Bittrex Exploits Security Flaw In Nexus

Bittrex Exploits Security Flaw In Nexus

What Is Nexus (NXS)?

Nexus is a digital currency, distributed framework, and peer-to-peer network that is in the works of being completely resistant to quantum computing. Nexus plans to launch satellite and ground-based mesh networks in order to provide uncensored internet access whilst bringing the benefits of distributed database systems to the world. (1)

What Happened On Bittrex?

Nexus withdrawals and deposits came to a halt during June 5th and the wallet went offline until June 8th. This caused a huge drop in price during the time many were buying only to withdraw on to Binance during the listing announcement on June 5th and were left with coins they couldn't transfer. (2)

Many associate Binance listings with pumps in the price of the crypto leaving the overall price of the currency higher than what it was before the listing. In this case, the reaction was reversed. (3)

Why did it happen?
Here is the response from the official Nexus Twitter: (4)

No where in the whitepaper or website does it mention this security "feature".

Bittrex triggered this "feature" on a Nexus node causing their wallet not to be able to interact with the blockchain. Deliberately or not, they caused a huge drop in the price of the cryptocurrency by not allowing withdrawals. When asking about the issue, customer support said there was no time frame on when the issue would be solved either. Holders panicked as the price dropped over 25% since before the Binance announcement even occurred.

The real question is: what could someone gain by exploiting this?

1. How a whale could benefit
   A holder with a large amount of NXS could short the coin by attempting to withdraw or move it from an exchange. The withdrawal would put a hold on the exchanges wallet and then the whale could sell off their NXS. This would crash the market on that exchange causing widespread panic. For a long time the price would remain lower on that exchange then others, but holders wouldn't be able to withdraw their funds to the other exchanges and would most likely sell them in the widespread FUD.

After the fix the whale could buy back the coin after gaining on the short and cause a massive pump to restart the cycle.

1. How an exchange could benefit
   Exchanges like Bittrex make most of their income from trading fees. By not allowing users to transfer funds to other wallets, the customers are more likely to trade for a crypto that is transferable. Bittrex had more than 2,000 BTC worth of NXS that traded during the issue, resulting in them gaining over 5 BTC or about $40,000 at the time.

A combination of these two scenarios would be very rewarding.

Conclusion
Did Bittrex know about the flaw and exploit it? Whose to say they didn't? Whether they did or not, they have no intention of reimbursing customers who were victims to this exploit as stated in Section 4 of their terms of service. (5) Bittrex recently reopened itself to new registrations and was previously closed so that they could uphold their quality customer service and remove many altcoins, but it doesn't seem to matter here. I never received a straight answer from Bittrex myself and only found out about the details of the flaw through the Nexus Twitter page.
For an exchange opening up to fiat (Bittrex), and a cryptocurrency that is supposed to be quantum resistant (Nexus), these two just don't add up to par. Bittrex doesn't report these things to their customers and Nexus doesn't need to be quantum resistant if it can't handle trading.
Although the wallet on Bittrex has been reopened as of June 8th, there have been no announcements by Nexus that this "feature" will be removed. No one is stopping anyone from triggering the FLAW again.

Author: TopBestTrend
Date: 6/10/2018

(1) https://nexusearth.com/nexus-faq/
(2) https://support.binance.com/hc/en-us/articles/360004543052-Binance-Lists-Nexus-NXS-
(3) https://bittrex.com/Market/Index?MarketName=BTC-NXS
(4) https://twitter.com/NxsEarth
(5) https://support.bittrex.com/hc/en-us/articles/360000560871-Bittrex-Inc-Terms-of-Service-Version-2