Vox Shines Spotlight on Latest Cryptocurrency Exchange Hack of Binance, Explains Targeting Method
Just a few days ago, a group of hackers was able to steal $40 million worth of Bitcoin (BTC) from the Binance exchange. This is one of the largest cryptocurrency exchanges in the world and one that claimed to be the safest as well. The main question that users are currently asking is whether the problem is Bitcoin or the security systems of exchanges.
How To Protect Users’ Funds?
Bitcoin expanded around the world as a technology that was supposed to be super secure and that would provide users with the possibility to deal with their funds in a secure way. However, this is something that the crypto market was not able to provide to enthusiasts and investors.
Binance announced on Tuesday that it was hacked and that attackers were able to steal 7,000 BTC in just a single transaction that was worth over $40 million. In this way, this became one of the largest hacks in the history of Bitcoin and cryptocurrencies. The exchange, which was considered to be one of the most secure in the world experienced a hack of over $40 million.
The good thing about it is that Binance has been allocating 10% of the trading fees into an emergency insurance fund that would be used for such situations. Nonetheless, that means that users are paying a 10% premium in fees in order to have an insurance fund in case a bug or code weakness allows an attacker to steal funds.
There have been many other attacks to the cryptocurrency market during the last years. Perhaps Mt. Gox was the most famous due to the large sum of money lost and because it handled over 70% of the total Bitcoin supply. Coincheck, one of the largest Japanese exchanges lost $500 million in NEM (XEM) coins back in January 2018, becoming one of the largest hacks in the history of virtual currencies.
Binance became known for being a safe exchange, but the hack that it just experienced shows that not even the most popular exchange is safe, even when it claimed that it worked in order for users to have their funds safe at all times.
Robert Long, an attorney at GreenbergTraurig, explained:
“It’s like robbing a bank, except you can do it from a thousand miles away, from the comfort of your home, and the money you get is virtually untraceable and you can disguise it by laundering it through multiple wallets in a matter of minutes.”
According to Binance, the hackers obtained user API keys and two-factor authentication codes in order to withdraw 7,000 Bitcoin. This affected Binance’s hot wallet and just 2 percent of the whole number of Bitcoin that the exchange has.
Bitcoin exchanges are not the best way for users to store their digital assets. Although they provide users with friendly user experience and it allows them to exchange virtual currencies, they are very vulnerable to hacks and attacks.
In general, users are advised to keep on exchanges the funds that they use to trade or exchange in these platforms, but the money they have should be stored in cold storage wallets such as Trezor or Ledger.
Users that store their funds in these trading platforms do not have control over their private keys, which basically means that the digital currencies are not on their possession. Using cold storage wallets, individuals would be able to have their private keys protected against attackers and hackers.
Jeremy Gardner, a crypto entrepreneur explained that if an exchange has a vulnerability and a hacker moves the coins out of the exchange, then the hacker is the owner of the new coins because Bitcoin was created in this way. It is not possible to get them back.
Bitcoin theft is an attractive way for hackers to earn money because digital assets have higher degrees of privacy and anonymity, funds can be moved easily across borders, and exchanges have many bugs that hackers know how to exploit. At the same time, the effort and expenses that hackers incur for attacking a crypto exchange are very low.
Thus, holding and storing digital currencies is a task that must be taken cared very well by users. Without the private keys, the funds are controlled by a third party. If the funds are stored in secure hardware wallets, they are safe.
Now, Bitcoin is being traded around $6,100 and it has a market capitalization of almost $110 billion. Exchanges will need to improve their systems to remain secure as hackers are always improving their technics and methods. But as mentioned before, the best way to store digital assets is by using a cold wallet disconnected from the internet and that gives the user ownership of their private coins.