Today, early morning news broke out of a hack of a popular & once world’s largest cryptocurrency exchange (currently at 6th) — Bithumb.
Crypto assets/tokens valued around $30 million USD were stolen from presumably Bithumb’s hard wallet. When the officials of the exchange noticed this they immediately halted deposits and withdrawals until further notice. While also announcing that Bithumb will cover the losses occurred to its customers due to the discussed hack that occurred.
The Seoul based crypto exchange has a daily volume of $330 million, as per CMC. This is the second incident in less than a month’s time of an crypto exchange getting hacked in South Korea & as a result users funds being stolen. Coinrail was the previous one that lost around $37 million.
As an aftereffect of this incident the market has dropped by almost $6 billion USD since the hack occurred and the news spread across the crypto community in various time zones.
Bithumb is the largest crypto exchange in South Korea & certainly does not stand on expectations with this kind of breach happening. Coinrail is ranked 10th in the country.
Almost 5 months back in January the largest crypto exchange hack of all time occurred when Japan-based, Coincheck went through a $530 million USD hack since it had a lot of its holing in a Hot Wallet!
Ok, so let me also explain a little bit of the Wallet types, there are 2 types — Hot Wallets & Cold Wallets.
Cold Wallets are considered more safe, secure and you should also consider them to keep most of your investments. They are offline, not connected to the internet thereby no risk of online attacks. They are of 2 types — Hardware Wallet & Paper Wallet.
Hot Wallets are online wallets and also are of 2 types — Cloud wallets & Multi-sig wallets. Since they are connected to the internet are more prone to attacks & hacks from prying thieves. Only keep the amount you need regularly for trading on these.
I have not covered these in detail since the article was on the hack.
Getting back to the hack it could have been much bigger if they had more amount of funds on their Hot Wallet like Coincheck.
Although they have promised to return investors fund through a Twitter announcement, it is sad that exchanges get to this kind of scale without having full-proof security on their platform, also that they will now pay from their own pocket for the same.
The South Korea Government & other related offices recently stated their inclination towards regulating the crypto market so that investors don’t get scammed, hacked while also have an eye on money laundering activities through crypto transactions on these popular platforms.
The incident might fuel a bill on crypto being formed and presented soon so that by 2018 end the crypto market in the country can be regulated & exchanges will then be required to cooperate with government authorities, maintain a security standard among other things that are also mandatory to be done by all financial institutions.
While Regulation or No Regulation is a wider topic & requires a lot of things to be considered and talked upon, it will need a full article dedicated to the same for in-depth research, understanding & analysis. It can be said that regulation will certainly bring in more investors, confidence & the respect that crypto markets deserves!
P.S. — This is an informational article out of my personal research, some things mentioned may or may not be correct. Please do your own research to understand everything clearly. And obviously no financial advice.