By Rebecca Heilweil
On Tuesday, the Taiwan-based cryptocurrency exchange Binanceー one of the largest in the world ーannounced that about $40 million worth of bitcoin (approximately 7,000 BTC) had been stolen by hackers. Bitcoin's value is at a six-month high, but the security breach raises the specter of cryptocurrencies' potential cyber vulnerabilities.
"The important point here is that these were hacks of exchanges, but not of bitcoin itself," Murad Mahmudov, a cryptoanalyst and the founder of Adaptive Capital, told Cheddar. He believes that investors should not be especially concerned, and said that "small pains like this are expected of a relatively immature industry, such as the cryptocurrency space."
To those who are worried, Mahmudov recommends keeping currency that investors are not actively trading in their personal hardware wallets, instead of leaving them in exchanges.
Investors are increasingly interested in cryptocurrencies, especially amid anticipation that Facebook may soon reveal its own. However, ensuring the security of exchanges remains a key concern, since bitcoin ー and and other cryptocurrencies ー are premised on decentralization and immutability.
Historically, close to $2 billion dollars worth of cryptocurrency has now been been lost to hacking, according to the Wall Street Journal. Last year, the Japan-based exchange Coincheck saw $500 million stolen by hackers, and in 2016, $72 million were stolen from the Hong Kong-based exchange Bitfinex.
The Binance hackers used a combination of phishing, viruses, and other attacks, and were able to access account information, including two-factor authorization codes, a widely-used security measure. Binance suspended withdrawals and deposits into the system to investigate the problem, which they hope will ward off hackers in the short-term. The hack also raised the possibility of a "re-org," in which Binance would adjust (or "undo") the transaction history by distributing the hackers' coins among the crypto-miners. The plan spurred extensive debate on social media, and the exchange's CEO ultimately eschewed the idea.
The company says it will be paying affected users back through an emergency insurance fund.
Mahmudov, an investor in Bitcoin himself, remains confident. "The fact that the price didn't react at all ー and only went further went up-and-up ー makes me think that we are in the beginning of a new bullish cycle," said Mahmudov. Today, bitcoin hit a value of $6,000 for the first time since November, and Mahmudov anticipates the number could get as high as $8,500 by the end of this year.