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
VampyreSquirrel
August 4, 2016 at 11:08
USD to Bitcoin rate increased after the hack… interesting.
HairyEwok
August 4, 2016 at 11:21
https://cdn-images-1.medium.com/max/600/1*zenXYoSqgLfjTPhqoEKMqg.gif
Admiral Chief - Check
August 4, 2016 at 11:30
“hacked”
Marco
August 4, 2016 at 13:25
By increase do you mean price increase? Because it dropped off a cliff quite substantially after the hack.
VampyreSquirrel
August 5, 2016 at 09:43
I got corrected, it dropped to $480 and then within an hour was back at about $540… it’s heading back to the $600 mark
miaau
August 4, 2016 at 11:59
E.E “Doc” Smith wrote a fairly cheesy Sci-Fi series about Lensman. Essentially a multi-solar system, eventually galaxy spanning police force. The problem they had to overcome was making a badge that could not be duplicated by the ever increasingly smart criminals. They came up the several options, but each could be copied. What man can create and design, can be copied, essentially. So, in steps hyper intelligent ancient race of beings that gave certain worthies (I kid not, also Super Ship, Super Person and all that gives them the “len” that cannot be copied, is made by force of mind and cannot even be held by other than the person that it was made for.
In essence, for me, this has been the problem with Bitcoins all along. What can be held virtually, can be, duplicated or stolen virtually. I know, I know clever maths is behind all this and all that. Still, I do see potential problems.
Marco
August 4, 2016 at 13:24
Until somebody comes up with a hack to crack the SHA-256 algo, then duplicating a single BTC will remain very improbable.Interesting book though 😛
miaau
August 4, 2016 at 13:45
Totally agree, very, very difficult to duplicate a single bitcoin. Not impossible, is the point I wanted to make.
And yes, the books were interesting, if a bit annoying at times. Own all of them, took me a while to get, from 2nd hand bookshops around the country.