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NXT cryptocurrency maintains integrity after the stolen $1.65 million

On the 15th August Chinese cryptocurrency exchange BTER was hacked and 51 million NXT were stolen, with a market value of approximately $1.65 million. Although BTER lists many cryptocurrencies, only NXT was stolen.

 
NXT-logo-1024
NXT-logo-1024
PRLog - Aug. 16, 2014 - NEW YORK -- NXT is the fourth largest cryptocurrency, and still some distance behind Bitcoin’s $7 billion market cap. Although NXT and Bitcoin are both cryptocurrencies, there is at least one major difference: NXT is based on a system called ‘Proof of Stake’ which, unlike Bitcoin’s Proof of Work method, does not require millions of dollars worth of energy usage and expensive mining hardware to secure the network. Instead, the blockchain – the shared ledger of transactions – is maintained by those who actually own NXT coins.

In a forum post to the community admitting the hack, BTER developer ‘freeworm’ revealed the gravity of the situation for both the exchange and the NXT community, stating: ‘It’s totally our fault and we are trying our best to cover all the loss. However, 50m nxt is huge for us, we cannot afford it at the moment.’

Rollback
The BTER representative suggested that the exchange was exploring all options, including contacting the NXT development team in an effort to ‘rollback’ the blockchain, thereby restoring it to its state before the theft occurred. Bitcoin itself was rolled back in 2013, when a technical glitch sparked a massive sell-off, crashing the price. Mt Gox, the Bitcoin exchange that went bankrupt in February this year after months or even years of mismanagement, performed a controversial ‘rollback’ of its order book in 2011 after a hack – an option not open to BTER, since the funds had already left the exchange. More recently, Vericoin – a newer and smaller cryptocurrency – conducted a blockchain rollback after a large proportion of its supply was stolen from a hacked exchange, Mintpal.

What is the significance of rolling back the blockchain? In essence, it is very simple. Cryptocurrency is based on decentralisation. There is no central authority, and transactions are therefore irreversible: there are no chargebacks. By rolling back the blockchain, participants undermine decentralisation and effectively enable chargebacks. Any cryptocurrency that does so thereby potentially devastates its reputation and calls into question its use as a credible payment system.

A rollback is only possible with the participation of the majority of the network’s miners (in the case of Bitcoin) or, in the case of NXT, the majority of its coin holders. A key difference between the two is that with Bitcoin, miners may or may not hold any coins themselves. By its very nature, those involved in protecting NXT’s network must be owners.

The NXT community made a bold move. Its developers created different apps to allow the decentralised community to choose whether to rollback the blockchain or stay on the original version – But at the cost of allowing the hacker to keep the stolen money. NXT voted overwhelmingly not to do so: only a tiny proportion of the community downloaded the software that would enable the ‘fork’. Because those who had the largest NXT balances also had the greatest vote in protecting the integrity of the network, their interests were aligned. This is the strength of the Proof of Stake system. The blockchain remained intact, along with NXT’s reputation. Decentralisation worked.

NXT’s future

Despite being one of the top five cryptocurrencies, NXT is still relatively unknown. Since June 2014, when NXT sponsored PayExpo alongside other sponsors such as Barclay’s Bank, it has gradually gained more exposure. The cryptocurrency has seen increasing attention in the last few weeks after a slew of new services were launched, including a decentralised music and digital goods store, which offers artists the opportunity to list their work with no commission fees.

One of the most exciting new projects in the NXT eco-system could also offer traders in crypto-currency an alternative to using old-fashioned exchanges, with their associated security risks.

The beta version of the Multi-Gateway project allows trade between currency pairs (for example BTC<>NXT) via a trust less, decentralised trading gateway based on the NXT blockchain. Users are able to trade directly from wallet to wallet, with no funds being held in storage on the exchange gateway itself, eliminating the possibility of losing large sums due to an exchange security issue.

http://multigateway.org/

Recently Jon Matonis, Executive Director of the Bitcoin Foundation, recounted his experiences managing the Forex desk at Visa in a previous career. He called it ‘an entirely rigged game’, admitting that it was possible to play with the exchange rates to get the best deal. How someone in such a position of influence openly say this casts the integrity of Bitcoin into doubt, since it raises similar issues of manipulation.

When Vericoin was rolled back in July this year to save Mintpal, the exchange from which it had been stolen, the message was clear: the exchange mattered more than the currency. Vericoin was slated and plummeted in value after the rollback. ‘Too big to fail’ is not a phrase that cryptocurrency enthusiasts entertain. Bitcoin, NXT or Vericoin, the cryptocurrency world should not accept this.

NXT did the right thing by allowing its holders to choose how to move forwards from the largest heist in its history. Only last month, one of the oldest members of the NXT community lost 6 million NXT and 1,170 Bitcoins when his PC was hacked. Luckily, BTER froze the hacker’s account and was able to return 3 million NXT, and the hacker returned 462 Bitcoins after a bounty was placed on his head.

Overstock.com recently made the announcement that they are looking at making a second stock listing using a ‘cryptostock’ solution. There should be doubts as to why Bitcoin-based solutions such as Counterparty should be used when there have already been suggestions that miners will avoid Counterparty blocks. With Bitcoin’s history of 51% threats, centralisation of mining and rollbacks, why would a company risk its stock with such an option?

NXT gold
Recently, Lee Gibson Grant one of the NXT forum members was introduced to the CEO of Global Coin Reserve. After some discussion the idea of smart contracts was discussed. GoldCoinsReserve are excited to announce that they are looking forward to adding new features to their GCRcoin by utilising NXT’s proven blockchain technology. This choice may come as a disappointment to Ethereum, who are also to be used by GCR, but choosing for NXT will allow GCR to begin work on the project immediately, as the launch of Ethereum is still almost 6 months away..

Grant is working with many enthusiastic businesses that are recognising the opportunities that using the NXT blockchain and systems can bring to their own business models. Overstock is not the only business that is interested in making a ‘crypto-stock’ issue and there are several businesses looking to work with NXT in similar ways.

Since the BTER hack, NXT has proved that it has integrity, and this has simply confirmed the business world’s trust in the NXT technology and community.

Bter has limited options over the theft of 50+ Million NXT, Grant proposed to use the NXT Asset Exchange along with the Smart Contracts to act as a Safety Net for Bter by creating Bter Tokens on the asset then listing them on Bter Exchange to be distributed to the NXters that have lost NXT Coins Due to the Theft. "Will Bter take the option or not"

NXT has just proved that, unlike our current banking network and even some cryptocurrencies, it is not prepared to compromise its integrity. The cost might have been $1.65 million, but the future value of that move will be priceless.


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Source:NXT Coin
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Industry:Business, Finance, Internet
Tags:bitcoin, crypto-currency, digital currency, NXT Coin, BTER, nxt, MultiGateway, GCR
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