The cryptocurrency exchange Bithumb experienced a multi-million dollar hack on Tuesday – making it the second attack of this scale in the month of June. As exchanges scramble to patch up the damages, the rest of us are left wondering how this could happen so frequently – and what else we can do to protect ourselves.
Déjà Vu
On Tuesday evening, major South Korean cryptocurrency exchange Bithumb reported that nearly 35 billion KRW ($31.6 million) worth of cryptocurrency had been stolen. This attack comes not even two weeks after an attack on Coinrail — another South Korean cryptocurrency exchange – in which hackers managed to steal more than $40 million worth of cryptocurrency tokens from the exchange. At the time of writing this article, investigations are underway, but no perpetrators have been named.
Attacks like these are not a new trend and are unfortunately something that can cause those looking to begin investing in the cryptocurrency market to keep away — and act as a reminder to those already invested to keep on their toes.
Most people on the outside looking in all have the same question – “How does this keep happening?”
John Sedunov, an assistant professor of finance at Villanova University has an idea:
Bitcoin and other cryptocurrencies have risen dramatically in popularity and value over the past few years. […] This fast run-up may have caught some exchanges off-guard, and they may not have had the capital on hand, time, or even the technical ability to ramp up security features fast enough to ward off potential attackers.
Rules And Tools
It is no secret that the cryptocurrency space is largely unregulated. Its basic and anonymous nature also makes it quite easy for those with a bit of computing knowledge to make off with huge scores of funds with little chance of punishment.
So what can we do to keep ourselves and our investments safe?
The cardinal rule of cryptocurrency is to only keep funds on an exchange that are to be used for short-term trading or exchanging. Many investors are guilty of getting too comfortable in the mindset that some exchanges are ‘too big to fail’.
Although many big exchanges now have funds set aside to repay damages of cryptocurrencies stolen from their customers, there is absolutely no guarantee of reimbursement.
For those looking to hold even small amounts of cryptocurrency in the long-term, it may be wise to invest in a cold storage wallet. There are many great and affordable options that now support many different cryptocurrencies, and although not as convenient as ‘hot wallet’ storage on an exchange, offer much higher security.
It is a tough, barely regulated world out there in the cryptocurrency markets and exchanges. The best tools at your disposal are knowledge and common sense.
What do you think about the recent cryptocurrency exchange hacks? What can exchanges do to increase security? What can traders do? Let us know in the comments below.
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