Bitcoin for many people is a largely unknown quantity—some may have heard about it, but most are probably saying “Bit what?”. Even so, many traders, speculators, investors and hardcore Bitcoinlievers are reeling over the past 2 days as they’ve watched their Taiwan-based bitcoin exchange Bitfinex suffer a devastating hack on the 2nd August 2016 . Details are unclear, but Zane Tackett, their communications officer, announced on Reddit that nearly 120 000 bitcoin had been emptied out of Bitfinex’s user accounts. To put that into a local perspective, the total amount in ZAR equals roughly R840 million. It may sound like a lot, but when you measure it up against how much “wasteful expenditure” (i.e corruption) afflicts local municipalities, you see the bigger criminals actually wear fancy suits and ask you for votes!
Details around the hack are still being investigated by Bitfinex who have brought in some blockchain specialists and law authorities to help. As such they are not furnishing the public with too much information regarding the hack, simply stating that the attacker managed to gain access to user accounts, bypassing security measures in place by Bitfinex and their wallet provider BitGo. Once the attackers were inside they simply drained user accounts for about an hour, although it seems not all user accounts were affected. Bitfinex have temporarily closed the exchange, but will be bringing it online soon with limited capabilities so that users may check their account balances.
For a technology and currency not backed by any form of government surety, there is little recourse for users of the site, even less so when you read the sites Terms and Conditions. Although it pales in comparison to the infamous MtGox hack in which nearly 600 000 bitcoins were stolen (around $500 million USD at the time), it still deals a massive blow to the seven year-old niche ecosystem of Bitcoin. It will potentially create another insolvent exchange while definitely giving many old and new bitcoin users a harsh reminder about how much the cryptocurrency space is still the digital Wild West.
I for one am a victim of the hack, and although I lost a fairly “small” amount of bitcoin, some people had large amounts of their accumulated wealth residing on the exchange. Although I’ve written about bitcoin before, two years later it’s still not even a blip on the radar of major worldwide importance, as it’s very niche technology which has the potential to be disruptive. I still believe the good story of bitcoin is far from over, but this event surely sets the story down a familiar path once again: the death of bitcoin.
Last Updated: August 4, 2016