A little-known Chinese crypto exchange is allegedly responsible for the unusually high Ethereum network congestion and gas fees recorded over the past few days.
FCoin, founded by Zhang Jian, formerly of Huobi, is accused of deliberately encouraging a rash of Sybil attacks so as to temporarily cripple the Ethereum blockchain and attract undeserved attention in the process.
What happened exactly?
Over the past few days, Ethereum network transaction prices have reached all time highs, creating problems for DApps and users who cannot pay the high transaction fees. The spike in network activity that caused this has been traced to the activities of FCoin, which apparently implemented a “cumulative deposit number ranking” voting protocol to list new coins on the exchange.
What this means is that for a new coin to be added to the platform, rather than a simple one-vote-per-user voting structure, votes are cast by sending the desired coins to the exchange. At the end of the voting period, the coin with the most deposits will be listed on the exchange. This does however, create an obvious incentive to carry out multiple voting, using different accounts to send tokens to the exchange – a Sybil attack.
A plethora of sub-par, Ethereum-based coins have thus entered the race to get listed on FCoin using Sybil attacks, and this has substantially increased the amount of congestion on the network, increasing the transaction fees and gas fees in the process. That is bad news for regular Ethereum blockchain users, who not only have to deal with high prices and disruption, but also increased wait times for transaction confirmation.
What’s in it for FCoin?
According to a number of crypto analysts, the obviously flawed voting format and the resulting fallout is deliberate, aimed at creating a storm of publicity on the premise that no publicity is bad publicity. The exchange thus hopes to ride the wave of anger and notoriety to achieving enhanced visibility.
A tweet thread from MyCrypto on July 2 reads in part:
“As we’ve been looking into the recent network congestion / high gas prices, one of the more interesting things to come to light involves a random exchange (whom we will not name as this is likely part of their “PR strategy”)…In summation: F**k exchanges, projects, or tokens that incentivize bad behavior, like Sybil attacks. Do not fall for their s**t. Instead, reward those who are building remarkable tools & communities responsibly.”