3 Months Since Korea’s Biggest Cryptocurrency Exchange Raid, What Happened?
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It has been three months since UPbit, South Korea’s biggest crypto exchange, was raided by local authorities. Yet, the government has not released a public statement on the investigation.
Did the Investigation Find Nothing?
Earlier this year, UPbit was under the suspicion of manipulating and inflating its balance sheet. The Korea Financial Intelligence Unit (KFIU) confiscated the company’s hard drives, servers, and computers to evaluate their existing financial data.
According to local reports, the investigation was initiated by the government after several insiders in the industry accused UPbit of running opaque operations and inflating its cryptocurrency holdings.
Three months after the raid, the KFIU and local police have not been able to prosecute or even challenge UPbit in court, primarily due to the decision of the government to punish government agencies that aggressively initiate investigations that cannot be backed by clear evidence and findings.
As such, the local police and financial authorities were heavily criticized by investors and companies in the cryptocurrency sector. The outrage of cryptocurrency investors intensified as UPbit of its holdings conducted and published by Yoojin, a recognized auditor in South Korea.
Government at Fault, Insiders Say It’s Positive
An insider told Hankyung, a recognized mainstream media outlet in South Korea, that the incident is positive for the crypto sector, as it will prevent the government and local financial authorities from unfairly accusing cryptocurrency companies for fraud and suspicious activities.
“If UPbit can prove that it holds the exact amount of cryptocurrencies as listed on its balance sheet, which it has already done through the audit report of Yoojin, financial authorities cannot challenge the company in court, as UPbit will always come out innocent. This incident is positive for the cryptocurrency sector, as it will prevent the government from assuming that the blockchain sector initiates opaque and suspicious activities,” the insider said.
In essence, the government and local financial authorities are currently in a position in which they cannot challenge UPbit in court because the company has released audit results that verified the company’s holdings of cryptocurrency.
But, if the incident ends here, without any announcement from local financial authorities, it will provide the cryptocurrency sector and businesses within it a sense of legitimacy, as government officials have continued to accuse crypto startups for conducting opaque and suspicious operations but have not been able to provide conclusive evidence to prove those claims.
The positive ending to the UPbit investigation along with the planned release of the country’s first cryptocurrency and blockchain legislation are expected to in the mid to long-term.
Busan, Jeju Island, and Sejong, three major region in South Korea, have also vowed to create a better ecosystem for crypto startups and blockchain projects, to ensure that South Korea can become a favorable region for crypto and blockchain-related businesses.
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(Bcash) forked from the bitcoin blockchain to create a new cryptocurrency (BCH), and ahead of the that may do the same thing, a third bitcoin fork is in the making: Gold (Bgold; BTG). But where Bcash and SegWit2X are scaling-related forks — both mainly increase bitcoin’s block size limit — Bgold wants to re-decentralize mining by implementing a new proof-of-work algorithm.
“What was born as decentralized is now centralized,” bitcoin Gold contributor J. Alejandro Regojo told bitcoin Magazine, referring to the current state of bitcoin mining. “With this fork, we want to show how bitcoin can be as ‘Satoshi’ as possible, as social as possible, and as decentralized as possible.”
Mining Centralization
bitcoin Gold was initiated by Jack Liao, CEO of Hong Kong–based mining hardware producer, and was first announced in late August. The open project has been gaining traction and support in the wider cryptocurrency space since, with a as a main hub for discussion and organization. Bgold is currently being developed by the pseudonymous developer “h4x3rotab” along with a small group of volunteers contributing to the project in other ways.
The attention Bgold has attracted is probably in part because anyone who owns bitcoin (BTC) on October 25th will receive the equivalent amount of BTG. While this model has been criticized, particularly because it presents a burden on service providers and users, it has also proven successful. With the launch of bitcoin Cash in particular, users eagerly accepted their batch of “free money,” while exchanges, wallets and other service providers proved relatively willing to integrate the new coin.
Further, the Bgold team believes that this distribution method should also benefit bitcoin over altcoins as it provides an extra incentive to hold BTC on particular dates.
“But the key goal that we are trying to achieve with this fork is to build a perpetually ASIC-resistant version of bitcoin,” said Robert Kuhne, another bitcoin Gold contributor, in explaining the purpose of the project to bitcoin Magazine.
Bgold contributors like Regojo and Kuhne think that bitcoin’s proof-of-work hashing algorithm was essentially broken by the introduction of specialized ASIC (application-specific integrated circuit) mining hardware. In the early years of bitcoin’s existence, individual users were often also miners; this has since become concentrated into relatively centralized operated by professionals.
“And we’re now in a situation where 65 percent of hash power comes from a country that doesn’t like bitcoin,” Regojo noted, referring to China’s recent on cryptocurrencies.
An Uneven Playing Field
And while mining is centralized, ASIC production is even more centralized, the Bgold contributors pointed out. Only a handful of companies currently produce such specialized chips.
This means that anyone who wants to be a miner in any meaningful way is beholden to these companies, Kuhne argued.
“The way the monopoly manufacturer currently operates is abusive to its customers — individual miners — and the industry at large,” he said, referring to major Chinese ASIC producer Bitmain. “Manufacturers can produce ASICs at a tiny cost, but miners have to buy at a high price. This violates the one-CPU-one-vote ethos as described in the bitcoin white paper, because while everyone can buy CPU at the same price, the same is not true for ASIC hardware.”
Regojo and Kuhne see this as a fundamental problem — not something that free market dynamics can realistically resolve. They suggest that the barrier of entry to the ASIC market to compete with existing manufacturers is fundamentally too high to allow for open competition.
“You can’t build a factory without approval from the government and banking system. So there are really only a handful of entities in the world that have total authority over who can and can’t manufacture ASIC machines. And all this could potentially get much worse if and when those institution really start feeling the disruption from bitcoin, which hasn’t begun in earnest yet,” Kuhne said.
As opposed to the bitcoin Cash and (especially) the upcoming SegWit2X forks, bitcoin Gold very specifically does not make a claim to be the “real” bitcoin. Instead, the Bgold project hopes it can prove a valuable exercise for bitcoin; a sort of test case for a hard fork that bitcoin itself may one day require.
Concretely, bitcoin Gold is now implementing the proof-of-work algorithm. This is already used by and is relatively ASIC-resistant.
Full ASIC-resistance, however, is thought to be impossible: Any mining algorithm could be subject to specialized chips. Like, the Bgold community therefore plans to re-deploy a new proof-of-work algorithm hard fork if it is found out that ASIC-chips for Equihash are being produced. (This plan alone, of course, could be a deterrent for any potential ASIC-producer.)
For security, the project plans to implement strong replay protection to avoid loss of funds for unsuspecting or non-technical users. It will also adopt a new difficulty re-target algorithm to prevent the blockchain from stalling: Difficulty is re-adjusted at every block instead of once every two weeks.
While the coin is set to launch two weeks from now, the Bgold codebase is not yet fully developed and ready to be deployed. Implementation of the new proof-of-work algorithm and replay protection, as well as the new difficulty re-adjustment scheme, are yet to be finished.
Nor are all the details for the project even ironed out.
indicated that bitcoin Gold would have a closed launch and a presale of coins. A new batch of BTG was to be mined in the first week after the fork and subsequently distributed to designated investors, not unlike an ICO. Proceeds of this “ICO” were then to be used for development and other Bgold-related purposes.
However, as interest in the project grew, this idea became more controversial. Not everyone involved with bitcoin Gold likes the idea of an additional founders reward — something Bcash, for example, did not have.
Kuhne addressed the issue by stating: “We have heard a lot of feedback from the community, so this proposal will be replaced with an updated and improved plan. But we will not completely rule out the possibility of a modest pre-mine to provide a basic level of funding for the project.”
Disclaimer: The author of this article holds BTC and will therefore also own BTG at launch.
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