Hackers steal $32mn from South Korean cryptocurrency exchange, again
On Wednesday, South Korea's largest cryptocurrency exchange, Bithumb, revealed that hackers had stolen $32mn worth of assets overnight. If that sounds bad, it's worth noting that this is the second major hack of a South Korean cryptocurrency exchange within two weeks, and the third major Bithumb hack in the past year. Understandably, several cryptocurrencies, including bitcoin, have tanked. Here's more on these hacks.
Just days back, Coinrail lost $37mn in a hack
On June 10, South Korean exchange Coinrail was hacked, and lost a massive $37mn - almost a third of its funds. Although South Korean police have managed to either recover or freeze almost 80% of the money stolen, it's unclear when the investigation will conclude.
Despite trying for days, Bithumb couldn't stop the hack
Reportedly, Bithumb had been aware of the attack since June 16, and its security team and developers had tried to prevent the breach. However, upon realizing that they had been overpowered, Bithumb moved most of its funds from its hot wallet to an offline, 'cold' (offline) one. The $32mn stolen was thus a mere fraction of potential losses which Bithumb averted by moving its funds.
Bitcoin's value has dropped by 54% in 2018
Within two days after the Coinrail hack, bitcoin's value dropped by 10%, while ethereum, ripple, and bitcoin cash fell by 11%. Bitcoin's value again dropped by 2% following the Bithumb hack, thereby bringing this year's decline to 54%, according to Bloomberg composite pricing.
Are all crypto exchanges hackable? In theory, yes
If Bithumb has been hacked repeatedly, and follows on the footsteps of the very recent Coinrail hack, it begs the question: are cryptocurrency exchanges safe at all? Well, the bad news is that industry experts believe that all cryptocurrency exchanges are hackable in theory as exchanges store information in a centralized manner, unlike the blockchains supporting cryptocurrency which store information in many places.
Why investing in security is of prime importance for exchanges
However, there are several major exchanges like Coinbase (US), Korbit (South Korea), Huobi (Hong Kong) etc., which have never seen a hack. What set them apart from the others is that they invest a significant amount of resources in acquiring and retaining specialized talent, precisely to prevent hacks. The lesson? If you don't have a formidable security team, hackers are going to target you.
Increasing regulatory interest in the cryptocurrency market
If one looks at the larger picture, the cryptocurrency market is witnessing increasing regulatory interest, especially in economies which see a large volume of cryptocurrency trading. While hacks are potentially devastating for investors, the fact remains that repeated breaches are bound to increase this regulatory interest which, consequently, will lead to tightening of security protocols. Will it make exchanges safer? We'll have to see.