Market panic drops price of Bitcoin.

in money •  2 years ago

Hacker attacks are a constant threat to any financial service, especially brokerage digital currencies that guard customer funds. The most recent case happened to Bitfinex, last Tuesday, August 2, and so far estimated losses are almost 120,000 bitcoins.

This attack has generated very strong impact on the market, since the Bitifinex, based in Hong Kong, is one of the leading brokers in the market and offers a lot of leverage and swap services on its platform.

As soon discovered the attack, the whole system the broker has been taken offline, disabling all transactions and suspend withdrawals and deposits. The following responsible investigating the causes of work and trying to find solutions to resume the activities and negotiate ways to compensate the customer losses.

The market panicked, causing the price of bitcoin plummet more than 20% to $ 480 on the international market and recovering some of the losses a few hours after reaching back above levels of $ 550.

Volatility returned with force and the main market players still measure the size of the systemic risk posed by problems in Bitifinex.


What we do know so far?

Those responsible for Bitifinex claim to have had problems with the multi-signed portfolios of broker which, in theory, should provide a greater degree of safety for the resources. Instead of using offline storage "cold wallets," the Bitfinex uses the BitGo storage solution with three cryptographic keys, and one held by Bitfinex, one with BitGo and third offline stored, but in possession of Bitfinex.

To move resources from a client's portfolio, two keys must approve the transaction. If BitGo is not available, the Bitfinex can use their two keys. The broker said that this system would be more secure than storing them out of Internet funds because hackers would need two keys to steal bitcoins.

On Twitter, the BitGo said it was not hacked. This leads us to believe that the problem occurred only with the Bitfinex keys. But no possibility can be ruled out.

In May this year, Bitfinex had been the target of another hacker attack and asked its members to suspend negotiations on the platform. Other brokers, such as Coinapult and Bitstamp also had stolen bitcoins from their wallets hot, with an estimated loss of US $ 5.4 million. In April, shapeshift company was also attacked and lost 315 bitcoins. All of these cases occurred in the portfolios connected to the Internet.


What should we learn from this?


History has shown repeated times to leave their bitcoins in brokerage custody is not the best strategy to store them. These companies concentrate large amounts of resources and will always be targets of hackers or stunts made by the company's own employees.

Given these facts, many bitcoin users have preferred to store your bitcoins so offline, in a situation that resembles save money under the mattress rather than deposit it in a bank. I will soon publish a comprehensive guide on how to store your bitcoins safely.

Let's clarify one very important thing: the bitcoin network has not been attacked and there's nothing wrong with it. Once again an intermediary suffered an attack and the market will be strengthened and better security practices now on.

Authors get paid when people like you upvote their post.
If you enjoyed what you read here, create your account today and start earning FREE STEEM!
Sort Order: