack. The process, which would be taken care of by Grant Thornton, came across as a surprise to the platform’s customers as several were of the notion that everything was going well, despite the hack. This was mainly due to the exchange’s reassurance prior to re-opening its service to its customers. Additionally, the exchange never gave any heads-up before entering the liquidation process.
On the liquidation side, the exchange has made it clear that the investigation to check the amounts “owing and available to return to customers” would take months and that they would not be opening their platform for withdrawal services.
Seemee89, a Reddit user, commented,
“It’s easy to understand. Cryptopia can’t follow legal frameworks. Cryptopia pays hackers to hack exchange or they ‘hack’ themselves. Cryptopia closes the company and founders are swimming with dolphins on Fiji with Eth and Btc earned. So, this Eth is actually not hackers ownership but founder ownership, right?”
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Coin Metrics data reveals inaccuracies in Kik’s claim of being as dominant as BTC, ETH blockchains
Upon investigating Kik’s claims in response to SEC’s lawsuit filed earlier this month, CoinMetric data reported inconsistencies in the on-chain activity and adoption rate of its native token, Kin.
In a study dubbed, “An Analysis of Kin’s On-Chain Activity,” the crypto-asset elaborated on the two assertions made by Kik in its letter to the US Securities and Exchange Commission.
Kik’s first claim was regarding its blockchain activity. Its in-house token, Kin, supposedly exceeded Ether and Bitcoin to record the fifth highest daily blockchain activity. This was debunked by CoinMetric’s investigation after taking into account its “Operation Count” [the same metric used by Kik to support their claim] and “Transfer Value.”
In terms of the Operation Count, the report explained,
“According to Kik’s source for the metric, “blockchain activity” is defined as “the number of operations on the blockchain in the last 24 hours.” Operations are broadly defined as any type of action that could be recorded on chain. But operations are not standardized across blockchains which makes comparing across chains difficult.”
Besides, drawing parallel comparisons across blockchains with radically different use cases and operations is difficult.
Although Kik’s original research showed a high number of account creations, Coin Metrics data revealed that many of these accounts were empty.
Additionally, Kin’s “create account” operation has a fee of .001 Kin. The report highlighted that a metric such as “operations count” for the purpose of blockchain activity cannot be used as a measurement tool since Bitcoin and Ethereum blockchains do not track account creations on-chain.
In terms of Transfer of Value, the report elaborated,
“Theoretically, high daily transfer value should signify high activity. But transfer value is often quite noisy, especially on low fee blockchains where there are minimal costs to sending transactions. Some transfers might simply be users moving money around between addresses they own”
Instead, Coin Metrics contrived “adjusted transfer value” metric to eliminate what it called, “noise and certain artifacts like self-sends, or deliberate spammy behavior.” Coin Metric noted that this gives a clearer picture of the on-chain activity, resulting in a decreased transfer value when compared to other blockchains, even if it had a high number of daily blockchain operations.
Additionally, Kin’s average transaction value was also low, when compared to other blockchains. For the first claim, Coin Metrics concluded that the Kin platform had more micro-transactions than Bitcoin and other dominant blockchains, while highlighting the fact that the latter blockchains are not primarily used for such transactions.
Regarding Kik’s second claim that said that over 300,000 users were earning and spending Kin as a currency, Coin Metrics assessed its blockchain usage. The number of addresses is not necessarily equal to the number of users since a single user could have multiple addresses. Hence, Coin Metrics took the number of active users into account, which the report defined as “the number of unique addresses that were active in the network [either as a recipient or originator of a ledger change] during that day.” The report noted,
“Kin 2 has significantly more originating active addresses than Kin 3. Although Kin is in the process of migrating to Kin 3, it appears that Kik is using data from the Kin 2 chain to support their claims about usage.”
Further, Kin 2 and Kin 3 had more active addresses that received payments than originated payments, which meant that there were more “earners” on Kin than “spenders,” also noting that only 35,000 addresses held over 10,000 kin [nearly $0.23]. The report added that the figures are lower than other blockchains which have a minimum of 1,000,000 addresses with at least $1.
After examining multiple critical aspects, Coin Metrics concluded that Kin fell below dominant blockchains in terms of daily active addresses, despite maintaining steady growth. It said,
“A majority of Kin’s active addresses have small account balances. While this makes sense for a network built around micropayments, when viewed across multiple metrics, our data show that Kin is not more widely used than dominant chains such as Bitcoin or Ethereum.”
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