Lawsuit alleges BCH collusion with Chinese government

Posted: 10 December 2018 7:14 pm
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Lawsuits are just one more attack vector blockchain developers need to be aware of.

A new lawsuit, with its own website, is being levied against Bitcoin Cash ABC, specifically Bitmain, Jihan Wu, Roger Ver, Kraken and other Bitcoin Cash ABC affiliates.

It paints a picture of an orchestrated campaign by the Chinese government to orchestrate the centralisation of the Bitcoin Cash network for control over the future of non-fiat digital currencies.

A tangled web

As the explainer says:

"This legal action will seek to prove that specific key actors, including some of the biggest US-based and international names and entities in the digital currency world, have been operating with the support of the Chinese government to centralise the Bitcoin cash network resulting in Chinese entities now having established dominance over this important segment of the cryptocurrency market with proprietary software checkpoints and instituting other means of control over the system."

It paints the picture as follows, only mildly hindered by typos.

Essentially, clockwise from the top, it asserts the following:

  • The Chinese government is taking an active role in supporting the country's crypto mining industry by providing energy and approving the Bitmain IPO.
  • Bitmain supported the BCH ABC fork, helped along by cheap energy from China.
  • also supported the BCH ABC fork. It then goes into some detail about Ver's involvement with Silk Road, even though it's completely unrelated to the allegations at hand.
  • Bitcoin ABC was supported by Bitmain and
  • Kraken is headed up by associates of pro-ABC forks and was also vocally opposed to the competing BCH SV fork.

The explainer doesn't make any attempt to explain the top left quarter of the diagram, which looks like it's trying to say that Kraken is paying the Chinese government – or something like that. That part is apparently left to the reader's imagination.

What does it propose?

The lawsuit is being levied by a company called UnitedCorp. It alleges that the actions taken by the defendants – those names and faces in the circle above – have caused monetary damage by damaging the value of BCH SV, and are damaging the "democratic and neutral principles of the Bitcoin Cash network."

It demands the following:

  1. That BCH ABC developers be barred from implementing any more checkpoints on Bitcoin Cash
  2. That they "return the blockchain to its previously decentralised form with the previous consensus rules"
  3. That the defendants pay the plaintiff a lot of money

A real decentralisation stress test

The most obvious issue with the lawsuit is that it's proposing that a centralised authority, in this case the relevant United States authorities, take control of the Bitcoin Cash blockchain to ensure that it's decentralised. Of course, if that's even possible, then it's not actually decentralised.

However, the president of UnitedCorp, the company that's bringing the suit, insists that this has everything to do with decentralisation.

"We are bringing this suit on behalf of UnitedCorp because we believe strongly in the value and integrity of democratic, distributed and decentralised blockchain networks which will become more important with time. In order to maintain confidence in cryptocurrencies such as Bitcoin Cash, no person or entity can be allowed to control them," said UnitedCorp president Benoît Laliberté in a press release.

Commenters on Twitter were quick to label UnitedCorp a "shell company," and point out that Craig Wright, the primary owner of the competing BCH SV fork, reportedly tweeted that he would help miners "start a long messy class action" if things didn't go his way. This might be that promised suit.

"It is clear that what's supposed to be a democratic process was not; it was hijacked by the ABC camp," said Lawry Trevor-Deutsch, VP of Corporate Affairs at UnitedCorp to MarketWatch.

He's referring to the way the and Antminer pools organised to combine their hashing power, overwhelming the pro-SV hashrates.

Opinion: Blockchains don't care

In a situation like this, it's also worth emphasising that blockchains like BCH do not care about decentralisation.

juicy crypto words

They are not democracies, and they don't care about fairness. Their number one goal is to give miners a way of turning electricity into money, and then hopefully promote decentralisation as a result of this function.

You cannot steal a blockchain election because there are no elections – just a constant anything-goes power struggle where different forces vie for more total control and the additional profitability it brings.

There are no right and wrong decisions either. If the majority hashrate decides that a network should be centralised under the control of a single entity, then that's self-evidently the correct course of action. Mining pool owners are similarly free to redirect their pool's hashrate as desired, unless it's against any legal obligations to the contrary.

The Chinese government has every right to attempt to usurp the BCH network, and BCH ABC has every right to attempt a complete takeover with checkpoints. By the same token, UnitedCorp and BCH SV also have every right to use every tool at their disposal, including humorous lawsuits, in their own attempts to control the network however they want in order to maximise their own profits.

That's not to say this is necessarily a good system. "Good," in this case, meaning a system that effectively facilitates secondary blockchain functions such as immutability and trustlessness.

This lawsuit is just one example of the inefficiencies which may be associated with these kinds of purely profit-driven proof-of-work blockchain models, and one example of how someone might attempt an attack against a blockchain.

There are lots of ways to attack a blockchain. There's the chance of a 51% attack, selfish mining, a long-range attack, the potential for Sybil attacks and more. This is just an example of a new attack type, also likely motivated by profit – the lawsuit attack.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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