Tag: hacking

1
Surge In Cryptocurrency Exchange Hacking Activity
2
Bitcoin operators exposed to cyber threats

Surge In Cryptocurrency Exchange Hacking Activity

By Jim Bulling and Edwin Tan

Cryptocurrency exchanges have always been a prime target for hacking activity due to the vast amounts of cryptocurrency and money held within each exchange.  Finding and exploiting weaknesses in exchanges can be very profitable for hackers, and such hacking activity has grown exponentially year on year.

In late December 2018, Coindesk published an article revealing that the amount of cryptocurrency stolen from exchanges increased 13 times in 2018 compared to 2017.  Analytics firm Chainalysis reported that approximately $1 billion worth of cryptocurrency was stolen from digital currency exchanges in 2018.

Read More

Bitcoin operators exposed to cyber threats

By Cameron Abbott and Rebecca Murray

Reuters has reported that a third of bitcoin trading platforms have been hacked, and nearly half have closed since they entered the scene 6 years ago. This increasing risk for bitcoin holders is compounded by the fact there is no depositor’s insurance to absorb the loss. That approach heightens cybersecurity risks and also exposes the fact that bitcoin investors have little choice but to do business with under-capitalized exchanges.

This issue was evident when Bitfinex was hacked earlier this month and an estimated $70 million in bitcoin was stolen. The virtual bank’s customers were forced to share the losses resulting in a generalized loss percentage of 36.067%. Read our blog post on this hacking here.

Experts say trading venues acting like banks such as Bitfinex will remain vulnerable. These exchanges act as custodial wallets in which they control users’ digital currencies like banks control customer deposits. However, unlike their brick-and-mortar counterparts, when customers’ bitcoin accounts are hacked, there is currently no third party that can step in to deal with the theft. As a result, these underfunded exchanges require nearly perfect security.

Given this it is not surprising that certain governments around the world are exploring the possibility of central bank issued digital currencies using distributed ledger technology which could compete with the private digital currency systems such as bitcoin. Read more on this here.

Copyright © 2019, K&L Gates LLP. All Rights Reserved.