A single point of failureMintpal was compromised. The attacker gained 30% of the total supply of Vericoin in the attack. Which in turn, led the Vericoin development team to do something unprecedented in cryptocurrency history. They created a mandatory rollback.
What is a rollback?A rollback goes back in time from blockheight 100 to blockheight 75. When a rollback is performed, all transactions after a certain point in the blockchain are effectively destroyed. If Bob bought a casacius coin from Sally for 1000 vericoin, Bob would now get the 1000 vericoin back while Sally has nothing. All transactions after blockheight 75 would no longer exist.
The necessity of the rollbackIn every single instance of any exchange or service getting hacked, there has never been a rollback implementation. For Vericoin, this was actually very necessary. Vericoin creates it's new blocks by using proof of stake. When the attacker gained 30% of the coins in one go, they effectively gained 30% of the hashing power. You can see how dangerous this is. All it would take is an additional 21% to effectively completely own the network. If Vericoin used a proof of work system, the only danger would be the market price plummeting from the sell off, but the network itself would never be in danger.
The unprecedented solutionA rollback is terrible. Every single cryptocurrency relies on the public blockchain ledger. It is the holy grail of the entire currency. Once something is written to it and not orphaned, it's set in stone. When the team decided to initiate the rollback, they decided to use the nuclear option. They broke the entire foundation of crypto and set a new norm where it will be ok to undo transactions if the are large enough. Instead of the developers only being developers, they've now taken the option to also be the federal reserve and the police.
Proof of Stake's flawsVericoin only had the nuclear option available because of proof of stake. When an attacker gains coins in a proof of stake currency, they not only gain money, they gain network control. Vericoin was between a rock and a hard place. They either let the attacker have 30% of the total staking power, or set the precedent of rolling back. The reason they took the rollback option was because they could. (for now)
Impossible to rollback when bigVericoin is so new that there is not a lot of merchant support. If it was as widely used as Bitcoin with 1000's of transactions a day and tons of merchant support, a rollback would kill the currency. Merchants would of shipped products with no payments and people wouldn't of been payed. Hypothetically, if any proof of stake currency did become as big as Bitcoin and was compromised just like now with 30% of the total coin supply taken, the currency would effectively not be able to rollback and allow a malicious entity to control the network. A large hack would become a death blow creating uncertainty in the integrity of the network.
TLDR- None of yesterdays events were Vericoins fault.
- Proof of Stake is not feasible: in a large attack, the attacker gains crypto and network control.
- When a single entity fails (an exchange) no currency should ever undo their mistakes by wiping it from the chain.
- If a proof of stake currency ever becomes huge, it would not be able to rollback and would have to allow a malicious entity to have network control.
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