Almost $70 million worth of the virtual currency was stolen from a bitcoin exchange called Bitfinex earlier this month when hackers penetrated a secure authentication system at the exchange.
But this is hardly a rare occurrence in the emerging world of crypto-currencies. After hackers took roughly $350 million in bitcoins at Tokyo's MtGox exchange in early 2014, the latest heist is the second largest by an exchange.
Nearly half bitcoin exchanges have closed in the half dozen years since they burst on the scene and a third of bitcoin trading platforms have been hacked, new data available to Reuters shows.
Even though many exchanges act like virtual banks, there is no depositor's insurance to absorb the loss which compounds this rising risk for bitcoin holders.
The fact that bitcoin investors have little choice but to do business with under-capitalized exchanges is exposed by this approach apart from casting the cyber security risk in stark relief. The way a traditional and regulated bank or exchange would have capital buffer to absorb these losses is not available in mst of such digital currency exchanges.
"There is a general sense in the bitcoin community that any centralized repository is at risk," said a U.S.-based professional trader who lost about $1,000 in bitcoins when Bitfinex was hacked who did not want to be named.
"So when investing, you always have that expectation at the back of your head. I lost a small amount compared to the others, but I know of traders who lost millions of dollars worth of bitcoins," the trader said.
According to experts in the currency, there seem to be no let up in the security challenge for the bitcoin world.
"I am skeptical there's going to be any technological silver bullet that's going to solve security breach problems. No technology, crypto-currency, or financial mechanism can be made safe from hacks," said Tyler Moore, assistant professor of cyber security at the University of Tulsa's Tandy School of Computer Science. He is soon to publish the new research on the vulnerability of bitcoin exchanges.
33 percent of all bitcoin exchanges operational during that period were hacked upto March 2015 bitcoin's creation in 2009, shows Moore’s study which was funded by the U.S. Department of Homeland Security. One of the first estimates of the extent of security breaches in the bitcoin world is represented by the figure.
In Contrast, of the 6,000 operational U.S. banks, only 67 banks experienced a publicly-disclosed data breach between 2009 and 2015, shows data from the Privacy Rights Clearinghouse, a non-profit organization. The figure comes to roughly 1 percent of U.S. banks.
Since hackers are attracted to the large pools of cash moving in and out of stock exchanges, security breaches are much higher among the world's trading venues. More than half of 46 securities exchanges surveyed had experienced a cyber attack, revealed the latest survey of securities exchanges released three years ago by the International Organization of Securities Commissions and World Federation of Exchanges.
Nicolas Christin, associate research professor at Carnegie Mellon University and Janos Szurdi, a Ph.D. student also at Carnegie were the other collaborators with Moore on the research.
(Source:www.reuters.com)
But this is hardly a rare occurrence in the emerging world of crypto-currencies. After hackers took roughly $350 million in bitcoins at Tokyo's MtGox exchange in early 2014, the latest heist is the second largest by an exchange.
Nearly half bitcoin exchanges have closed in the half dozen years since they burst on the scene and a third of bitcoin trading platforms have been hacked, new data available to Reuters shows.
Even though many exchanges act like virtual banks, there is no depositor's insurance to absorb the loss which compounds this rising risk for bitcoin holders.
The fact that bitcoin investors have little choice but to do business with under-capitalized exchanges is exposed by this approach apart from casting the cyber security risk in stark relief. The way a traditional and regulated bank or exchange would have capital buffer to absorb these losses is not available in mst of such digital currency exchanges.
"There is a general sense in the bitcoin community that any centralized repository is at risk," said a U.S.-based professional trader who lost about $1,000 in bitcoins when Bitfinex was hacked who did not want to be named.
"So when investing, you always have that expectation at the back of your head. I lost a small amount compared to the others, but I know of traders who lost millions of dollars worth of bitcoins," the trader said.
According to experts in the currency, there seem to be no let up in the security challenge for the bitcoin world.
"I am skeptical there's going to be any technological silver bullet that's going to solve security breach problems. No technology, crypto-currency, or financial mechanism can be made safe from hacks," said Tyler Moore, assistant professor of cyber security at the University of Tulsa's Tandy School of Computer Science. He is soon to publish the new research on the vulnerability of bitcoin exchanges.
33 percent of all bitcoin exchanges operational during that period were hacked upto March 2015 bitcoin's creation in 2009, shows Moore’s study which was funded by the U.S. Department of Homeland Security. One of the first estimates of the extent of security breaches in the bitcoin world is represented by the figure.
In Contrast, of the 6,000 operational U.S. banks, only 67 banks experienced a publicly-disclosed data breach between 2009 and 2015, shows data from the Privacy Rights Clearinghouse, a non-profit organization. The figure comes to roughly 1 percent of U.S. banks.
Since hackers are attracted to the large pools of cash moving in and out of stock exchanges, security breaches are much higher among the world's trading venues. More than half of 46 securities exchanges surveyed had experienced a cyber attack, revealed the latest survey of securities exchanges released three years ago by the International Organization of Securities Commissions and World Federation of Exchanges.
Nicolas Christin, associate research professor at Carnegie Mellon University and Janos Szurdi, a Ph.D. student also at Carnegie were the other collaborators with Moore on the research.
(Source:www.reuters.com)
