Last Wednesday, prices for cryptocurrencies fell amid reports about the latest in a series of hacking of cryptocurrency exchanges. This time, the attack affected the South Korean exchange Bitfinex. While people’s losses are measured in millions of dollars, the platforms suffer from the same mistakes that endanger user assets. However, exchange services with the highest level of security are already exist on the market.
Having become the object of the break-in, Bithumb, the sixth-largest crypto-currency in the world, was forced to suspend work. According to the company itself, the total loss was $31.5 million.
A week earlier, another South Korean exchange Coinrail also underwent the attack. About a third of the cryptocurrency, which was traded on the exchange, was stolen. According to media reports, the hacker's booty was the equivalent of $37 million. As a result, the site announced its future business restructuring and the resumption of work scheduled for July 2018.
Despite Coinrail's claims that 70% of the exchange's currency is stored in so-termed cold wallets that don’t have a direct Internet connection, the media voiced an opinion that Coinrail had a poor level of cyber defense and is subjected to lots of risks.
Over $1 bln In Losses
The total amount of theft in cryptocurrencies in the first half of 2018 was more than $1.1 billion.
Last year, the crypto community also witnessed a number of major break-ins: Bithumb, NiceHash, Youbit, to name a few. The last company from the list was hacked even twice, after which it went bankrupt.
Either way, security remains one of the main problems for digital currencies. If the attackers have already taken hold of the wallets and withdrew the money, it is technically impossible to return them. A rare exception are situations where the exchanges themselves attempt to return stolen values from their own pockets. Bitfinex did in a like manner, managing to restore its reputation after a severe hacking.
Money Back At Cost Of Rule Breaking
The hard fork may serve as a way out. It’s a backlash of the blockchain to the time before the attack and establishing an alternative branch. A classic example is a notorious project The Dao, which set a hard fork in the summer of 2016. However, a significant part of the developers oppose the fork, because it violates one of the main ideas of the blockchain, irreversibility.
It is important that the user's money shouldn’t be kept within the platform, suggests Vladislav Kuznetsov, CEO and Founder of Streamity, a decentralized crypto exchange which is currently running the second phase of ICO and presenting the beta version of its flagship product, StreamDesk.
The platform’s developers found the solution with the application of smart-contracts that are integrated with the API of payment system. The smart contract receives a signal from the API as one account receives fiat money from another. While the cryptocurrency is locked in a smart-contract until the fiat money is transferred in a certain period of time, there is no way to gain access to the smart-contract. The only way to unlock it is to receive the signal from the payment system.
According to the idea declared above, the platform doesn’t store funds inside the system. Cryptocurrency is stored in users' wallets and nobody else has access to them.
While the exchangers don’t understand the simplest rule that users want to keep their assets safe, crypto currencies will remain in a specific niche. Reliability and protection from third-party interference may restore people’s credibility, believes Vladislav.