In dramatic 12 hours for the crypto community, the erratic behavior of Syscoin’s blockchain and Binance trading mystified everyone.
Syscoin (SYS) was not hacked, but a series of events led to confusion. A period of erratic behavior on the Syscoin blockchain coincided with unusual trading patterns on Binance, ending up in filling an order selling 11 SYS at 96 BTC per SYS.
The timeline for the Syscoin blockchain anomalies started with the requirement to upgrade to the 3.0.6. Qt wallet. Afterwards, the network created a so called superblock, paying out staking rewards to verifying nodes. Those nodes that still ran the 3.0.5 version froze.
The team explained the subsequent mining anomaly:
“The majority of miners that were mining Bitcoin+Syscoin (merge-mined) that had upgraded have fee policies above the default kb / Sys fee rate of 10,000 satoshi per kb. We later realized the fee rate for these miners has been set to 0.001 Sys per kb — an order of magnitude higher than default. As a result, transactions seemed to not be processed and some equated it to an attack during the same time as a large price fluctuation.”
Afterwards, the Syscoin network started to produce abnormally large blocks, while noticing activity suggesting withdrawals from a large Binance wallet. It was around that time that the Syscoin team alerted Binance for a possible attack against exchanges. This potential attack, still not clarified, coincided with the anomalies on the Syscoin network.
“We recognized the large 46 million Syscoin used to send out funds and chained as unconfirmed transactions as suspicious activity and immediately requested a halt to trading on all exchanges to protect users. Bittrex and Poloniex immediately complied. Binance began to identify the issue.”
The team claims Binance reset the API keys and resumed trading, leaving a handful of coins with flash pumps to go back to normal.
The case of the 7,000 BTC withdrawn from Binance during the time of the network anomaly and flash pumps is a third event with no certain relationship to the anomalous Syscoin blocks and the Binance API exploit. The Syscoin team also denied the exploit was due to using old Syscoin balances, dismissing it as ungrounded speculation.
Binance users are also reporting lowered BTC balances. But according to the Syscoin team, the blockchain itself has not been hacked, and the problem lies with exchanges or other attempts for a double spend.