Creators Accused of Ripping Off Investors by Covertly “Premining” Bitcoin Private Coins

Individuals behind a “fork-merge” of Bitcoin and a fork of ZCash called ZClassic, “Bitcoin Private,” are in hot water this week on Twitter following the publication of an article by CoinMetrics that alleges they secretly pre-mined and vested themselves with BTCP coins and failed to disclose these actions in the project’s white paper.

CoinMetrics, “is a provider of crypto asset market and network data.”

According to the article:

“Bitcoin Private (BTCP) is a fork-merge of Bitcoin and ZClassic (a ‘privacy coin’)…BTCP defined its initial supply according to the sum of the outstanding supply of Bitcoin at the time (16.8m), ZClassic (3.4m) and a small 62,500-unit miner program. This was intended to give it an initial supply of ~20.4m BTCP, with a decaying miner reward, capping the total supply at 21m units as with Bitcoin.

However, 2.04m additional units were covertly minted during the import of the Bitcoin UTXOs and sent to the BTCP shielded pool, bringing the initial supply to 22.6 million, contradicting the whitepaper and all of the materials published by the team.”

Not only did the team behind Bitcoin Private create and fail to disclose the extra coins, CoinMetrics believes, someone even moved them quickly to exchanges, meaning the coins may have diluted the value of early publicly-traded coins while enriching the selling coins’ creators.

While marketing a crypto coin can be expensive, creating them is cheap:

“Three hundred thousand units of the covert premine were moved out of the shielded pool towards what appear to be exchanges.”

If successfully sold, the coins could have yielded between up to $3 million for purveyors of the scheme:

“If those coins were sold on the open market, they could have netted a profit on the order of $1M to $3M.”

CoinMetrics said there are five possible ways to explain the appearance of additional coins:

  • Our node is not on the correct chain – someone is somehow feeding our node garbage
  • There’s a bug in the gettxoutsetinfo code
  • The mining reward changed since the publication of the whitepaper making our original estimate wrong
  • Zk-snarks have been broken and someone is minting BTCP in the shielded pool
  • There was a hidden premine

The analysts then provide technical evidence of why they think there was a premine.

Following Bitcoin Private’s release in May 2018, it traded as high as $50 USD, but now trades for $2.


Register Now
Sponsored Links by DQ Promote

 

 

Send this to a friend