You have probably heard by now that a Japanese cryptocurrency exchange was hacked, and more than $500million worth of funds stolen. This was considered to be the worlds largest ever cryptocurrency hack. The biggest before this was in 2014, when $460million in Bitcoin was stolen.
This has led many people to ask the question of how this was allowed to happen. Although all hacks are different, it has been noted that this one was carried out thanks to security weaknesses at the exchange. One thing that a lot of people have noted and are having a hard time working out is why these exchanges are being targeted, when the blockchain technology behind it can record transactions.
In this particular case, Coincheck, the targeted exchange admitted that it had not used adequate security measures to store the virtual currency XEM, and as a result are now being forced to compensate their customers a large chunk of the stolen goods. Different security measures are used for different currencies, which led to XEM funds being stored in a hot wallet instead of a cold wallet, which is kept offline, making it much safer. On top of this, they did not use multi-signature authentication for the funds, which should be standard measure for large-scale holders.
Coincheck have been able to trace 11 addresses where the stolen coins ended up, and have since developed a tracking tool that allows the exchanges to automatically reject any stolen funds. This means that the hackers are less likely to be able to use their stolen funds.
Expert Charles Bovaird, who writes about cryptocurrencies for high profile companies questions whether any large-scale holder of cryptocurrency is immune from hacking and attacks., saying;
“Centralisation of resources – I think of it as a big carrot dangling in front of criminals that’s covered with money”.
Image Source: Pixabay