Nearly 7,000 bitcoins worth nearly $40 million dollars disappeared from cryptocurrency trading hub Binance this week. According to Gizmodo (https://gizmodo.com/one-of-the-worlds-largest-crypto-exchanges-binance-ha-1834600280), hackers attacked the company’s “hot-wallet” system which is used to process transactions.
While the number appears large, it only represents about two percent of the cryptocurrency exchange’s holdings. According to Binance(https://binance.zendesk.com/hc/en-us/articles/360028031711-Binance-Security-Breach-Update), the hackers used a “variety of techniques, including phishing, viruses and other attacks” to obtain a large amount of user data. The company says they are still trying to figure out all the possible methods used and that additional affected account might be identified at a later time. They will conduct a thorough security review in the next week and will “post updates frequently” as they move through the process.
Meanwhile, Binance has suspended all deposits and withdrawals during the investigation. The company does plan to continue to enable trading, allowing users to adjust positions. CEO Changpeng Zhao urged for “understanding in this difficult situation” adding that the company will “strive to main transparency and would be appreciative” of user support.
TechCrunch (https://techcrunch.com/2019/05/07/binance-breach/)has reported that Binance will cover all user losses through its Secure Asset Fund for Users, or SAFU. The emergency insurance fund was established in 2018 to “protect future interests in all users” and offer “protection to our users and their funds in extreme cases.”
Binance is also getting some financial help from Tron CEO Justin Sun. Cryptocurrency news agency CCN (https://finance.yahoo.com/news/tron-justin-sun-offers-deposit-023055558.html) reported that Sun is offering to personally deposit 7,000 BTC to replace the stolen funds, if Zhao approves it. Sun is very familiar with the Binance platform, as he used it to launch his own BitTorrent token.
Analysts believe that Sun’s proposed intervention, along with the announcement of the use of SAFU by Binance, has saved the BTC price from plummeting (Source: CoinMarketCap). However, cyber security expert Matthew Hickey at Hacker House believes high-profile hacks in blockchain businesses will undoubtedly shake consumer confidence. “Blockchain businesses will need to implement controls more commonly seen in the traditional banking sector if they are to win over consumers,” he told the BBC (https://www.bbc.com/news/technology-48199375). “Cyber-insurance is a common necessity today as identity theft, malware and cyber-attacks are frequently being performed against high-value blockchain and cryptocurrency companies.”
