Bitfinex Hack Fuels Bitcoin Security Concerns

Experts say the theft of 120,000 bitcoins from the Hong Kong digital currency exchange could spook potential investors.
Matthew HellerAugust 4, 2016
Bitfinex Hack Fuels Bitcoin Security Concerns

The cybertheft of about 120,000 bitcoins from Hong Kong-based digital currency exchange Bitfinex has renewed concerns over the security of the cryptocurrency.

Bitfinex earlier this week suspended trading on its platform after discovering the security breach. The bitcoins that were stolen by the hackers were worth $72.3 million at the price when Bitfinex halted trading.

“We are deeply concerned about this issue and we are committing every resource to try to resolve it,” the exchange said in a blog post.

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It was the third hack in recent months to affect bitcoin. In April, around $230,000 was stolen from the trading platform ShapeShift, while Gatecoin lost more than $2 million of cryptocurrency in May.

In the largest hack of its kind, Tokyo’s Mt. Gox lost about $450 million worth of bitcoins in early 2014.

“The core fundamental cryptographic strengths behind bitcoin remain strong but naturally events of this nature will spook potential investors,” Charles Hayter, chief executive and founder of  digital currency comparison website CryptoCompare, told CNBC.

“It’s a reminder of the fragility of the infrastructure in such a nascent industry,” he added.

The Financial Times noted that the bitcoin blockchain has proved “extremely robust,” but “the same cannot be said of the wider bitcoin economy, where hacking is commonplace.” The Bitfinex hack represented about 0.8% of all bitcoins in circulation.

“Bitcoin balances are only as secure as the private keys that control them,” the FT noted. “Since these keys take the shape of complicated strings of numbers, they can be easily forgotten or lost if not stored securely.”

Jack Liu, chief strategy officer at digital currency exchange OKCoin, said there should be more discussion between exchanges over best practices.

“We care about the health of the ecosystem,” he told The New York Times. “Hackers are only getting better and so adoption of the same solution may not be the safest for the industry.”

Bitcoin prices plunged about 11% on news of the Bitfinex breach, going as low as $514 per bitcoin. They later rebounded to $576, still well below July prices.