Monero Gold: What a dead coin looks like
Monero Gold blew up leaving early traders holding the pin.
An elaborate scam has been pulled off, completely fooling not only traders, but also the exchange that it was listed on.
Monero Gold (XMRG) floated with CoinExchange on Friday 2 February 2018 and starting from US$0.022, one unit of XMRG climbed 672% within hours to US$0.17, according to market data released by CoinMarketCap.
XMRG dropped from that height very quickly, recoiling to about US$0.04. From there, 24-hour trading volume gradually increased until XMRG dropped off a cliff, taking traders with it.
On Sunday 4 February, the price of XMRG went from US$0.073 to US$0.0024, losing 96.71% of its value. This has left distressed traders with no recourse to recoup their lost funds.
Monero Gold is completely different to Monero. First of all, Monero is a leading privacy-focussed cryptocurrency and has advanced cryptographic functions which give it very high levels of privacy.
Monero Gold was an ERC20-compliant token. This means that it was created using the Ethereum blockchain and because of the nature of ERC20 tokens, XMRG had no connection to Monero.
As far as blockchain programming goes, it is incredibly easy to create an ERC20-compliant token.
It appears as though some opportunists have used their skills to create a token, gotten lucky enough to have tricked an exchange to list them and then dumped their coins on early traders.
How did this happen?
Looking at CoinExchange, their highest trading cryptocurrency was Monero Gold which registered over US$2.5 million in a 24-hour period of trade on CoinExchange. The next highest trading cryptocurrency registered just over US$400 thousand in a 24-hour period of trade. The total trade on CoinExchange is only US$7 million per day.
It would be impossible to know if they could have been involved in a scam or whether their due diligence processes are not developed enough to detect a scam like XMRG.
There would have been big challenges even preventing a scam like XMRG anyway.
What the developers did was set the token amount to below 0. The programming logic meant that there could not be less than 0 tokens. What this did was reset the amount of XMRG tokens at an almost incomprehensible amount of tokens. To put this in perspective, bitcoin will have 21 million total tokens when the mining supply has been exhausted.
Because of the programming error, the XMRG total supply became approximately this many tokens: 1,157,920,892,373,160,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000.
This glitch could not have been picked up by reviewers. It would have taken some brains to have even worked out that such an event could be mathematically possible. Such is the beauty of computer science.
What can be learned from this?
Monero is an established cryptocurrency. It has a big community of readers and contributors to its source code and to social media forums such as reddit. It can be considered an authentic cryptocurrency
For Monero Gold, its developers pretty much grabbed the Monero brand and put gold on the end of it. Plus, with some creative programming, they managed to scam early traders out of up to US$4 million.
As a rule, you should be a bit sceptical if a cryptocurrency uses the name of a trusted, established cryptocurrency and places a new word on the end of it like gold, plus, diamond, private or any other potentially deceptive change from a well-known cryptocurrency.
Exchanges have some responsibility, but ultimate responsibility rests with the buyer. There would be no way to prove if the exchange knew that this programming flaw would lead to such a burn on its exchange. Also there would be no way to prove the developers of Monero Gold knew that was going to be the outcome.
It is important to do thorough research before considering holding cryptocurrencies since there is no regulation in this space yet. Purchases in cryptocurrencies are final and there is no way to recover funds that are lost this way.