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Bitcoin bug let people create coins from thin air
The SEC is warning investors to stay away from digital coins and initial coin offerings (ICOs) that might be tied to fraud. Why? Well, it all started with a bug that allowed people to create digital coins inside of their game. “Players can then use those new coins at the game’s marketplace,” said SEC director of advertising and public relations Sharon Machlis in a statement released on February 13th, 2018. “Shortly after the game launched in December 2016, one enterprising player, using a ‘bug’ in the game, was able to create a currency entitled ‘clear’ that was worth billions of in-game coins. That player then used those created coins to build up an inventory of valuable goods and services within the game.” Reference: https://www.bloomberg.com/news/articles/2018-02-13/sec-warns-of-initial-coin-offerings-heres-what-to-know
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The SEC is warning investors to stay away from digital coins and initial coin offerings (ICOs) that might be tied to fraud. Why? Well, it all started with a bug that allowed people to create digital coins inside of their game. “Players can then use those new coins at the game’s marketplace,” said SEC director of advertising and public relations Sharon Machlis in a statement released on February 13th, 2018. “Shortly after the game launched in December 2016, one enterprising player, using a ‘bug’ in the game, was able to create a currency entitled ‘clear’ that was worth billions of in-game coins. That player then used those created coins to build up an inventory of valuable goods and services within the game.”
Bug was exploited to the tune of $220,000
This bug was then exploited to the tune of $220,000 in real dollar transactions. The developers of the game never anticipated or coded for the possibility that a user would create millions of coins out of thin air. As a result, investors are at risk of losing their investment should the developers be unable to satisfy their debt.
It has been suggested that the game be shut down, but the developers have said that they planned to fix it and re-open the game in the future.
Since its launch, Blackcoin has been heavily marketed via online videos and word of mouth by its creator. This strategy has appeared to work well so far, as Blackcoin is currently the second most popular electronic currency after Bitcoin.
Blackcoin’s rise in popularity can also be attributed to its recent adoption by CoinKite. CoinKite’s recent addition of Blackcoin to their platform has helped the currency gain more awareness. CoinKite is a web-based digital currency exchange providing trading services exclusively for digital currencies such as Bitcoin and Blackcoin.
How the bug worked and how it was fixed
The bug was created by a user named, “clear” who built up his fortune by exploiting a programming glitch. The bug allowed users to enter the game and “breach the imaginary digital limit of 10 coins per day.” This meant that any user could spend up to $10,000 per day, without having to go through the proper verification process that would stop every other player. The developers of the game quickly brought the bug to their attention, and it was fixed by January of 2017.
Although, users who exploited the bug before it was fixed were allowed to keep their virtual earnings. The developers, who are anonymous and only known by their online handles that they created for themselves, named “Dookie” and “Rapture” said in one of their posts: “We are aware of the situation and currently have all our moderators working on banning those who have exploited. We will be donating all proceeds from this round to charity.No coins will be removed from legitimate players. We have made it so that new round starts every day at midnight, so people will have time to collect and spend their earnings. If you have been affected by this exploit, we recommend you don’t play for the next few days.”
What this means for the future of Bitcoin and other digital currencies
This incident did not only highlight the need for responsible blockchain development, but it also highlights cryptocurrency as a whole. The SEC’s warning came five days after the United States Financial Crimes Enforcement Network (FinCEN) said that all ICOs and digital currencies are currency and are subject to federal supervision. As such, FinCEN went on to advise investors that ICOs were not only a way for developers to raise money in hopes of building future commodities, but they also functioned as “investment contracts” that had to comply with securities laws. This means that most digital coins are now classed as securities and must be registered with the SEC. Furthermore, the recent rulings related to the Bitcoin Cash fork still classify Bitcoin as a commodity, which means that buyers and sellers of BTC will have to pay capital gains tax on their profits.
Kryptowährungen waren immer in einer Minderheit. Doch sind sie die Aufkäufer von – Krypto-Fonds? (Cryptocurrencies were always in a minority. But are they the buyers of crypto-fonds?) https://t.co/TmMtjKG1Ri — Antoine Ogez (@ogez92) January 16, 2018
Although this pivot means that digital currencies are now more heavily regulated than ever before, the SEC did note that they were not declaring every cryptocurrency a security. The commission noted that some digital tokens may be commodities and “may not be securities.”
