Update: NXT has announced to CCN that there will be no rollback. To read the announcement, visit our article here.
Earlier this year, the cryptocurrency exchange MintPal, now owned by Moopay LTD., became the victim of an attack. The hacker got away with eight million VeriCoin, a staggering 30% of all VeriCoin in existence. The theft caused the VeriCoin developers to face a decision to roll back the blockchain and effectively erase the transactions from occurring, returning coins to Mintpal’s customers.
Today, cryptocurrency exchange BTER was hacked, and the thief got away with 50 million NXT, a total of 5% of the existing one billion NXT. The hacker then ransomed the coins, and is rumored to be still in negotiations, but did not complete the transaction as promised after receiving 100 bitcoins from BTER. The NXT developers were then faced with the same decision as the VeriCoin developers, but Patrick Nosker of VeriCoin doesn’t believe they should respond the same way.
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“I would like to point out that NXT had 50 million out of one billion coins stolen, or 5% total. VeriCoin had 8M of 26.7M or around 30% total. Both are Proof-of-Stake, but only the VeriCoin hacker could have attacked the blockchain with a 51% attack.”
“Because of this, I believe that the NXT chain should not be rolled back. We rolled back not to save the owners who held coin on Mintpal, but to preserve the integrity of the chain by preventing an illicit holder from attacking it.”
The attack on the BTER exchange has taken the NXT community members on a roller coaster of events. First, the initial theft, then the hacker ransomed the coin, then the hacker didn’t fulfill his end of the bargain, and now the NXT developers have offered a roll back leaving the decision to switch up to the community.
Nosker recalled the difficult times he and his co-developers faced when dealing with the VeriCoin roll back:
“It was a very tough decision for us, and we ultimately decided to act quickly and rollback due to the insecurity presented with one person owning such a large quantity of coin. When I first heard about the BTER hack, I could tell the developers must be going through a very tough time. But the solution is quite obvious to me: Do nothing, or at most, blacklist the hacker’s address and make those coins ‘disappear’ from the chain. I think the NXT developers need to think carefully but also need to not roll back as VeriCoin did since the NXT chain security is not at stake here.”
NXT: A Question of Ethics
The question posed at this point is one of ethics in digital currency. The technology is new and obviously has many more benefits than traditional currency, but the limits are still unknown. When is it right to roll back a blockchain? What effect does that action have on the integrity of cryptocurrency as a whole?
These are questions that need to be discussed. If you’d like to take part in the conversation, head over to the CCN forums and discuss whether or not blockchain roll back is ethical.