Hong Kong bitcoin exchange Bitfinex reported yesterday that hackers had stolen 119,756 bitcoin, which is worth as much as $US72 million dollars ($94.9 million), with some reports going even higher. News of the hack sent bitcoin tumbling 23 per cent, with its current value hovering around $753. Bitfinex confirmed that no other digital currency except bitcoin was targeted in the hack.
Seeing as Bitfinex is the world’s largest dollar-based exchange for bitcoin, the hack represents one of the biggest thefts, rivalled only other big security lapses like the Mt Gox hack in early 2015. Although there have been several bitcoin hacks littered in between, few have produced such volatility in the market as the Bitfinex breach. Although its too early to know exactly how Bitfinex was compromised, The Next Web reports that the exchange stored no bitcoin in cold storage (AKA offline), meaning users had to secure their own wallets. This could have made Bitfinex an appealing target.
Of course, a bitcoin hack is a little bit different than your standard digital bank heist. While traditional banks can trace and reverse transactions, one of bitcoin’s primary reasons for existing is its relative anonymity and irreversibility. But that also means that people like reddit user nukumu, who says that they lost 12 years of life savings in the hack, could be out of luck.
Bitfinex did say in its original statement that the exchanger will “look at the various options to address customer losses” as the investigation continues. Although there are various theories on how that might work, Cornell computer science professor Emin Gün Sirer suggests in a blog post that implementing a complex “secure vault” system could help safeguard against these kinds of hacks.
We still don’t know exactly how the exchange will address losses. But for the numerous people who woke up today in financial ruin, let’s hope a fix comes soon.