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USBcoin gained some popularity for a supposed extremely short PoW stage before switching to a pure PoS model. Or at least that was the story.
Bitcoin scams and frauds
USBcoin, altcoin, scam, cryptocurrency, Bittrex, exchange, news
UPDATE: It has been confirmed that USBcoin will be deleted from the Bittrex exchange. Bittrex also announced the creation of the aforemention Scam Coin bounty, which will be community run. They also plan to implement a community driven vetting process and increase their internal security on false positives.
USBcoin gained some popularity for supposedly having an extremely short PoW stage before switching to a pure PoS model, there was also an alleged USB stick functionality that was designed to keep your coins safe. Or at least that was the story.
The coin gathered enough popularity to be listed on Bittrex, a popular exchange that often deals with newer altcoins. Just hours after being listed, a huge amount of coins started being sold on the Bittrex exchange. Immediately, people started calling it a dump, but the developer remained in contact with the Bitcointalk forum and assured people that there was nothing nefarious going on.
It was around then that people started having trouble getting the block explorer running, when they did they found previously undisclosed blocks that were not in the coin's github page. By that time, the scammer, likely the original dev of the coin, had sold off most of the coins value. During the scam, the number of USBcoins in existence jumped from roughly 3 million to 55 million. It turns out the developer inserted code that allowed him to pay himself any amount of USBcoins every time a block was generated.
This is the fifth coin listed on Bittrex that ended up being a scam in a little over a month. Nebula, Ninja, Sparta, and Elite coin have all been confirmed as scam coins.
Bittrex wasn't the only exchange that accepted USBcoin, but it was the largest, early reports indicate that as much as 60BTC was taken from Bittrex customers.
We spoke to Bittrex co-founder “Rami” about the scam. He stressed that while the company is always updating its security protocols, which coins get listed are based mostly on consumer demand. He stated that “we do our best to weed this out, but in the end it’s a losing battle. Caveat Emptor, you can't buy brand new coins and hope for massive returns without accepting a huge risk” He also noted that the only way to completely prevent scam coins from getting onto the market would be to implement strict controls and only add coins after they have been carefully vetted.
While that strategy works to an extent for some exchanges, Bittrex's market became popular because of its quick acceptance of altcoins. It is recommended that users BYOR (bring your own research) when investing in a new coin on the exchange. If the site got too restrictive, Rami claims, it would alienate its consumer base that uses it because of its loose acceptance policy.
USBcoin was only a few days old when it got listed on Bittrex, but its existence on there does seem to convince some users that the coin is legit enough to invest in. That presumption is likely misplaced, as Bittrex never states that its coins are thoroughly vetted, although they could perhaps do a better job at explaining that the coins aren't.
As for the fight on keeping coins off of the market? Rami admits that while they are doing what they can without alienating their base, he gave a grave warning “right now, we are losing [the fight against scam coins] and we will continue to lose, unfortunately. It's an unwinnable fight[.]”
Later conversations in the IRC chat channel show that the creators are open to expanding their bug bounty to also include finding scam coins, but that program isn't in the works yet if it comes out at all.
There is hope for those that find themselves holding a digital bag full of worthless USBcoins. The developer of Rubycoin has decided to work on hardforking the USBcoin blockchain to before the scam took place. The USBcoin source code was deleted from GitHub by the creator in an attempt to cover up his actions. However, the Rubycoin developer managed to find someone on the bittrex IRC channel who had a copy. If he can do his work fast enough, there may be a chance to save the coin. He stressed that he is focused on Rubycoin development and is not taking over USBcoin, he simply felt bad for the community and decided to do what he can to help. When asked what people can do to support his efforts, he asked that rather than give donations, anyone looking to reward him for his work should instead support Rubycoin.
Even if successful, USBcoin's value will likely remain in the basement for the time being, and the money stolen out of the Bittrex exchange will still be missing. There is no way to get the BTC stolen from the exchange back. Because of that, Bittrex may be hesitant to reopen its USBcoin exchange even once it is running legitimately. It will however, at least restore the blockchain to a valid record and would give early investors at least a chance of having their coins regaining some value in the future. The coin did gain what popularity it did have for a reason and if enough time passes after the scam, it could recover some value with a dedicated community.
We will have more as it becomes available.
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