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Beyond Porn: Verge Courts Controversy And Headlines

Simple Missteps or Purposeful Manipulation?

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The long-anticipated partner of anonymity-focused coin Verge is officially PornHub, the company announced Tuesday. The market was deeply disappointed, Verge’s price collapsed, and the privacy currency created breathless headlines beyond the world of crypto and into the mainstream media.


This news comes following a statement released on Monday night, in which the company promised a partnership unmatched in size by any other coin on the market:

“…we jumped on this opportunity with the understanding that it is destined to be one of the biggest adoptions of cryptocurrency in the entire industry. This partner owns one of the largest payment processors on the internet with several hundreds of businesses routing their payment traffic through them. The partner is going to be supporting Verge Currency by rolling out a global marketing campaign with continuous marketing effort throughout the year.”

Investors, though, were less than impressed with the hyperbole and the adult-only partnership, and the token dropped precipitously in value immediately following the announcement:

 

Verge Pornhub announcement

 

Beyond the financial impact the decision had, it was decried by some for bringing a poor image to the crypto community, and by others for over-promising and under-delivering.

This isn’t the first time that Verge has been the subject of controversy though. In fact, the red flags have popped up enough times for a sizable number in the crypto community to accuse the coin’s founder and lead developer, Justin “sunerok” Vendetta (real name: Justin Valo), of potentially fraudulent behavior.

It’s important to note that merely reporting on these events in no way indicates a “FUD” play. For those unaware, “FUD” stands for “fear, uncertainty, and doubt”, and is often a battle cry used in the crypto community to disparage those suspected of attempting to drive down the price of a coin or reduce its credibility.

Instead, the following timeline is meant for informational purposes only.

December 13, 2017: McAfee Tweet

John McAfee has quickly rebranded himself from eccentric founder of the eponymous security company to cryptocurrency leader. On his site, he and his team claim that “nothing can match the power of the McAfee effect”.

On December 13th, 2017, John McAfee sent the following tweet:

And this is how the value of Verge (here relative to the USD) reacted:

 

Verge crypto McAfee tweet

 

Obviously, there is nothing inherently unethical about paid promotions such as those offered by McAfee. It depends on who is paying.

March 2018: The Fundraiser that Didn’t Need Funding? 

In late March 2018, Verge announced a crowdfunding campaign, requesting fans to donate $XVG to help pursue the following goals:

“• Ledger Nano hardware wallet integration and support

•Wraith protocol iOS enabled wallet applications

•Advanced Marketing tactics which span the globe

• Partnerships with large scale companies

• Real world adoption”

While all seem a bit vague for such a large request, the more concerning questions stem from the fiasco with Ledger. After tweets from the wallet company claimed that there was no present or future working relationship with Verge, many users were quick to accuse the company of misleading donors. An April 14th Twitter thread seems to close the issue for good, though:

That’s Fred de Villamil, VP of Engineering at Ledger. Verge quickly responded in thanks:

This interaction supposedly occurred in September 2017. At this point, Verge claims to have had insufficient capital to pursue integration at the quoted price of $60,000.

John McAfee’s site, on the other hand, says that the fee for a single tweet is $105,000. It was only 3 months after the Ledger quote, and before the fundraiser, that McAfee’s account tweeted multiple times about Verge’s potential.

April 4th, 2018: Hacking and Hard-Forking

 

At first glance, the company’s official stance on the hack is clear and reassuring. A deeper dive into the situation, however, reveals that it may not be the entire truth.

On bitcointalk.org, a popular forum for crypto and blockchain enthusiasts, a member named “ocminer”, who also runs the Suprnova mining pools, outlined the true scope of the attack (full thread available here).

The hash attack referenced in the tweet worked very specifically to exploit a code misstep. In standard cases, each new block in the chain must be of a different algorithm than the one before. The Verge codebase, though, left a loophole that allowed for a fake timestamp to be added to a supposedly mined block. Thinking its been over an hour since the last time that algorithm was mined, the fake block is added into the chain between valid blocks. Here’s a screenshot of some of the transactions:

 

Verge mining

Seeing as the legitimate blocks are one second apart, ocminer concludes that the hacker was mining at the ridiculous pace of one block per second. The reward for mining is set at 1560/block, which at the three hour timeframe reported officially equates to an astonishing 16,848,000 stolen $XVG.

In situations of that magnitude, it’s possible (and prudent) to rollback the chain to before the breach, thereby invalidating the hacked coins. Verge, however, decided not to do this, as evidenced in chat logs, also posted by ocminer (vergeDEV is Justin Vendetta):

[16:12:43]  <ocminer>   hmm no filtering/rollback of the attackers coins ?

[16:12:55]  <ocminer>   thats over 20 mills for him…

[16:13:08]  <vergeDEV>   we dont do rollbacks.

[16:13:16]  <vergeDEV>   we roll forward

The “roll forward”, though, was less effective than Justin might have hoped. In what unconfirmed reports have called an “accidental” move, the Verge blockchain was hard-forked.

Hard-forking is the blockchain equivalent of a robbery occurring and, instead of invalidating the bills lost, responding by burning down the entire bank and starting over across the street. Hard forks, among other things, invalidate every block following on the chain onward from where it occurs. It effectively closes loopholes, but requires awareness on every end to get all users and miners onto the new chain protocol.

As the fork came without much warning, many in the Verge community, especially pools and their miners, were upset with what they perceived to be a lack of transparency.

Explanations and Looking Forward

Obviously, it’s entirely possible that Verge’s complicated history is simply another saga of understandable missteps by a new organization. There are suspicions, though, that the newly-sexy coin will go the way of BitConnect.

Some say that Justin doesn’t have the technical ability to lead a coin of this size, others say Wraith will never work as promised and accuse him of propping up a flawed coin, while still others accuse him of outright theft and suspect him of conducting the hack.

Regardless of the outcome, the drama of the coin has certainly became much more public since Tuesday’s announcement. Sex sells, and Verge’s porn partnership has given it a lot of free publicity.

Will that be enough to satisfy Verge critics – or even the devout #vergefam?

 

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