In this edition, we let you know all about the hard fork that is scheduled to take place on August 1st of the bitcoin blockchain, and how to make sure you get your Bitcoin Cash (assuming you want it). Despite being small in power, Bitcoin Cash’s sudden, dramatic effect on the markets and the community is huge. We also cover last week’s government-mandated shutdown of BTC-e, one of the oldest and largest bitcoin exchanges, and discuss why bitcoin’s ties to ransomware are prompting world governments to take action.
Hard Fork a Go
Though fears of a major chain split have subsided thanks to the implementation of SegWit2x and BIP 91 (as discussed thoroughly in our last edition), there is one contingency of miners that are dead set on hard forking the bitcoin network on August 1st, come hell or high water. This backlash against the delayed increase in block size currently commands only about 0.26% of all hashing power, but is commanding all the attention in the bitcoin community. While BIP 91 assures a hard fork to increase the block size from 1 MB to a modest 2 MB, Bitcoin Cash, otherwise known as the User Activated Hard Fork (UAHF), intends to raise the block size to 8 MB, solving the problem of transaction fees and waiting times – at least for owners of Bitcoin Cash.
The problem for Bitcoin Cash is, in addition to commanding a miniscule amount of overall mining power, a lot of major bitcoin exchanges and businesses have decided not to support it, as supporting a tiny splintering of a bitcoin faction and treating it as bitcoin’s equal is, by consensus, “not a rational thing to do.” Currently there is one lone mining pool that is signaling support for the UAHF, however there is the speculation that some of the bigger pools may follow suit. Exchange adoption policy varies widely, with major corporations like Coinbase flatly refusing to acknowledge Bitcoin Cash or credit wallet owners with their corresponding amount of the new coin. Other exchanges like Kraken have taken the opposite approach, deciding not only to reward BTC holders with an equal amount of Bitcoin Cash tokens but also list Bitcoin Cash as a trade-able coin on their exchange.
How to Make Sure Your BTC is Fork Eligible
Regardless of the future of Bitcoin Cash, owners of bitcoin who want to assure they will receive their share of the new coin can best do so by having personal control over their wallet private keys. The most common ways to insure this are by running a bitcoin Core client or lightweight wallet that allows you access to your own bitcoin private keys. The world’s most popular and longest-standing online bitcoin wallet, blockchain.info, expressly addressed concerns of customers recently by reminding wallet owners that they have always had sole control over the private keys to their web wallets.
Also crucial to success in obtaining your forked coins is never giving out your private keys over the internet. There will no doubt be “malicious actors” claiming to help you receive your Bitcoin Cash but actually phishing for your bitcoin private key, usually through the form of an app or online service. The private key to any wallet you own should only be transferred to a highly trusted source, such as a client-side, open source project that has been vetted and retains a level of credibility among the community. The most surefire way to receive your Bitcoin Cash is to confirm that your BTC is stored on one of the officially-supporting wallets listed on the project website. It’s also worth reminding starry-eyed crypto enthusiast that free coins do not necessarily mean free money, even though Bitcoin Cash IOUs were selling for as much as $400 as of July 30th.
BTC-e Goes Down Amid Criminal Allegations
One of the biggest and longest-standing bitcoin exchanges, which outlived the infamous MtGox by six years, ceased operations on July 26th, after it was revealed that one of its operators was allegedly responsible for the illegal laundering of some $200+ million in BTC from MtGox during its collapse into bankruptcy. A 21-count indictment by the U.S. Department of Justice claims that BTC-e illegally laundered over $4 billion worth of bitcoin during its existence. U.S. DOJ forces were tipped off that the main operator of the exchange was living in Greece, where he was arrested and extradited to America on a U.S. warrant. In a period when U.S.–Russia tensions are again reaching a boiling point, the extradition of a Russian citizen to the United States on money laundering, fraud and embezzlement charges are not likely to disarm tensions between the two superpowers.
BTC-e has been at the center of investigation for quite some time. It is estimated by Google that about 95% of all bitcoin stolen in ransomware attacks is sent to and sold through BTC-e. The exchange had quietly been hailed as an anonymous refuge for hackers and scammers, where BTC could be traded to a number of fiat currencies with little customer verification required. Greek police described the detained suspect as the mastermind behind a large criminal organization that operated in numerous countries and continents. Unlike most exchanges that operate under a business model of providing a service for which there is demand, allegations against BTC-e infer that the exchange itself was specifically designed to aid and abet criminal activity rather than act principally as a bitcoin exchange.
We have issued an announcement on our BTC-e review page.
Bitcoin Ransomware Continues to Flourish
With BTC-e out of the picture, it would be reasonable to expect a setback to the operations of ransomware developers, whose malicious creations are often the embarrassing subject of hushed talk among academics, businessmen and even government officials. Computer file-encrypting, bitcoin-demanding viruses have been a consternation to computer users worldwide for years. Deployers of the virus seem to have no other concern than receiving a bitcoin ransom from the user of an infected computer, with reports of church member and hospital patient databases being locked up and made inaccessible due to the virus.
Unfortunately, the closure of BTC-e will not stop ransomware in its tracks. Instead, it is likely that other criminal elements will soon move in to fill BTC-e’s void, competing to develop the most efficient ransomware virus. This power struggle will inevitably result in the creation of even more sophisticated ransomware, perhaps demanding coins less traceable than bitcoin, or tumbling the extorted bitcoin profits into obscurity before being cashed out through any hundreds of currently available channels. A successor to the aptly-named WannaCry ransomware that made its rounds earlier this year is the far less malevolent-sounding SpongeBob Ransomware 2.0, which, in a bizarre juxtaposition, features images from the popular animated series SpongeBob SquarePants while simultaneously demanding bitcoin from the owner of the infected computer, if they ever want to have their files back to normal again.