Do you ever feel like the above picture. A primate looking at a bone trying to figure what it does. How it works.
It’s like that now. The more I learn about cryptocurrency “exchanges” — at least the friendly ones — the less I know. What the hell is this “bone” thing?
Perhaps, it is best to clear our minds of the extraneous nonsense dished up on the internet like so much fast food, no matter how good it tastes.
Maybe we should go to the source. Talk to the guys and gals on the front lines. Go to the exchanges themselves and just ask. So, that’s what I did. Like a smart guy. Really smart, I tell you.
I feel that I have implied things in a previous post that I should not have. So, in a sense, this post is my retraction and clarification. My bit of re-education. Hey, I’m not perfect, but neither is crypto, so bite me.
Here’s what I learned, after being contacted by a manager from a cryptocurrency firm. I learned that things are rather screwed up, to put it politely.
The Tables have Turned:
I questioned the Cryptopia Cryptocurrency Exchange’s decision to delist Bytecoin. I was not on about Cryptopia’s fees or trying to review their policies. And it was not specifically about Bytecoin. I don’t even like Bytecoin (BCN) — any longer.
I was after the reasoning behind the delisting process. In fact, given my suspicions, I thought that there was something more to this story. Something nefarious. And I was right that their was more, but wrong for suspecting foul play.
As it turns out, a manager at Cryptopia took the time to explain to me why BCN will be delisted there. I’ll not give a name, but I have obtained permission to use the information here.
This is my interpretation of Cryptopia’s dilemma, but a predicament all exchanges of this nature should be aware. If I’m off base here, I apologize – to Cryptopia.
If cryptocurrency experts have questions about the following, please let me know in the comments section below.
So, here’s the scoop.
It is not so much that BCN has a “paymentid” issue. It has more to do with another well-known exchange.
An exchange which is quite large, but perhaps has outgrown its ability to serve the customer. I’m referring to Poloniex, of course. It is becoming a dinosaur.
There are all kinds of complaints against Poloniex. Poloniex scams people. Poloniex scalps investors. Poloniex delists or freezes coins for months at a time. It has been seized by unknown parties, banned users, been hacked, and the list goes on.
But we’re focused on one thing here: BCN. Why the delist?
For those of you who are unaware of how one sends BCN’s, it’s a bit more involved than sending bitcoin (BTC’s). One requires, in many cases, two pieces of information.
- A wallet address where the BCN is supposed to go
- A paymentid, to ensure your BCN is credited to your account.
And this is where the difficulties arise.
One can encrypt the “paymentid” and the fact that one did this is visible on the blockchain. Even on Bytecoin’s blockchain.
Knowing this, means one can exploit this knowledge.
So, how does it work?
Poloniex transfers cryptocurrencies to other exchanges. A large percentage of the CryptoNote transactions, especially the ones Poloniex sends to Cryptopia deposit with no problems. The “paymentids” are not encrypted.
Unfortunately, about 10% of the Poloniex transfers to Cryptopia were (are) transferred encrypted.
But here is the problem. Poloniex has not provided the “key” to unlock the encrypted deposits.
In other words, Poloniex sends the BCN, but Cryptopia is unable to clear the transaction – unable to credit the customers’ cryptocurrency account.
So, what happens?
Lack of Customer Service:
Cryptopia contacts Poloniex and you guessed it, Poloniex does not respond in a timely manner.
Haven’t we heard this before? Months on “support” waiting lists. Why do we bother any longer? I recall many a time waiting weeks for a response from Poloniex, but my problems were always resolved. And you know what I did wrong, in the early days? I forgot to put in my paymentid. CryptoNote and other coins which required additional addresses fouled me up
Perhaps Poloniex should try using the Discord app, like Cryptopia does. Makes for real time solutions. I’m gathering that the application is not just for “gamers” these days.
Good communication may not help the CryptoNote deposit/withdrawal problems, however. The continued lack of “user friendly options” should serve as a notice for Monero (XMR) and even the Aeon cryptocurrency users. Yes, we’ve heard about the benefits of early adoption, but can you imagine the increase in cryptocurrency volume if everything was streamlined?
Here is an interesting response from my source at Cryptopia that should serve as a warning to any CryptoNote user:
“…working theory that like us [Cryptopia], Polo [Poloniex] has issues with Cryptonote wallets timing out calls, and thus it’s probably only the manually reprocessed transactions that are going badly…”
Another piece of bad news about BCN: Blockchain watchers. Crime.
Suppose you are a bad guy, a criminal, and you want to pull a fast one. Do some low tech “social engineering.” Watch the blockchain, even the allegedly private one like Bytecoin, and pick out the encrypted “paymentids.” You see one flash by. You copy it. You note the timestamp, block height, size, the number of transactions within the transfer and the hash. It’s all public and visible. You can even click on the “hash” to obtain the number of coins sent.
Perhaps you already have a list of BCN addresses you have skimmed from the net or bought from a corrupted exchange employee. You know that the addresses are located at your target exchange. If you don’t, you simply apply a pre-step. You somehow finagle the BCN address from the target. Or is there a simpler way to scam an exchange?
The strength of BCN and all CryptoNote cryptocurrencies, in general, is that (allegedly) nobody knows your address. Where you send your coins or where you receive them is, by default, secret, right? Up to a point. I mean, if I’m going to pay you, I need your address. I need, in this case, your BCN address. But what if I’m a smart crook trying to scam an exchange. An exchange is like a bank, right? It’s where the money is. So, these days, instead of washing checks or forging them, they forge support tickets.
In any case, you move on to the next step – as a crook.
You send in a support ticket to the Cryptocurrency Exchange you are trying to heist. Say today, you’re in the mood to rip off Cryptopia. You type out a ticket. Complain that you sent a million BCN’s from Poloniex to Cryptopia. You decide, you know what, I’m going to give them my BCN address. After all, you have an account.
You complain, repeatedly, that you did send over the BCN, from Poloniex. That it had to have landed somewhere. You advise Cryptopia to check the main wallets, that maybe Poloniex sent over some type of bulk transfer and your BCN’s wound up in someone else’s account. You point out that BCN does split up the transfers into parts to make the transfer more secure, and just maybe, your part is missing.
You hope Cryptopia will not check or maybe they cannot be certain. Then you cross your fingers. As you do this, a thousand other scumbags – the world over – do exactly what you did. Support tickets pour in all after the same million BCN that has not yet been credited. The accusations fly.
Meanwhile, the real depositor, who did send the encrypted BCN, is probably scratching his/her head. He or she is now sending in support tickets to Cryptopia. Under the barrage of tickets, I think Cryptopia knew, that until Bytecoin had a better system, its days were numbered.
Oddly and perhaps because of its popularity, Monero (XMR), which is a CryptoNote derived coin, does not have near the deposit trouble as BCN does at Cryptopia. Maybe the crooks like its value? They need to keep one avenue open? Not. There is no honor among thieves, that’s all baloney. Movie nonsense.
So, here we have Cryptopia, loaded down with what can only be described as “Spam-Crime,” trying to obtain a response from one of the most unresponsive cryptocurrency exchanges out there: Poloniex. An exchange which some joke is going “Gox.” (A reference to the Mt. Gox fiasco.) What do they do? Delist. It is a smart decision in my estimation. Why pursue a cryptocurrency with such a high rate of Spam-Crime?” I mean, until the wash is clean?
Before Cryptopia delisted Bytecoin, however, they had to do the right thing. They could not hold any BCN’s if they were not certain of the rightful account owner. If they accepted classes of BCN, the non-encrypted transfers over the encrypted ones, it might look like a form of de-privatization. Reducing or making BCN transactions less secure, when in fact, they were only attempting to credit the correct depositor.
Delist and return. That’s what Cryptopia did. They sent all the encrypted transactions back to Poloniex. They even paid the fees to do that, with the same:
“…encrypted payloadid hoping that Polo [Poloniex] would figure out what we were doing and why…”
Thus far, Poloniex has failed to act.
Cryptopia has also advised that the BCN delisting has nothing to do with regulations (KYC/AML) and that the overhead to support the CryptoNote coins is simply not a value-added proposition. The complaints and crime generated, because of BCN brings unwanted attention to an otherwise impeccable reputation (my estimation).
The fact that Cryptopia is “actively” delisting other CryptoNote coins, is troubling. Monero (XMR) and Aeon hold promise and any bad news would not help the cause. Again, my impression is that Cryptopia will not delist XMR’s any time soon.
The take away? The anonymity components of the CryptoNote coins are not the problem as much as the clash between Poloniex and Cryptopia.
A combination of factors to include poor business service from Poloniex, leading to a perfect storm of complaints, magnified by Spam-Crime, against Cryptopia, has led to the delisting of BCN by Cryptopia.
Let this be a lesson. Don’t use Poloniex. When you start to see an organization begin to reduce their service, remove the Trollbox, all the while complaining of high volume, know that something is fishy. Their business model is not working.
Caveat Emptor, as always.