According to Coin Metrics, the anonymous miner was able to steal about 4,000 BCH, which was worth US$1.6 million [AU$2.4 million] in May 2019.
This amount was an accumulation of anyone-can-spend money following the Bitcoin Cash hard fork.
In August 2017, the Bitcoin network split into two, which gave birth to the Bitcoin Cash chain. In addition, the original Bitcoin network upgraded to SegWit that same month.
At that time, both blockchains had similar-looking addresses, which made it hard to distinguish one from the other.
As a result, numerous users erroneously sent out BCH to SegWit addresses, which are not supported by the Bitcoin Cash blockchain. Furthermore, all transactions sent to SegWit addresses became anyone-can-spend addresses, which don’t require a signature to access.
These lost funds became honeypots for whoever could get to them first.
Yet years went by and the developers weren’t able to correct this issue right away, which resulted in 18,000 lost BCH coins from its users.
Half of them were recovered by benevolent mining pools and returned to their owners, the other half appear to have been taken by a mysterious miner.
Back in September 2017, a Reddit user recognized the need for a BCH recovery service after witnessing all the lost coins, with no way of preventing them from happening again.
Unfortunately, this only resulted in more BTC vs. BCH drama and endless debates that no sincere action was taken.
But as the bounty size of the misplaced funds became larger and larger, people started to take them more seriously. Antoine Le Calvez of Coinmetrics tweeted the estimated amount of wrongly sent BCH around that time.
Two days after the tweet, Mining pool BTC.com conducted the first-ever coin recovery operation and returned 100.7 BCH to their rightful owners. Since then, the pool continued to recover BCH funds while taking 10% as a finder’s fee.
Later on, other pools like BTC.top and ckpool joined in and helped recover user funds.
The Bitcoin Cash community had scheduled two hard forks in November 2018 and May 2019, respectively. Both have important code changes for lost fund recoveries.
This consequently attracted malicious miners wanting to claim the bounty for themselves.
In response, the miners cooperatively decided to launch a chain reorganization as a way to force the network to orphan the blocks mined by the unknown miner. This action prevented its users from losing access to their SegWit funds.
Hayden Otto, CEO of BitcoinBCH.com, told Micky that, while some choose to see the reorg as a coordinated “attack” on the Bitcoin Cash network, it was actually “a defense of the network.”
“Two blocks were orphaned but the transactions from those blocks were re-included on what ended up being the longest chain. They only left out the attacker’s transaction,” he clarified.
Regardless of intent, however, chain reorgs have generally been frowned on by the crypto community.
A week before the BCH 51% attack, Binance lost around 7,000 BTC from a hacker and considered working with the miners to reorg the stolen transactions. Despite the horrible situation, many in the community were firmly against reversing transactions; hence, the idea was quickly abandoned.
In January, the top Bitcoin mining pools came together to direct 12.5% of BCH block rewards from May to November this year for a “6-month short-term donation plan” in order to finance Bitcoin Cash development, though that amount has since been reduced to 5% and will be subject to miner vote.
Editor’s note: The article has been updated to provide greater clarity and to correct an omission regarding the percentage of BCH block rewards that are to be held back.
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