$70M Worth Of Bitcoin Was Stolen From Bitfinex Exchange

How Did The Bitcoin Exchange Get Hacked?

Suffering a major hack, Bitfinex is one of the most popular cryptocurrency exchanges online as the company notes in a post on the website detailing the security breach whereas it doesn’t mention a total amount but one of the employees confirmed on Reddit that the total amount stolen was 119,756 bitcoins. 

It means the amount converts to about $ 77,000,000 as based on a price of USD 650 per Bitcoin while it traded at over last week. The price of Bitcoin dropped almost 20 percent after the news of the hack spread and settling in around the current price of USD 540 per Bitcoin. As of now, it is not clear why the price dropped as its likely Bitcoin investors are nervous about potential hacks on other exchanges and decided to sell off Bitcoin holdings leading to a rapid decrease in price.

How Do You Secure The Transactions In The Exchanges?

Does the question remain that how exactly did the hack happen? While it’s not clear yet as the exchange has not released any additional information beyond the said incurred loss as also suspending operations, the USD funds, as well as other cryptocurrency balances, haven’t been compromised. 

It is a known fact that Bitfinex’s platform was using BitGo, which came as a Palo Alto-based Bitcoin security company allowing exchanges providing segregated, multi-signature wallet for each of the customer’s funds supposed security improvement over exchanges merging customer’s funds into large communal wallets. Users can keep a tab on their wallet balance at all times where the method of maintaining segregated wallets for each user on the exchange, is how some Bitfinex users can see the funds being removed from the wallets. Whereas tweeting about it BitGo said they found no evidence of a breach on any BitGo servers. 

That said it doesn’t help to tell how exactly the hack happened where neither the service has yet claimed responsibility with the question remaining why neither BitGo nor Bitfinex has working limits ready to stop rapid withdrawals of large amounts of Bitcoin. 

The Current Scenario In Bitcoin Mining

The situation is such that many exchanges are automatically restricting the amount of Bitcoin as that it can be withdrawn at once even if they are hacked, these losses are sure to be capped at a smaller amount. Bitfinex on Reddit said that however there were limits in place restricting the amount of BTC and are signed for withdrawing while still trying to investigate how the limits were bypassed. 

Being too early to speculate the next steps, however, there are many wondering what the fate of the coins will be and because of this, the segregated BitGo wallets are sure to come as compromising customer’s wallets. As a result, some user’s wallets may be intact as the question becomes do you let those users withdraw funds, or pool the funds with proportionally issuing refunds where every user incurs the same loss even if their wallets that weren’t directly compromised. 

How Can The Loss Be Mitigated?

Further saying that they were alerted, Bitfinex is working with law enforcement making things complicated further on if the company needs to go through a bankruptcy proceeding similar to that the Mt.Gox did after hackers drained the exchange of all operating funds. 

As this comes just weeks after hackers stole $ 50M worth of Ethereum, this has caused the currency to complete a hard fork where it could also reverse the transactions containing stolen currency. Here the lesson to be learned is that again the safest way to store Bitcoin comes in your wallet that is preferably offline and not on the website or exchange. 

The Conclusion

While Bitcoin mining is a risky process and needs a credible exchange to store the coins, this is also the current trend amongst Bitcoin developers who range in various degrees along the length and width of countries across the world. This is why we recommend stable exchanges with sufficient security measures to help developers from getting hacked and thereby losing their coins and investments. Again exchanges like Bitfinex, even though secure had to bear the brunt of professional hacking whereby the investors were plunged into murky waters thereby making investors vulnerable even on the world’s best and most secure exchange. There comes to be seen a lot of developments in Bitcoin exchanges and Bitcoin mining as cryptocurrency remains a lucrative investment for the tech world.